Weekend Economists Go to the Dogs August 5-7, 2011

[Demeter]

There was a significant birthday this week. Yes, a well-beloved national icon completed a year of life, a year full of terror, triumph, international stardom and domestic strife. He did it with great aplomb, with no drama, and made his people proud.

I am of course referring to Rosco, the newest addition to the Fuddnik family. The proud master may stop in to post a photo or two anon, but the impatient can look on today's stock market watch thread for a glimpse of the Birthday Boy...er, dog.


So we are celebrating all aspects of Man's Best Friend this weekend.






My sister will be having a birthday this weekend, too. Happy birthday, Sis! Sis and her husband have been owned by many a Scottie, but are currently dogless. They are instead caring for The Old Man of the family. Try not to freak out, Sis...

That's all the birthdays this week I can think of....the significant ones, anyway. :evilgrin:

So, tell us about the dogs in your life. Tell us about the economy as it relates to dogs. Shaggy Dog stories also welcome.

[keynesFailed]

1. lol

[Demeter]

2. BANK WATCH: Nothing I like better than watching a bank fail (SIGH)

At 5:45 EDT, there are no banks down. They are probably still mopping up the blood on Wall St. and haven't had a chance to count casualties yet.

[Demeter]

10. ONE BANK DOWN AT 8 PM

Bank of Shorewood, Shorewood, Illinois, was closed today by the Illinois Department of Financial and Professional Regulation—Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Heartland Bank and Trust Company, Bloomington, Illinois, to assume all of the deposits of Bank of Shorewood.

The three branches of Bank of Shorewood, including the location operating as Bank of Elwood, will reopen on Saturday as branches of Heartland Bank and Trust Company....As of June 30, 2011, Bank of Shorewood had approximately $110.7 million in total assets and $104.0 million in total deposits. In addition to assuming all of the deposits of the failed bank, Heartland Bank and Trust Company agreed to purchase essentially all of the assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $25.6 million. Compared to other alternatives, Heartland Bank and Trust Company's acquisition was the least costly resolution for the FDIC's DIF. Bank of Shorewood is the 62nd FDIC-insured institution to fail in the nation this year, and the sixth in Illinois. The last FDIC-insured institution closed in the state was First Chicago Bank & Trust, Chicago, on July 8, 2011.

[Demeter]

14. SECOND BANK DOWN, AND IT'S COMPLICATED!

Bank of Whitman, Colfax, Washington, was closed today by the Washington State Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Columbia State Bank, Tacoma, Washington, to assume all of the deposits of Bank of Whitman.

Eight of the 20 branches of Bank of Whitman will reopen during their normal business hours beginning on Monday as branches of Columbia State Bank. The eight branches reopening are located at: 233 Bridge Street, Clarkston; 201 S. Main Street, Colfax; 605 E. Main Street, Othello; 795 SE Bishop Blvd., Pullman; 201 W Main Street, Ritzville; 618 W Riverside Avenue, Spokane (Downtown); 12812 N Addison, Spokane; and, 500 W Main Street, Walla Walla.

While all deposits were transferred to Columbia State Bank, the remaining 12 branches of the former Bank of Whitman will not reopen. Customers of the 12 branches not reopening should utilize the eight branches that are reopening, except customers of Pasco and Kennewick, who should utilize the local Columbia State Bank Branches listed on the page in the link below. Depositors also can access their accounts and other banking services through the use of checks, ATM and debit cards and the Internet. Please also note that ATMs at the branches not reopening will remain operational only throughout the weekend. Columbia State Bank will notify depositors of the Bank of Whitman once it fully integrates its systems to allow the failed bank's customers to use other Columbia State Bank branches in the state, in addition to the branches referenced above.

For additional information, customers of the 12 branches not reopening should see http://www.fdic.gov/bank/individual/failed/whitman_branches_closed.html.

All depositors of Bank of Whitman will automatically become depositors of Columbia State Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits.

As noted, this evening and over the weekend, depositors of Bank of Whitman can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of June 30, 2011, Bank of Whitman had approximately $548.6 million in total assets and $515.7 million in total deposits. In addition to assuming all of the deposits of the failed bank, Columbia State Bank agreed to purchase approximately $314.4 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $134.8 million. Compared to other alternatives, Columbia State Bank's acquisition was the least costly resolution for the FDIC's DIF. Bank of Whitman is the 63rd FDIC-insured institution to fail in the nation this year, and the third in Washington. The last FDIC-insured institution closed in the state was First Heritage Bank, Snohomish, on May 27, 2011.

[Demeter]

3. Fannie Demands Another $5.1B Aid / Treasury Q2, $103.8B Total Since Conservatorship

http://www.zerohedge.com/news/fannie-demands-another-51-billion-aid-treasury-q2-1038-billion-total-conservatorship


There is just one number that is important in the just released Fannie Mae Q2 earnings release, in which the firm reported a loss of "just" $2.9 billion, which includes $6.1 billion in credit related expenses all of which was blamed on Bush (no, really "substantially all of which were related to the company’s legacy (pre-2009) book of business"). The number that matters is that for the 11th consecutive quarter a bankrupt Fannie Mae came running to the Treasury, this time requesting $5.1 billion from Tim Geithner, the second highest number in the past year. This brings the total cumulative bailout since Fannie's conservatorship to a stunning $103.8 billion. And wasn't it pathological liar Tim Geithner who himself said a month ago that the GSEs are no longer a burden on the Treasury? Perhaps he can explain the chart below taken from the company's announcement.




...“We remain the largest source of liquidity for the U.S. mortgage market, and we are committed to creating long-term value by helping to build a stable, sustainable housing market for the future,” said Michael J. Williams, president and chief executive officer. “We are focused on reducing taxpayer exposure by limiting our credit losses and building a strong new book of business. Our new book of business is now nearly half of our overall single-family book and we expect these new loans will be profitable over their lifetime.”

Fannie Mae’s net loss attributable to common stockholders in the second quarter of 2011 was $5.2 billion, or $(0.90) per diluted share, including $2.3 billion in dividend payments to the U.S. Treasury. The company’s net worth deficit of $5.1 billion as of June 30, 2011 reflects the recognition of its total comprehensive loss of $2.9 billion and its payment to Treasury of $2.3 billion in senior preferred stock dividends during the second quarter of 2011. The Acting Director of the Federal Housing Finance Agency (“FHFA”) will submit a request to Treasury on Fannie Mae’s behalf for $5.1 billion to eliminate the company’s net worth deficit. Upon receipt of those funds, the company’s total obligation to Treasury for its senior preferred stock will be $104.8 billion...

[Demeter]

4. Robert Kuttner: On the Corner of 14th and Wall Street

http://blog.prospect.org/robert_kuttner/2011/08/on-the-corner-of-14th-and-wall.html

A number of commentators have asked: Why did the president categorically reject recourse to the 14th Amendment to raise the debt ceiling, even as a bargaining chit, when that rejection forced Democrats to accept a deal mostly on Republican terms?...Obama, speaking a week before the final deal, said that his lawyers advised him that the 14th Amendment did not apply. In fact, a lot of very well-informed constitutional scholars say otherwise...But this is not the real story. The main reason Obama rejected taking the 14th was that his Wall Street cronies, from Chief of Staff Bill Daley and Treasury Secretary Tim Geithner on down, were told by the financial industry that recourse to the 14th Amendment would spook financial markets. Presumably, use of the 14th Amendment would have produced lawsuits. And the lawsuits might have caused some investors to shun some Treasury securities or money-market funds filled with Treasury securities. And the bond rating agencies might have reacted badly.

This projection of worst-case outcomes, of course, is all speculation—Wall Street’s stock in trade. But look what happened when the deal finally passed. The stock market tanked!

That’s because the real economy is going to hell in a handbasket. On Tuesday, a report showed that consumers, the source of most demand in the economy, were cutting spending at an increasing rate. Last Friday, the Commerce Department revised the GDP growth figures downward, from a weak 1.8 percent rate in the first quarter to a dismal 0.4 percent. Durable-goods orders have tanked.

David Frum, the very conservative former Republican special assistant to Bush I, in a Monday commentary for CNN observed:

1) Unemployment is a more urgent problem than debt.

The U.S. can borrow money for 10 years at less than 3 percent. It can borrow money for two years at less than one-half a percent. Yes, the burden of debt is worrying. Yet lenders seem undaunted by those worries.

Meanwhile, more than 14 million Americans are out of work, more than 6 million for longer than six months. The United States has not seen so many people out of work for so long since the 1930s.

2) The deficit is a symptom of America’s economic problems, not a cause.

When the economy slumps, government revenues decline and government spending surges.

Federal revenues have collapsed since 2007, down from more than 18 percent of national income to a little more than 14 percent. To put that in perspective: That’s the equivalent of losing enough revenue to support the entire defense budget.

Federal spending has jumped to pay for unemployment insurance, food stamps, and Medicaid benefits.

Fix the economy first, and the deficit will improve on its own. Cut the deficit first, and the economy will get even sicker.

3) The time to cut is after the economy recovers.

Businesses are hoarding cash. Consumers are repaying debt. State and local governments are slashing jobs….Right now, there’s only one big customer out there: the federal government. How does it help anybody if the feds suddenly stop buying things and paying people?

Wow! Why aren’t more Republicans speaking like this? Maybe, as the real economy keeps tanking, and austerity only makes matters worse, more will.

