Damn Mr. President, things couldn't be better...

Customers furious in Day 2 of IndyMac fed takeover
LOS ANGELES (AP) — Police ordered angry customers lined up outside an IndyMac Bank branch to remain calm or face arrest Tuesday as they tried to pull their money on the second day of the failed institution's federal takeover.

Worried customers with deposits in excess of insured limits flooded IndyMac Bank branches on Monday, demanding to withdraw as much money as they could or get answers about the fate of their funds.
http://ap.google.com:80/article/ALeqM5hUsHq4hmx_WYzcFWVjAsPnbQHB9AD91UCKI01

It's just one bank out of 6000 that face this possible demise...insolvency. The question then? Are there enough police?


Stocks Shed Losses as Oil Sinks
Wall Street recouped its steep early losses and traded mixed Tuesday as oil plunged, giving investors hope that lower energy prices could help revive the flagging economy.

I found this late morning headline particularly amusing. "...hope that lower energy prices could help revive the flagging economy." LOOOOOOOOOOOOOOL! Oil is down ONE day and hope springs eternal? How stupid a supposition is that? Only in the US media... Recall that Oil prices were down early last week $10, and Oil closed the week at new ALL-Time highs. Yes, Oil is due for a fall...a correction even...but it will in no way be "enough" to "revive the flagging economy". The problems in our economy run a whole lot deeper than the cost of energy. Are falling energy prices going to miraculously boost home prices? Reliquidate the banks? End the war in Iraq? Of course Wall Street found away instead to revive losses, and close down near 100 points on the day. So much for falling Oil prices.

It was even more amusing the reason given for the falling prices...lower demand on a weaker economy. How many times has this supposition been made to explain lower Oil prices, only to see the prices move even higher. Oil demand no longer revolves around the US. It revolves around the emerging world economies, in particular China, India, and Russia. The three combined now use as much Oil as the gluttonous USA. Demand is NOT dropping in these economies, it is increasing...and increasing faster than it is falling here.

It was particularly annoying, to see the prices of Gold and Silver wither on the falling prices of Oil. The Euro hit a new ALL-TIME high versus the Dollar today. It is high time we see a disconnect between Oil and the Precious Metals. Oil is up because of a weaker Dollar, and so is Gold and Silver. The Dollar was down all day today. Gold did close up on the day, but well off it's highs because of falling Oil prices? Nobody ever claimed that the clowns at the Crimex are very smart. Gold and Silver have a lot of catching up to do versus Oil. Should Oil sell off, the money leaving it is going to flow into Gold and Silver. Take that to you bank and ask for your money.


Bernanke: Economy faces 'numerous difficulties'
WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Tuesday the fragile economy is facing "numerous difficulties" despite the Fed's aggressive interest rate reductions and other fortifying steps.

The situation, he said, poses "significant challenges" for Fed policymakers as they try to chart the best course for keeping the economy growing, while making sure inflation doesn't dangerously flare up. All the economy's problems -- including slumping home values, which threaten to make people feel less wealthy and less inclined to spend in the months ahead -- represent "significant downside risks" to economic growth.

Over the rest of this year, the economy will grow "appreciably below its trend rate" mostly because of continued weakness in housing markets, high energy prices and tight credit conditions, Bernanke said.
http://biz.yahoo.com/ap/080715/bernanke.html


Bush Says U.S. Economy Still Fundamentally Strong
President Bush sought yesterday to reassure shaky markets and frightened consumers about worsening financial conditions, and he blamed congressional Democrats for not acting quickly enough to tackle the nation's economic troubles.

And with one large California bank already taken over by the federal government, Bush even offered a brief tutorial on the mechanics of bank runs. "I happened to witness a bank run in Midland, Texas, one time," Bush told reporters at the White House. "I'll never forget the guy standing in the bank lobby, saying, 'Your deposits are good. We got you insured. You don't have to worry about it if you got less than $100,000 in the bank.' The problem was, people didn't hear."

"My hope is, is that people take a deep breath and realize that their deposits are protected by our government," he added.

