Lending money to nearly anyone who asked for it

WaMu Built Empire on Shaky Loans

Excerpt:

... one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.

Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.

...
On one loan application in 2005, a borrower identified himself as a gardener and listed his monthly income at $12,000, Ms. Zaback recalled. She could not verify his business license, so she took the file to her boss, Mr. Parsons.

He used the mariachi singer as inspiration: a photo of the borrower’s truck emblazoned with the name of his landscaping business went into the file. Approved.

....

For WaMu, variable-rate loans — option ARMs, in particular — were especially attractive because they carried higher fees than other loans, and allowed WaMu to book profits on interest payments that borrowers deferred. Because WaMu was selling many of its loans to investors, it did not worry about defaults: by the time loans went bad, they were often in other hands.

...

By 2005, the word was out that WaMu would accept applications with a mere statement of the borrower’s income and assets — often with no documentation required — so long as credit scores were adequate, according to Ms. Zaback and other underwriters.

“We had a flier that said, ‘A thin file is a good file,’ ” recalled Michele Culbertson, a wholesale sales agent with WaMu.

Martine Lado, an agent in the Irvine, Calif., office, said she coached brokers to leave parts of applications blank to avoid prompting verification if the borrower’s job or income was sketchy.

Comment: WaMu is now owned by JPMorgan Chase.

Money "worthless beyond its shores"

The Isle That Rattled the World

Excerpts:

.... housands of Icelanders were protesting one of the strangest economic failures of the global financial crisis. This past fall, every bank that matters in this tiny nation -- that is, all three of them -- failed. Iceland's currency, the krona, became worthless beyond its shores. The country's financial system stopped working.

...

Iceland is an extreme casualty of an era in which it became extraordinarily easy to borrow money. But it was more than that: An examination of the nation's banking system, which collapsed over about 10 days this autumn, reveals the degree to which Iceland was one of the international financial bubble's most enthusiastic players. Home to fewer people than Wichita, Kan., Iceland became so leveraged and so deeply intertwined with the global financial infrastructure that its collapse has rattled the world from Tokyo to California to the Middle East.

...
Like Americans who rode a housing bubble thanks to the U.S. Federal Reserve's maintaining low interest rates for years, Icelanders had found a cheap source of borrowing to finance their consumption.

As long as foreign money kept flowing into Iceland, everything remained fine. But an outflow would dangerously reverse the equation, and set the stage for calamity.

Iceland isn't the only small country to be whipsawed by foreign money flooding in, then gushing out. Hungary and Latvia were similarly hit.

What makes Iceland different: It tried to build a global banking center on top of a tiny currency. So when foreign investors tried to pull out -- converting kronur back into dollars or euros en masse -- its currency fell like a rock, spurring more withdrawals.

Amid Iceland's euphoria, there were warnings. In 2006, analysts at Danske Bank wrote a paper titled "Geyser Crisis" saying that Iceland's banks had grown too much, and the country was dangerously reliant on the willingness of foreigners to keep sending money.

Comment: Americans (US citizens) should carefully consider the fate of the Krona and the Zimbabwean dollar. Their fate could be ours!

"the poor country lending to the rich.”

Dollar Shift: Chinese Pockets Filled as Americans’ Emptied

Excerpt:

The problem, he said, was not that Americans spend too much, but that foreigners save too much. The Chinese have piled up so much excess savings that they lend money to the United States at low rates, underwriting American consumption.

This colossal credit cycle could not last forever, he said. But in a global economy, the transfer of Chinese money to America was a market phenomenon that would take years, even a decade, to work itself out. For now, he said, “we probably have little choice except to be patient.”

Today, the dependence of the United States on Chinese money looks less benign. And the economist who proposed the theory, Ben S. Bernanke, is dealing with the consequences, having been promoted to chairman of the Fed in 2006, as these cross-border money flows were reaching stratospheric levels.

In the past decade, China has invested upward of $1 trillion, mostly earnings from manufacturing exports, into American government bonds and government-backed mortgage debt. That has lowered interest rates and helped fuel a historic consumption binge and housing bubble in the United States.

China, some economists say, lulled American consumers, and their leaders, into complacency about their spendthrift ways.

Comment: This can't last forever!

God's Christmas Card

On a day some 2000 years ago, God entered time and space.

"Behold, a virgin shall conceive and bear a son, and shall call His name Immanuel" Isaiah 7:14

"For unto us a child is born, unto us a son is given, and the government shall be upon His shoulder; and His name shall be called Wonderful, Counselor, the mighty God, everlasting Father, the Prince of Peace" Isaiah 9: 6

"In the beginning was the Word, and the Word was with God and the Word was God...And the Word became flesh and dwelt among us, and we beheld His glory, glory as of the only begotten of the Father, full of grace and truth" John 1:1, 14

The following from a Christmas card expounds on John 3:16:

For God (the greatest Person)
So loved (the greatest degree)
The world (the greatest company)

That He gave (the greatest act)
His only begotten Son (the greatest gift)
That whosoever (the greatest opportunity)
Believeth (the greatest simplicity)
in Him (the greatest attraction)

Should not perish (the greatest promise)
But have (the greatest difference)
Everlasting life (the greatest possession)

JP: Image from an antique Christmas card in my Sister-in-law's collection.

It is a cold (minus 4) white Christmas in Minnesota. We are awaiting (expected at 9) the arrival of our children.

More:

"For unto you is born this day in the city of David a Savior, which is Christ the Lord." (Luke 2:11)

A quote that captures the importance of this truth.

• If our greatest need had been information, God would have sent us an educator;
  
• If our greatest need had been technology, God would have sent us a scientist;
  
• If our greatest need had been money, God would have sent us an economist;
  
• If our greatest need had been pleasure, God would have sent us an entertainer;
  
• But our greatest need was forgiveness, so God sent us a Savior.

HT: Frank Sansone

The Father of "Pick-A-Pay"

Once Trusted Mortgage Pioneers, Now Pariahs

Excerpt:

Known as an option ARM — and named “Pick-A-Pay” by World Savings — it is now seen by an array of housing analysts and regulators as the Typhoid Mary of the mortgage industry.

Pick-A-Pay allowed homeowners to make monthly mortgage payments that were so small they did not cover their interest charges. That meant the total principal owed would actually grow over time, not shrink as is normally the case.

Now held by an estimated two million homeowners, the option adjustable rate mortgage will be at the forefront of a further wave of homeowner distress that could greatly delay or even derail an economic recovery, mortgage industry analysts say.

The Wachovia Corporation, which bought the Sandlers’ bank two years ago, was so battered by the souring portfolio of World Savings that it began writing off losses now projected at tens of billions of dollars and eventually stopped offering option ARMs.

Through it all, the Sandlers have maintained they did nothing wrong beyond misjudging the real estate bubble.

“I didn’t mislead anybody, and to the best of my knowledge, our company didn’t, though there may have been an isolated case here and there,” Mr. Sandler said. “If home prices hadn’t declined by 50 percent, nobody would be raising these questions.”

Mr. Sandler also finds it incredible that borrowers feel victimized by Pick-A-Pay. “All of a sudden their home is worth half of what it was, and they say they didn’t know.”

Yet the Sandlers embraced practices like the use of independent brokers who used questionable methods to reel in borrowers. These and other practices, critics contend, undermined the conservative lending practices that the Sandlers built their reputations upon.

“This product is the most destructive financial weapon ever deployed against the American middle class,” said William J. Purdy III, a housing lawyer in California who is representing elderly World Savings customers struggling to repay their loans. “People who have this loan are now trapped, and they can’t get another loan.”

Comment: Sounded like a good idea at the time

Wachovia "what ifs"

Wachovia shareholders OK Wells deal

Excerpt:

Wachovia Corp.’s shareholders approved the company’s merger with Wells Fargo & Co. at a relatively sedate shareholder meeting Tuesday morning, clearing the way for the deal to close next week.

The proposal passed overwhelmingly, with 76 percent of the votes cast in favor of the deal. That included preferred stock that Wachovia issued to Wells as part of the deal, giving the San Francisco company 39.9 percent of Wachovia’s voting power.

Security was tight at the meeting, held in a packed ballroom at the Hilton hotel next door to Wachovia’s Charlotte headquarters. Most of the company’s board of directors was absent, however, and Chief Executive Bob Steel told the audience that the day was one of a “variety of emotions,” including disappointment that Wachovia (NYSE:WB) won’t survive as an independent company. He expressed some excitement about the combination, along with some relief that employees could move forward and focus on their jobs “without the overhanging pressure of balance-sheet challenges.”

What ifs: Could sale have been avoided?

Excerpt:

Golden West Financial: Wachovia bought this nontraditional California lender in 2006 at the top of the housing boom. The deal exposed the bank to the faltering housing market and caused investors to worry about mounting losses. Wells now estimates losses of $36 billion, or 29 percent, on Golden West's $122 billion option adjustable rate mortgage portfolio.

Comment: The biggest misstep was Golden West Financial.

Excerpt:

While Wachovia Chairman and CEO G. Kennedy "Ken" Thompson had described Golden West as a "crown jewel", investors did not react positively to the deal at the time. Analysts have since said that Wachovia purchased Golden West at the peak of the US housing boom, and its mortage-related problems would in turn bring down Wachovia

The Biggest Ponzi Scheme Ever?

Social Security: The Biggest Ponzi Scheme Ever?

Excerpt:

Jim Cramer of CNBC points out that Social Security is really nothing but a big Ponzi scheme.

Comment: HT Darrell Dow

Will the economy suddenly "go poof"?

Wells Fargo so confident recession will end in '09

Excerpt:

The second half of '09 is going to be "better than expected," said Jim Paulsen, chief investment strategist for Wells Fargo Capital Management:

"It's like you're at a cookout and you're trying and trying to get your charcoal going and you keep squirting lighter fluid and all of a sudden it goes 'poof!' "

Comment: Quote from the 2008 Economics Conference.

Al Sicherman's NASTY index

How cold is it? It's so cold…

Excerpt:

So here is the New Al Sicherman Temperature Yardstick (NASTY).

NASTY Level 0: "Brisk," 32 to 20 degrees: Barely visible layer of ice forms overnight; you almost slip getting into car. You regret not wearing gloves.

NASTY Level 1: "Uncomfortable," 20 to 10 degrees: Frost on windshield too firm to come off just by running wipers; requires scraping (if you can find scraper). You really regret not wearing gloves. And hat.

NASTY Level 2: "Frosty," 10 to 0 degrees: After briefly removing glove while walking dog, to put newspaper bag to its highest use, your hand remains ice-cold inside glove all the way home.

NASTY Level 3: "Frigid," 0 to -10 degrees: Sound of car starter changes from rettita-rettita-VROOM to wuoh-wuoh-wuoh-wuoh-VROOM.

NASTY Level 4: "Awful," -10 to -15 degrees: Remote door-unlock button produces only strangled hum.

NASTY Level 5: "Terrible," -15 to -20 degrees: Inside of windshield frosts over from your breath; protruding lower lip, to force breath up instead of out, causes your glasses to frost over.

NASTY Level 6: "Dreadful," -20 to -25 degrees: Sound of car starter changes from wuoh-wuoh-wuoh-wuoh-VROOM to wuoh wuoh wuoh wuoh wuh.

NASTY Level 7: "Horrible," -25 to -30 degrees: Pressing button to turn on car radio causes crack to open across entire dashboard. (Radio doesn't come on.)

NASTY Level 8: "Unspeakable," -30 to -35 degrees: After leaving car all evening in unheated ramp, car window has frozen up and can't be lowered to pay the attendant; you have to open the door, but there's no room because you're right next to attendant's booth, and you can't pull forward because attendant has crossing arm down (and through closed window you can't make him understand you need to pull forward so you can open door to pay him) and you can't back up because there's somebody behind you.

NASTY Level 9: "Ghastly," -35 to -40 degrees: When you try to open car door, handle breaks off.

NASTY Level 10: "Evil," colder than -40 degrees: When you try to open car door, hand breaks off.

Comment: Nasty level 3 today (-6). We took the car through the car wash which is very interesting (car wash foggy) at this temp!

Stocking stuffer - a life's lesson

Comment: I am giving each of my kids 100 Billion (Zimbabwean) dollars. Found on Ebay. When released on July 1st, 2008, a $ 100 Billion would by 3 eggs!

Liberals are cheapskates!

Bleeding Heart Tightwads

Excerpt:

Liberals show tremendous compassion in pushing for generous government spending to help the neediest people at home and abroad. Yet when it comes to individual contributions to charitable causes, liberals are cheapskates.

Arthur Brooks, the author of a book on donors to charity, “Who Really Cares,” cites data that households headed by conservatives give 30 percent more to charity than households headed by liberals. A study by Google found an even greater disproportion: average annual contributions reported by conservatives were almost double those of liberals.

Other research has reached similar conclusions. The “generosity index” from the Catalogue for Philanthropy typically finds that red states are the most likely to give to nonprofits, while Northeastern states are least likely to do so.

The upshot is that Democrats, who speak passionately about the hungry and homeless, personally fork over less money to charity than Republicans — the ones who try to cut health insurance for children.

...

Americans give sums to charity equivalent to 1.67 percent of G.N.P., according to a terrific new book, “Philanthrocapitalism,” by Matthew Bishop and Michael Green. The British are second, with 0.73 percent, while the stingiest people on the list are the French, at 0.14 percent.

...

Conservatives also appear to be more generous than liberals in nonfinancial ways. People in red states are considerably more likely to volunteer for good causes, and conservatives give blood more often. If liberals and moderates gave blood as often as conservatives, Mr. Brooks said, the American blood supply would increase by 45 percent.

Comment: Interesting.

Teamwork in Russia

Comment: Sent to me by my brother

Have we started down "the Zimbabwean path"?

Is the Medicine Worse Than the Illness?

Excerpts:

... Federal Reserve's announcement last Tuesday that it intends to debase its own paper money. The year just ending has been a time of confusion as much as it has been of loss. But here, at least, was the bright beam of clarity. Specifically, the Fed pledged to print dollars in unlimited volume and to trim its funds rate, if necessary, all the way to zero. Nor would it rest on its laurels even at an interest rate low enough to drive the creditor class back to work. It would, on the contrary, "continue to consider ways of using its balance sheet to further support credit markets and economic activity."

....

One market, only, registered a protest. The Fed's declaration of inflationary intent knocked the dollar for a loop against gold and foreign currencies. In many different languages and from many time zones came the question, "Tell me, again, now that the dollar yields so little, why do we own it?"

...

If the Fed is going to create boatloads of depreciating, non-yielding dollar bills, who will absorb them? Who will finance the Obama administration's looming titanic fiscal deficits? Who will finance America's annual surplus of consumption over production (after 25 more or less continuous years, almost a national trait)? Inflation is a kind of governmentally sanctioned white-collar crime.

...

In ages past, it was so simple. A central banker had one job only, and that was to assure that the currency under his care was exchangeable into gold at the lawfully stipulated rate. It was his office to make the public indifferent between currency or gold. In a crisis, the banker's job description expanded to permit emergency lending against good collateral at a high rate of interest. But no self-respecting central banker did much more. Certainly, none arrogated to himself the job of steering the economy by fixing an interest rate. None, I believe, had an economist on the payroll. None facilitated deficit spending by buying up his government's bonds. None cared about the average level of prices, which rose in wartime and sank in peacetime. It sank in peacetime because technological progress and the opening of new regions to agricultural production made merchandise and commodities cheaper and more abundant.

...

Gold is a hard master, and a capricious one, too, insofar as growth in the world's monetary base depends on the enterprise of mining engineers. But, as we have seen lately, there is no caprice like the caprice of sleep-deprived Mandarins improvising a monetary solution to a credit crisis (or, for that matter, of fully rested Mandarins setting interest rates by the lights of their econometric models).

The times were hard in the 1870s and, for that matter, again in the 1890s, but Americans repeatedly spurned the Populist cries for a dollar you didn't have to dig out of the ground but could rather print up by the job lot. "If the Government can create money," as a hard-money propagandist put it in an 1892 broadside entitled "Cheap Money," "why should not it create all that everybody wants? Why should anybody work for a living?" And -- in a most prescient rhetorical question -- he went on to ask, "Why should we have any limit put to the volume of our currency?"

...

starting in 1971, there would be nothing behind it more than the good intentions of the U.S. government and (somewhat more substantively) the demonstrated strength of the U.S. economy. Still less could he have guessed that the world would nonetheless fall in love with that uncollateralized piece of paper or -- even more astoundingly -- that the United States would enjoy so great a reservoir of good will that it would be allowed to borrow its way to a net international investment position of minus $2.44 trillion ($17.64 trillion of foreign assets held by Americans vs. $20.08 trillion of American assets held by foreigners). "It goes up and up," Mr. Root said of the inflationary cycle, but just how high he could not have dreamt.