As for those credit-rating agencies, nobody should take them seriously. These are the geniuses whose corrupted process led to the financial collapse because they were willing to bless subprime junk with triple-A ratings. So now they think maybe Treasury bonds are worth less than subprime? These people belong in jail for the fraud they committed, not in the financial driver’s seat. And anyway, markets are paying no attention to these rumors. Throughout the supposed debt crisis, markets for Treasuries held up fine...Still, there is a decent chance that by election season, we will be debating the real issues. If Obama bothers to point it out, the blood of perverse deficit policy is far more on Republican hands. This was their deal, their ideology, their victory. His main sin was not fighting harder to oppose it.

[Demeter]

5. Robert Kuttner: The Markets' Verdict on the Debt Deal

http://blog.prospect.org/robert_kuttner/2011/08/the-markets-verdict-on-the-deb.html

Let’s take a moment to recall the logic of the deficit hysteria and the related deal just signed by President Obama. The economy, supposedly, was mired in stagnation because of a lack of “confidence.” That confidence gap, in turn, reflected anxiety about the escalating deficits and national debt. Deal with the debt, and businesses would invest; consumers would spend, and recovery would return...As some of us have been writing almost since the Obama administration began, that view of the crisis was always absurd. With Americans out of work, and out trillions of dollars in home equity, consumers weren’t spending. Business was neither hiring nor investing. The deeper deficit reflected the reduced revenues of a deep recession, but government was laying off workers, too. Very low interest rates suggested that no serious person was worried about inflation—the bigger worry was deflation.

Well, now we have the grim proof. The very day Obama signed the deficit deal, the Dow lost 266 points. And yesterday, the key index shed another 515. The reason: The markets focused on increasing evidence of a weakening real economy. Despite the echo chamber, Beltway obsession about deficits and debts, investors never cared much about that...And the statistics about the real economy keep worsening. The July jobs numbers, just out from the Bureau of Labor Statistics showed the addition of just 117,000 jobs. The slight drop in the nominal unemployment rate was entirely due to people leaving the labor force, not an increase in the percentage of workers with jobs.

But it’s bleak satisfaction to say, “I told you so” unless these revelations lead to a changed politics. What sort of scenarios can we imagine going forward?...Despite the plan to have even steeper cuts kick in around Christmas after the special congressional joint committee reports in, I doubt there will be much enthusiasm for a second round of belt tightening as the economy keeps weakening. But what then? The right will call for more tax cuts as a form of stimulus (and reward for their wealthy patrons). These tax cuts would be offset by even deeper cuts in public outlays. And the center may join the push for tax cuts (though the two rounds of Bush tax cuts did nothing to head off the economic collapse of 2008).

For instance, Anita Dunn, former Obama communications director, is calling for a “tax holiday” so that U.S. firms can repatriate the roughly a trillion dollars in profits that are stashed abroad to avoid taxation. Dunn, in her current role as lobbyist/strategist (mixed with her role as TV commentator) is advising Cisco Systems CEO John Chambers, a leading corporate advocate for a tax holiday as a supposed form of stimulus. This is the same Chambers who announced layoffs of some 6,500 workers in mid-July...Ed Rendell, former Pennsylvania governor, on Dylan Ratigan, has also lent his support for this corporate tax holiday. Rendell is now a private lawyer and investment banker. The close connections between the business wing of the Democratic Party, the Obama White House, and the corporate elite, plus Obama’s continuing obsession with fiscal prudence, does not make one terribly optimistic that the president will drastically change course.

However, a different course is available. As economic stagnation deepens, Democrats could call for a real recovery program made up of public investment and jobs, financed by surtaxes on wealthy Americans, a crackdown on tax evaders, and taxes on financial transactions. This would make for a much more effective election year program than more belt-tightening, and would be far better for the economy. The Congressional Progressive Caucus Budget shows, in detail, how such an approach could lead both to economic recovery and eventual fiscal balance.(SEE NEXT POST FOR BUDGET) For Obama to embrace this course would require him to turn away from his austerity advisers as well as his other corporate cronies (who are financing much his campaign). But his current course has proved to be bad economics—and bad politics, with his approval ratings still sinking. And there is nothing like an impending defeat to concentrate the mind.

Some pressure from Democrats in Congress and in the electorate wouldn’t hurt, either.

[Demeter]

6. Budget of the Congressional Progressive Caucus Fiscal Year 2012

http://cpc.grijalva.house.gov/index.cfm?sectionid=70

ONE PAGE SUMMARY

http://grijalva.house.gov/uploads/People%27s%20Budget%20One-Page%20Handout.pdf

TECHNICAL ANALYSIS

http://epi.3cdn.net/55d8ba5873e5bd097e_avm6b8rb1.pdf

12 PAGE SUMMARY

http://cpc.grijalva.house.gov/files/The_CPC_FY2012_Budget.pdf

The People’s Budget eliminates the deficit in 10 years, puts Americans back to work and restores our economic competitiveness. The People’s Budget recognizes that in order to compete, our nation needs every American to be productive, and in order to be productive we need to raise our skills to meet modern needs.

Our Budget Eliminates the Deficit and Raises a $31 Billion Surplus In Ten Years
Our budget protects Social Security, Medicare and Medicaid and responsibly eliminates the deficit by targeting its main drivers: the Bush Tax Cuts, the wars overseas, and the causes and effects of the recent recession.

Our Budget Puts America Back to Work & Restores America’s Competitiveness
• Trains teachers and restores schools; rebuilds roads and bridges and ensures that users help pay for them
• Invests in job creation, clean energy and broadband infrastructure, housing and R&D programs

Our Budget Creates a Fairer Tax System
• Ends the recently passed upper-income tax cuts and lets Bush-era tax cuts expire at the end of 2012
• Extends tax credits for the middle class, families, and students
• Creates new tax brackets that range from 45% starting at $1 million to 49% for $1 billion or more
• Implements a progressive estate tax
• Eliminates corporate welfare for oil, gas, and coal companies; closes loopholes for multinational corporations
• Enacts a financial crisis responsibility fee and a financial speculation tax on derivatives and foreign exchange

Our Budget Protects Health
• Enacts a health care public option and negotiates prescription payments with pharmaceutical companies
• Prevents any cuts to Medicare physician payments for a decade

Our Budget Safeguards Social Security for the Next 75 Years
• Eliminates the individual Social Security payroll cap to make sure upper income earners pay their fair share
• Increases benefits based on higher contributions on the employee side

Our Budget Brings Our Troops Home
• Responsibly ends our wars in Iraq and Afghanistan to leave America more secure both home and abroad
• Cuts defense spending by reducing conventional forces, procurement, and costly R&D programs

Our Budget’s Bottom Line
• Deficit reduction of $5.6 trillion
• Spending cuts of $1.7 trillion
• Revenue increase of $3.9 trillion
• Public investment $1.7 trillion



Support for the People's Budget

Paul Krugman

“genuinely courageous”

“achieves this without dismantling the legacy of the New Deal”

Dean Baker

"if you want a serious effort to balance the budget, here it is."

Jeffrey Sachs

“A bolt of hope…humane, responsible, and most of all sensible”

The Economist

“Courageous”

“Mr Ryan's plan adds (by its own claims) $6 trillion to the national debt over the next decade, but promises to balance the budget by sometime in the 2030s by cutting programmes for the poor and the elderly. The Progressive Caucus's plan would (by its own claims) balance the budget by 2021 by cutting defence spending and raising taxes, mainly on rich people.”

The New Republic

“In passing, Miller also draws attention something that's gotten far too little attention in this debate. The most fiscally responsible plan seems to be neither the Republicans' nor the president's. It's the Congressional Progressive Caucus plan…”

The Washington Post

"It’s much more courageous to propose taxes on the rich and powerful than spending cuts on the poor and disabled."

Rachel Maddow

“Balances the budget 20 years earlier than Paul Ryan even tries to”

The Guardian

“the most fiscally responsible in town… would balance the books by 2021“

The Nation

"the strongest rebuke...to the unconscionable 'Ryan Budget' for FY 2012."

Center for American Progress

"once again puts requiring more sacrifice from the luckiest among us back on the table"

Economic Policy Institute

"National budget policy should adequately fund up-front job creation, invest in long-term economic growth, reform the tax code, and put the debt on a sustainable path while protecting the economic security of low-income Americans and growing the middle class. The proposal by the Congressional Progressive caucus achieves all of these goals."

The Washington Post

“The Congressional Progressive Caucus plan wins the fiscal responsibility derby thus far."

Rolling Stone

"This is more than a fantasy document. It's sound policy."

Forbes

"instead of gutting programs for the poor like Medicaid and Medicare, food stamps, and the new healthcare law, the People’s Budget focuses on cuts in defense. It also doesn’t scrap new financial regulations designed to at least partly stave off another massive financial collapse like the one that put us in this mess in the first place."

[Demeter]

7. 'The Future Is Terrifying': 6.2 Million Long-Term Unemployed Living On the Edge of Disaster

http://www.alternet.org/story/151763/%27the_future_is_terrifying%27%3A_6.2_million_long-term_unemployed_living_on_the_edge_of_disaster?page=entire

...That leaves President Obama and his mighty bully pulpit to stand up firmly and empathetically for the long-term unemployed. Wrongly, Obama completely ignores these long-suffering millions. During the president’s recent Twitterfest he answered some jobs questions, but he was never offered a question about what he was willing to do for the long-term unemployed and 99ers who have exhausted all unemployment benefits. The Chicago Tribune picked up on that oversight when it released “Best Tweets Obama didn't answer.” The best tweet?

Why is so little being done for the 6.2 million long-term unemployed? Why have 99ers been abandoned by Congress and the White House?

[Demeter]

9. Leaked Wal-Mart Memo Reveals America's Not Buying Their Stuff

http://www.alternet.org/newsandviews/article/644585/leaked_wal-mart_memo_reveals_america%27s_not_buying_their_stuff/#paragraph5

Bloomberg News obtained an internal memo revealing that the economic downturn companies like Wal-Mart help create isn't exactly helping its sales--while competitors' sales continue to grow.

