Is That a Spot of Mustard on Your Tie?

7/30 A balanced budget amendment in the midst of a depression.... sound idiotic?   It should.

What does this do to gold? :)  Let's see, on the one hand the contraction of money supply makes gold less valuable. On the other hand the contraction of money supply is exactly what can deepen the depression, causing gold to be more valuable...maybe?  hmmmm.

The idea is, though, a partially brilliant strategic move by the fairly idiotic to get re-elected. Such an amendment would be widely supported and politicians voting against it would do so at their peril. However, any concerted effort could block things as it isn't easy to pass a Constitutional amendment. Even a veto stops it and that would jeopardize only one politician's career, albeit for the sake of sanity.

The obvious? Any economic stimulus we might need in a future downturn (perhaps the double dip that looks to be appearing) would be impossible unless the Fed would be allowed do it. But Fed stimulus is mostly a rich man's game.

Would wars be taken off-budget? Or would we just not go to war? That would certainly be a positive, unless, per chance, we actually needed to go to war. Had we had a balanced budget amendment, the Iraq war would have been impossible but Hitler's Germany would probably have controlled most of the world's oil supply long ago anyway.

All in all, I think I'll start calling them the Mad Tea Party.

7/30 I will have to stop using sandwich shop lingo for titles. I'll make a pledge. If our country doesn't default, no more sandwich puns. :)  The inability of our government to work is becoming shocking even to me. I think this illustration is much more extensive than the first failed bailout vote that sent the stock market off a cliff. Truly awe inspiring.

Don't Throw that Bread Out Because of a Little Spot of Mold

7/29 I have been saying that perhaps a large wake up call would be better for us than more negotiating and crap legislation that can get through our completely non-functional legislative bodies. Check out this chart on "sovereign" (a nation's) debt that has been downgraded from "AAA" by the rating services. Instead of yield (cost of borrowing so to speak) going higher, after a period of adjustment (9 days on this chart, for heck sakes), it heads on down. The idea, I think, is that a nation who has just been downgraded will... try harder, and investors jump in. Or the uncertainty is gone. Or to put it another way, as we have seen in the past from the ratings just before the current Bank Deregulation Depression, those damned ratings services far from prophesying future problems are merely lagging indicators. Probably this falls in the category of "lies, damned lies, and statistics" but anyway here's the rather humorous chart:

7/29  This is some writing that didnt' make the cut over at Aimless. :)  That should really put the attenna up. :)

I looked up the policies of the 1930’s because I usually believe we have not completely rid ourselves of those policies in the aftermath of the Crash of 1929. Certainly our policies leading up to our current problems look eerily similar to the pre-depression days, and currently it looks like we are making a U-turn on the progress we have made post catastrophe.

While we do not appear to be making the sharp policy mistakes of the 1930s, we do appear to have some longer-term drags—the potential for debt downgrades and the need to ‘write the rules’ still on financial regulation and the Healthcare bill,” said Don Rissmiller, chief economist for Strategas research and one time economist at the Federal Reserve Bank of New York.  – CNBC Online  “Debt Fallout: Even Market Pros Don't Know What to Do” http://www.cnbc.com/id/43932320\

Below find the general agreement among monetarists about what the bad policies after 1929 amounted to:

“Monetarists, including Milton Friedman and current Federal Reserve System chairman Ben Bernanke, argue that the Great Depression was mainly caused by monetary contraction, the consequence of poor policymaking by the American Federal Reserve System and continued crisis in the banking system.” – Wikipedia   “Great Depression” 

Is this the moment when the Market Pros finally realize that they are in uncharted waters? Is the debt downgrade contemplated by the rating agencies more realistic in its reasoning than we give it credit?  It’s not just an event to avoid but a series of factors that are to be considered when a ratings agaency takes such an unprecedented step.

If I were rating the debt, the big question to me would be whether our current system of government (3 clashing parties in the House of Reps, and a 60 percent majority necessary to pass a bill in the Senate) is viable.  We are in the midst of a historic period of corporations lobbying in profound numbers, pouring record amounts of money into campaigns, having company employees assigned to key government offices like Secretary of Treasury and myriad agencies designed to regulate the very companies they are from, and companies handing out jobs as rewards to ex-government officials. In the midst of this the Supreme Court takes off the caps on the amounts of money that companies can be used to influence the government.  Is that viable?

Do “market pros” think that the debt reduction being discussed in the form of less government outlays, or even in raising taxes should that actually occur, is  not a “contraction of the money supply?” Do they think there isn’t a continued crisis in the banking system with very little money to lend?

The reason that Market Pros don’t know what to do is very broad indeed. If we could actually look at the similarities between what happened in the Great Depression and the current day depression without the moderation of unemployment benefits, fiscal stimulus, government bailouts of banks, and the many other things we have done right UP UNTIL NOW, we would see a more direct correlation. To believe that we are out of this depression because we have moderated it to death is pretty wishful thinking.

Panini Press

7/28 It's becoming more and more fun to blog here than on my real blogs. I really don't want to seriously think too long on the Boner mess. I have two charts today. One shows the reality of the depression which screams for an even easier money policy. Please don't forget that the way out of the famous Great Depression was money being pumped into the economy. Even willy nilly money now termed as "helicopter money" helps get the economy churning. May I have the first chart please? Suzy, will you get the lights?

As you can see, hey, pay attention little Johnny B., stop that sniffling...Suzy stop messing with his name tag, as I was saying, as you can see by the chart, the Bank Deregulation Depression is now doing a double dip. Housing prices seem to be a fair judge of the depression originally caused by a bubble in real estate and those Mad Hatter real estate financing instruments. And look, it is double dipping and gets worse with every month. THIS is reality. The employment graph shows the same double dip pattern.