Knowledge of the precepts of classical central banking prepared no one to understand, much less to anticipate, the Fed's conduct in this credit crackup. The central bank is lending freely, all right, but not at the stipulated "high" interest rate. As a matter of fact, it is starting to lend at a rate below which there is no positive rate. The gold standard was objective. Modern monetary management is subjective (under Alan Greenspan, it was intuitive). The gold standard was rules-based. The 21st century Fed goes with what works -- or seems to work. What it hopes is going to work for the fellow who fell off the stepladder is more debt and more dollars. Just how much of each can be found every Thursday evening on the Fed's own Web site. Open up form H4.1 and prepare to be amazed. Since Labor Day, the Fed's assets have zoomed to $2.31 trillion from $905.7 billion. And what is the significance of this stunning rate of asset growth? Simply this: The Fed pays for its assets with freshly made dollars. It conjures them into existence on a computer; "printing" is a figure of speech.

Excerpt:

Thatcher Wouldn't Have Gone Wobbly on Detroit - Keynsianism is proof you shouldn't 'leave economics to economists.'Thatcherite principles remain as valid as ever. The freedom of the marketplace is still the only effective mechanism for eliminating poor business practices, identifying productive investment, and providing long-term growth.

...

President-elect Barack Obama has said that he expects things to get worse before they get better. If the experience of the first Thatcher administration is anything to go by, that will certainly be the case. For one thing, some "hidden unemployment," as Mrs. Thatcher called it, will be flushed out into the open. This will be the case with the expected closure of the Big Three's "job banks," which pay almost full wages and benefits to several thousand auto workers for doing nothing.

Comments: Easy money created our credit crisis and yet we continue to make it EZ'r. Buy yourselves some real money: http://www.apmex.com/

Carpocalypse

After Lifeline, Big 3 Are Still in Deep

Excerpts:

... the auto companies’ challenges came down to four C’s: cash, cost reduction, cars and culture.

The cash and cost reduction will come through the federal aid and the revamping plans they submitted in return for the help. “But they quite obviously need to get a different management culture ...

...

Detroit still depends heavily on pickups, and S.U.V.’s, as well as crossover vehicles, which are sport utilities built on car underpinnings.

Through November, light trucks made up 58 percent of G.M.’s sales; they account for 63.5 percent of Ford’s sales and 72.2 percent for Chrysler.

In fact, Toyota has sold more Camry models alone this year than Chrysler has sold of all its cars, according to Motorintelligence.com, a firm that follows industry statistics.

...

Comment: It's like they are primarily TRUCK companies! I doubt Chrysler will make it - my Dad is "rolling in his grave"! Chrysler's best option is merger with someone - Nissan? GM? But perhaps no one wants them.

New Zimbabwean $ 10 Billion note introduced

New Zimbabwe $10B note buys bread

Excerpt:

Zimbabwe's central bank introduced a $10 billion note worth less than 20 U.S. dollars, as the once-prosperous southern African nation battles against spiraling hyperinflation.

The new note, expected to buy just 20 loaves of bread, comes just a week after Zimbabwe issued a $500 million note to ease a cash shortage.

Reserve Bank of Zimbabwe Governor Gideon Gono said the $10 billion note was being introduced for the "convenience of the public ahead of the festive season."

On Thursday, the U.S. dollar traded for about 600 million Zimbabwe dollars, and the hyperinflation was expected to continue.

People slept overnight at the bank doors, hoping to get money for the next day.

Comment: Search Ebay for Zimbabwe notes. Above is a $ 50 Billion note

That's what they all say!

Obama says he'll address growing deficit _ later

Excerpt:

But he says it'll be easier to tackle that deficit when the economy is up and running.

Obama told reporters in Chicago on Friday that every economist he's spoken to has told him that the most important thing to do—even for the deficit—is to fix the economy. Otherwise, he says, the government will have to spend more on services for out-of-work Americans, and the deficit will grow even faster.

He says the deficit is not a problem that he's simply going to leave for a future president.

As for the infrastructure projects that will be part of his plan to reinvigorate the economy, Obama says none of them will represent wasteful spending.

Comments:

Re: "the deficit is not a problem that he's simply going to leave for a future president". Don't take this one to the bank!

Re: "the infrastructure projects ... [will not] will represent wasteful spending" - doubt it!

Far from the “holy huddle”

For Evangelical College, Home Is Where the Sin Is

Excerpt:

The King’s College was founded in the seaside town of Belmar, N.J., 70 years ago, before moving to Briarcliff Manor, N.Y., in 1955. The college closed after going bankrupt in 1994, and reopened five years later with 17 students after its backers raised enough funds.

Its setting, college leaders say, was a deliberate move. They wanted students to be exposed to new ideas and hone their intellectual chops far from the “holy huddle,” places that are religiously and ideologically sealed off from the rest of the world.

Comment: Better to have a Christian College in an urban center rather than deep in the woods!

The Book of Human Troubles

Psychiatrists Revise the Book of Human Troubles

Excerpt:

“This is not cardiology or nephrology, where the basic diseases are well known,” said Edward Shorter, a leading historian of psychiatry whose latest book, “Before Prozac,” is critical of the manual. “In psychiatry no one knows the causes of anything, so classification can be driven by all sorts of factors” — political, social and financial.

“What you have in the end,” Mr. Shorter said, “is this process of sorting the deck of symptoms into syndromes, and the outcome all depends on how the cards fall.”

Psychiatrists involved in preparing the new manual contend that it is too early to say for sure which cards will be added and which dropped.

The current edition of the manual, which was published in 2000, describes 283 disorders — about triple the number in the first edition, published in 1952.

Comment: I predict that the number of "disorders" will again trible (job security). Want to read the real book of human troubles ... read the book of Job!

Wells Fargo economics conference

Wells Fargo Economists Predict Worst Recession Since 1930s

Excerpt:

What is shaping up as the deepest and longest recession since the 1930s will end in the second half of 2009, Wells Fargo’s senior economists predicted during the company’s annual economic forecast teleconference yesterday.

The ongoing impact of $2 trillion in government stimulus, with other factors such as pent-up consumer demand and returning consumer confidence, will finally lead to a turnaround, and the third quarter of next year will be "better than expected” by many, said Dr. Jim Paulsen, chief investment strategist of Wells Capital Management. "It’s like you’re at a cookout and you’re trying and trying to get your charcoal going and you keep squirting on lighter fluid and all of a sudden it goes ‘poof!’” Paulsen said.

....

Reporters can hear a recording of the December 18th teleconference until January 17, 2009, by dialing 1-866-837-8032(domestic) or 1-703-925-2474. The conference ID is 1303927.

Comment: More from conference I attended yesterday

Kathee's a Calvinist

Comment: I know because I did not choose her, she chose me!

Will Harry Reid override Minnesota voters?

Paul Weyrich: Uncertainty in Minnesota’s U.S. Senate Race

Excerpt:

... if Mr. Franken can’t prevail in federal court, he may turn to Senate Majority Leader Harry Reid, D-Nev. Sen. Reid could have the U.S. Senate wade into the disputed ballots, as Democrats did in a disputed election for a House seat some years ago.

More likely, however, Sen. Reid would have the seat declared vacant, forcing candidates Sen. Coleman and Mr. Franken into another election.

Democrats naturally hope to achieve a 60-40 filibuster-proof majority in the U.S. Senate, so it would not be surprising to see them concentrate their resources in Minnesota and deliver the state for Mr. Franken.

As the former Director of the Senate Republican Conference said to me the other day, “Nothing could demean the Senate as an institution more than to have Franken as a member.” Perhaps, but that will be up to the citizens of Minnesota to decide.

Comment: One of Paul Weyrich's last columns - he died Thursday: Architect of Religious Right Dies. Latest looks like Franken will win: Franken pushes his lead over Coleman past 250

How many handshakes?

One hundred guests attended the Mathematical Institute Christmas party ...

Excerpt:

One hundred guests attended the Mathematical Institute Christmas party. How many handshakes must take place for all 100 guests to shake hands with each other?

Comment: I'm not very good at these ... click link for more

When you cannot flush your money

When Money Goes Down the Toilet

Excerpt:

At around 231 million percent, Zimbabwe’s hyperinflation rate (which we’ve written about before) is currently the highest in the world.

Blog reader Ben Saltsman sent us this photo of a restroom sign in South Africa, which hints at one use for Zimbabwe’s severely devalued currency:

Comment: For a picture of Zimbabwean toilet paper click here

Coleman: +5

Good news / bad news on Credit Cards

Fed OKs credit card crackdown - Regulators approve a number of key protections for credit card customers

Excerpt:

The Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration approved the regulation, which prohibits banks from certain practices like applying interest payments in ways that maximize penalties, and forces lenders to be more transparent about their billing practices.

"These protections will allow consumers to access credit on terms that are fair and more easily understood," Federal Reserve Chairman Ben Bernanke said in a statement.

The regulations mark an end to double-cycle billing, which averages out the balance from two previous bills. That means that consumers who carry a balance will no longer get hit with retroactive interest on their previous month's bill. And credit card companies will no longer be able to raise the interest rates on pre-existing credit card balances unless a payment is over 30 days late.

Consumers will also be given a reasonable amount of time to make payments, and payments will be applied to higher-rate balances first, to reduce interest penalties and fees.

Credit card statements will clearly list the time of day that a payment is due, and any changes to accounts will be in bold or listed separately.

And, finally, no more universal defaults - a policy that allowed credit card issuers to increase the interest rate on one card if a customer missed a payment on another card.

The Fed's Price Controls - Raising the cost of credit cards.

Excerpts:

That might sound good if you're those borrowers, but for everyone else it will mean higher rates even if you treat credit responsibly. If the banks can't raise prices on the riskiest borrowers, they will either limit to whom they lend or raise rates on everyone -- or both.

...
The new rules will also appeal to those who think Americans spend too much, and save too little, and blame credit cards for encouraging the trend.

But now seems like a particularly inopportune moment to tell banks that they should do less to manage their exposure to credit risk. Banks are already pulling back on consumer credit as the economy worsens and the credit crisis drags on, with lower credit limits and higher rates. If the Fed votes in favor of its new rules Thursday, expect that trend to accelerate.

Comment: The law of unintended consequences! How bad is it? (first article)

In the midst of a credit crunch, Americans have about $976.3 billion in revolving credit and 4.9% of all credit cards were delinquent in the third quarter, according to the latest data from the Federal Reserve.

More on cities' infrastructure requests

Mayors' infrastructure request full of pork

Excerpt:

The U.S. Conference of Mayors went to Capitol Hill earlier this month with a report listing 11,391 infrastructure projects proposed by 427 cities. The mayors claimed the proposal would create 847,641 jobs in 2009 and 2010.

The more than 800-page document is titled "Main Street Economic Recovery: 'Ready To Go' Jobs and Infrastructure Projects."

"Our plan calls for investments that will stimulate our economy by quickly creating jobs, fixing our aging and crumbling infrastructure, increasing our global competitiveness, and further reducing our carbon footprint," Miami, Florida, Mayor Manny Diaz said at a news conference last week. Accompanied by other big-city mayors, he held up a copy of the hefty report to stress its importance.

"To reverse the current economic crisis, we must invest wisely. We must invest where we get the greatest return. We must invest in Main Street," said Diaz, who is the president of the mayors' group.

But a close examination of the projects by CNN shows proposals that go far beyond basic infrastructure plans for roads, bridges and other traditional public works projects.

David Copperfield: Messing with your mind

Comment: Send to me by my Sister-in-Law. Sorry that the images are kind of small. Click on an image to enlarge. Bet you can figure out how this is done. Leave a comment

2008 Economic Outlook Conference

Comment: I am on a teleconference hosted by Wells Fargo economists. Brief comments (not quotes)

• Worst post-war (WW II) recession
  
• Household debt too high
  
• Expect end to recession in June 2009 (19 months from commencement in Dec '07)
  
• 3.7 M job loss in '09
  
• Unemployment expected to be 8.8% in the 4th Qtr '09
  
• 5.5 M job loss total
  
• Deflation in '09: Oil prices and commodity prices in decline
  
• Inflation expected in '10
  
• Stimulus package size 750B ---> 1T
  
• Fiscal deficit: $ 1.9 T in '09; $ 1 T in '10
  
• Total debt will be 9% of GDP (high and risk) - risk of currency collapse
  

I missed the last 20 m of the meeting (unfortunately).

The Lizard People ballot

'Lizard People' Ballot Ruled An Overvote

Excerpt:

The infamous "Lizard People" ballot from Bemidji, Minn. was declared an overvote. The Norm Coleman campaign's challenge on the ballot was allowed, though not before some discussion among the board.

Secretary of State Mark Ritchie's original motion was to reject the challenge and allow the vote for Al Franken, whose circle was filled above the write-in vote for "Lizard People."

But in deliberation, it was brought up that there is no way to determine that there is not a legitimate person named "Lizard People" and, thus, the ballot would have to be considered as carrying two votes for the U.S. Senate race.

Comment: Full PDF of the 'Lizard People' ballot available here. Fascinating to follow this! MRP coverage with full PDF's of ballots: here

Ponzi schemes: No exit strategy

Hey Ponzi: What’s Your Exit Strategy, Exactly?

Excerpts:

I have never understood why someone would ever start a Ponzi scheme when, by definition, there’s no way to end it.

The scam works by bringing in new unwitting investors to pay off the old unwitting ones. Since there’s no actual investment involved — just a transfer of money backward, with some portion presumably pocketed by the Ponzi schemer — keeping the scheme going requires an endless supply of new investors. The schemer’s liabilities only get bigger as time goes on, and there’s no way to end the ploy. Other than jail, that is. Or death. Or perhaps faking one’s own death.

...

I recently asked a few experts what such Ponzi perpetrators might envision their “exit strategies” to be.:
...

1. Cut and run.
   
2. Turn (or return) the business into something legitimate. Unlike the schemers in #1, these Ponzi architects likely started out with some hope for legitimacy. They wanted seed money to kick off some brilliant investment idea.
   
3. No exit. These schemers, usually from relatively humble backgrounds, are deeply insecure. They have felt like impostors their whole lives, whether in the country club or on the trading floor. They expect to be exposed for something, sometime, somewhere, which allows them to rationalize fraudulent behavior. They focus on denying and delaying the inevitable for as long as they can — and living well until they get caught.
   

Comment: There's a fourth strategy as well - read the article. Famous Ponzi schemers: Bernard Madoff, Tom Petters, Gerald Payne of Greater Ministries International, Bill Crotts of the Baptist Foundation of Arizona, and the Father of them: Charles Ponzi. On the other end of a Ponzi scheme is a greedy sucker.

Retail wasteland

The dead mall problem

Excerpt:

"Our country has six times more retail space per capita than any other county," said Ellen Dunham-Jones, director of the architecture program at Georgia Institute of Technology.

"We're just cannibalizing our existing stores by building more stores even when sales aren't increasing," she said. "We were long due for a retail correction and we're going through it now."

Dunham-Jones said big-box enclosed malls have become a dying breed as more shoppers prefer going to shop at strip malls or "lifestyle" open-air malls.

Brookdale: A ghost of its former self

Excerpt:

Built in the 1960s as one of the four Dales, Brookdale has had a variety of problems in the past several years, including the loss of major tenants and owners that fell behind on property taxes.

But not all the problems have been self-made. Brookdale has faced increased competition from a boom in retail development in nearby Maple Grove. Demographic changes have led to a decline in per capita income in its trade area.

A new set of owners, Brooks Mall Properties, took over about three years ago and settled the tax bill. But the Coral Gables, Fla.-based company stumbled in efforts to redevelop the mall, and recently called off a project that would have filled the former Mervyn's store space with a Wal-Mart Supercenter, according to Gary Eitel, Brooklyn Center community development director.

Comment: Too many stores! Too many restaurants (consider the strip of restaurants along I-94 in Maple Grove).

Planned obsolescence - a global shell game

Time to Buy a New Stove. Again.

Excerpt:

Planned obsolescence, a diabolical manufacturing strategy that took root with the rise of mass production in the 1920s and ’30s, has now escalated from disposable lighters to major appliances. Its evil genius is this: make the cost of repairs close to the item’s replacement price and entice us to buy new. Again. “A repair of $700 is more than the stove cost,” I whined. The repairman shrugged and counseled me that I could get the same thing for about $1,200 now.