This leads Gawker's Hamilton Nolan to wonder if America's "love affair" with the nasty corporate giant may be slowly coming to an end...

http://www.bloomberg.com/news/2011-08-03/wal-mart-visits-drop-2-6-as-added-products-fail-to-draw-buyers-memo-says.html

[Demeter]

33. Beneath Jobs Report Surface Lie Some Ugly Truths

http://www.cnbc.com/id/44033486

Before getting too excited about the modest uptick in net job creation and a slight downward move in the unemployment rate, it’s probably worth a look under the hood...Let’s start with the reality that fewer people actually were working in July than in June. According to a Bureau of Labor Statistics breakdown, there were 139,296,000 people working in July, compared to 139,334,000 the month before, or a drop of 38,000.

But the job creation number was positive and the unemployment rate went down, right? So how does that work? It’s a product of something the government calls “discouraged workers,” or those who were unemployed but not out looking for work during the reporting period. So the drop in the unemployment rate is fairly illusory—stick all those people back in the workforce and you wipe out the job creation and the drop in unemployment.

For once, some of the government’s other tools of economic voodoo didn’t help the count. The vaunted birth-death model, a byzantine approximation of business creation and failure, actually subtracted 18,000 from the total job creation after a five-month run where it added a total of 741,000 positions to the count. And the so-called “real” unemployment rate, which adds in discouraged workers and others not counted as part of the headline unemployment rate, actually pulled back one notch to 16.1 percent...


THAT BIRTH-DEATH MODEL IS STILL PREDICTING LOTS OF JOBS CREATED BY SMALL BUSINESSES...ARE THERE EVEN ANY SMALL BUSINESSES STILL OPEN?

[Demeter]

8. Shady Company Donates a Million Dollars to Mitt Romney Super-PAC, Then Immediately Dissolves

http://www.alternet.org/newsandviews/article/644582/shady_company_donates_a_million_dollars_to_mitt_romney_super-pac%2C_then_immediately_dissolves/#paragraph5

...W. Spann LLC was created by Cameron Casey, a Boston estate-tax lawyer in March. A mere six weeks after donating a million dollars to a Mitt Romney super-PAC called "Restore Our Future," it dissolved. Even shadier: it gave a wrong address, listing a building in Manhattan that has "no record of such a tenant," reports NBC. Lawrence Noble, former general counsel for the Federal Election Commission, unsurprisingly has questions about its legality...

http://www.msnbc.msn.com/id/44011308/#.TjxzPGFEN3I

[InkAddict]

11. US AAA credit rating downgraded ...bbc link here

See LBN links - http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4949617

though apparently there was a mistake (?)

Math Error Fuels Fight Over Rating

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4949585



I read in the paper there are robbers...
With flashlights that shine in the dark
My love needs a doggie to protect him
And scare them away with one bark.

[Pale Blue Dot]

13. It's absolutely fascinating that they did this Friday evening.

It's like they felt that they had to downgrade, yet knew and feared Wall Street's reaction and wanted to give everyone the weekend to sort it out.

Wow.

[Demeter]

17. Somebody put them up to it

Koch bros, is my bet.

[Pale Blue Dot]

20. I don't know... S&P specifically mentions wanting the Bush tax cuts to expire.

Full text here:

http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8

[Demeter]

24. Guess I'll have to read it tomorrow

After wine with dinner and a nice film, I'm not currently motivated...

[Demeter]

54. S&P IS PART OF THE BFEE

Through McGraw-Hill....this could be a particularly twisted ploy.

[Demeter]

15. Whether the Stone Hits the Pitcher, or the Pitcher Hits the Stone

it's gonna be bad for the rating agency. Maybe this will take out some of Timmeh's buddies too.

One has to wonder what it would take to get some competent help in DC.

Seeing eye dogs?

[Demeter]

18. WSJ:S&P Downgrades U.S. Debt for First Time

http://online.wsj.com/article/SB10001424053111903366504576490841235575386.html

A cornerstone of the global financial system was shaken Friday when officials at ratings firm Standard & Poor's said U.S. Treasury debt no longer deserved to be considered among the safest investments in the world.

S&P removed for the first time the triple-A rating the U.S. has held for 70 years, saying the budget deal recently brokered in Washington didn't do enough to address the gloomy long-term picture for America's finances. It downgraded U.S. debt to AA+, a score that ranks below Liechtenstein and on par with Belgium and New Zealand.

The unprecedented move came after several hours of high-stakes drama. It began in the morning, when word leaked that a downgrade was imminent and stocks tumbled sharply. Around 1:30 p.m., S&P officials notified the Treasury Department they planned to downgrade U.S. debt, and presented the government with their findings. But Treasury officials noticed a $2 trillion error in S&P's math that delayed an announcement for several hours. S&P officials decided to move ahead anyway, and after 8 p.m. they made their downgrade official.

S&P said "the downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics." It also blamed the weakened "effectiveness, stability, and predictability" of U.S. policy making and political institutions at a time when challenges are mounting...

THEY ARE JUST ASKING FOR THEIR MORTGAGE-BACKED-SECURITIES CHICKENS TO COME HOME TO ROOST.

[Demeter]

19. MSNBD: US government loses triple-A credit rating

http://www.msnbc.msn.com/id/44040574/ns/business-stocks_and_economy#.Tjyd5GFEN3I

S&P cut the long-term U.S. credit rating by one notch to AA-plus. The credit agency said it was making the move because the deficit reduction plan passed by Congress Tuesday did not go far enough to stabilize the country's debt situation.

U.S. Treasury securities, once undisputedly the safest investment in the world, are now rated lower than bonds issued by countries such as the United Kingdom, Germany, France or Canada.

The move is likely to raise borrowing costs eventually for the American government, companies and consumers....

Read the full S&P report in PDF format: http://msnbcmedia.msn.com/i/MSNBC/Sections/NEWS/SPdowngrade.pdf

On Tuesday, President Barack Obama signed legislation designed to reduce the fiscal deficit by $2.1 trillion over 10 years. But that was well short of the $4 trillion in savings S&P had called for as a good "down payment" on fixing America's finances...

[Demeter]

22. BBC: US loses AAA credit rating after S&P downgrade

The agency said it might lower the US long-term rating another notch to AA within the next two years if its deficit reduction measures were deemed inadequate.

S&P noted that the bill passed by Congress this week did not include new revenues - Republicans had staunchly opposed President Barack Obama's calls for tax rises to help pay off America's deficit.

The credit agency also noted that the legislation contained only minor policy changes to Medicare, an entitlement programme dear to Democrats...

http://www.bbc.co.uk/news/world-us-canada-14428930

I GUESS THE WHITE HOUSE WILL HAVE TO BE RENAMED THE "DOG HOUSE"

AND IT SEEMS THAT OBAMA NEVER HEARD ABOUT DANEGELD:

The Danegeld ( "Danish tax", literally "Dane's gold") was a tax raised to pay tribute to the Viking raiders to save a land from being ravaged. It was called the geld or gafol in eleventh-century sources; the term Danegeld did not appear until the early twelfth century. It was characteristic of royal policy in both England and Francia during the ninth through eleventh centuries, collected both as tributary, to buy off the attackers, and as stipendiary, to pay the defensive forces...The Viking expeditions to England were usually led by the Danish kings, but they were composed of warriors from all over Scandinavia, and they eventually brought home more than 100 tonnes of silver....In 994 the Danes, under King Sweyn Forkbeard and Olav Tryggvason, returned and laid siege to London. They were once more bought off, and the amount of silver paid impressed the Danes with the idea that it was more profitable to extort payments from the English than to take whatever booty they could plunder...

[Demeter]

51. Will S&P Downgrade Be Another Y2K Scare? NAKED CAPITALISM

http://www.nakedcapitalism.com/2011/08/will-sp-downgrade-be-another-y2k-scare.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Remember Y2K? The world was gonna end because there was tons of legacy code that couldn’t accommodate the rollover to the new century. I know people in who went into survivalist mode, stocking up months of supplies, and others who took less extreme precautions, like having lots of cash on hand in case ATMs were disrupted....

...It isn’t yet clear what the impact of the S&P downgrade of the US to AA+ will have. There are good reasons to believe, despite the media hyperventilating, that it won’t add up to much, and may perversely hit wobbly stock markets more than Treasury yields.

But there is a much bigger issue, namely S&P’s highly questionable conduct, the lack of any analytical process behind this ratings action, and the political implications.

THANK YOU YVES, FOR CONCURRING WITH MY SKEPTICISM...MORE AT LINK, INCLUDING A SAMPLING OF INSIDER GOSSIP AND SPECULATION.

[Fuddnik]

12. You missed the Boozehounds.

The dearly departed Fudd, loved his beer.





Then you have Rosco, the birthday boy who turned one today. Rescued from a shelter in GA last year, we got him at 10 weeks.


Then, there is the Queen, Sara. Rescued 2 years ago from the same shelter. She'll be two, in two weeks. Got her a 9 weeks.


Labs + water = Nutz

[Demeter]

16. Sorry, that's not a recognized breed

We miss the Fudd, too.

Congrats to the happy family.

[Tansy_Gold]

26. Four dog evening

Miss Mattie, rescued from a shelter in New Jersey, flown to Arizona because she barked too much. She still barks, but my definition of "too much" is much higher.




Moby, cast off because he was too big for a little house; Biscuit, found wandering in the grocery store parking lot




Chiquita, the runt of a litter of 12


All much more loyal than most human "friends."