...Bush sought to balance his trademark optimism with assurances that the economic troubles facing Americans will subside.

He said that "it's been a difficult time" for American families but that "we will come through this challenge stronger than ever before." There is "no short-term solution" to energy problems, Bush said, but it is "urgent" for Congress to lift its ban on offshore oil drilling. He said the unique status of mortgage giants Fannie Mae and Freddie Mac required a "special step" to show that the government will stand behind the companies' mortgages, but he added that conventional private enterprises should not expect a government bailout.

"I think the system basically is sound, I truly do," Bush said. "And I understand there's a lot of nervousness. . . . But the economy is growing, productivity is high, trade is up, people are working. It's not as good as we'd like, but . . . to the extent that we find weakness, we'll move."
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/15/AR2008071501490.html

Now that's leadership! How did this Muppet ever become president of the United States? As if his words are going to magically make everything better. I'm sorry Mr. President, but when it comes to the economy, you don't know your ass from a hole in the ground. Please, just shut up...and go away. The system isn't sound, the FDIC doesn't have enough "cash" to insure depositors in ANY bank, FEWER people are working, and your government has done a damn thing to fix anything, only make it worse.


Downturn gains steam as inflation roars ahead
WASHINGTON (AP) -- The U.S. economic downturn gained steam Tuesday, with a report of the highest inflation since the early 1980s, more bad news for banks and automakers and a suggestion by the Federal Reserve chief that worse days are ahead.

The Labor Department said wholesale inflation, driven by skyrocketing gas and food costs, rose by 9.2 percent for the 12 months ending in June -- the fastest pace since the summer of 1981, during another energy crunch.

At the same time, consumers hit the brakes hard despite a massive infusion of government stimulus checks. Retail sales turned in their poorest showing in four months.

Outside Washington, there was plenty more bad news. On Wall Street, the Dow Jones industrials closed below 11,000 for the first time in two years, and shares of troubled mortgage giants Fannie Mae and Freddie Mac tumbled again. Fannie shed 27.3 percent and Freddie lost 26 percent.
http://biz.yahoo.com/ap/080715/economy.html

Damn Mr. President, things couldn't be better...


Is that progress...or what?

As if the pretensions and conceits of the financial industry weren’t comic enough...we’re now going to see a hilarious farce. The same people who set up a government sponsored enterprise to jack up the mortgage market...and created the biggest housing bubble the world has ever seen...now come to the rescue when the bubble pops.

How, exactly, are they going to rescue America’s mortgage industry? Henry Paulson says they’re going to lend more money to Fannie and Freddie. And he wants the feds to buy their stock too. That should do it. Fannie and Freddie, in their heyday, put their hands on 80% of all the new mortgages in the entire country. Now, they have a book of business that includes more than $5 trillion in liabilities – an amount equal to about half the outstanding mortgages in the country...and a third of the nation’s total GDP.

In other words, Fannie and Freddie are probably the two most important businesses in the consumer economy. Now, nearly three decades after the Reagan Revolution, they will be nationalized. Is that progress...or what?

Yes, dear reader...this is what it has come to. It’s not just a war between inflation and deflation. It’s also a fight between the forces of delusion..and the forces of reality. The delusion is that you can make the problems caused by too much credit go away – by giving more credit! A related delusion: that you can make people richer by printing up more money for them. Yet another: that you can spend your way out of a slump caused by too much spending. And here’s another: the federal bureaucrats can manage the economy better than it can manage itself. And how’s this: that hedge fund hustlers such as Mr. Devaney can make you rich by making huge gambles with your money. Or this: that if you just allow capitalism to work, we’ll all get rich.

The reality is that you can’t get something for nothing. Asians are gaining wealth because they work for peanuts and save their money. Americans are losing wealth because they spend too much and don’t save at all. And when a bubble is ready to pop, it will pop...no matter what you do. Sometimes you can delay it...or push the damage onto to someone who doesn’t deserve it – such as the taxpayer. But all interventions just make the situation worse...causing more, and bigger problems elsewhere.

Bill Bonner
The Daily Reckoning