“This one’s headed for scrap,” he said. He predicted it would end up on a fast boat to China, where apparently they can’t get enough of the stuff.

Planned obsolescence is now a global shell game; someday our atomized stove might come back at us in the form of a fireplace screen, an air-conditioner, a gas grill! I vowed to hold out as long as I could. With the flinty resolve of my favorite Beverly Hillbilly, Granny Clampett, I cooked on the remaining three burners — until the thing tried to gas us.

Comment: How about P.C.'s ... wasted in 3 years! Cell phones - worn out in 2.

A vote for Mickey Mouse

In Minnesota Recount, Scribbles, Mice and Other Ballot Puzzles

Excerpt:

At another point, Judge Kathleen Gearin expressed puzzlement over a voter whose only selection was a write-in — for Mickey Mouse.

“Why would they go in just to vote for Mickey Mouse?,” Judge Gearin asked.

Chief Justice Magnuson responded, “This is not a voter that cared a lot.”

Comment: It's a vote for Al Franken!

Modern cave living in China

Energy efficient home, easy to maintain — and no mortgage

Excerpt:

About 20 million Chinese still reside in caves and dirt-covered dwellings on the Loess Plateau that straddles the middle and upper reaches of the Yellow River in China's northwest.

Some of the caves have been passed down for generations, with hard-packed earthen walls, electrical wiring, piped-in plumbing and other modern conveniences, including cable television.

Longtime cave dwellers are often passionate about their way of life, saying they are shielded from the elements in a practical and efficient fashion, dwelling along hillsides and leaving valuable arable land in valleys for growing crops.

Researchers say economic necessity isn't the only reason so many Chinese continue to reside in caves.

"People from abroad think people who live in caves are very poor. But our research shows that is not always the case," said Wang Jun, a researcher on caves at the Xian University of Architecture and Technology.

Many simply have grown accustomed to a lifestyle that dates back more than a millennium. Caves also have a revolutionary luster. Mao Zedong, the revolutionary founder of modern China, lived in caves that still honeycomb this region after the Long March, plotting the drive to take over the country that succeeded in 1949.

Caves are easily excavated from the silty soil here, requiring only picks and other digging implements. The earth is so hard-packed that caves don't need additional support to prevent collapse. Most have a stone facade, with large lattice windows framing a door and allowing light to pour in during the day.

Generally, the caves are shaped like loaves of bread, 10-to-13 feet wide and anywhere from 20-to-25 feet deep, with arched ceilings. Several caves dug next to each other can have connecting doors, providing for a larger overall dwelling, with flues allowing for ventilation from indoor cooking fires.

Comment: Click link for one picture.

Government can always find new ways to spend our money

Santa Claus government

Excerpt:

he U.S. Conference of Mayors sent its list of wishes to the political equivalent of Santa Claus: Congress. The mayors apparently figure with all the talk from President-elect Obama about infrastructure repair and job creation, they might as well try to pile onto Santa's lap, too.


The mayors claim the economy will be stimulated if their wishes are granted. What do they want? The National Taxpayers Union (NTU) has analyzed the 72-page list. Here are some of the lowlights.

• $1.102 billion in projects involving sidewalks; — $1 million for annual sewer rehabilitation in Casper, Wyo. (emphasis mine);
  
• $6.1 million for corporate hangars, parking lots, and a business apron at the Fayetteville, Ark., airport.
  
• 15 projects with the term "stadium" in them, including a $150 million Metromover extension to the Florida Marlins' baseball stadium; and
  
• 81 projects mentioning "landscaping" and/or beautification efforts.
  
• $1,500,000 for an initiative in Dayton, Ohio for the "Reduce Prostitution-Off the Streets Program." The proposed spending would "connect individuals involved in prostitution with resources to leave a life of prostitution." I guess Ronald Reagan was right when he observed, "It has been said that politics is the second-oldest profession. I have learned that it bears a striking resemblance to the first."
  
• "$6,000,000: Ventura, Calif., Water Surfers Point Improvements." "This project is to protect the beach with natural buried cobble stone, create sand dunes over the buried cobble, relocate, and rebuild the State Owned Omer Rains beach front bike path, and construct parking lot and drainage."
  

Kristina Rasmussen, NTU's director of government affairs, offers more analysis of the mayors' report on NTU's blog: "Total cost of the wish list is $73,163,299,303. They claim this will create an estimated 847,641 jobs in 2009 and 2010. Divide that out, and you get a cost to taxpayers of $86,314 per job. Not exactly a great deal."

Comment: Keep your eye out for these government scams!

The end of "the daily"

Detroit papers drop home delivery to 3 days a week

Excerpt:

Fighting to stay in business, Detroit's two daily newspapers will radically change their relationship with readers by slashing home delivery to three days a week, printing small editions on other days and encouraging people to get information online.

Comment: Believe it or not, when I was a kid in Cincinnati, we received 2 papers a day. The Cincinnati Enquirer in the morning and the Cincinnati Post in the afternoon.

In college, I worked Saturday nights at the Enquirer loading papers onto trucks. I think it was from 6:00 p.m. until 2:30 a.m.

We also had thrice weekly milk delivery. How times have changed!

Islam According to the Reformers

Islam According to the Reformers

Comment: Interesting read

Nuts: "a gross overreaction to the magnitude of the threat"

Are Nut Bans Promoting Hysteria?

Excerpt:

In the column, Dr. Christakis points out that about 3.3 million Americans are allergic to nuts, and even more — 6.9 million — are allergic to seafood. But of 30 million hospitalizations each year, just 2,000 are due to food allergies, and about 150 people die annually from serious allergic food reactions. That’s the same number of people killed by bee stings and lightning strikes combined. About 10,000 children are hospitalized annually with traumatic brain injuries from sports, 2,000 children drown each year, and about 1,300 die in gun accidents, he writes.

Dr. Christakis notes that there is no scientific evidence that nut bans are particularly effective at protecting children. But more important, he argues, is that limiting widespread exposure to nuts can make things worse. The “policy of avoidance” means that fewer children are being exposed to nuts, likely increasing their risk for developing an allergy. A 2008 study in The Journal of Allergy and Clinical Immunology of 10,000 British children found that early exposure to peanuts lowers risk of allergy, rather than increasing it.

Comment: Link to full article is in the last sentence of the link above. In that article is this precious quotation:

At this time of year many municipal elementary schools in the United States, including the one attended by my children, raise money by selling wrapping paper and candy. This year parents in our school were told that they could no longer pick up their purchases from their children’s classrooms. Instead they had to pick up their orders from a loading dock at specified times, to avoid a danger to the children. The danger? Some of the orders contained sealed tins of festive nuts.

Out of an overabundance of caution the school decided not to allow any of the items on the premises. This decision came on the heels of another recent event: a peanut was spotted on the floor of a school bus, whereupon the bus was evacuated and cleaned (I am tempted to say decontaminated), even though it was full of 10 year olds who, unlike 2 year olds, could actually be told not to eat food off the floor.

Autos: Government report on consumer preferences

Excerpt:

As a US Government report into the motor industry has stated: “The shift in consumer preferences towards smaller, more fuel-efficient passenger cars appears to be permanent.”

Comment: HT: The buyer's-market car

More:

(The report said this in 1980, a year after giving Chrysler $1 billion of bail-out money to arrest its spiral towards the plughole. Truly, there is nothing new under the sun.)

Welcomed w flowers ... farewell by a shoe

Iraqis Pick Up Their Shoes: Reaction From Around the Country

Comment: Reactions to yesterday's shoe throwing incident from around Iraq. No excerpts. Worth a read.

Senate Republicans: Refusing UAW and Big 3 a taxpayer E-Z pass

Mitch McConnell's Finest Hour

Excerpt:

... Led by Tennessee Senator Bob Corker, they asked the auto workers to show they were serious about making Detroit competitive again. In exchange for a lifeline from Washington, Mr. Corker wanted the union to set a "date certain" in 2009 for lowering the Detroit Three's hourly labor costs to the average of foreign-owned auto makers in the U.S. He also wanted creditors to bring down Detroit's total debt by two-thirds through an equity swap, making sure debtholders share the cost of restructuring.

The union's counteroffer was that it would bring down labor costs in 2011, when its current contracts run out. Maybe we missed something, but we thought GM and Chrysler were facing bankruptcy now, not in three years. As Minority Leader Mitch McConnell said on the Senate floor, that sounds like "taxpayer money today for reforms that may or may not come tomorrow."

Thursday's showdown marked an important political moment for the Republican Party. By refusing to write a blank check to Detroit, Senate Republicans have started to reclaim some credibility on fiscal policy and the role of government in the economy. They did so standing up to a Republican President who doesn't want any more bad headlines, as well as to Democrats who will blame the GOP if the auto makers collapse.

They also stood up for the right reasons. No bailout will ever restore the car companies to profitability without a restructuring. Yet an explicit UAW goal is to use the bailout to avoid any such thing. The union and their Democratic protectors want to avoid the discipline that a bankruptcy could impose under Chapter 11. A government-directed salvation would also give environmentalists huge leverage over the cars Detroit builds, a power they and Democrats have wanted for decades.

Comment: Republican backbone! We need this kind of leadership!

Bush ... quick reactions.

Comment: Still has a sense of humor too! Iraqi journalist hurls shoes at 'dog' Bush

A trillion here ... a trillion there ....

Obama stimulus could reach $1 trillion: report

Excerpt:

President-elect Barack Obama's team is considering a plan to boost the recession-hit U.S. economy that could be far larger than previous estimates and might reach $1 trillion over two years, the Wall Street Journal reported on Saturday.

Obama aides, who were considering a half-trillion dollar package two weeks ago, now consider $600 billion over two years "a very low-end estimate," the newspaper said, citing an unidentified person familiar with the matter.

The final size of the stimulus was expected to be significantly higher, possibly between $700 billion and $1 trillion over that period, it said, given the deteriorating state of the U.S. economy.

How to spend the stimulus

Excerpt:

If I had my druthers, the word ’stimulus’ would be expunged from public discussion, along with ‘bailout’ and ‘rescue.’ These words convey the idea that, because we have so mismanaged our economic and financial affairs, we are somehow able or entitled to conjure up additional funds out of thin air to fix our problems.

Comment: Consider What's a Billion?. Soon there will be no more trillions to throw at the nation's problems. What then?

Chuck Colson: I know how Rod Blagojevich feels!

Chuck Colson: I know how Rod Blagojevich feels!

Excerpt:

In the wake of Blagojevich’s arrest, many Americans are left wondering once again how intelligent people can do such stupid things — especially when they’ve achieved the pinnacle of power.

The answer comes down to pride.

At the height of Watergate, a dear friend of mine, Tom Phillips, then CEO of Raytheon, invited me to his home. As we sat in his kitchen, Tom read to me a chapter on pride from a little book by C.S. Lewis titled “Mere Christianity.”

Lewis wrote, “There is one vice of which no man in the world is free. … The vice I am talking about is Pride or Self-conceit. …. Pride leads to every other vice. … A proud man is always looking down on things and people: and, of course, as long as you are looking down, you cannot see something that is above you. … Pride is a spiritual cancer: it eats up the very possibility of love, or contentment, or even common sense.”

Tom — who told me about Jesus Christ that night — didn’t know I was in utter despair over Watergate, watching the president I’d worked for flounder in office. I’d learned I might become a target of the investigation. In short, my world was collapsing.

That night I sat in a darkened driveway and in a flood of tears called out to God. I didn’t know what to say; I just knew I needed Christ. At that moment God took the White House “hatchet man” and turned me into a new creation.

Comment: From my other blog: http://www.4bya.info/

There is a U.S. auto industry that works

There is a U.S. auto industry that works

Excerpt:

there are 12 international car companies that have manufacturing operations in the United States. Collectively, they employ 113,000 Americans directly -- even though that is less than the 239,000 at Ford, GM and Chrysler. However, those international car companies sell more cars than the Big Three and their customers love their products. They have millions of American shareholders. They do sophisticated work like research, design and marketing in the United States. All in all, they add jobs and high value to the United States.

Comment: I have a Buick and I love it. But I am still against the Dem sponsored bailout.

KFC chicks bathe in sink

Kentucky Fried Chicken trio photographed turning sink into hot tub


Comment: From the look of them, they've been eating it too!

Tim Pawlenty: "We cannot be free if we are a debtor nation"

Tim Pawlenty: A Modern, Not a Moderate, Party

Excerpt:

... when we talk about the national debt, it is not freedom and we are not protecting and advancing freedom when we handcuff our children and our grandchildren to wagon loads full of debt - $35,000 for every man, woman, and child in the United States of America. We are choking in debt. We are swimming in debt. That's $10 trillion in debt, not including the entitlement programs. We cannot be free if we are a debtor nation. We cannot be free if our federal officials are worried about what the Chinese might do in terms of withholding and enabling our debt, if we don't bail out the banks.

And that's part of what's going on. Part of the reason that the federal government is so scared about the financial systems collapsing is because they're worried that the Chinese and others are going to stop investing and buying our debt, and if they do that, things will collapse. How did we get to this point in this country where we have the Chinese financial investments dictating or influencing our federal policy? That is not freedom. We are not free if we are in debt. The average American is $20,000 in debt in credit cards. We are not free if people who are disadvantaged cannot grab the keys to opportunity, because their school system is so bad that they don't graduate from high school, and even if they do they need remedial education and they don't have the education or the skills to access the economy of today and tomorrow, and they get marginalized into society as a ward of the state.

That is not freedom for them, and it's awful for us. It's bad economically. It's bad morally. It's bad socially. Freedom is about school choice. Freedom is about improving performance pay in schools. Freedom is about having the school system look more like an iPod than a 1940s industrial one-size-fits-all assembly line. Freedom isn't having the government take over the healthcare system, so your decisions are made by bureaucrats instead of between patients and doctors; freedom isn't having lunatics threaten the state of Israel and say they're going to wipe it out and tolerate that as some sort of a need to accommodate lunatics in foreign policy. We have lost our way.

Freedom starts with ending the culture of debt. This has been erased from our memory, but I think one of the things we should do is demand a constitutional requirement to balance the federal budget.

Comment: HT: Pawlenty Speech at Horowitz Freedom Center. A stand on fiscal responsibility is essential to the future of conservatism.

Did Obama Ever Meet With Blagojevich?

Did Obama Ever Meet With Blagojevich?

Excerpt:

[Did] this meeting ever took place (from KHQA on Nov 5):

Ill. governor meeting with Obama today

CHICAGO, ILL. — Now that Barack Obama will be moving to the White House, his seat in the U.S. Senate representing Illinois will have to be filled.

That’s one of Obama’s first priorities today. He’s meeting with Governor Rod Blagojevich this afternoon in Chicago to discuss it.

Comment: It would be nice for the media to get to the bottom of this!

2006 a 'lifetime' peak in home prices?

Why home values may take decades to recover

Excerpt:

The boom in home prices — fueled by heavily leveraged loans built on low or even no down payments — made it easy to forget that housing values had been remarkably stable for a half-century after World War II, rising at roughly the same pace as income and inflation. Prices soared in most of the country — especially in Arizona, California, Florida and Nevada and metro areas of Washington, D.C., and New York — during a brief period of easy lending, especially from 2002 to 2006. That era's over.

So far, home values nationally have tumbled an average of 19% from their peak. As bad as that is, prices would need to fall as least 17% more to reach their traditional relationship to household income, according to a USA TODAY analysis of home prices since 1950. In that scenario, a $300,000 house in 2006 could be worth about $200,000 when real estate prices hit bottom.

The price plunge has wiped out trillions of dollars in home equity and caused the worst financial crisis since the Great Depression. Susan Wachter, professor of real estate at the University of Pennsylvania, fears that foreclosures and tight credit could send home prices falling to the point that millions of families and thousands of banks are thrust into insolvency.

Comment: Longer article that is a worthwhile read. Explains how this housing crisis is different than previous.

My suggestion: "The Great Reset"

No Question We’re in a Financial Pickle. What Do We Call It?

Excerpt:

The economy is formally in a recession, as the National Bureau of Economic Research and President Bush said last week. But the current crisis lacks a capital-letter name.

Then again, the Great Depression did not become “great” immediately, and World War I wasn’t known as No. 1 at the time. While the “economic crisis” — a term often used by journalists — has also been called the “credit crunch” and the “Wall Street crisis,” it remains the rare major news event without a defining logo, one that crystallizes attention and acts as shorthand for reporters.

Comment: I consider it "the great reset" after "the great excess".

UAW won't budge ... next up Chapter 11?