[InkAddict]

30. LOL at the pics - My old boy is a product of generations of

VERY selective southern breeding according to this description - we kid him all the time about being a "rare breed."

http://www.doggyhelp.com/dogs/breeds/Mountain%20Feist/

[Pale Blue Dot]

21. You also missed the dogs I live with: Basenjis

The Basenji is a breed of hunting dog that was bred from stock originating in central Africa. Most of the major kennel clubs in the English-speaking world place the breed in the Hound Group; more specifically, it may be classified as belonging to the sighthound type. The Fédération Cynologique Internationale places the breed in Group 5, Spitz and Primitive types, and the United Kennel Club (US) places the breed in the Sighthound & Pariah Group.

The Basenji produces an unusual yodel-like sound commonly called a "barroo", due to its unusually shaped larynx.<1> This trait also gives the Basenji the nickname "Barkless Dog."<2>

Basenjis share many unique traits with Pariah dog types. Basenjis, like dingos and some other breeds of dog, come into estrus only once annually, as compared to other dog breeds which may have two or more breeding seasons every year. Both dingos and Basenjis lack a distinctive odor,<3><4> and are prone to howls, yodels, and other undulated vocalizations over the characteristic bark of modern dog breeds. One theory holds that the latter trait is the result of the selective killing of barkier dogs in the traditional Central African context because barking could lead enemies to humans' forest encampments. While dogs that resemble the basenji in some respects are commonplace over much of Africa, the breed's original foundation stock came from the old growth forest regions of the Congo Basin, where its structure and type were fixed by adaptation to its habitat, as well as use (primarily net hunting in extremely dense old-growth forest vegetation).

http://en.wikipedia.org/wiki/Basenji

The ones I live with look similar to this:

[Demeter]

23. They're so cute! And Very Normal-Looking

With an unusual name and characteristics, I expected something more exotic...

[Demeter]

25. After Months of Partisan Wrangling, Wall Street & Pentagon Emerge Victorious on Debt Deal

http://www.democracynow.org/2011/8/2/after_months_of_partisan_wrangling_wall

PODCAST

[Demeter]

27. Are We Heading For A Second Global Financial Crisis?

I'LL GIVE YOU 3 GUESSES...

http://www.alternet.org/story/151906/are_we_heading_for_a_second_global_financial_crisis_?page=entire

How far are we from #gfc2? For those not aware, #gfc2 is the Twitter hashtag used for "global financial crisis 2". And the question I ask is a real one.

A couple of weeks ago I wrote a blog wondering whether July 2011 felt like July 1914. And then along came a Greek deal, and now a US debt deal, and you might presume I had been prematurely melodramatic...I wish that were true; I very much doubt it is....As I'm explaining in my forthcoming book – The Courageous State – there is a two-part economy in this world. There's the real one – the one where you and I live and meet our needs, make and sell things (if only words on screens) and which is the measure of real well-being.

Then there's the other one – the feral one, if you like (feral as in wild and out of control) – existing way beyond the limits of the real economy and only loosely related to it, made up of the enormous financial balances denominated in cash of various sorts, existing only as entries in computer ledgers. Some of these cash balances are backed up by supposed assets, which are at best legal claims on property which may or may not realise real worth, such as shares (whose value usually have almost no direct bearing to the companies that lend them their names), property (which has been priced as a consequence beyond the reach of the real economy) and more obscure derivative products, which few understand and which even fewer trade in ever larger amounts.

This feral economy represents the wealth quite deliberately extracted from the real economy by those who have exploited it over the last thirty years of neoliberal domination by ensuring that the share of real wages in GDP has fallen from about 58% in 1980 to about 53% now (see diagram 1 here for detail) – with the cash they have extracted being stashed as unproductive wealth (often offshore). That unproductive wealth, whether held as cash or placed in assets that have near liquidity such as shares, property, derivatives, hedge fund and other portfolios, has had enormous consequences. There are many; let me just note two....The first is that the refusal of the owners of this wealth to engage it constructively in the economy has been a contributory factor to underinvestment, stagnant real wages, and the rise in what has effectively been enforced borrowing by far too many households struggling to make ends meet – who have become increasingly indebted to the agents of the feral elite in the process (see diagram 3, here), reinforcing the whole vicious cycle as a consequence and withdrawing yet more and more funds from the real economy and into the free-floating world of feral finance. The relationship of feral finance with the real economy has, therefore, been wholly negative here...Second, the use of those feral financial balances to undermine currencies in pursuit of short-term gain and maximum income returns has brought the whole edifice to the point of breaking. Breaking the real economy does nothing to the feral economy – downsides can be traded as much as upsides in the feral world of finance: gain is to be had in this world whatever happens in the real one. But the relationship of the feral economy with the real economy is again wholly destructive: those feral deals – done beyond regulation, assisted by the world of secrecy that tax havens provide, are bringing destitution, unemployment, real failure and fear to real lives.

There is only one way out of this – and that is to bring feral finance back under control. Of course, that economy will fight back – Bob Diamond already is as he's admitted that 90% of Barclays' profits come from feral activity – but that's a challenge courageous states have to face. And doing so is possible; the techniques are available. New, green quantitative easing, spent into the economy and not just given to banks, can reclaim this feral world and it's resources for the real economy. Forcing new investment policy onto funds that have been exposed to feral policies, such as pension funds, can reclaim these assets for ordinary people. I explain how here. And if necessary the countries of Europe and beyond will have to demand that banks deposit their cash in Treasury deposit receipts with central banks (as happened in the UK in the second world war) to ensure resources are taken out of the feral economy and made available for the public good at a time of national and international crisis...MORE

[bread_and_roses]

78. "Feral Finance" - I like that...

... but we can't assign them a breed - even feral dogs are just trying to scrabble by, not eat the world, nor do wolves kill for the joy of it or to starve other wolves ....

The only canine metaphor that would not malign our noble companions is "rabid."

[Tansy_Gold]

85. Indeed. +1 n/t

[Demeter]

28. How JP Morgan Took Over All Kentucky's Financial Services, And Why You Should Be Scared

http://www.alternet.org/story/151917/how_jp_morgan_took_over_all_kentucky%27s_financial_services%2C_and_why_you_should_be_scared?akid=7367.227380.6q-nJF&rd=1&t=2

On July 1, JP Morgan Chase became the Commonwealth’s bank. As the state’s official depository, JP now receives all deposits, writes all checks and makes all wire transfers on the $12-15 billion that flow through Kentucky state government in the course of a fiscal year. It will cut payroll checks, receive federal and other funds earmarked for the state, and disburse educational or transportation or any other funds to their appropriate monetary endpoints. For its trouble, the bank will receive $1.3 million in state fees and the ability to re-lend idle state funds out to customers for private gain.

Yes, you should be worried...

[DemReadingDU]

29. We live with 2 doggies and a cat

I need to get some pictures.

[Demeter]

31. Foxconn to Replace Half a Million Employees with Robots

Taiwan's IT giant Foxconn announced it plans to replace up to half a million human workers with robots in the next three years...

http://www.youtube.com/watch?v=EBSPNOTa40g&feature=player_embedded#at=23


...they don't mention how many iPhones these robots are likely to purchase..

[Fuddnik]

36. The robots won't commit suicide on the job.

At lleast they shouldn't.

[pscot]

69. Robots get depressed too, ya know

[Demeter]

70. Like Marvin The Paranoid Android

[tclambert]

71. This is why I don't use the self scan lines at the supermarket anymore.

When they were new, I thought they were cool, so I did my own scanning and bagging. Then a friend pointed out these machines were taking away human beings' jobs.

I thought I just heard a machine say, "Resistance is futile." Sigh. I think it's right. The robots are gonna win.

[hamerfan]

84. Big +1

The only way I would use the self checkout lane is if the retailer gave me a 10% discount for doing their job! That'll never happen.

[Tansy_Gold]

86. Another Big +1 n/t

[Demeter]

32. IRS: 235,413 million-dollar earners

The data shows, the 235,413 taxpayers who reported earning seven digits or more in 2009 took in a total of $726.9 billion - yet 1,470 paid not a penny of income taxes. In 2007, 959 Americans earning $1 million or more paid no income taxes.


http://www.politico.com/news/stories/0811/60717.html <http://r20.rs6.net/tn.jsp?llr=iqnuv6bab&et=1106955629056&s=62166&e=00168rXqntv7Pn9XQFYxuWV5pOXTS5BEesT8DjSLnHKM-SGML9OwF99A7G3lbS2SgY_JebqNOVS3o5xTAtVLxgGYZ65fuBng-oYZa1HkrLJKudE3Cd5V-YMVY-CIXFeDjnCRRaC4GSyhCcNauoqdxYlLDN3_mLt94c_>

[Demeter]

34. The FAA Will Reopen, But The GOP Still Has Its Hostages

http://www.alternet.org/newsandviews/article/644809/the_faa_will_reopen%2C_but_the_gop_still_has_its_hostages/#paragraph3

The good news is that with the FAA reopening, tens of thousands of workers will be back on the job within a few days and able to finish needed construction and other projects. The bad news is that the current extension of FAA operating authority ends Sept. 16 and the anti-union agenda that led Republicans to shut the agency down this time are no closer to resolution...

[Demeter]

35. THE WAY OLIPHANT SEES IT

http://cdn.svcs.c2.uclick.com/c2/55a3bd809ea1012e2f8200163e41dd5b?width=750.0

[hamerfan]

66. +1 for Oliphant toon!

Best one I've seen in quite a while. Thanks, Demeter!

[Fuddnik]

37. Got spaghetti?

Got teeth?