Meanwhile this next chart is the result of the "boner headed" wrangling over the debt ceiling. Remember, money pumped in is needed. And you can't just get the money needed to end the Depression from the people actually in the Depression, the ones without the jobs and money. You either have to take it from the people who have the money, let's call them "the rich," or you have to borrow the money. So the debt ceiling thing is kind of bothersome since the rich people solution is off the table. And the worst thing that could happen when you need to borrow money is a higher cost of borrowing caused by lenders having no confidence in their ultimate payback. Yesterday, the stock market finally stopped listening to the parade of analysts on CNBC (and other media sources) who claimed we would obviously meet the deadline. Why? The ratings services, who don't want to be behind the curve yet again, let it be known that a downgrade in our credit worthiness score was imminent. This has major conseqences on the debt we already owe and the world who have invested in us. Overnight foreign indices are showing trouble ahead for tomorrow's trading in the US as well. I write at 4am 7/28. (New medication is messing with my sleep pattern.) Suzy, the lights again...

This shows yesterday's loss of faith in the two year US treasury bond. It is probably going to cost us a lot more to borrow and we are borrowed to the hilt now. Is a Greece-like desertion of lenders imminent? In some way, I guess this might occur. Oddly enough, I listened to a Planet Money show (NPR?) the other day that had one of the authors of This Time is Different linkie , I'm not sure which one. They were talking about the tipping point that causes investers to flee in mass movements from a country. Our debt numbers compared to GDP were past the fleeing stage but perhaps...wait for it...this time is different.

Wouldn't it be fun if the ratings services were responsible in a major way for the first and second dip of the GREAT Bank Deregulation Depression? NO, not really.

2 Slices of Bread Short of a Hoagie

7/27   http://www.cbsnews.com/stories/2011/07/26/politics/main20083934.shtml  The Tea Party just doesn't want to govern. Threats to the full faith and credit of our nation, yes. Compromise, no.

7/27 I was going to blog this yesterday when I heard about what appeared to be a done deal of the rating services downgrading the USA from a AAA rating. The irony of this is awesomely stupendous. It's the definition of "Oh no they didn't..."  :)   The same rating agencies that actively lied about the CDO's and derivatives would now be rating what they have wrought in regards to the US Economy? I've looked long and hard to find all the villains in the Bank Deregulation Depression but it is hard to top these guys. And now, with all the retirement funds and the like struggling, the retirement funds that could only purchase AAA and were assured that these CDO's and the like were as safe as "treasury bills", white collar criminals at the rating agencies have not gone to jail, but are responsible for rating the USA which they hurt so badly. At the very least, they should recuse themselves. :)   Anyway I was going to write about this rather obvious story but as I was looking up on the internets whether or not they had actually rated us below triple A, I came across this: http://gretawire.foxnewsinsider.com/2011/07/26/ratings-agencies-whats-wrong-with-this-picture/  The story must be obvious to all. Even Fox News gets the story, well with a few twists. You see, it's the fault of congress, not then but now. And that graphic of the upside down Whitehouse, well that ties them in, too. You gotta wonder why that graphic was considered. Maybe this graphic has been too dull and lame to use in the past and this is it's moment of glory. I kinda doubt it. :)

This self parodying piece ends with the amazingly dull and cliched rhetorical question "Am I wrong?"   Well Greta, you have grasped the obvious and dared to speak it but yes you are slightly wrong that the Congress has only just recently been at fault. Weren't they far more at fault when they sat on their hands when Brooksley Born was warning about the lack of regulation in the derivatives market?  They were wrong then and the Clinton adminstration Whitehouse was upside down, trusting the Wall Street guys with the keys to the deregulation car.  Asking congress to do something now, to cheat the ratings, is to avoid responsibility for the past. The avoiding of personal responsibility again. *sigh*  I remember saying in one of my blogs that I was surprised the credit agencies didn't proactively ding the USA earlier so that they could innoculate themselves and be able to say that any guff from congress after the fact was retaliation. I'm guessing they had their finger on the pulse of Washington and now have decided the time is ripe for a little vacination shot. It will only hurt just a little when Nurse Greta jabs it in a little to deep.

Am I wrong?

Super Deluxe

7/26  The completely non-functioning bodies of the Legislative Branch need extra-Constitutional help to get anything passed. http://www.huffingtonpost.com/2011/07/23/super-congress-debt-ceiling_n_907887.html?utm_source=Triggermail&utm_medium=email&utm_term=Daily%20Brief&utm_campaign=daily_brief   I'm all for the Super-Committee for all legislation of any kind going forward. The idea is that legislation would actually come out of the legislative branch and then be signed or vetoed by the President, an idea once backed by the Founding Fathers. It is just brilliant in it's simplicity. Let's give it a try. :)

Sweet Tea Tax

7/25  This chart shows the obvious. Cutting expenditures is irresponsible without raising revenues. Easy enough to see:

Fillet O' Fish

7/22

Some of what I have recently learned in a nutshell:

 If you drop that fish sandwich and hold your empty hand out to help pull a man out of a pond into which a banker pushed him, tomorrow that man is more likely to be around to learn how to fish, learn how to swim, and avoid variable interest rates with balloon payments whose notes are rolled into Mortgage Backed Securities, packaged into Collateralized Debt Obligations and bet against by strangers with Credit Default Swaps.