Union balks and $14B auto bailout dies in Senate

Excerpt:

Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit's beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.

The breakdown left the fate of the auto industry - and the 3 million jobs it touches - in limbo at a time of growing economic turmoil. General Motors Corp. (GM) and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. (F) says it does not need federal help now, but its survival is far from certain.

Comment: GM and Chrysler will be in chapter 11 (where this belongs) in the 1st QTR '09. More from the NYTimes:

Senate Abandons Automaker Bailout Bid

The failure to reach agreement on Capitol Hill raised a specter of financial collapse for General Motors and Chrysler, which say they may not be able to survive through this month.

...

The failure in Congress to provide a financial lifeline for G.M. and Chrysler was a bruising defeat for President Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.

More from the Star Tribune: Domino effect of bankruptcy could begin quickly

GM and Chrysler are unlikely to be able to hold out until Obama takes office and that could affect their suppliers, many of which are barely holding on themselves.

With Congress unable to agree on a bailout for Detroit, the odds that General Motors and Chrysler will be insolvent by year's end are growing rapidly.

The companies have been warning that they would run out of money for some time, but crushing bills from their suppliers are coming due. It appeared unlikely that they could hold on until President-elect Barack Obama takes office next month, when he and a new Congress might be able to provide a lifeline.

Self-defense with .... "fox urine"

Man Sprays 'Toilet-Papering' Teens With Fox Urine

Excerpt:

A 50-year-old man who told authorities he was fed up with teens toilet-papering his house decided to defend his property -- with a squirt gun filled with fox urine. Now, Scott Wagar is in trouble with the law.

Wagar pleaded not guilty on Wednesday in Kandiyohi County District Court to misdemeanor assault and other charges. He was released on personal recognizance.

According to police, Wagar was on his property Sept. 16 when he used night vision goggles to see 15-20 people running toward his place. He told police that he told them to leave, swore at them and sprayed them with the fox urine. He also allegedly struggled with one of the teens.

Comment: So .... what's wrong with that? Local reporting: West Central Tribune

Freakonomics: "When will they ever learn?”

What’s the Point of Bailing Out the Auto Industry?

Excerpt:

Where does the auto bailout fit in?

It certainly doesn’t make markets more competitive; instead it subsidizes American oligopolists. It certainly doesn’t spur innovation; while the provisions may talk about this, bailouts have proven to be a poor way of getting firms to innovate.

It doesn’t reduce transactions costs; Chapter 11 bankruptcy procedures exist for that purpose, and they do well at it. The only possible economic argument might be fear that a bankruptcy by G.M. might spook many other markets. What about a bankruptcy by Wal-Mart? It’s much bigger than G.M., so wouldn’t the spooking effect be bigger?

Let’s face it — the bailout is purely political, pushed by troglodyte companies and their unions of high-paid workers, and helped by their agents — elected representatives from the many states in which auto production occurs. Once again, as was true with the Chrysler bailout of the late 1970’s, the taxpayer will take a beating. To quote the old protest song, “When will they ever learn?”

Comment: The Senate Republicans (bless their hearts) are playing tough on this: Republicans Float Auto Bailout Alternative

That proposal would impose even tougher requirements on the automakers than the bill approved by the House, and it would mandate the “auto czar” overseeing the rescue plan for the federal government to force the companies into bankruptcy should they fail to meet the requirements.

Under his plan, which was the subject of intense negotiations with Democrats, the automakers would be required by March 31 to cut their debt obligations by two-thirds — an enormous sum given that G.M. alone has more than $60 billion in debt.

The automakers would also be required to cut wages and benefits to match the average hourly wage and benefits of Nissan, Toyota and Honda employees based in the United States, and the companies would have to impose equivalent work rules. The plan would bar any pay for idled workers other than “customary severance pay.”

Democratic Congressional aides said that the United Auto Workers union did not support the proposal, but was willing to negotiate.

Is NASA out of control?

NASA has become a transition problem for Obama

Excerpt:

NASA administrator Mike Griffin is not cooperating with President-elect Barack Obama’s transition team, is obstructing its efforts to get information and has told its leader that she is “not qualified” to judge his rocket program, the Orlando Sentinel has learned.

In a heated 40-minute conversation last week with Lori Garver, a former NASA associate administrator who heads the space transition team, a red-faced Griffin demanded to speak directly to Obama, according to witnesses.

In addition, Griffin is scripting NASA employees and civilian contractors on what they can tell the transition team and has warned aerospace executives not to criticize the agency’s moon program, sources said.

Griffin’s resistance is part of a no-holds-barred effort to preserve the Constellation program, the delayed and over-budget moon rocket that is his signature project.

Comment: The Constellation program would put US astronauts on the moon in 2019.

Bit.ly

Bit.ly


Comment: Another URL shortening service. Like Tinyurl.com but looks like you can create an account and save shortened URLs.

# 5 offered up to $ 1M for Senate seat

Emissaries for Senate Candidate 5 offered Blagojevich up to $1m for the Senate seat

Excerpt:

According to the FBI affidavit in the case, emissaries for Senate Candidate 5 offered Blagojevich up to $1m for the Senate seat.

Describing the offer in an October 31 conversation recorded by the FBI, Blagojevich said: "We were approached 'pay to play'. That you know, he'd raise me 500 grand. An emissary came. Then the other guy would raise a million, if I made him [Senate Candidate 5] a senator."

Comment: Of course ... innocent until proven guilty! Who is # 5? See yesterday's post.

Blagojevich's schemes

The Plans to Sell a Senate Seat

Excerpt:

The United States Attorney’s office in Chicago charged in a 76-page complaint that Gov. Rod R. Blagojevich of having numerous schemes for profiting from his office, including several related to gaining jobs or contributions in exchange for making a particular appointment to Barack Obama’s vacated seat in the Senate.

Comment: graphic from the NYTimes.

I.O.U.S.A.

Comments: I've been concerned about this issue for 30+ years. It will not go away.

Get informed and involved: Peter G. Peterson Foundation and The Concord Coalition

How wage and price controls fostered health insurance

Why Tie Health Insurance to a Job? One thing we can all agree on is that portable coverage is more secure.

Excerpt:

Employers didn't start offering health benefits roughly 60 years ago because they were experts in medical decisions. It was a way of circumventing the World War II wage and price controls. Barred from offering higher salaries to attract workers, employers offered health insurance instead. Aided by an IRS ruling that said workers who received health benefits did not have to pay income taxes on them, and by the fact that employers could write off the cost of the health benefits as a business related expense, this accidental arrangement became the primary way most Americans access health care.

The system worked at first, but a lot has changed in 60 years. Back then, the average soldier returning from World War II took a job with a local company where he would work for decades until he got a gold watch at a big retirement party. Today, lifetime employment is dead. By 42, the average American will change jobs 11 times.

Sixty years ago, most American companies competed only against neighboring companies for lucrative contracts. Today, most businesses are up against foreign companies that don't foot the bill for their employees' health-care costs.

Comment: Interesting about how health care benefits were a way to circumvent wage and price controls. Can any of my readers verify that this is fact?

On Autos - will Obama be "Chance the Gardener or Abraham Lincoln"

The Bailout That Won't

Excerpts:

Understand something: Ford and GM in Europe successfully sell cars that are small but not cheap. Europeans are willing to pay top dollar for a refined small car that gets excellent mileage, because they face gasoline prices as high as $9. Americans are not Europeans. In the U.S., except during bouts of high gas prices or in the grip of a Prius fad, the small cars that American consumers buy aren't bought for high mileage, but for low sticker prices. And the Big Three, with their high labor costs, cannot deliver as much value in a cheap car as the transplants can.

Under a law of politics, such truths were unmentionable in last week's televised circus because legislators are unwilling to do anything about them. They won't repeal CAFE because they fear the greens. They won't repeal CAFE's "two fleets" rule (which effectively requires the Big Three to make small cars in domestic factories) because they fear the UAW. They won't hike gas prices because they fear voters.

And make no mistake: An even more massive auto wreck lies ahead when a soon-to-be taxpayer-financed and taxpayer-owned auto industry confronts a California rulemaking that, in a silly gesture against global warming, would render most of its auto designs, profit centers and tooling unsalvageable.

We hate to admit it, but the only good idea from the bailout debate is the proposal for a new "auto czar." Along with disposing of Chrysler and downsizing Ford and GM, his job should be to confront Congress with its own policy cowardice and failure. If saving gasoline and Detroit are both worthy goals, let's ditch CAFE and institute a gasoline tax to make consumers value the cars government is forcing auto makers to build. If Congress doesn't have the tummy for that, at least ditch the "two fleets" rule so Detroit can import small cars to meet the mandate.

Alas, Barack Obama's vaunted "change" apparently doesn't include spending the political capital to make Congress acknowledge the failure of CAFE. If he can't do better than throw taxpayer money at a dismal policy disaster like our fuel-economy regulations (and so far he seems to be joining Congress in pretending it's all Detroit's fault), we might as well give up on his presidency along with any hope of progress on the nation's other unresolved dilemmas.

His campaign never really answered the question of whether he was Chance the Gardener or Abraham Lincoln. We might as well find out now.

Comments: Chance the Gardener: Being There. Another opportunity for Republicans to stand together and vote no! Some Chance quotes:

President "Bobby": Mr. Gardner, do you agree with Ben, or do you think that we can stimulate growth through temporary incentives?
[Long pause]
Chance the Gardener: As long as the roots are not severed, all is well. And all will be well in the garden.
President "Bobby": In the garden.
Chance the Gardener: Yes. In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.
President "Bobby": Spring and summer.
Chance the Gardener: Yes.
President "Bobby": Then fall and winter.
Chance the Gardener: Yes.
Benjamin Rand: I think what our insightful young friend is saying is that we welcome the inevitable seasons of nature, but we're upset by the seasons of our economy.
Chance the Gardener: Yes! There will be growth in the spring!
Benjamin Rand: Hmm!
Chance the Gardener: Hmm!
President "Bobby": Hm. Well, Mr. Gardner, I must admit that is one of the most refreshing and optimistic statements I've heard in a very, very long time.
[Benjamin Rand applauds]
President "Bobby": I admire your good, solid sense. That's precisely what we lack on Capitol Hill.

Stimulus package: A revealing wish list

Stimulus Shouldn't Be an Excuse for Pork

Excerpt:

On Monday, the U.S. Conference of Mayors went to Capitol Hill to ask for a handout, or as they put it: "We are reporting that in 427 cities of all sizes in all regions of the country, a total of 11,391 infrastructure projects are 'ready to go.' These projects represent an infrastructure investment of $73,163,299,303 that would be capable of producing an estimated 847,641 jobs in 2009 and 2010."

A wish list that is 11,391 projects strong! What vital infrastructure projects would cash-strapped taxpayers get for their $73 billion? Here's a sampling:

• Hercules, Calif., wants $2.5 million in hard-earned taxpayer money for a "Waterfront Duck Pond Park," and another $200,000 for a dog park.
  
• Euless, Texas, wants $15 million for the Midway Park Family Life Center, which, you'll be glad to note, includes both a senior center and aquatic facility.
  
• Natchez, Miss., "needs" a new $9.5 million sports complex "which would allow our city to host major regional and national sports tournaments."
  
• Henderson, Nev., is asking for $20 million to help "develop a 60 acre multi-use sports field complex."
  
• Brigham City, Utah, wants $15 million for a sports park.
  
• Arlington, Texas, needs $4 million to expand its tennis center.
  
• Miami, Fla., needs $15 million for a "Moore Park Community Center, Tennis Center and Day Care" facility. The city is also desperate for $3.6 million to build a covered basketball court and a new tennis court at Robert King High Park. Then there's the $94 million Orange Bowl parking garage you are being asked to pay for.
  
• La Porte, Texas, wants $7.6 million for a "Life Style Center." And Oakland, Calif., needs $1 million for Fruitvale Latino Cultural and Performing Arts Center.
  

And you thought infrastructure investment meant roads, bridges and schools. It is clear that any infrastructure stimulus money given to the country's mayors will lead to thousands of tennis centers to nowhere. News alert for mayors: We are officially in a recession. American families have to get by with less, and so do American cities.

Comment: My grandchildren shouldn't have to pay for these tennis courts, water parks, and duck ponds! Republicans - this is your golden opportunity to be fiscally responsible and vote AGAINST this wasteful folderol!

The Chicago political culture: "where money and government power seem especially fungible"

The Chicago Way, on Tape: This wiretap was golden

Excerpt:

The Governor's comments were taped in court-approved wiretaps and include such self-incriminating classics as: "I've got this thing [the power to appoint Barack Obama's Senate replacement] and it's [expletive] golden, and, uh, uh, I'm just not giving it up for [expletive] nothing. I'm not gonna do it. And, and I can always use it. I can parachute me there." We recommend the entire 76-page FBI affidavit for every high school civics course as proof of the need for political checks and balances.

Comment: 76-page FBI affidavit & Dept of Justice press release. If you have Acrobat Reader - search for "Candidate 5" in the 76-page FBI affidavit. Think "son of shakedown". More from the Wall Street Journal editorial:

If convicted, Mr. Blagojevich would be the second consecutive Illinois Governor to be found guilty of a felony, and the fourth in 35 years. We'd ask if it's something in the water, but that would be unfair to the Chicago River. It is certainly something in the Chicago political culture, where money and government power seem especially fungible.

....

Now would be a good time for the President-elect to say that Mr. Blagojevich and his cronies should have nothing to do with naming Mr. Obama's successor. And that, given the taint of corruption that now hangs over any choice, the state should hold a special Senate election.

Is "son of shakedown" candidate # 5

Sources Say Rep. Jesse Jackson Jr. is 'Senate Candidate #5'

Excerpt:

Chicago Congressman Jesse Jackson, Jr. (D-IL) is the anonymous "Senate Candidate #5" whose emissaries Illinois Governor Rod Blagojevich reportedly claimed offered up to a million dollars to name him to the U.S. Senate, federal law enforcement sources tell ABC News.

..

According to the FBI affidavit in the case, Blagojevich "stated he might be able to cut a deal with Senate Candidate 5 that provided ROD BLAGOJEVICH" with something "tangible up front."

Comment: Seems like the kind of "change" we are getting in Washington is corruption! The phrase "The apple never falls far from the tree" applies to Jesse Jr. More on "father shakedown":

• Shakedown: Exposing The Real Jesse Jackson
  
• Book: Shakedown: Exposing The Real Jesse Jackson
  
• Jesse Jackson – for blacks or himself?
  

Excerpt from Jesse Jackson – for blacks or himself?:

How many blacks can truthfully say they tangibly benefited from Jackson's shakedown of Credit Suisse, Goldman Sachs, Morgan Stanley and Paine Weber?

Many in the media know the merger of Clear Channel Communications and AMFM, Inc. was threatened by Jackson with trumped-up accusations of racism ... that is until they forked over 46 stations, worth $2 billion to minority owners – minority owners who just happened to comprise the support base for the non-profits that pay his bills and organize his travels. (See "Rainmaker Redux" by H.W. Jenkins Jr., Wall Street Journal, Jan. 24, 2001)

Noah Robinson, Jackson's half brother, was the principle beneficiary of Jackson's Coca-Cola shakedown. Jackson successfully strong-armed the Cola giant to award lucrative distributorships to minorities. The recipients were once again those associated with his non-profit supporters. I am certain that all of Robinson's fellow inmates (it seems he was sentenced to life imprisonment for hiring gang members to kill three business associates) are especially appreciative of Jackson on those hot, humid days of summer. After all, time "goes better with Coke."

How many blacks benefited from the hundreds of millions Texaco paid to settle a discrimination lawsuit even though a "smoking gun" tape proved there were no racial slurs voiced by company execs?

Jackson's Wall Street Project takes in approximately $10 million yearly. How much of that goes to blacks outside of his narrow network?

How many of the jeering black faces Jackson uses as backdrop benefited from his 1997 shakedown of Viacom? Once Viacom agreed to pay $2 million with Jackson as the principle recipient, all opposition disappeared.

How much benefit was Jackson's extortion of the SBC and Ameritech merger to blacks in the Watts section of Los Angeles, Harlem, Cincinnati or Chicago? We know Jackson's Citizenship Education Fund was pledged $1 million by the named mergers. We also know that Jackson's "gumba" Chester Davenport, with no prior telecommunications experience, made off with a cellular business as a result of the deal. As Don King would say: "Only in America."

We cannot point to a black NASCAR team or driver, but we can point to a black con-man who made off with a quarter million NASCAR dollars under the guise of producing the same.