[Po_d Mainiac]

74. One of the animals in the top/first picture

Uses their tongue as toilet paper. hmm

[Demeter]

38. Faber: Brace for a Global 'Reboot' and a War

August 05, 2011 "CNBC" -- Markets could rebound after Thursday's global market sell-off, but investors should see any bounce as a selling opportunity, as the world economy rolls towards total collapse, Mark Faber, editor and publisher of the Boom, Doom and Gloom Report, told CNBC Friday.

VIDEO AT LINK: http://www.informationclearinghouse.info/article28764.htm

[Demeter]

39. This is a classic liquidity crisis | Edward Harrison

http://www.creditwritedowns.com/2011/08/this-is-a-classic-liquidity-crisis.html

...This is a classic liquidity crisis. Bond markets in Europe are selling off. Commercial paper markets in the US are seizing up. Retail investors in Asia are already running for safety in overnight trading. What we are experiencing is a market panic and that means liquidity is the first order of the day.

The sovereign debtor solvency issues in Europe are medium term issues. Even the obviously insolvent Greece has yet to give principal haircuts to creditors. The proposed restructuring is just another exercise in extend and pretend. And yet Greece is fine for now. So liquidity can tide the market over until the panic passes and then that’s when the solvency issues should be dealt with. Yes it is a solvency crisis. But the liquidity issues are the pressing ones right now...

[Demeter]

40. Euroscepticism | Edward Harrison

http://www.creditwritedowns.com/2011/08/euroscepticism.html

...Yes, I am a eurosceptic and have always been. But we are here now. The euro exists. And that does change things.

It would easy for me to say something like, “see I told you so. The euro is an abomination and the peripherals should simply leave or be tossed out of the euro zone.” I even remember suggesting the Irish should threaten this to get the most leverage before their banking sector imploded...Ireland didn’t do that. In fact they did the opposite...But, again, we are here now. The political imperatives for closer European ties that created the single currency are still with us. And the negatives of abandoning it are many, both politically and economically - in the periphery and the core...

[Demeter]

41. Italy bank valuations sink to Lehman crisis lows

http://www.reuters.com/article/2011/08/04/banks-italy-valuations-idUSL6E7J428V20110804

Italian bank shares have tumbled to valuations matching the lows seen at the depth of the 2008/09 financial crisis as worries mount that Italy will be sucked deeper into the euro zone crisis.

A near 30 pct percent fall by Unicredit and Intesa Sanpaolo since July 1 has left Italian banks trading at just 0.32 times their book value, according to Thomson Reuters data.

That's the same as in March 2009, the low point for bank shares in the wake of the collapse of U.S. investment bank Lehman Brothers.

Investors have been rattled by fears the euro zone debt crisis will spread to Italy, which could saddle its banks with massive losses as they hold tens of billions of euros of domestic bonds. It is also pushing up their funding costs...

[Demeter]

42. The Full Backstory On The New Investigation Into Christine Lagarde

Today French courts said they would officially investigate Christine Lagarde for her conduct in a deal she helped orchestrate in 2008, before she became the head of the IMF.

All everyone seems to be saying is just how embarrassing it is for her, because by some appearances, it looks like she arranged for the state to award a $400 million "gift" to a rich guy, Bernard Tapie, a businessman turned politician, in a court case after he had his yacht and other possessions taken from him by a state-owned bank.

But that's mostly true because people don't seem to know the full story.

It's been speculated for months now that Lagarde might be investigated for her help in arranging a big settlement that a state-owned bank awarded to a wealthy businessman in 2008.

It's never been clear that she did anything wrong, but according to the BBC, "Prosecutors say Ms Lagarde abused her authority by approving a 285m-euro ($406m) payment to businessman Bernard Tapie."

Here's what really happened.

Read more: http://www.businessinsider.com/christine-lagarde-investigation-2011-8?utm_source=Triggermail&utm_medium=email&utm_term=Clusterstock%20Select&utm_campaign=Clusterstock_Select_080511#ixzz1UFLC4K00

[Demeter]

43. Citigroup Said to Get California Subpoena Over Mortgage Deals

http://www.businessweek.com/news/2011-08-05/citigroup-said-to-get-california-subpoena-over-mortgage-deals.html

Citigroup Inc., the third-biggest U.S. bank, was subpoenaed by the California Attorney General’s Office over mortgage securitization, a person familiar with the matter said.

Attorney General Kamala Harris, who is investigating mortgage fraud, is seeking information from the New York-based bank on its practices, said the person, who wasn’t authorized to speak publicly about the matter and didn’t want to be identified.

The subpoena comes after Harris’s May announcement that she had set up a mortgage-fraud task force to investigate “every step” of the mortgage process from lending to securitization....Attorneys general in New York, Delaware and Massachusetts are also conducting investigations into mortgage practices of banks as the settlement negotiations continue.

[Demeter]

44. Big Money Gets Into Landlord Game

http://online.wsj.com/article/SB10001424053111904292504576484571234105448.html

Agustin Gutierrez, a construction worker from this town in the hills northeast of San Francisco Bay, lost his job in 2009, then, 10 months later, he lost ownership of his home.

Now, the husband and father of four rents the same five-bedroom ranch from McKinley Capital Partners, an investment company that's at the forefront of a new breed of big-money landlords.

McKinley, which has acquired more than 300 foreclosed single-family homes in the Bay Area over the past two years, recently teamed up with Och-Ziff Capital Management Group LLC, a New York hedge fund, with plans to buy...

[Demeter]

45. Bank of America Death Watch (Updated) NAKED CAPITALISM

http://www.nakedcapitalism.com/2011/08/bank-of-america-death-watch.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

This blog is starting a Bank of America death watch.

It is clear that the Charlotte bank has too much in the way of legal liability that it will not be able to shed and yet-to-be-taken writedowns on balance sheet items (for instance, roughly $125 billion of home equity loans and junior liens on residential real estate as of end of last year) for it not to be at risk of a death spiral. Its stock was down 7.44% yesterday(THURS), which puts its market cap at $89.5 billion, which is a mere 41.6% of common equity (total equity less book value of preferred) of $215 billion. That means if the bank is under pressure to raise its capital levels, it will be so dilutive as to be problematic, particularly if the stock market weakens further and banks continue to take it on the chin. And the entire mortgage industrial complex is coming under stress. Number three mortgage insured PMI posted yet another loss and fell short of regulatory standards. Although mortgage insurer woes are mainly a Fannie-Freddie issue, problems in tightly-coupled systems can ricochet in unexpected ways.

The death spiral dynamic kicked in during the crisis as a result of funding stress: as interbank markets dried up and short term funding costs rose, CDS spreads also rose and banks faced risk in terms of both cost and availability of funding. Rating agencies downgrades exacerbated the spiral. Some of these conditions would appear not to be operative now, with banks having tons of reserves parked at the Fed. But BofA in particular has been suffering a slow bleed of depositors (correction of earlier “deposits”, see comments for discussion as to why the reported increase in deposits on BofA’s balance sheet is more complicated than a superficial reading might suggest) as angry consumers vote with their feet, making it more dependent on market funding than before.

The other way for BofA to shore up its capital level would be for it to sell assets. But it already disposed of the Merrill Lynch stake in Blackrock. Merrill would seem to be the most logical sale candidate, but who would buy it when the logical buyers, other TBTF banks, are now under stress thanks to financial market upheaval? It would seem nuts to allow any of the US TBTF banks to double up on market risk. Citi has been under regulatory pressure to skinny down. JPM is less sound than its PR would have you believe (there is a ton of risk sitting in its derivatives clearing business) but Dimon loves to be the government’s subsidized buyer if things get that far. Morgan Stanley? A sale of a stake to a sovereign wealth fund (the notion that this is a “buy low” in an entity not exposed to mortgage liability?)

Bank of American and Citigroup both had near death experiences in early 2009. Citigroup was forced by the FDIC to trim its operations considerably. Bank of America was not required to make any serious overhaul. The mortgage mess has exposed the weakness of the bank’s foundations. Perhaps it will manage to muddle through again (VIA) extraordinary official measures, but I would not bet on it....

[Demeter]

46. Market Rout Continues

http://www.nakedcapitalism.com/2011/08/market-rout-continues.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

...There is plenty of evidence of rattled nerves. Commodities took a hit, another sign that deflationary expectations are taking hold. But perhaps the biggest change in attitude is lost faith that central bankers can or will intervene successfully. Bond purchases by the ECB did little to calm markets (a recovery in Italian and Spanish bonds quickly reversed). The Fed seems bizarrely preoccupied with inflation although the real problem is that what the US needs is fiscal stimulus to offset consumer deleveraging and failure of businesses to invest. We actually need more bankruptcies and asset writedowns in combination with more aggressive spending. In Euroland, the scope of the sovereign debt crisis has now reached the too big to fail Italy, and one of my German press reading contacts said that finance minister Wolfgang Schauble nixed yesterday the notion of enlarging rescue facilities.

Even though the US media has tended to focus on a series of bad data releases as teh trigger for the declines, in addition to no one being happy with the immediate resolution of the faux debt ceiling crisis, the bigger source of near term risk is the escalating Eurozone crisis (and Europe in not halfway around the world from an economic standpoint; the US economy is considerable integrated into it, with roughly 25% of S&P earnings dependent on it, for instance).

Thanks to the failure of the ECB intervention yesterday to accomplish much, Eurozone leader appear to recognize the need to Do Something, but given that they seem to need to Do Something every two weeks or so, their response time is increasingly lagging market demand...

[Demeter]

49. Market Craters: Dow Falls 512 Points (THURS)

http://www.nakedcapitalism.com/2011/08/market-craters.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

What we are seeing today is not as bad as the worst days of the crisis, but it ins’t much consolation for investors who had gotten back in the pool on the belief that the system had been patched up reasonably well and the economy was on the mend.