We can point to the financial wizardry (spelled t-h-i-e-v-e-r-y) of Terry McAuliffe vis a vis Global Crossings, and Hillary Clinton vis a vis the futures market, but even they pale in comparison to Jackson.

Jackson claims to have an annual salary of $1 – but his plush lifestyle includes limousines, three lavish homes, sweetheart stock deals, big private bank accounts, first-class travel, private schools and the best universities for his children. ("Shakedown" by K.R. Timmerman)

This may be viewed as an acceptable way for corporate America to assuage their collective consciences. It may also be acceptable to blacks who would rather blame "whitey" and be the master's pets waiting for handouts, than to realize they can obtain (what today passes for) education at free schools, learn trades, open shops, go to the best colleges they are not qualified for on scholarship
(even if they can't run, jump or throw) at the expense of someone who is.

Even Jesse James and Al Capone gave away many times that which they kept of their stolen fruit. But Jackson funnels his ill-gotten gains through his Citizenship Education Fund to his wife and children who serve as board members, while paving the way for his mistress to obtain a lucrative consultant job. And let us not forget his sons' – Yusef and Jonathan – lucrative Anheiser-Bush distributorship.

To all of the Jackson sycophants, I ask you the same question: Name 10 things that Jesse Jackson has done to tangibly help individual black Americans.

Blagojevich "go ahead tape me"

The Smoking Gun: Obama Senate Seat For Sale?

Comment: Rod Blagojevich's "Gary Hart moment" (Bug me: Blagojevich has Gary Hart moment)

Illinois: “Land of Greased Palms”

Illinois has long legacy of public corruption - At least 79 elected officials have been convicted of wrongdoing since 1972

Excerpt:

The state, Cook County and its governmental seat, Chicago, have a long history of corruption by elected and appointed officials.

The culture of corruption dates back to the late 19th century, when a gambling-house owner named Michael Cassius McDonald created the city's first political machine, establishing a model in which officials would distribute contracts, jobs and social services in exchange for political support, according to a scholarly history of organized crime in Chicago by Robert Lombardo, a sociology professor and former Chicago and Cook County police officer.

Its persistence was documented in Sept. 7, 2006 by the Chicago Sun-Times, which reported that at least 79 current or former Illinois, Chicago or Cook County elected officials had been found guilty of a crime by judges, juries or their own pleas since 1972. The paper provided this tally of the tarnished: three governors, two other state officials, 15 state legislators, two congressmen, one mayor, three other city officials, 27 aldermen, 19 Cook County judges and seven other Cook County officials.

The article noted that so many aldermen had been jailed that the newspaper ran a front-page-story in 1991 when the year passed with none being indicted or convicted.

The ranks of imprisoned pols include three former Illinois governors — George Ryan, Dan Walker and Otto Kerner Jr.

Ryan, a rare Republican in the heavily Democratic state and Gov. Rod Blagojevich’s predecessor, is serving a six-year prison sentence after being convicted in April 2006 on racketeering and fraud charges. A decade-long investigation began with the sale of driver's licenses for bribes and led to the conviction of dozens of people who worked for Ryan when he was secretary of state and governor.

Illinois Governor in Corruption Scandal


Excerpt:

Mr. Blagojevich, a Democrat, called his sole authority to name Mr. Obama’s successor “golden,” and he sought to parlay it into a job as an ambassador or secretary of Health and Human Services, or a high-paying position at a nonprofit or an organization connected to labor unions, prosecutors said.

He also suggested, they said, that in exchange for the Senate appointment, his wife could be placed on corporate boards where she might earn as much as $150,000 a year, and he tried to gain promises of money for his campaign fund.

If Mr. Blagojevich could not secure a deal to his liking, prosecutors said, he was willing to appoint himself.

“If I don’t get what I want and I’m not satisfied with it, then I’ll just take the Senate seat myself,” the governor said in recorded conversation, prosecutors said.

Comment: One has to wonder how much Barak Obama knew about the plan to sell his Senate seat. Update: Obama: No contact with Blagojevich on Senate seat

Update 2: Or did he? Questions Arise About the Obama/Blagojevich Relationship

But on November 23, 2008, his senior adviser David Axelrod appeared on Fox News Chicago and said something quite different.

While insisting that the President-elect had not expressed a favorite to replace him, and his inclination was to avoid being a "kingmaker," Axelrod said, "I know he's talked to the governor and there are a whole range of names many of which have surfaced, and I think he has a fondness for a lot of them."

...

There are no allegations that President-elect Obama or anyone close to him had anything to do with any of the crimes Gov. Blagojevich is accused of having committed.

In fact, there are indications that Mr. Obama and his team refused to go along with the "pay to play" way Blagojevich is accused of operating, offering only "gratitude" if the governor appointed his friend Valerie Jarrett to take his U.S. Senate seat, much to the governor's chagrin.

But there remain questions about how Blagojevich knew that Mr. Obama was not willing to give him anything in exchange for the Senate seat -- with whom was Blagojevich speaking? Did that person report the governor to the authorities?

And, it should be pointed out, Mr. Obama has a relationship with Mr. Blagojevich, having not only endorsed Blagojevich in 2002 and 2006, but having served as a top adviser to the Illinois governor in his first 2002 run for the state house.

That 2002 endorsement came at the same time that Axelrod had such serious concerns about whether Blagojevich was ready for governing he refused to work for his one-time client.

A call to personal responsibility and market forces

Getting Out of the Credit Mess - The last thing we need is policy that encourages or incurs more debt

Excerpt:

The intellectual start of this mess was in a flawed Boston Federal Reserve study published in 1992 that purported to show that minorities were treated less well than whites. That study led to increased political pressure on banks to modify their standards with increased emphasis through the Community Reinvestment Act, and aided by U.S. Department of Housing and Urban Development regulations in the Clinton administration that required parity of outcomes in the lending process.

The effect of all of this meddling was compounded by the lax or incompetent supervision of Fannie Mae and Freddie Mac. All in all, the government got into the business of encouraging and then forcing lending institutions to make mortgage loans to people who could not pay them back. What we ended up with is a failure of government, which we have erroneously termed a failure of capitalism.

...

All of this led to a huge overleveraging in the consumer market. The increase in debt burden fueled much of the nation's economic growth over recent decades, aided somewhat by increases in productivity and underpinned by easy money from the Federal Reserve. Since consumers represent about 70% of the nation's GNP, and since leverage cannot increase forever, we were bound to see the bubble burst and eventually enter a substantial recession.

So, are the current credit easing actions likely to be helpful or not? In my judgment, measures to create liquidity are likely to be helpful. Financial institutions that lend money to credit-worthy people for reasonable purposes have experienced a substantial reduction in available funding from which they can make loans. Hence the programs to support the securitization markets are sensible because money used for this purpose will be lent and used for purchases. Programs that deliver a short-term reduction in mortgage rates will, at the margin, help absorb some of the available housing stock, reducing the time it will take for housing to reach market-clearing levels.

...

In the longer term, our nation must delever -- either by reducing the amounts of borrowing or by increasing consumer earning power through economic growth. Relying on growth alone implies a growth rate higher than we have ever experienced in our nation's history. Nonetheless, our public policy must encourage economic growth by lowering tax rates for corporations and individuals while at the same time avoiding what would be growth killers, including "card check" legislation and trade restrictions. Public policy should support higher savings rates, and avoid encouraging increased consumer spending funded by further debt, which may be helpful in the short term but catastrophic in the longer term.

It is not only consumers that must delever. Governments must as well. State and local governments across the nation have incurred direct and indirect debt or obligations in the tens of trillions of dollars -- obligations that cannot be met under any set of reasonable circumstances without an explosion in growth and tax revenues. In fact, we continue to incur debt for politically palatable ideas, like rebate checks, which have very little stimulative power but increase the depth of the hole we're in.

To solve this problem for ourselves and future generations, we must get back to our historic reliance on personal responsibility and market forces, and get government out of economic management. It doesn't do a good job, as the current economic mess amply proves.

Comment: The last paragraph is key - "personal responsibility and market forces, and get government out of economic management"

My right foot

This will boggle your mind and you will keep you trying over and over again to see if you can outsmart your foot, but, you can't.

It's pre-programmed in your brain!

1. Without anyone watching you (they will think you are GOOFY......) and while sitting at your desk in front of your computer, lift your right foot off the floor and make clockwise circles.
   
2. Now, while doing this, draw the number '6' in the air with your right hand. Your foot will change direction.
   

I told you so!!! And there's nothing you can do about it! You and I both know how stupid it is, but before the day is done you are going to try it again, if you've not already done so.

Send it to your friends to frustrate them too!

Comment: Sent to me by my Sister-in-law.

Skater goes through ice on Medicine Lake

Skater falls through ice of Medicine Lake

Excerpt:

A skater who fell through thin ice was pulled from Medicine Lake in Plymouth Sunday and rushed to North Memorial Medical Center in Robbinsdale.

The man was found in the water about 3 p.m. after another skater spotted a hat floating in the water and called police at 1:50 p.m., the Hennepin County Sheriff's Water Patrol reported.

When pulled from the water, the man had no pulse and was not responsive to resuscitation attempts, but authorities offered no more information about his condition Sunday evening.

Water Patrol personnel found him about 600 yards from shore, said Sgt. Chris Mathisen of the Sheriff's Department.

The man was wearing ice skates and had a camera around his neck, Mathisen said.

The victim, who authorities believe was visiting from out of town, has not been identified pending notification of relatives.

The area where he was skating, near French Regional Park off Rockford Road, had been open water on Saturday and froze overnight, Mathisen said.

Comment: We saw the news trucks there this afternoon. This is the same area of the lake where 2 trucks went through in February 2007. Trucks through thin ice

What if worship were like the NFL?

HT: The Irish Calvinist



Comment: I'm glad it's not!

Ratings Agencies - just profit-maximization entities?

Debt Watchdogs: Tamed or Caught Napping?

Excerpts:

“The mistaken notion that Moody’s was a company like any other, that was very fundamental,” said Sylvain Raynes, a former Moody’s analyst who is co-founder of R&R Consulting, a firm that helps investors gauge debt risks. “It is not just a profit-maximization entity like Exxon or Microsoft. Moody’s has a duty to the American public. People trusted it.”

Comment: Rating agencies and area of specialty

• Moody's Corporation (commercial and government entities)
  
• Fitch, Inc (One of the 3 NRSRO's along with Moody's)
  
• Standard & Poor's (research and analysis on stocks and bonds) - (One of the 3 NRSRO's along with Moody's)
  
• A. M. Best (insurance companies)
  
• Morningstar (investment offerings, including stocks, mutual funds, bonds, and ETFs)
  

There are two superpowers in the world today in my opinion. There's the United States and there's Moody's Bond Rating Service. The United States can destroy you by dropping bombs, and Moody's can destroy you by downgrading your bonds. And believe me, it's not clear sometimes who's more powerful. (Thomas Friedman. From Feb. 13, 1996 interview with Jim Lehrer.)

Obama's 21st Century New Deal

Obama Pledges Massive Public Works Program

Excerpts:

“We need action — and action now,” he said in an address taped for broadcast Saturday morning on radio and YouTube.

...

Mr. Obama and his team are working with Congressional leaders to fashion a spending package that could invest hundreds of billions of dollars into the economy. A big part of that would be infrastructure projects such as building or repairing roads, bridges, schools, sewer systems and other public utilities. Democrats hope the new Congress that takes office in early January could pass such a measure in time for Mr. Obama to sign almost instantly after taking office Jan. 20.

The president-elect in his Saturday address offered some general ideas of what he wants to see in the package. Besides public works construction, he promised to make government buildings more energy efficient, modernize school classrooms and libraries with computers, expand access to broadband Internet service and upgrade information technology in hospitals and doctors’ offices.

The big ticket will be the public works spending. “We will create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s,” Mr. Obama said.

He did not give any estimate of how much he would devote to that purpose, but when he met with the nation’s governors this week, they said the states had $136 billion worth of already-approved road, bridge and other projects ready to go as soon as funding became available. They estimated each billion dollars spent would create 40,000 jobs.

By invoking the federal interstate program, Mr. Obama sought to summon the spirit of Dwight D. Eisenhower, who launched the highway construction that became integral to the nation’s economic development. That imagery seemed intended to respond to critics, who argue that public works spending historically has not been a reliable catalyst for short-term economic growth and instead is more about politicians gaining points with constituents.

Comment: Sounds nice on the surface. But probably will just spend us into more debt.

Updated: (plus changed the title of the blog to reflect politico.com article)

Obama unveils 21st Century New Deal

North Dakota is hiring

North Dakota Asks, What Recession?

Excerpts:

North Dakota’s cheery circumstance — which economic analysts are quick to warn is showing clear signs that it, too, may be in jeopardy — can be explained by an odd collection of factors: a recent surge in oil production that catapulted the state to fifth-largest producer in the nation; a mostly strong year for farmers (agriculture is the state’s biggest business); and a conservative, steady, never-fancy culture that has nurtured fewer sudden booms of wealth like those seen elsewhere (“Our banks don’t do those goofy loans,” Mr. Theel said) and also fewer tumultuous slumps.

As it happens, one of the state’s biggest worries right now is precisely the reverse of most other states: North Dakota has about 13,000 unfilled jobs and is struggling to find people to take them.

...

“Our problem is that everybody thinks that it’s a cold, miserable place to live,” said Bob Stenehjem, a Republican and the State Senate’s majority leader. “They’re wrong, of course. But North Dakota is a pretty well-kept secret.”

With 635,867 residents, North Dakota is among the least populous states, and, in the past few years, more people have moved away, census figures show, than have moved here.

Katie Hasbargen, a spokeswoman for Microsoft’s Fargo campus, which is in the middle of a $70 million or so building expansion and is, even now, looking for a few additions to its work force (of more than 1,500), said false perceptions of the state are the problem when it comes to recruiting workers. “The movie,” Ms. Hasbargen said, referring to the 1996 Coen brothers’ film that bears this city’s name, “didn’t do us a lot of favors.”

Comment: But it is North Dakota! Re: "everybody thinks that it’s a cold, miserable place to live" - they're right!

Job's report: “horrendous"

Grim Job Report Not Showing Full Picture

Excerpts:

The number of people out of the labor force — meaning that they were neither working nor looking for work and that the government did not consider them unemployed — jumped by 637,000 last month, the Labor Department said. The number of part-time workers who said they wanted full-time work — all counted as fully employed — rose by an additional 621,000.

Take these people into account, and the job market may be in its worst condition since the early 1980s. It is still deteriorating rapidly, too.

Already, the share of men older than 20 with jobs was at its lowest point last month since 1983, and very close to the low point of the last 60 years. The share of women with jobs is lower than it was eight years ago, which never happened in previous decades.

...

Even Wall Street economists, whose analysis usually comes shaded in rose, seemed taken aback by the report. Goldman Sachs called the new numbers “horrendous.” Others said “dreadful” and “almost indescribably terrible.” In a note to clients, Morgan Stanley economists wrote, “Quite simply, there was nothing good in this report.” HSBC forecasters said they now expected the Federal Reserve to reduce its benchmark interest rate all the way to zero.

Such language may sound out of step with a jobless rate that, despite its recent rise, remains at 6.7 percent; the rate exceeded 10 percent in the early 1980s. But over the last few decades, the jobless rate has become a significantly less useful measure of the country’s economic health.

That is because far more people than in the past fall into the gray area of the labor market — not having a job and not looking for one, but interested in working. This group includes many former factory workers who have been unable to find new work that pays nearly as well and are unwilling to accept a job that pays much less. Some get by with help from disability payments, while others rely on their spouses’ paychecks.

U.S. Job Losses Signal Recession Will Be Long, Deep

Employers cut payrolls last month at the fastest pace in 34 years as the unemployment rate rose to 6.7 percent, the highest level since 1993. The 533,000 drop brought cumulative job losses this year to 1.91 million, the Labor Department said yesterday in Washington.

“Almost all businesses are in survival mode, and they’re slashing payrolls and investments just to conserve cash,” Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, said in a Bloomberg Television interview yesterday. “We’re in store for some big job losses.”

Comment: First of three economic posts today. My own company (unnamed by policy) has a hiring freeze. One of my kids is out of work (but has a part time job - was his 2nd job). For the first time in my life, I know personally probably at least a dozen who are out of work or soon will be.

Cars designed in DC won't sell

Bridge Loan to Nowhere - Congress and business 'viability' rarely mix.

Excerpts:

All three restructuring plans are heavy on promises to build the "green" cars that a Democratic Congress wants built. GM promises 15 hybrid models by 2012 and 37 miles per gallon on average for its cars. Chrysler commits to putting flex-fuel engines, which can run on ethanol or gasoline, in half of its cars. Ford promises to save 16 billion gallons of gas by using "advanced technology" and to invest $14 billion to improve fuel efficiency.

...
This is not a bailout that Congress is debating. It is a federal takeover. We don't mean that in the sense that the feds will own the companies on paper, although that can't be ruled out. What Congress wants to own is their business plan, and Detroit seems prepared to oblige.

...
The core problem is that the companies can't pay their creditors in fuel-economy standards. Two economists testified that the ultimate cost of this bailout would certainly be much, much higher than $34 billion. Mark Zandi of economy.com put the number at up to $125 billion -- and he supports the bailout. NYU's Edward Altman said the company proposals were "doomed to fail." He proposed a prepackaged bankruptcy for GM and Chrysler, with the government providing the debtor-in-possession financing if necessary. His point, which ought to be sobering, was that outside of bankruptcy there is no way to make these taxpayer loans senior to existing secured debt -- meaning the government might never get paid back if the companies go bankrupt later.

...
The car makers' request for a bridge loan, by contrast, looks like a $34 billion bridge to nowhere. It has already morphed into an opportunity for political extortion -- and we don't even have a bill yet. When, in a couple years, costs have not come down as expected because of political pressure to keep the unions happy and the green cars aren't selling -- because they were designed in Washington, not for consumers -- the companies will be back for more money.

The bailout commitment, in other words, is effectively open-ended, no matter what anyone says. And with the feds so invested in the companies, it will only be a short step for Congress to begin to coerce consumers to buy the cars that Washington prefers. Mr. Friedman, the concerned scientist, is already planning for that day. He said Friday that we'll eventually have to impose a "fee" (read: tax) on cars that "pollute too much" or use "too much gas."

This fairy tale, in other words, does not end happily ever after. A bankruptcy, prepackaged or otherwise, keeps looking better.

Comment: What Washington gives ... it takes away.

Donald Trump believes in God!

Trump Sees Act of God in Recession

Excerpts:

Guess who is complaining that condominiums in Donald Trump’s latest big project are ridiculously overpriced.

Donald Trump is.

But he isn’t cutting the prices. He says the banks won’t let him.

The project is the Trump International Hotel and Tower in Chicago, which is to be the second-tallest building in that city (after the Sears Tower). By Mr. Trump’s account, sales were going great until “the real estate market in Chicago suffered a severe downturn” and the bankers made it worse by “creating the current financial crisis.”

Those assertions are made in a fascinating lawsuit filed by Mr. Trump, the real estate developer, television personality and best-selling author, in an effort to avoid paying $40 million that he personally guaranteed on a construction loan that Deutsche Bank says is due and payable.

Rather than have to pay the $40 million, Mr. Trump thinks the bank should pay him $3 billion for undermining the project and damaging his reputation.

He points to a “force majeure” clause in the lending agreement that allows the borrower to delay completion of the building if construction is hampered by such things as riots, floods or strikes. That clause has a catch-all section covering “any other event or circumstance not within the reasonable control of the borrower,” and Mr. Trump figures that lets him out, even though construction is continuing.

“Would you consider the biggest depression we have had in this country since 1929 to be such an event? I would,” he said in an interview. “A depression is not within the control of the borrower.”

What's Force majeure?

Force majeure

Excerpt:

Force Majeure (French for "superior force") is a common clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or act of God (e.g., flooding, earthquake, volcano), prevents one or both parties from fulfilling their obligations under the contract.

Comment: But Donald Trump doesn't believe in God for his buyers:

Mr. Trump, it may be noted, does not think remorseful condominium buyers are in a similar position. When I asked him if he would let them walk away from contracts to buy apartments at predepression prices, he said he would not. “They don’t have a force majeure clause,” he said.

Coleman holds +192 lead after recount

The recounting is done (with one exception)

Excerpt:

Except for 133 missing ballots from Minneapolis, the recounting of votes from the U.S. Senate race is over. According to the Star Tribune's tabulations, Republican Sen. Norm Coleman has a 192-vote advantage over Democrat Al Franken, pending the resolution of those Minneapolis ballots and of thousands of ballot challenges.

When the recount began, Coleman held a 215-vote edge.

At 11:29 this morning, Wright County maintenance worker Allen Buskey pushed a cart with 10 boxes of ballots into Room 217 at the county government center in Buffalo and locked up the last of the 2.9 million ballots recounted since Nov. 19.

"We're done," said state elections director Gary Poser, after putting stickers on the 21st challenged ballot from the Wright County town of Montrose.

The last ballot tallied in the recount of the bitter race was for neither Coleman nor Franken, but the Independence Party's Dean Barkley, from a voter in Hanover.

The 192-vote margin almost certainly will change once the challenged ballots that have been set aside are reviewed by the state Canvassing Board.

Comment: Image captured from the Star Tribune (12/5/08). Compare Coleman & Franken: 238 votes from 11/7/08

Update: Minnesota Secretary of State Mark Ritchie said Coleman led Franken by 787 votes

With the recount virtually complete on Friday, Minnesota Secretary of State Mark Ritchie said Coleman led Franken by 787 votes. Local newspapers put Coleman's margin at about 200 votes, tallying ballots that had previously been challenged.

Peet's Coffee and Tea

Peet's Coffee and Tea

I have a special offer for all of my readers and friends. Mention my name and get discounted shipping at Peet's Coffee and Tea through Sunday.

Just mention my name - "Jim Peet"!

Stocks are unreasonably cheap now

Is Buffett Insane?

Excerpts:

In the midst of economic chaos, Warren Buffett recently made a bold prediction. He said that now is the time to buy American stocks.

...

1974: Stagflation


The years 1973 and 1974 were two very bad ones for the market. OPEC had started flexing its muscles, causing oil to quadruple. This resulted in a long recession, with inflation spiking to 12.3% in 1974, while real GDP growth fell by 0.5%. America experienced stagflation -- the ugly combination of a recession and high inflation rates -- and people were terrified. The situation was even worse in the United Kingdom, where the government was bailing out banks after real estate crashed. Over those two years, the S&P 500 plunged by 42%.

It was then, on Nov. 1, 1974, at the height of the pessimism, that Buffett made his first well-publicized bullish market call. He noted that he was well aware that the world was in a mess, but that stocks were simply too cheap. "If you're only worried about corporate profits, panic or depression, these things don't bother me at these prices."

To be totally clear, Buffett made one of the most direct predictions of his entire career: "Now is the time to invest and get rich." Buffett himself was buying shares of The Washington Post (NYSE: WPO) and advertising agency Interpublic (NYSE: IPG).

It worked out pretty well for him. The market jumped 32% in 1975, and another 19% the next year. Even today, the Dow Jones Industrial Average's 38% gain in 1975 stands up as its biggest increase since 1955.

Comment: Unreasonable Pessimism has replaced Irrational Exuberance. Time to keep investing!

Credit President Bush for our safety

Peggy Noonan: 'At Least Bush Kept Us Safe'

Excerpts:

There's a rough justice with the American people. If a president presides over prosperity, whether he had anything to do with it or not, he gets the credit. If he has a recession, he gets the blame. The same with war, and terrorist attacks. We have not been attacked since 9/11. Someone—someones—did something right.

Comments: In my own "book of blames". I blame the Democrats for the Fannie Mae / Freddie Mac mess. I blame the wholly uneducated American consumer - just plain STUPID about debt - for our debt crisis. And I credit President Bush for our safety.

Seems fitting ...

Obama Spent Four Times as Much as McCain at Race End

Excerpt:

Barack Obama’s record-breaking fundraising gave him four times as much cash to spend as rival John McCain in the final months of the presidential campaign.

Obama brought in $291 million between Sept. 1 and Nov. 24 and spent $349 million, helped by funds left over from a primary battle that began in February 2007, his campaign said. McCain, a Republican senator from Arizona, spent $78.9 million of the $84.1 million he received in public financing.

The president-elect shattered fundraising records, with donations of $746 million for the primary and general campaigns. Obama previously reported raising $642 million through Oct. 15. The campaigns reported their final totals yesterday to the Federal Election Commission.

Obama, 47, was the first major party nominee to bypass taxpayer funding for the general election, and his large base of donors gave him a massive advantage over McCain. During the last six weeks of the campaign, the Democrat was able to run twice as many commercials as McCain, 72, according to the Nielsen Co.

McCain spent $26.5 million in the final weeks of the campaign, with $9.5 million going for advertisements, $4.5 million for message phone calls and $2.2 million for salaries. He ended up with $4.9 million in bills still to be paid. McCain also had $25 million in his legal and accounting fund, which can cover expenses incurred during a mandatory FEC audit.

Comment: Seems fitting that "the Father" of the Bipartisan Campaign Reform Act of 2002 (AKA "the McCain-Feingold bill") would be outspent by Barak Obama! Wall Street Journal opines below:

McCain Couldn't Compete With Obama's Money

Mr. McCain was outspent by wide margins in every battleground state. But it would have been worse for him if RNC Chairman Mike Duncan and Finance Chairman Elliott Broidy hadn't stockpiled funds in 2007 and early 2008. The RNC provided nearly half the funds for the GOP's combined general-election campaign, while the DNC provided less than a tenth of the funds that benefited Mr. Obama.

To diminish criticism, Mr. Obama's campaign spun the storyline that he was being bankrolled by small donors. Michael Malbin, executive director of the Campaign Finance Institute, calls that a "myth." CFI found that Mr. Obama raised money the old fashioned way -- 74% of his funds came from large donors (those who donated more than $200) and nearly half from people who gave $1,000 or more.

But that's not the entire story. It's been reported that the Obama campaign accepted donations from untraceable, pre-paid debit cards used by Daffy Duck, Bart Simpson, Family Guy, King Kong and other questionable characters. If the FEC follows up with a report on this, it should make for interesting reading.

Mr. Obama's victory marks the death of the campaign finance system. When it was created after Watergate in 1974, the campaign finance system had two goals: reduce the influence of money in politics and level the playing field for candidates.

This year it failed at both. OpenSecrets.org tells us a record $2.4 billion was spent on this presidential election. And with Mr. Obama's wide financial advantage, it's clear that money is playing a bigger role than ever and candidates are not competing on equal footing.

Ironically, the victim of this broken system is one of its principal architects -- Mr. McCain. He helped craft the Bipartisan Campaign Finance Reform along with Sen. Russ Feingold in 2002.

No presidential candidate will ever take public financing in the general election again and risk being outspent as badly as Mr. McCain was this year. And even liberals, who have long denied that money is political speech that should be protected by First Amendment, may now be forced to admit that their donations to Mr. Obama were a form of political expression.

It is time to trust the American people and remove limits on how much an individual can donate to a campaign. By doing that, we can design a system that will be much more open by requiring candidates to frequently report donations in an online database. Technology makes this possible. Such a system would be easier for journalists to use and would therefore make it more likely that fund raising would be included in news coverage. That would give voters the tools they need to determine if a candidate is getting too much from unattractive people.

Rather than showing the success of a new style of post-partisan politics, Mr. Obama's victory may show the enduring truth of the old Chicago Golden Rule: He who has the gold rules

California's rolling budget fiasco - spending the state to ruin

Arnold's 'Ishtar' - The Governor surrenders on taxes.

Excerpts:

A big part of the problem [in California] is the Terminator himself. When Mr. Schwarzenegger ran for Governor in 2003 amid the last California fiscal crisis, he promised a new ethic of spending restraint, no new taxes and less debt financing. Six years later none of that has happened. Once California crawled out of that last fiscal emergency, Mr. Schwarzenegger made one more stab at budget reform, got clobbered at the ballot box, and has since given in and let the budget grow to $144.5 billion -- a 40% hike over four years.

...

Mr. Schwarzenegger even boasts that his tax plan will "invigorate our economy and generate jobs." Well, perhaps jobs for moving van companies to help people flee to better tax climes. The sales tax could not be more poorly timed: Golden State retailers have already seen a rapid slowdown in sales. The last time the sales tax was raised, in 1991, California's retail sales slumped to their lowest ebb in 30 years.

The only politicians standing against the media-political consensus for higher taxes are Republicans in the Assembly. Under California law, a two-thirds vote by the legislature is needed to pass a tax increase. Assembly leader Mike Villines has it right when he says that "We just believe that higher taxes will lead to more businesses leaving the state and encourage even more spending."

Democrats refuse even to trim the budget. Neither they nor the Governor have proposed shutting down a single government program. Many California voters also seem to live under this delusion that government is free. The state has a debt of $60 billion and the worst credit rating among the 50 states. But in November Californians approved a $10 billion bond for a high-speed rail system that will add $600 million in annual debt servicing costs to the state budget every year until the middle of the century.

...

We'd suggest Mr. Schwarzenegger and the rest of the Sacramento establishment take a field trip to New Hampshire. That state maintains better schools, roads and general public services than California, though the Live Free or Die state has no sales or income tax. Meanwhile, California labors under the second highest income tax rates, and the politicians now want to impose the fourth highest sales tax. And the state still has the largest budget deficit in the nation.

The real crisis isn't a lack of tax dollars. It's a political class that is spending that beautiful state to ruin.

Comment: Michigan's another state that taxed small businesses to emigrate: Michigan: A Taxing Place To Do Business. Note author's comments on Detriot:

Our state’s largest city still has a per capita tax burden far higher than the average for Michigan municipalities. It is burdened by bloated bureaucracy, corruption and cronyism, and old ways of thinking and doing things. Instead of being the engine for Michigan’s growth that it ought to be, it’s too much of a drain on both the economy and state taxes. Indianapolis, a city that works, has one-fourth the bureaucracy per citizen and spends about a third as much. Mackinac Center recommendations for fixing Detroit would go a long way to improving Michigan’s overall tax and business climate.

Will Barack Obama stare down Detroit?

The Latest Song of Detroit - Barack Obama's opening to practice some tough love

Excerpt:

In addition to these measures, Congress must revisit one of its own special-interest shibboleths if it really wants to save Detroit. Requiring car companies to meet corporate average fuel economy (CAFE) standards forces them to lose money on small cars that people don't want so they can sell big cars that people do want, at least until gas prices soar out of sight. Proof positive came last month, when the Toyota Sequoia and Honda Pilot SUVs posted big gains while sales of most other cars plunged. The obvious reason: gasoline prices plunged too.

The reason Europe has fuel-efficient cars is high gas prices, not CAFE laws. What's more, the only times that Americans have switched to smaller cars is 1973, 1979 and the spring of 2008, when gas prices here were high. So the time has come for Congress to stop pretending that fuel-economy can be legislated and to put market forces to work. That means raising gasoline taxes -- offset by cuts in income taxes and by gas vouchers for needy people. These measures would succeed at raising fuel economy and in reducing automotive emissions where the CAFE law has failed.

There are no painless solutions here. But amid this dismal picture, there is a real opportunity for our new president-elect. If Barack Obama can stare down the UAW, the pro-CAFE environmental lobby and the corporate-welfare supplicants by insisting on the sort of tough-love measures outlined here, he'll establish himself as a true leader. Rahm Emanuel, the president-elect's designated chief of staff, says a good crisis shouldn't be wasted. That goes for presidents, too. Can you rise to the tough-love challenge, Mr. Obama? If so, a lot of people will be singing your praises.

UAW grants concessions, exec warns of depression

Excerpt:

Worried about their jobs and warned that the cost of failure could be a depression, hundreds of leaders of the United Auto Workers voted overwhelmingly Wednesday to make concessions to the struggling Detroit Three, including all but ending a much-derided program that let laid-off workers collect up to 95 percent of their salaries.

"Everybody has to give a little bit," said Rich Bennett, an official for Local 122 in Twinsburg, Ohio, representing Chrysler workers. "We've made concessions. We really feel we're doing our part."

Union leaders also agreed to let the cash-starved automakers delay billions of dollars in payments to a union-administered trust set to take over health care for blue-collar retirees starting in 2010.

In addition, they decided to let the Detroit leadership begin renegotiating elements of landmark contracts signed with the automakers last year, a move that could lead to wage concessions.

GM, Chrysler May Accept Bankruptcy to Receive Bailout

Excerpt:

General Motors Corp. and Chrysler LLC executives are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multibillion-dollar government bailout, said a person familiar with their internal discussions.

Auto executives have warned bankruptcy would lead to liquidation as customers abandoned the companies. Staff for three members of Congress have asked restructuring experts if a pre- arranged bankruptcy -- negotiated with workers, creditors and lenders -- could be used to reorganize the industry without liquidation, a person familiar with that matter said.