All the authorities did was patch up a predatory banking system with duct tape and bailing wire and hoped enough cheerleading would restore confidence. And after the banks got their bailout money, the mood seemed to be “we spent so much on them, we don’t have anything left for anyone else.” The alarming rise in government deficits, which was primarily the result of the crisis (falls in tax revenues and increases in automatic stabliizers like unemployment payments) and not discretionary spending, has led to a deadly combination of austerian policies (which is making debt to GDP ratios worse, see Ireland, Latvia, and Greece for proof), dysfunctional government responses, faltering recoveries, and deliberate shredding of social contracts. It’s like watching a house burn and then having people throw Molotov cocktails at it.

The pattern of serious financial crises is the market meltdown hits first, then the real economy plunge takes place later. Our officialdom had been patting itself on the back that “better” policy responses had stopped the sort of damage that the US suffered in the Great Depression and Japan experienced in its post bubble hangover. But the GDP revisions of last week included some stunning reductions to 2008 figures which called the comparatively cheery story we’ve been told into question. And the powers that be have refused to take the important step of writing bad debt down. Zombification was treated as the solution to our woes, when the result of past financial crises shows that taking the losses early which does result in a worse initial GDP hit, leads to much better outcomes. And here, the casualty has been not only growth but to a fair degree our political system, as the corporocrats have used the crisis to solidify their position....

[Demeter]

47. New York Attorney General Schneiderman Drops Bomb on Bank of America Settlement and Bank of New York

http://www.nakedcapitalism.com/2011/08/new-york-attorney-general-schneiderman-drops-bomb-on-bank-of-america-settlement-and-bank-of-new-york.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

The meltdown in the financial markets obscured an important development on the mortgage front, namely, that New York state attorney general Eric Schneiderman filed a motion to intervene in the proposed $8.5 billion settlement between Bank of America and the Bank of New York acting as trustee of 530 Countrywide residential mortgage securitizations.

We said when the deal was announced that it was not a done deal and it stank to high heaven, so we are glad to see confirmation of our dim view. In keeping, the motion charges Bank of New York with “fraudulent and deceptive conduct”. As we will see, the allegations that Schneiderman has made against Bank of New York opens up a whole new front of mortgage securitization liability, that of the trustees failing to live up to their contractual duties and worse, making ongoing certifications that they had. This is an area we’ve discussed at some length before and have been surprised hasn’t been taken up until now.

By way of background, the proposed settlement purportedly had Bank of New York acting on behalf of investors, although it conferred with only 22 and did not even go through the motions of consultation with the rest. In addition, we indicated, many of that 22, such as the New York Fed, had reason to support Bank of America getting a sweetheart deal if it alleviated questions about the bank’s solvency. Moreover, as we pointed out, Bank of New York itself had substantial conflicts of interest in entering into this deal. BofA represented nearly 2/3s of Bank of New York’s trustee business, and as Adam Levitin had noted prior to the settlement being filed that Bank of New York would “inevitably have to be deferential” to Bank of America.

But the biggest problem with the deal were the broad releases that went well beyond the matter at hand, which were breaches of representations and warranties (in simple terms, that investors were promised that the mortgages would meet certain standards and those promises were violated). One was effectively a payoff: that Bank of America gave Bank of New York indemnification that looked to be too good an offer to refuse...

[Demeter]

52. Delaware to intervene in BoA $8.5 billion pact

http://www.reuters.com/article/2011/08/05/us-bofa-delaware-idUSTRE77474E20110805

A day after New York's attorney general called Bank of America Corp's (BAC.N) $8.5 billion mortgage-backed securities settlement "unfair" and "inadequate", another state attorney general hinted he may also oppose the deal.

Delaware Attorney General Beau Biden plans on filing a motion to intervene next week, said an attorney from his office on Friday...

[Demeter]

53. Bank of America’s ReconTrust Sued by Washington State Over Foreclosures

http://www.bloomberg.com/news/2011-08-05/bofa-s-recontrust-unit-sued-by-washington-state-over-foreclosure-practices.html

Bank of America Corp. (BAC)’s ReconTrust unit failed to conduct foreclosures as a neutral third party as required by law, Washington state Attorney General Rob McKenna said in a lawsuit.

ReconTrust, which acted as a trustee handling foreclosures, had a duty to act in good faith to borrowers as well as lenders, McKenna said today at a press conference announcing the suit. ReconTrust also concealed or misrepresented the actual owner of the debt when handling foreclosures, according to the complaint filed in state court in Seattle.

The lawsuit follows an investigation of Washington trustees’ foreclosure practices, including faulty documentation. McKenna said the lawsuit was filed because ReconTrust didn’t take corrective actions to change its ways.

“They have left us with no choice,” McKenna said. “We will have the full attention of ReconTrust and its owner, Bank of America, and they will be more interested in sitting down and making things right.”

[Demeter]

48. Bill Black: U.S. Subsidies to Systemically Dangerous Institutions Violate WTO Principles

http://www.nakedcapitalism.com/2011/08/bill-black-u-s-subsidies-to-systemically-dangerous-institutions-violate-wto-principles.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

This article makes the policy case that U.S. subsidies to its systemically dangerous institutions (SDIs) violate World Trade Organization (WTO) principles. The WTO describes its central mission as creating “a system of rules dedicated to open, fair and undistorted competition.” There is a broad consensus among economists that the systemically dangerous institutions (SDIs) receive large governmental subsidies that make “open, fair, and undistorted competition” impossible. To date, WTO is infamous for its hostility to efforts by nation states to regulate banks effectively. At best, the result is a classic example of the catastrophic damage cause by the “intended consequences” of the SDIs’ unholy war against regulation.

There is broad agreement among economists that the U.S. provides extremely valuable subsidies to the SDIs and that these subsidies have disastrous consequences. Neither major Party in the U.S., however, is willing to end the SDIs or even subject them to effective regulation. I propose that Latin America take the lead in demanding that the WTO live up to its stated mission and stop the massive governmental subsidies that the rent-seeking SDIs have extorted through their political power and their ability to hold the global economy hostage. It would be a irony of cosmic degree if the WTO, among the SDIs’ most consistent allies were to find the SDI subsidies to violate U.S. treaty obligations. (The same argument can be made against other nations that subsidize their SDIs, but some of the best data on the magnitude of the subsidies and the damage they cause is available now in the United States.

The direct bailout programs to banks were enormous, but the indirect subsidies through massive purchases by the Fed of poor quality mortgage paper are far larger. The Fed continues to hold the paper and to refuse to book losses on the bad loans. The SDIs receive an even more opaque subsidy, however, and it too is massive. The SDIs are able to borrow more cheaply and have greater leverage because they are perceived as “too big to fail.” Because they pose a systemic risk of causing a global crisis SDI creditors believe that the U.S. is likely to bail them out rather than allow an SDI to collapse. In economic essence, the SDIs hold the global economy hostage, daring the U.S. to allow them to collapse and spark a global crisis.

Economists and bank regulators favor a thoroughly dishonest term that should be treated with derision – “systemically important” – as if the SDIs deserved a gold star for putting the global economic system under constant risk of catastrophic failure. The U.S. does not bail out banks because they are well run institutions that provide unique benefits to the economy. It bails out banks because they are so badly run that they have losses so large that the regulators fear could cause cascade failures at dozens of other banks. I urge you to call authors on their use of any euphemism that fails to stress that these banks are systemically dangerous. The U.S. is in the process of trying to define which banks are SDIs, but there are roughly 20 U.S. financial institutions that the regulators have treated as SDIs during this crisis...

[Demeter]

50. A TIMELY MESSAGE FROM DILBERT'S EVIL DOG DOGBERT

[Demeter]

55. National 'poverty tour' will highlight hardships in Obama's backyard

http://www.chicagotribune.com/news/local/ct-met-poverty-tour-20110804,0,1048655.story

SHAMING THE SHAMELESS?

[xchrom]

56. Obama Talks With Sarkozy, Merkel on Europe Crisis

http://www.bloomberg.com/news/2011-08-05/obama-speaks-with-sarkozy-merkel-about-europe-debt-crisis-syria-violence.html

President Barack Obama spoke today with French President Nicolas Sarkozy and German Chancellor Angela Merkel as European leaders struggle to calm concerns that the region’s debt crisis and global economy will worsen.

Obama “welcomed the continued leadership” of Sarkozy and Merkel in addressing the challenges facing Europe’s economy and they talked about the “significant steps” taken at a July 21 summit, according to a White House statement.

The discussions, in separate telephone calls, came on the same day that Italian Prime Minister Silvio Berlusconi called for finance ministers from the Group of Seven nations to meet in the coming days. G-7 finance ministers are now scheduled to meet Sept. 9-10 in Marseille, France.

European officials are renewing efforts to stamp out the region’s debt crisis against the backdrop of a slumping global stock market. While the rout slowed today on optimism that faster Italian austerity measures will prompt the European Central Bank to prop up the country’s debt, Berlusconi said at a news conference in Rome that leaders are still facing a “very difficult situation.”

[xchrom]

61. Italian, Spanish Economic Growth Sluggish as Crisis Threatens Recovery

http://www.bloomberg.com/news/2011-08-05/spanish-economic-growth-slows-on-euro-debt-crisis-stress-1-.html

Italian and Spanish economic growth remained sluggish with weak domestic demand complicating efforts to convince investors the countries can expand enough to reduce debt and avoid becoming victims of Europe’s sovereign crisis.

Gross domestic product in Italy rose 0.3 percent in the second quarter from the previous three months, when it grew 0.1 percent, Rome-based national statistics institute Istat said today. Spanish GDP expanded 0.2 percent from the January-March period, when it increased 0.3 percent, the Bank of Spain estimated today. Industrial output fell in June in both countries and in Germany, separate reports showed today.