“It’s essential for Congress to do due diligence on bankruptcy as an option so it gets a clear sense from independent people what the risks and possibilities are,” said Alan Gover of White & Case, who has been lead lawyer in $60 billion of corporate-debt restructurings.

Comments:

Re Barak Obama: I doubt he has the intestinal fortitude to address the Detroit issue

Re the UAW: Seems to be too little too late

Re GM and Chrysler: They waited until they were at the edge of the cliff (Think Tina and Louise!) before they began to get serious about their problem.

Homes now undervalued?

U.S. homes now undervalued, economists say: Prices fall in 241 metro areas in third quarter, and are likely to fall further

Excerpt:

Compared with their long-term fundamental values, U.S. homes are now 3.8% undervalued, the economists said.

"With no end in sight to the downward spiral of house prices, it is likely that the long-anticipated market correction will now overshoot fundamental valuations on the downside," said James Diffley, head of regional economics at Global Insight.
"Weak economic conditions and wary consumers continue to hold the housing market back," said Jeannine Cataldi, senior economist in charge of Global Insight's regional real estate analysis. "Although many areas are seeing home sales increase, it is largely due to foreclosure homes being snapped up at significantly discounted prices. As the inventory of these homes is removed from the market, prices will remain on a downward path."

However, another economist said home prices are still too high in many bubble areas.

Comment: They are still falling in Minneapolis and her suburbs. (But property taxes are going up! ???)

Scribd (IPaper)

Comment: The basic service is free. Worth trying out. You can mark documents as private or share with a limited number of people.

Scribd.com

Scribd supports the following formats:

1. Adobe PDF (.pdf)
   
2. Adobe PostScript (.ps)
   
3. Microsoft Word (.doc, .docx)
   
4. Microsoft PowerPoint (.ppt, .pps, .pptx)
   
5. Microsoft Excel (.xls, .xlsx)
   
6. OpenOffice Text Document (.odt, .sxw)
   
7. OpenOffice Presentation Document (.odp, .sxi)
   
8. OpenOffice Spreadsheet (.ods, .sxc)
   
9. All OpenDocument formats
   
10. StarOffice Documents
    
11. Plain text (.txt)
    
12. Rich text format (.rtf)
    

Comment: Sample below (from Evangelical Council of Financial Responsibility)

Best Practices Churches

Publish at Scribd or explore others: Religion

Child of "Migrant Mother" speaks

Girl from iconic Great Depression photo: 'We were ashamed'

Excerpt:

The photograph became an icon of the Great Depression: a migrant mother with her children burying their faces in her shoulder. Katherine McIntosh was 4 years old when the photo was snapped. She said it brought shame -- and determination -- to her family.

"I wanted to make sure I never lived like that again," says McIntosh, who turns 77 on Saturday. "We all worked hard and we all had good jobs and we all stayed with it. When we got a home, we stayed with it."

McIntosh is the girl to the left of her mother when you look at the photograph. The picture is best known as "Migrant Mother," a black-and-white photo taken in February or March 1936 by Dorothea Lange of Florence Owens Thompson, then 32, and her children.

Lange was traveling through Nipomo, California, taking photographs of migrant farm workers for the Resettlement Administration. At the time, Thompson had seven children who worked with her in the fields.

Comment: View CNN article (Link) for picture of Katherine McIntosh, now 77 - then 4, holding famous photo. Wiki article on Florence Owens Thompson. The Library of Congress entitles the Migrant Mother image, Destitute pea pickers in California. Mother of seven children. Age thirty-two. Nipomo, California. Six other fascinating Dorthy Lange photos of the "Migrant Mother" are available here

GM's plan

Detroit Free Press artcle: GM: Shrink brands, pay, jobs, dealers

PDF of GM Plan: Restructuring Plan for Long-Term Viability (37 pages)

Excerpts:

Hummer has recently been put under strategic review, which includes the possible sale of the brand. GM will also immediately undertake and expedite a strategic review of the Saab brand globally. Finally, Saturn, which has performed below expectations, has a unique franchise agreement and operating structure. As part of the Plan, the company will accelerate discussions with Saturn retailers and explore alternatives for the Saturn brand.

...

GM will launch the ground-breaking Chevrolet Volt in 2010. As indicated in Table 8, GM is investing over $750 million in the Volt and its propulsion system, prototypes of which are currently on test at GM‘s Milford Proving Grounds. An extended-range electric vehicle, the Volt will deliver up to 40 miles on a single electric charge, well within the daily commute of approximately 80% of Americans. Volt represents a fundamental reinvention of the American automobile industry, creating new growth and environmentally-friendly/sustainable industries, and represents a giant step toward energy independence. No other car company has made such a commitment to the American people. It involves the development of advanced batteries, power electronics, systems integration and manufacturing methods. The company‘s product plan includes additional vehicles utilizing Volt‘s extended-range electric vehicle system and potentially, the assembly of battery packs in the United States.

...

As indicated, the number of GM retailers is expected to decline to 4,700 by 2012. This will occur primarily in metropolitan and suburban areas where GM has too many dealers to serve the market. In the Plan, it is projected these dealers will be reduced by 35%, increasing annual throughput for the remaining outlets to a more competitive level with other high-volume manufacturers. GM‘s distribution strength in rural areas, which is a significant competitive advantage, will be largely preserved.

Comment: I understand they are in danger of running out of cash this month! Without aid, it could run out of cash this month: "General Motors Corp. said Tuesday it could run short of the cash it needs to operate by the end of this month if Congress doesn't approve $4 billion in emergency federal loans ... 'The first $4 billion is crucial,' GM President and Chief Operating Officer Fritz Henderson said. 'Absent support, we can't continue to operate.'"

CAFE killed the Big Three

Can the Big Three survive a bailout?

Excerpts:

... [In 1975] the institution of the Corporate Average Fuel Economy requirements designed to limit our reliance on foreign oil in the wake of the Arab oil embargo.

Instead of simply limiting foreign imports or adding federal taxes to fuel costs to give consumers an incentive to buy more fuel-efficient vehicles, the government instituted byzantine regulations that required American manufacturers to build (or at least market) fuel-efficient cars just so they could continue selling the cars and trucks they were already known for.

Since the United States had always been a country of "cheap gas," (a tradition that continues, by the way) American car companies were not geared up to build small, fuel-efficient cars, but foreign manufacturers were. The result was that Americans were almost forcibly exposed to import vehicles, and many American consumers liked what they found.

The CAFÉ regulations accompanied by inexpensive gasoline were analogous to plopping consumers into the middle of a giant candy store and then forcing the candy manufacturers to somehow persuade a percentage of consumers to buy broccoli instead.

When all was said and done, the CAFÉ rules ended up giving a strong leg up to the Big Three's import competitors, putting their market share on an upward curve that hasn't ceased climbing.

Of course, having helped push American consumers into import cars, albeit inadvertently, the federal government then tried to reverse the trend through new intervention.

At the urging of the U.S. government, the Japanese manufacturers adopted "voluntary" restraints on their exports of vehicles to the U.S. beginning in 1981. The goal was to give U.S. companies "breathing room" so they could catch up to the Japanese in producing small, fuel-efficient vehicles. (Sound familiar?)

Again, this might have seemed a worthy plan at the time, but it had several unintended consequences that ended up doing much more harm to the domestic manufacturers than good. In the short term it limited supply of popular Japanese-built vehicles, which resulted in windfall profits for the dealers of the top imports, helping those brands establish very strong dealer networks.

It influenced the import manufacturers to move up-market both by building more expensive vehicles and by establishing luxury brands like Acura, Lexus and Infiniti. And it gave strong impetus for the import manufacturers to build plants here in the United States.

Today a large percentage of the "import brand" share of the U.S. market -- more than 50 percent of the total light-vehicles sold here -- are vehicles built by Americans in foreign-managed factories on U.S. soil. Ironically, to counteract this, the Big Three automakers have increasingly moved production from the U.S. to lower-labor-cost countries like Mexico.

So what are the implications of this history lesson? The first takeaway is that a portion of the woes the domestic Big Three are suffering today are the result of current and past federal government policies, so it seems fair that they be accorded government assistance now in time of dire need.

But equally important, while the Big Three automakers might well be accused of not correctly gauging the needs and desires of the American buying public, one group that is demonstrably much worse in that endeavor is Congress. If the U.S. government were a car company, it would not only be deep in the red, but also have miserable customer satisfaction scores.

Comment: See SUVs and minivans created due to original mandate

CAFE standards signaled the end of the traditional long station wagon, but Chrysler's Lee Iacocca developed the idea of the minivan, which would fit into the separate truck category and allow automakers to comply with emissions standards. Eventually, this same idea led to the development of the SUV

Governmentium: New element on the periodic table

Heaviest Element Known to Science: Governmentium

Lawrence Livermore Laboratories has discovered the heaviest element yet known to science.
The new element,Governmentium (Gv), has one neutron, 25 assistant neutrons, 88 deputy neutrons, and 198 assistant deputy neutrons, giving it an atomic mass of 312.

These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons.

Since Governmentium has no electrons, it is inert; however, it can be detected, because it impedes every reaction with which it comes into contact. A tiny amount of Governmentium can cause a reaction that would normally take less than a second, to take from 4 days to 4 years to complete.

Governmentium has a normal half-lif e of 2- 6 years. It does not decay, but instead undergoes a reorganization in which a portion of the assistant neutrons and deputy neutrons exchange places.

In fact, Governmentium's mass will actually increase over time, since each reorganization will cause more morons to become neutrons, forming isodopes.

This characteristic of morons promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as critical morass.

When catalyzed with money, Governmentium becomes Administratium, an element that radiates just as much energy as Governmentium since it has half as many peons but twice as many morons.

Comment: Sent to me by a coworker (Nancy A). Here's the real periodic table

College: Tuition up 439% over 25 years.

College May Become Unaffordable for Most in U.S.

Excerpt:

... college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent. Student borrowing has more than doubled in the last decade, and students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families.

Comment: 2 of my children are still in college. One is closing in on his Associates' degree (paying his own way while working), the other is working on a Bachelor's (Engineering). He is funding his by work, VA benefits, and tuition reimbursement. Both (along with my daughter) eschewed student loans.

Bailouts mean the government will "tax you more for a very long time"

Even in Michigan, Not Everyone Wants a Lifeline

Excerpt:

Jeffrey Kerr, a real estate developer who lives in the Lake Michigan town of Saugatuck, objects to the personal costs that he says come with bailouts. “When the government starts bailing out private companies,” Mr. Kerr said, “what they’re basically saying is, ‘We’re going to tax you more for a very long time.’ ”

Pat Weber, a construction manager who was laid off last year in Fennville, near Saugatuck, largely agreed. “A bailout will cause a snowballing effect,” Ms. Weber said, “and it’s way too scary how it will come back on all of us.”

At the shop where Mr. Raterink makes tools and machinery, there used to be 15 men. Now there are five.

“They weren’t offered any bailout,” he said of those who lost their jobs. Then, of the Big Three and the mismanagement he perceives, he added, “The wolf you let loose is at your door.”

Comment: Interesting read about how the average Michigan "Joe" is disinclined to auto bailouts. See George Will column below for his view that government intervention actually exasperates recessions.

Same Old New Deal?

Excerpts:

In a 2004 paper, Harold L. Cole of the University of California at Los Angeles and Lee E. Ohanian of UCLA and the Federal Reserve Bank of Minneapolis argued that the Depression would have ended in 1936, rather than in 1943, were it not for policies that magnified the power of labor and encouraged the cartelization of industries. These policies expressed the New Deal premise that the Depression was caused by excessive competition that first reduced prices and wages and then reduced employment and consumer demand. In a forthcoming paper, Ohanian argues that "much of the depth of the Depression" is explained by Hoover's policy — a precursor of the New Deal mentality — of pressuring businesses to keep nominal wages fixed.


Furthermore, Hoover's 1932 increase in the top income tax rate, from 25 percent to 63 percent, was unhelpful. And FDR's hyperkinetic New Deal created uncertainties that paralyzed private-sector decision making. Which sounds familiar.

...

Barack Obama says that the next stimulus should deliver a "jolt." His adviser Austan Goolsbee says that it must be big enough to "startle the thing into submission." Their theory is that the crisis is largely psychological, requiring shock treatment. But shocks from government have been plentiful.


Unfortunately, one thing government can do quickly and efficiently — distribute checks — could fail to stimulate because Americans might do with the money what they have been rightly criticized for not doing nearly enough: Save it. Because individual consumption is 70 percent of economic activity, St. Augustine's prayer ("Give me chastity and continence, but not yet") is echoed today: Make Americans thrifty but not now.


Obama's "rescue plan for the middle class" includes a tax credit for businesses "for each new employee they hire" in America over the next two years. The assumption is that businesses will create jobs that would not have been created without the subsidy. If so, the subsidy will suffuse the economy with inefficiencies — labor costs not justified by value added.

Thanksgiving Leftovers

What’s Left Over From Thanksgiving Now That All The Good Leftovers Have Been Eaten?

• Whipped Cabbage Salad
• Gravy Skin Rollups
• Mashed Potatoes with Turkey Drippings and Gummi Worms
• Blue High-Bounce Squash Balls
• Pumpkin Pie With Wishbone Marrow
• Uncle Ken’s Five-Alarm Tex-Mex Brussels Sprouts
• Quad-Baked Potatoes
• Cornish Game Skunk
• Candied Gizzards
• The Last 200 Bucks’ Worth Of The $12,000 Cheese-Spread Sculpture Of Squanto We Commissioned For Our Office Thanksgiving Party
• Cranberry Sauce

Comment: I hate that leftover Cranberry Sauce. (For my daughter who brought Cranberry Sauce for dinner!)

New .Tel domain - a phone book for the Internet

.Tel Them Where to Find You

Excerpt:

On Wednesday, companies and organizations can register Web addresses with a new top-level domain, .tel. The new domain, which stores and encrypts contact information directly into the Domain Name System, has the potential to become a phone book for the Internet.

A .tel domain name links to the contact information of businesses, organizations and individuals. Information can include telephone numbers; links to Web sites, including a Facebook or MySpace page; e-mail addresses; instant messaging names,

Comment: Official site ... check out the simulator! General availability is March 24th, 2009. Perhaps a little pricey at $ 19.95 per year (for individuals).

The "new General Motors"

Pursuing U.S. Aid, G.M. Accepts Need for Drastic Cuts

Excerpt:

G.M. said its plan would create a “new General Motors,” that will be significantly smaller and more competitive.

The company said it would sell off its Hummer and Saab brands, shrink its Pontiac brand into a niche vehicle division, and explore opportunities to sell, close or consolidate the Saturn brand that — when it was started in the 1980s — was supposed to be G.M.’s answer to the smaller, fuel-efficient cars sold by Japanese competitors.

Comment: Out with Saturn, Saab, Hummer, and Pontiac.

Ford's Business plan submission

FORD MOTOR COMPANY SUBMITS BUSINESS PLAN TO CONGRESS; PROFIT TARGET, ELECTRIC CAR STRATEGY AMONG NEW DETAILS

Excerpt:

Ford Motor Company this morning submitted to Congress its comprehensive business plan, which details the company’s plan to return to profitability and outlines a request for potential access to a temporary bridge loan in case the current economic crisis worsens or there is a bankruptcy of a major competitor.

In the plan, Ford said the transformation of its North American automotive business will continue to accelerate through aggressive restructuring actions and the introduction of more high-quality, safe and fuel-efficient vehicles – including a broader range of hybrid-electric vehicles and the introduction of advanced plug-in hybrids and full electric vehicles.

Ford is asking for access to up to $9 billion in bridge financing, but reiterated that it hopes to complete its transformation without accessing the loan should Congress agree to make the funds available.

Despite the serious global economic downturn, Ford said it does not anticipate a liquidity crisis in 2009 – barring a bankruptcy by one of its domestic competitors or a more severe economic downturn that would further cripple automotive sales and create additional cash challenges.

Comment: Link below is full PDF (33 pages). Interesting comments on the economy.

FORD MOTOR COMPANY BUSINESS PLAN - SUBMITTED TO THE SENATE BANKING COMMITTEE

Excerpts:

The forward economic outlook is also negative, with a wide range of possible outcomes due to the uncertain financial market environment. Real GDP is projected to decline significantly in the current quarter, as much as 4% or more as compared to the prior quarter (at an annualized rate). Consumer confidence is the weakest since the early 1980s, with nearly three in four consumers expecting the recession to deepen in the months ahead, according to the recent Survey of Consumers report released by Reuters/University of Michigan.

The economy is projected to contract through the first half of 2009, with a peakto-trough decline in real GDP in the 2.0% to 2.5% range. The housing sector decline, as measured by housing starts and sales, is expected to weaken somewhat from already low levels.

Spending by consumers has already fallen at an annual rate of nearly 4% in the third quarter (as compared to the second quarter). A further contraction in consumer spending is underway in the current quarter, with an additional step down likely in the first quarter of 2009. Consumers are weighing likely further employment declines and responding by increasing their saving rates and pulling back on purchases, especially of durable goods such as automobiles.

The financial crisis, now 16 months old, persists. Despite the actions taken by the Federal Government and the Federal Reserve (and other governmental institutions around the world), there is no near-term end in sight.

... we are acutely aware that our supply base, our labor structure, and our dealer network, among other factors, are sized for an industry and a market share that the domestic companies can no longer support.

there are other important policies that will help enhance the industry’s global competitiveness. First, Ford was proud to support stronger CAFE standards, and we are absolutely committed to meeting them. However, we urge Congress to maintain one economy-wide set of national standards on fuel economy. A patchwork of standards would place enormous financial and engineering burdens on manufacturers and have the effect of reducing consumer choice -- all for little or no environmental benefit.

Throughout the 1990s and into this decade, we became increasingly dependent in the U.S. market on trucks and large SUVs, which were in heavy demand by consumers and generated large profits. Many of our competitors, both foreign and domestic, likewise followed market demand and added more truck and SUV products to their lineups. Our focus on these vehicles, however, left us exposed in the event of a market shift to smaller, more fuelefficient vehicles. In anticipation of such a shift, and inspired by the compelling vision outlined by our Executive Chairman, Bill Ford, we began to refocus our portfolio earlier in this decade, introducing a new line of mid-size cars (the Fusion, Milan, and MKZ) as well as the first hybrid sport utility (the Ford Escape -- still the most fuel efficient sport utility available with an EPA city mileage rating of 34 miles per gallon). When fuel prices shot up rapidly earlier this year, the shift occurred much more quickly and was much more pronounced than we or anyone else in the industry anticipated.

In addition, we had, over a period of many years, created a labor structure that was uncompetitive with the foreign-owned transplant operations that had been established in the United States. And, we made small cars in the United States largely because of a requirement to meet federal Corporate Average Fuel Economy standards.

Comment: A worthwhile read.

How long the Recession?

The Longest Recession Since …

Excerpt:

Economists have been forecasting that the current recession will likely end sometime in the spring (which is, presumably, when some of the new stimulus money will start to be spent). If they’re right, this recession will be roughly as long as the 1973-75 recession and the 1980-81 recession, both of which were 16 months. To find a longer one than that, you have to go back to the Depression.

Comment: I'm pessimistic about that time frame because:

1. I have read about a commercial real estate mortgage crisis (Meltdown far from over, new mortgage crisis looms)
   
2. I don't think housing is anywhere close to bottoming out (Housing Prices: Bottom or Temporary Bear Break?) (By the way: Good news if you are buying a home!)
   
3. There are more ARM resets that will force more into foreclosure (Closer Look At The ARMs Reset Problem)
   
4. The last stimulus package seemed to do so little (Reality Checks: Living costs are keeping stimulus-money recipients from going on shopping sprees)
   
5. The national savings rate is so low, and consumers are so extended that they are unable to borrow (see yesterday's posting)
   
6. Back to the stimulus: putting money into consumers' wallets to have them spend on imported goods (think of China-Mart (er Wall Mart)) really does nothing to help US manufacturing
   
7. Job losses are just beginning to climb (coincidentally, a guy at work told me just today that today is his last day!)
   

My own thought is that the recession may go all the way through 2009 and end in the 1st or 2nd QTR of 2010.

Potential borrowers are not credit worthy

Bailout Monitor Sees Lack of a Coherent Plan

Excerpts:

“You can’t just say, ‘Credit isn’t moving through the system,’ ” she said in her first public comments since being named to the panel. “You have to ask why.”

If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, she continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, “pouring money into banks isn’t going to fix that problem,” she said.

...

In her view, the government should be trying to create more reliable customers for those banks by shoring up the fragile finances of the millions of American families that could not save, borrow or spend even if their banks were flush with capital.

“Any effective policy has to start with the households,” she said. “Years of flat wages, low savings and high debt have left America’s households extremely vulnerable.”

Comment: Heard: GMAC will not make a car loan to anyone with less than a 700 FICO score. GMAC limits loans to buyers with 700+ FICO rating. We need a long term national program to encourage savings and investing. See: In 2005, the U.S. savings rate hit negative levels for the first time since the Great Depression. (article has graph)

Bernanke: won't be like Great Depression

Bernanke says crisis 'no comparison' to Great Depression

Excerpt:

Federal Reserve chairman Ben Bernanke said Monday the current economic situation bears "no comparison" to the much deeper crisis of the 1930s Great Depression.

"Well, you hear a lot of loose talk, but let me just ... say, as a scholar of the Great Depression -- and I've written books about the Depression and been very interested in this since I was in graduate school, there's no comparison," Bernanke said in a question period after an address in Austin, Texas.

Bernanke cited "an order-of-magnitude difference" in the current situation compared to the 1930s.

"During the 1930s, there was a worldwide depression that lasted for about 12 years and was only ended by a world war," he said.

"During that time, the unemployment rate went to 25 percent, at least, based on the data that we have. The real GDP (gross domestic product) fell by one-third. About a third of all of the banks failed. The stock market fell 90 percent."

Bernanke said the situation at that time represented "very difficult circumstances," because "we didn't have the social safety net that we have today. So let's put that out of our minds; there's no -- there's comparison in terms of severity."

He added, "We're very lucky to live in a country as rich and diversified as the one we have. And I hope that we will have a quick and rapid recovery from the current slowdown."

Still, the Fed chief said lessons learned from the Depression may still apply today, including the "excessively tight monetary policy" that led to higher interest rates and deflation of about 10 percent a year over the first three years of the 1930s.

"We have learned from that experience that monetary policy has got to be proactive and supportive of the economy in a situation of difficult financial conditions," he said.

"The other part was -- the other error, the big mistake that policymakers made in the early '30s was they essentially allowed the financial system to collapse and they didn't do anything about it. The Federal Reserve did no action as the banks failed by the hundreds and the thousands."

Comment: It'll be the worst recession in our lifetimes (unless you are the age of my 88 year old Mother)

The Death of Credit Cards?

The Death of Credit Cards

Excerpt:

Meredith Whitney -- bank analyst extraordinaire -- predicts that the credit card industry may slash more than $2 trillion of existing credit lines -- 45% of the total -- over the next year and a half. Yikes! The obvious outcome here would be a huge risk reduction for companies that issue consumer credit, such as JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), and Citigroup (NYSE: C), while kicking an already-bloodied consumer -- and to a lesser extent, card processors Visa (NYSE: V) and MasterCard (NYSE: MA) -- while they're down.

The big question is whether those consumers deserve to be kicked, with all due respect. Among the more disturbing tidbits Whitney mentions in her report is that credit cards serve as consumers' second most important source of "consumer liquidity," behind actual jobs. Why is it disturbing? In any healthy economy, you'd expect savings to be the closest backstop to job income, not credit cards.

One of the key reasons we're in such a bind right now is that consumers scoffed at saving for a rainy day, and instead spent like there'd be eternal sunshine. Sure, a 45% contraction in credit-card lines will be miserable for some, but the harsh reality going forward is that people will be restricted to purchasing things they can actually afford. I know -- it's a tough concept to grasp.

All of this highlights what I think is one of the biggest fallacies we're facing today: the notion that the key to an economic recovery is getting consumers back to previous spending levels, without realizing that those same levels of spending are partially what ushered in this mess. There's no way around it -- the key to a stabilized economy is to get people to spend less and save more. Unfortunately, that'll mean a reduction in the standard of living for those reliant on plastic to begin with, not to mention the economy as a whole, which is composed of roughly 70% consumer spending.

That said, R.I.P., credit cards. You won't be missed.

Comment: I don't see CC's going away. The point highlighted above is key!

It's official: Recession Declared

Dow Plunges 680 Points as Recession Is Declared

Excerpt:

This is the first official recession since 2001, when the economy suffered after the bursting of the technology bubble. The period of expansion lasted 73 months, from November 2001 to December 2007.

Determination of the December 2007 Peak in Economic Activity

Excerpt:

The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.

Because a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity.

The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment. This series reached a peak in December 2007 and has declined every month since then.

NBER list: Business Cycle Expansions and Contractions

Peak	Trough	Contraction	Expansion	Cycle (peak to peak)
November 1948	October 1949	11	37	45
July 1953	May 1954	10	45	56
August 1957	April 1958	8	39	49
April 1960	February 1961	10	24	32
December 1969	November 1970	11	106	116
November 1973	March 1975	16	36	47
January 1980	July 1980	6	58	74
July 1981	November 1982	16	12	18
July 1990	March 1991	8	92	108
March 2001	November 2001	8	120	128
December 2007	???	???	73	81

Comment: I remember the recession of 1975. I was a computer salesman (IBM) and sales (and commissions) dropped off significantly.

Here's my question: If December 2007 was the last peak, when do you expect the trough?

How a 50 year-ish deputy sheriff infiltrated Anarchist organization

'Anarchist' looked like someone's mom

Comment: From the Star Tribune. Worthwhile read. Star Tribune links disappear after a while so read it while it is available.

Excerpts:

On Aug. 31, 2007, Marilyn Hedstrom, who appeared to be in her early 50s, walked into a run-down store-front where anarchists hung out on E. Lake Street in Minneapolis.

She introduced herself as Norma Jean.

Asked by a man at the Jack Pine Center why she was there, she said she had issues with President Bush and the Iraq war. "I told him I was interested in helping the cause and interested in participating in the protesting,"

...

What she did not tell him is that she was a deputy sheriff for the Ramsey County Sheriff's Office. Along with two other undercover sheriff's operatives and an FBI informer, she had been assigned to infiltrate the RNC Welcoming Committee, which was planning street blockades at the 2008 Republican National Convention.

She went "dumpster diving" at the group's instructions to find food for the anarchists to eat. She cooked meals for some meetings, ran errands, coordinated committee discussions and represented the organization at some gatherings of the protest movement. She became friends of some of the activists. And she, ironically, even helped on security for the anarchists, who worried that the cops were infiltrating them.

For a year Deputy Hedstrom led a double life as Norma Jean Johnson, filing her recollections, often daily, with the Special Investigations Unit, as did the other operatives.

...

"Norma Jean looked like somebody's mom," recalls Meredith Aby, a member of the Anti-War Committee, a group that occasionally met with the anarchists. "She was treated by the Welcoming Committee as if she were one of their own."

Betsy Raasch-Gilman, 56, who helped raise money with Hedstrom on the Welcoming Committee, said they sometimes discussed family and grandchildren. "To this day, I don't know how much was put-on and how much was real," she said. Raasch-Gilman learned that Hedstrom was undercover after court documents were filed

From the Big Three ... a Big One?

And Then There Was One - Distilling the Big Three into a single player could save Detroit.

Excerpts:

The notion of three powerful U.S. automakers is already an anachronism. These companies are husks of the mighty institutions that once ruled the road. Now they control less than half the U.S. auto market and will lose a combined $30 billion this year. Collectively they are burning through nearly $6 billion a month, and General Motors and Chrysler warn that by the end of the year they'll be broke. They'll head back to Washington this week (ideally by car pool) to beg for a bailout.

But Detroit actually has parts worth saving. Melding them into a single entity could buff up its best brands, like Chevy, Ford and Cadillac, while leaving the clunkers (Pontiac, Mercury, Saturn, et al.) by the side of the road. It would take a healthy dose of Nietzsche's "creative destruction," but that's preferable to total destruction, especially when you're talking about an industry that supports 2.5 million jobs. Other major American industries have undertaken calamitous consolidations to survive. Why should Detroit be spared from market forces?

...

After the Berlin Wall came down in 1989 and the end of the Cold War led to shrinking defense contracts, America's aviation companies began falling into one another's arms. Boeing grabbed up all U.S. civil-aircraft business, acquiring its chief domestic rival McDonnell Douglas in 1997. That allowed Boeing to take on the true competition: Europe's Airbus.

...

Like autos, foreign competition laid waste to the American steel industry. Beginning in 1986, more than 35 American steel makers went bankrupt. In 2002, billionaire investor Wilbur Ross agreed to buy up bankrupt LTV Steel, setting off a merger frenzy that saw 17 companies shrink down to three, while financial results reversed from a $1.1 billion loss in 2003 to a $6.6 billion profit in 2004. Ross used the bankruptcy courts to renegotiate labor contracts and hire back a fraction of the workers.

... some say Detroit's salvation could come in the form of a prepackaged bankruptcy, a quicker reorganization where creditors agree to cuts up front that would hopefully be less disruptive to the overall economy. With government backing to secure loans and preserve car warranties, buyers might not turn away.

Bankruptcy could solve another intractable problem: Detroit's glut of dealers and car brands. The Big Three need to cut their dealers by one third but are blocked by state franchise laws. In bankruptcy, carmakers can tear up franchise contracts and wipe out entire brands. The question is, would a Wilbur Ross-type speculator come along to consolidate the remains of the domestic auto industry?

Comment: I think "the Big Three" is essentially a misnomer. Chrysler is virtually a non-player. Maybe "the Big Two and a Half" or "The General, a Sergeant, and a buck private". My own solution is a "Government-Sponsored-Bankruptcy". Brands worth saving: GM: Cadillac, Chevrolet, Buick; Ford: Ford and Lincoln; Chrysler: Jeep and their mini-vans. Perhaps Ford should buy Chrysler and retain the Jeep brand. All will be interesting to see it unfold.

1836 all over again

The Madness of Crowds

Excerpt:

Let us begin our account of the catastrophic effects of speculative bubbles and political gamesmanship with the collapse of 1836. Thanks to a growing population, prosperity, and the advancing frontier, poorly regulated state banks had been multiplying throughout the 1830’s. In those days, chartered banks issued paper money, called banknotes, backed by their reserves. From 1828 to 1836, the amount in circulation had tripled, from $48 million to $149 million. Bank loans, meanwhile, had almost quadrupled to $525 million. Many of the loans went to finance speculation in real estate.

Much of this easy-credit-induced speculation had been caused, as it happens, by President Andrew Jackson. This was a terrific irony, since Jackson, who served as President from 1829 until 1837, hated speculation, paper money, and banks. His crusade to destroy the Second Bank of the United States, an obsession that led him to withdraw all federal funds from its coffers in 1833, removed the primary source of bank discipline in the United States. Jackson had transferred those federal funds to state banks, thereby enabling their outstanding loans to swell.

The real-estate component of the crisis began to take shape in 1832, when sales by the government of land on the frontier were running about $2.5 million a year. Some of the buyers were prospective settlers, but most were speculators hoping to turn a profit by borrowing most of the money needed and waiting for swiftly-rising values to put them in the black. By 1836, annual land sales totaled $25 million; in the summer of that year, they were running at the astonishing rate of $5 million a month.

While Jackson, who was not economically sophisticated, did not grasp how his own actions had fueled the speculation, he understood perfectly well what was happening. With characteristic if ill-advised decisiveness, he moved to stop it. Since members both of Congress and of his cabinet were personally involved in the speculation, he faced fierce opposition. But in July, as soon as Congress adjourned for the year, Jackson issued an executive order known as the “specie circular.” This forbade the Land Office to accept anything but gold and silver (i.e., specie) in payment for land. Jackson hoped that the move would dampen the speculation, and it did. Unfortunately, it did far more: people began to exchange their banknotes for gold and silver. As the demand for specie soared, the banks called in loans in order to stay liquid.

The result was a credit crunch. Interest rates that had been at 7 percent a year rose to 2 and even 3 percent a month. Weaker, overextended banks began to fail. Bankruptcies spread. Even several state governments found they could not roll over their debts, forcing them into default. By April 1837, a month after Jackson left the presidency, the great New York diarist Philip Hone noted that “the immense fortunes which we heard so much about in the days of speculation have melted like the snows before an April sun.”

The longest depression in American history had set in. Recovery would not begin until 1843. In Charles Dickens’s A Christmas Carol, published that same year, Ebenezer Scrooge worries that a note payable to him in three days might be as worthless as “a mere United States security.”

Comment: See also Panic of 1837. Image is from the Wiki article. Sent to me by my son, Roger. It's almost as if there is a 40 year stupidity cycle. See Panic of 1873