Combined with “market tensions and higher interest rates, the economy is very likely to contract” in the third quarter, Luigi Speranza, an economist at BNP Paribas in London, said in a note about Italy.

“Increased uncertainty in recent months has accentuated the downside risks for economic growth,” Spain’s central bank said in its monthly economic bulletin, released in Madrid today.

[Demeter]

62. I'm sure he mentioned Predator Drones

That seems to be the only threat he knows. Imagine Berlusconi under attack from the air...he'd never know what hit him.

[Po_d Mainiac]

68. Just tell him it's under-age....he'd welcome the hit. n/t

[Demeter]

57. White House unveils broad plan to fight domestic radicalism

THIS IS UNCONSTITUTIONAL ON ITS FACE...A COMPLETE VIOLATION OF FIRST AMENDMENT RIGHTS. RADICALISM BRINGS CHANGE. IT'S TERRORISM, DOMESTIC TERRORISM, THAT THE GOVERNMENT REFUSES TO ADDRESS.

http://www.latimes.com/news/nationworld/nation/la-na-domestic-radicals-20110804,0,5516565.story

The White House announced a strategy to help police, schools and other local organizations counter the threat of domestic radicalism, a broad plan involving federal departments not usually associated with national security.

The effort is modeled on anti-gang initiatives developed in the 1990s and programs intended to prevent school shootings like the tragedy at Columbine High School in Colorado in 1999.

Although short on details, the eight-page outline for the first time called on all parts of the U.S. government, including the departments of Education and Health and Human Services, to devise ways to help communities identify extremist agendas that could lead to violence...

YOU WANT TO STOP VIOLENCE? JOBS, JOBS, JOBS, UNIVERSAL, SINGLE PAYER HEALTH CARE, KILL THE ZOMBIE BANKS AND UNWIND THE MORTGAGE CRISIS, AND JOBS. AND EDUCATION THAT INCLUDES CIVICS AND HISTORY IN ITS NON-IDEOLOGICAL FORMS, AND REALITY-BASED SCIENCE AND MATH. SPELLING WOULDN'T HURT, EITHER. THIS IS A COMBINATION OF FEAR-MONGERING AND WINDOW-DRESSING.

[bread_and_roses]

65. Amen, Sister (n/t)

[Demeter]

58. War and Debt By MICHAEL HUDSON

http://www.counterpunch.com/hudson08032011.html

To begin with the most obvious question: If governments run up their debt in the process of carrying out programs that Congress already approved, why would Congress have yet another option to stop the government from following through on these authorized expenditures, by refusing to raise the debt ceiling?

The answer is obvious when one looks at why this fail-safe check was introduced in almost every country of the world. Throughout modern history, war has been the major cause of a rising national debt. Most governments operate in fiscal balance during peacetime, financing their spending and investment by levying taxes and charging user fees. War emergencies push this balance into deficit – sometimes for defensive wars, sometimes for aggression.

In Europe, parliamentary checks on government spending were designed to prevent ambitious rulers from waging war. This was Adam Smith’s great argument against public debts, and his urging that wars be financed on a pay-as-you-go basis. He wrote that if people felt the economic impact of war immediately – rather than postponing it by borrowing – they would be less likely to support military adventurism.

This obviously was not the Tea Party position, nor that of the Republicans. What is so remarkable about the August 2 debt ceiling crisis in the United States is its seeming dissociation with war spending. To be sure, over a third ($350 billion) of the $917 billion cutback in current spending is assigned to the Pentagon. But that simply slows the remarkable escalation rate that has taken place from Iraq to Afghanistan to Libya.

[Demeter]

59. CLARIFICATION CONTINUES

What is even more remarkable is that last month, Democrat Dennis Kucinich and Republican Ron Paul sought to make President Obama obey the conditions of the War Powers Act and get Congressional approval for his war in Libya, as required when warfare goes on for more than three months. This attempt to apply the rule of law to the Imperial Presidency was unsuccessful. Obama clamed that bombing a country was not war. It was only war if a country’s soldiers were being killed. Bombing of Libya was done from the air, at long distance, and perhaps also by drones. So is a bloodless war really a war – bloodless on the aggressor’s side, that is?

Here was precisely the situation for which the debt ceiling rule was introduced in 1917. President Wilson had taken the United States into the Great War, breaking his election campaign promise not to do so. Isolationists in the United States sought to limit America’s commitment, by imposing Congressional oversight and approval of raising the debt ceiling. This safeguard obviously was intended to be used against unscheduled spending that occurred without Congressional approval.

The present rise in U.S. Treasury debt results from two forms of warfare. First is the overtly military Oil War in the Near East, from Iraq to Afghanistan (Pipelinistan) to oil-rich Libya. These adventures will end up costing between $3 and $5 trillion. Second and even more expensive is the more covert yet more costly economic war of Wall Street against the rest of the economy, demanding that losses by banks and financial institutions be passed onto the government balance sheet (“taxpayers”). The bailouts and “free lunch” for Wall Street – by no coincidence, Congress’s number one political campaign contributor – cost $13 trillion.

[Demeter]

60. For those who still doubt the role of corporations in raising food prices through speculations

http://landandpeople.blogspot.com/2011/08/for-those-who-still-doubt-role-of.html

"Reports that a company owned by Cargill and ABF bought all the available UK feed wheat last month has renewed calls for tighter regulation of commodity markets.

Traders reportedly told the Bureau of Investigative Journalism that Frontier Agriculture bought all available May Futures contracts on the London International Financial Futures and Options Exchange (Liffe) in the period running up to the tender date in the last week of April.

It has been described as an “unprecedented move” and an attempt to manipulate the market, which Frontier denies.

However, the BIJ says that Frontier is believed to have taken delivery of about 225,000 tonnes of feed wheat now worth about £40m."

[Demeter]

63. Warren Reportedly Ready to Drink From Poisoned Chalice of a Senate Bid

http://www.nakedcapitalism.com/2011/08/19751.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

YVES DESPAIRS, AND RIGHTLY SO, IMO.

[bread_and_roses]

76. Oh, goddess, that's depressing ...(n/t)

[Demeter]

64. That's as much grief as I can stand for now

Got a crazy Saturday ahead....see you Sunday!

[Fuddnik]

67. Yeah, get some rest. I fear it's going to be a sucky week.

[DemReadingDU]

72. The Great Dog Escape

2 minute video

http://www.youtube.com/watch?v=yJ13Wcx4wjQ&feature=response_watch

[DemReadingDU]

73. Useful Dog Tricks performed by Jesse

3 minute video

http://www.youtube.com/watch?v=P9Fyey4D5hg&feature=player_embedded

[Demeter]

79. Awesome doggie videos, thanks DRDU

[muriel_volestrangler]

75. Tel Aviv exchange halts trade after 6% fall

Trading on Israel's Tel Aviv stock exchange was temporarily halted on Sunday after share prices fell six percent at the open on news of a US credit rating downgrade, public radio reported.

Trading opened as normal on Sunday, the first day of Israel's working week, but mandatory suspensions went into effect minutes into the session as the stock exchange plunged.

Both the blue-chip TA-25 and the TA-100 indices dropped more than five percent in pre-trading, prompting the exchange to put into effect a practice known as an "English opening," with trading delayed for short periods.

"What happened this morning is that during pre-trading, the TA-25 went down more than five percent, so there are a few actions that are taken," exchange spokeswoman Idit Yaaron told AFP.

http://www.google.com/hostednews/afp/article/ALeqM5iC3k64YdFzgdQExBScexrHEsvZKg?docId=CNG.4590fa77cce3e594dd1933dbadbd27aa.a1

Is Tel Aviv the only notable exchange that trades on a Sunday?

(And does anywhere else refer to an 'English opening'?)

[Pale Blue Dot]

83. Dubai Shares Drop Most Since February on Global Growth Concern, U.S. Cut

Middle East shares tumbled, sending Dubai’s index down the most since February, after Standard & Poor’s cut the credit rating of the U.S. for the first time and amid rising concerns the global economy is faltering.

Emaar Properties PJSC (EMAAR), developer of the world’s tallest tower, slumped 5.3 percent. Arabtec Holding Co. (ARTC) dropped the most since March after it said second-quarter profit fell 74 percent. The DFM General Index (DFMGI) lost 3.7 percent, the most since Feb. 28, to 1,484.31 at the 2 p.m. close in Dubai. The measure has plunged 12 percent from this year’s high in April, entering a so-called correction. Israel’s TA-25 Index slumped 5.9 percent, the most since November 2008, at 2:09 p.m. in Tel Aviv.

“We’re playing catch-up and trying to anticipate and price in the response to the downgrade by global markets tomorrow,” said Julian Bruce, equity sales head at EFG-Hermes Holding SAE in Dubai. “The impact on stock prices that we’re seeing reflects the feelings of uncertainty” about global growth, he said.

Global stocks tumbled last week as investors fled equities amid signs the world’s largest economy is stalling. S&P downgraded the AAA credit rating of the U.S. on Aug. 5 by one level to AA+, while keeping the outlook at “negative.” The rating may be cut to AA within two years if spending reductions are lower than agreed to, interest rates rise or “new fiscal pressures” result in higher general government debt, the New York-based firm said.

http://www.bloomberg.com/news/2011-08-07/dubai-shares-fall-most-since-january-lead-gulf-drop-on-u-s-rating-cut.html

[Demeter]

89. The Whole Country is a Bubble

and they've been on the verge of popping for ages.

[DemReadingDU]

90. The whole world is a bubble, n/t

[bread_and_roses]

77. Noam sums everything up: "America in Decline"

Noam is our German Shepherd - presence, gravitas, intelligence, alertness, loyalty to one master - the truth (at least insofar as any human can be so, and, of course, IMHO). http://www.commondreams.org/view/2011/08/06-0

America in Decline, by Noam Chomsky

... The comic opera in Washington this summer, which disgusts the country and bewilders the world, may have no analogue in the annals of parliamentary democracy.

The spectacle is even coming to frighten the sponsors of the charade. Corporate power is now concerned that the extremists they helped put in office may in fact bring down the edifice on which their own wealth and privilege relies, the powerful nanny state that caters to their interests.

Corporate power’s ascendancy over politics and society—by now mostly financial—has reached the point that both political organizations, which at this stage barely resemble traditional parties, are far to the right of the population on the major issues under debate.

For the public, the primary domestic concern is unemployment...

...For financial institutions the primary concern is the deficit. Therefore, only the deficit is under discussion. A large majority of the population favor addressing the deficit by taxing the very rich (72 percent, 27 percent opposed), reports a Washington Post-ABC News poll. Cutting health programs is opposed by overwhelming majorities (69 percent Medicaid, 78 percent Medicare). The likely outcome is therefore the opposite.

[Demeter]

80. Wake Up, Everyone, It's Sunday

and what a horrible day it is. The temperature is 71F and the humidity is 97%

I spent two hours yesterday assembling shelves in the garage...it was awful, but not that bad. I was literally soaked in sweat after. I'm not leaving the house today, not until the humidity gets back down to breathable.

[Demeter]

81. If you need a wry chuckle, or a reason to get mad

http://whatinthefuckhasobamadonesofar.com/

[Demeter]

82. The $1 Billion Armageddon Trade Placed Against the United States Bond Market

http://www.marketoracle.co.uk/Article29477.html

Jack Barnes writes : Someone dropped a bomb on the bond market Thursday - a $1 billion Armageddon trade betting the United States will lose its AAA credit rating. In one moment, an invisible trader placed a single trade that moved the most liquid debt market in the world. The massive trade wasn't placed in bonds themselves; it was placed in the futures market. The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures executed at 125-01.

The value of the trade was about $850 million dollars. In simple terms, if that was a direct bond buy, no one would be talking about it. However, with the use of futures, you have to have margin capacity behind the trade. That means with a single push of a button someone was willing to commit more than $1 billion of real capital to this trade with expectations of a 10-to-1 return ratio.

You only do this if you see an edge.

This means someone is confident that the United States is either going to default or is going to lose its AAA rating. That someone is willing to bet the proverbial farm that U.S. interest rates will be going up.

I believe what happened is a debt-ceiling deal was done in Washington and leaked to a major proprietary trader. Everyone knows the debt negotiations in Washington have been an extreme game of brinksmanship between political parties, but now someone knows how that game played out. This had the hallmarks of one of the largest bond shops in the world knowing something the rest of the market didn't. The number of shops or even central banks that can take on this level of market risk is extremely small. Some that come to mind are hedge fund manager John Paulson, Bill Gross's PIMCO, and the U.S. and Chinese central banks. Paulson already scored big - about $6 billion big - on a similar trade years ago when he bet against subprime mortgages, the investments that helped bring down Lehman Bros. and many other investors.

Whoever was behind it wanted a trade on ASAP, and didn't care about the ripples they would cause...You can see how this trade caused fear to be unleashed in the market once it got out and the implications hit by looking at U.S. Treasuries. People who were long 30-year Treasuries panicked as they saw the huge short put on the futures market, and started to unwind their long exposure...What you, as investors, should do now is look at the bond exchange-traded funds (ETFs) that provide a positive rate of return when U.S. Treasuries drop in value. Yields are going up sooner rather than later, if the person behind this Armageddon trade is correct.

Source :http://moneymorning.com/2011/07/25/the-1-billion-armageddon-trade-placed-against-the-united-states/

[Tansy_Gold]

87. Who's on the other side of the bet?

I can bet you a trillion dollars on 10 to 1 odds that tomorrow is gonna be Monday, but if you don't accept the bet, it's meaningless.

I'm less interested in who placed the bet than in who they bet it with, and who's gonna pay off on the ten billion.



TG, TT

[Demeter]

88. So is everyone else who isn't corrupted

We haven't found out who bet against the airlines on 9/11, so what are the odds we'll find out this one?

[DemReadingDU]

91. The thing is, there is no money to pay off the bet(s)

The taxpayers are broke, and so now the countries are broke.

[Pale Blue Dot]

92. Dollar Tumbling To Record Low Against Swiss Franc, New Lows Against Yen

For an early look at the risk aversion gripping the market look no further than the USDCHF and the USDJPY, the first of which just took out 0.75, and the second now almost at BOJ intervention levels. Ironically, since the math Ph.D.s have still not recalibrated their models, it is very likely that the collapse in the dollar will lead to an explosion in ES courtesy of the inverse correlation, which will once and for all confirm that global capital markets and now nothing but a robotic circus.

http://www.zerohedge.com/news/dollar-tumbling-record-low-against-swiss-franc-new-lows-against-yen

[Po_d Mainiac]

94. The e/s is now under 1175

Gonna be interesting

[Pale Blue Dot]

93. ECB Considers Massive Purchases of Italian and Spanish Bonds

Even thought the US media has been fixated on the downgrade of Treasuries to AA+ by Standard and Poor’s, the real risk to the markets is continuing decay in Eurozone sovereign debt. The BBC’s Robert Peston said today that the failure of the ECB to buy Italian bonds would be a Lehman moment. As our Ed Harrison stresses, while some countries like Greece have a solvency crisis and need to have their obligations restructures (as in written down), the stress on Spanish and Italian bonds looks like a classic liquidity crisis. And the concern has spread to the core, as French sovereign debt (remember, rated AAA) was trading at a 90 basis point premium to German bunds.

This is a much more important potential disruptor than the S&P downgrade, which is almost certain to hit stocks rather than Treasuries. Central banks have indicated, not surprisingly, that they will continue to hold Treasuries (note all the Chinese harrumphing contained no specific threat); big foreign money managers have also said that Treasuries are still the most appealing game in town for investors who need safety and liquidity. Wall Street banks confirm our view, that any selloff in Treasuries is likely to be temporary. There are lots of investors that are desperate for yield and any uptick would be welcomed and seized.

But that fact that we have had a debt deal put in place that is massively deflationary, and S&P (and to a lesser degree, Fitch) want further cuts means lower GDP growth and higher unemployment. And where is the place to be in deflation? High quality bonds and cash. Last week’s combination of a large rally in Treasuries, which were already trading at high levels with the debt ceiling negotiations, and falling stock prices, is exactly what you’d expect to see with investors waking up to the risks and consequences of deflation. A failure of the Eurozone to deal with a liquidity crisis induced by its lame response to the rolling solvency crisis in Greece would be another deflationary blow. It would be nice if we could carry off deflation as gracefully as Japan, but they have the social cohesion to settle on a model of shared sacrifice. Our version is certain to be more ugly.

http://www.nakedcapitalism.com/2011/08/ecb-considers-massive-purchases-of-italian-and-spanish-bonds.html

[Fuddnik]

95. Asian markets opening in deep red territory right at the opening.

http://finance.yahoo.com/intlindices?e=asia



Dow futures minus 241 for now.

[Demeter]

96. -241?

And that's just to start....

Well, I hope they are all happy, down in DC. This is what comes of "playing chess" with people who have to cheat at checkers.

[Demeter]

97. The REAL Crisis is Finally Here... Are You Prepared For It?

http://www.zerohedge.com/contributed/real-crisis-finally-here-are-you-prepared-it


Well, it’s finally here, the REAL Crisis: the one where entire countries go bust, not just the banks. And this time around the Fed and central banks won’t be able to stop it....Case in point, the Swiss central bank intervened in the markets on August 3 to suppress the Swiss Franc. The effect of its intervention lasted less than a few hours..The same goes for any action the Fed might implement as well.

I know that the bulls believe QE 3 can save the market. They’re right in the sense that the announcement of QE 3 would slow the pace of the unfolding Crisis.However, QE3 wouldn’t stop the Crisis or cause the same kind of rally that QE 2 did for the mere fact that everyone now realizes that the Fed cannot solve the problems facing the Financial System. As I’ve pointed out many times, the Fed will be powerless this time around. Indeed, as I write this the US Dollar AND stocks are tanking, indicating that the Fed’s ability to reflate the markets by devaluing the Dollar is ending. And what happens when the Fed’s primary monetary tool (devaluing the Dollar) becomes useless?

GAME OVER.



Just like in 2008 we’re going to see a full-scale market Crash. Only this time it will also involve countries defaulting on their debt, bank holidays, civil unrest, and more. In simple terms, it’s going to be 2008 on steroids.

[Demeter]

98. Dear friends and readers

I have great dread over what this week will bring. I think our leaders in DC are totally responsible for it, though. All of them without exception.

Isn't it lovely that Timmy will stick around? At least ONE of the architects of this dog's breakfast will be there when it hits the fan.

Please, keep cool, keep well, and survive. We will get through this, together.

[Fuddnik]

99. You can't sleep either, huh?

Dow futures now down 281pts.

[tama]

101. Why fear?

It's just money, nothing... :)

[tama]

100. My birthday was yesterday

And I'm in love with a woman who has a dog called Wuli. She once pointed to me the main difference between dogs and (most) people: if you lock up a dog in a room and then let it out, it comes out merrily wagging its tail and giving kisses. If you do that to a human person, it comes out grumpily and holding crudge.

[DemReadingDU]

102. So true

Happy Belated Birthday!

:hi: