Wednesday, December 16, 2009

The Debt Stockade

Two weeks ago our fiscally ill-equipped, and politically over-rated President suggested that our way out of and through this economic morass was to "spend our way out of this recession".

WASHINGTON (AP) - President Barack Obama outlined new multi billion-dollar stimulus and jobs proposals Tuesday, saying the nation must continue to "spend our way out of this recession" until more Americans are back at work.

Without giving a price tag, Obama proposed a package of new spending for highway, bridge and other infrastructure projects, deeper tax breaks for small businesses and tax incentives to encourage people to make their homes more energy efficient.

Last week our Presidential Prince of Perpetuating the Government's Ponzi Scheme invited banking leaders to the White House and begged them to loan more money to Americans.

WASHINGTON -- President Barack Obama challenged top bankers Monday to explore "every responsible way" to increase lending, saying they were obliged to help after being rescued by taxpayers. He asked them to "take a third and fourth look" at their small-business lending.

Would you lend money to somebody that you thought couldn't pay it back just because the President asked you too?

If it were possible to spend our way out of debt, America would be the richest nation in the universe. But, alas, it is impossible to spend ones way out of debt by accumulating more debt. Seriously, what a stupid concept.

Prepare For The Hyperinflationary Great Depression

If the $1.2 trillion in excess reserves were to actually hit circulating currency overnight, or even in a much more gradual fashion, then hyperinflation would surely be unavoidable, not so much as function of the consumer becoming a dominant force once again, which is the deflationists' key point, but as a result of the excess liquidity of the capital markets, which is the only reason why the S&P is where it is, into Main Street. As it stands, banks' unwillingness to recreate the cheap credit bubble by lending to anyone who has a pulse and can walk is the only thing that is so far preventing America's name change to the United States of Zimbabwe.

A must read essay.

Fed Keeps ‘Extended Period’ Pledge, Sees Improvement
Dec. 16 (Bloomberg) -- The Federal Reserve repeated its pledge to keep interest rates “exceptionally low” for “an extended period” and said the economy is strengthening.

“Deterioration in the labor market is abating,” the Federal Open Market Committee said in a statement today after meeting in Washington. “Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit.”

Policy makers led by Chairman Ben S. Bernanke, who faces a confirmation vote for a second term by the Senate Banking Committee tomorrow, met after a week of reports suggesting growth is picking up. With inflation forecast to be “subdued for some time,” investors maintained bets the Fed won’t tighten policy until August to bring down a jobless rate near a 26-year high.

“The economy has stabilized, the recession is over,” said Mickey Levy, chief economist at Bank of America in New York. “The Fed is not at the point where it is willing to say the recovery is sustainable.”

Bernanke Foes Seek to Curtail Fed
Ben Bernanke is widely expected to win Senate approval for a second term as Federal Reserve chairman, but opponents are hoping to use the debate on his nomination to curtail his autonomy at the central bank.

The Senate Banking Committee is poised to clear Mr. Bernanke's nomination on Thursday, sending it to the full Senate for a vote. Several lawmakers plan to use the proceedings to gain momentum for a bill that aims to subject the Fed's monetary-policy making to congressional audits.

The measure, crafted by Sen. Bernie Sanders (I., Vt.), mirrors one written by Rep. Ron Paul (R., Texas) that was included in the House's overhaul of financial-industry regulations passed last week.

Republican Sens. Jim DeMint of South Carolina and David Vitter of Louisiana have vowed to block Mr. Bernanke's confirmation until the full Senate considers the audit legislation, which has been co-sponsored by about a third of the Senate.

Mr. DeMint said Tuesday that he thinks the measure, which has steadily gained support among lawmakers, would pass if it came to a full Senate vote.

"It would surprise me if very many people would be willing, in public, to vote against the audit," Mr. DeMint said. "Americans don't trust the Federal Reserve," he said. It has expanded its "mission well beyond anything that was ever discussed."

Where's Our Money?

Chairman of the Federal Reserve Ben Bernanke is up for confirmation to his second term, but he has still refused to disclose where he sent $2 trillion in taxpayers' money. Send a message to your senators and ask them to make Bernanke come clean before his confirmation moves forward!

Person of the Year, My Foot! Bernanke "Failed Miserably," Chris Whalen Says
Ben Bernanke has been named Time's "Person of the Year," for his aggressive actions to stem the global financial crisis.

But does Bernanke deserve to be "Person of the Year"?

"Absolutely not," says Christopher Whalen, managing director of Institutional Risk Analytics. "On a personal level I have great sympathy for Chairman Bernanke but he's made such a pig's breakfast of this whole situation."

Unlike those who praise Bernanke for bringing the economy back from the brink of the abyss, Whalen says all he's done is "saved the dealer community" from themselves by overseeing a massive taxpayer-funded bailout of the financial community.

Bernanke "hasn't done anything for the real economy," the analyst says. "The only thing I see is inflation. For the average American the message they should take away from this year is this: Bernanke's policy has insured we'll see the purchasing power of Americans' savings dwindle."!-bernanke-%22failed-miserably%22-chris-whalen-says-391846.html?tickers=%5EDJI,%5EGSPC,SPY,DIA,TLT,TWX,GLD

The Audacity of Debt
At least someone in America isn't feeling a credit squeeze: Uncle Sam. This week Congress will vote to raise the national debt ceiling by nearly $2 trillion, to a total of $14 trillion. In this economy, everyone de-leverages except government.

It's a sign of how deep the fiscal pathologies run in this Congress that $2 trillion will buy the federal government only one year before it has to seek another debt hike—conveniently timed to come after the midterm elections. Since Democrats began running Congress again in 2007, the federal debt limit has climbed by 39%. The new hike will lift the borrowing cap by another 15%.

There is surely bipartisan blame for this government debt boom. George W. Bush approved gigantic spending increases for Medicare and bailouts. He also sponsored the first ineffective "stimulus" in February 2008—consisting of $168 billion in tax rebates and spending that depleted federal revenues in return for no economic lift.

Democrats ridiculed Mr. Bush as "the most fiscally irresponsible President in history," but then they saw him and raised. They took an $800 billion deficit and made it $1.4 trillion in 2009 and perhaps that high again in 2010. In 10 months they have approved more than $1 trillion in spending that has saved union public jobs but has done little to assist private job creation. Still to come is the multitrillion-dollar health bill and another $100 billion to $200 billion "jobs" bill.

House Narrowly Passes $290 Billion Increase in Debt Limit
The House on Wednesday approved a short-term $290 billion extension in the nation's debt ceiling, delaying a decision until February about a larger increase in the borrowing cap.

The vote comes less than a week after House Majority Leader Steny Hoyer (D., Md.) said he intended to seek a $1.8 trillion increase in the ceiling to support federal government borrowing through 2010.

A decision was made to seek the more modest increase after it became clear the larger increase may have failed to win support in the Senate.

The Senate must still take up the two-month increase, which it is expected to do next week.

House lawmakers voted by a razor-thin margin of 218-214 to pass the borrowing increase. On most major pieces of legislation, 218 votes are required for approval in the House.

Not a single Republican lawmaker voted to support the increase. They argued that increasing the debt ceiling was giving the Democratic majority and the Obama administration a license to spend more money.

The increase in the debt limit raises the total debt the federal government can hold to $12.394 billion from $12.104 billion.

Treasury officials have warned the current cap will shortly be hit, requiring the ceiling to be increased.

Increasing the debt ceiling is largely symbolic as the public debt is the accumulation of past deficits, or money already spent.

But were the U.S. to breach its debt limit, it would default on its obligations, potentially lose its prized top-shelf credit rating and have to pay significantly higher interest to its creditors

Such a scenario, albeit an extremely unlikely one, would have tremendous ramifications for the wider financial markets.

The federal budget deficit reached historic levels of $1.4 trillion in fiscal 2009. Through the first two months of fiscal 2010, the government is on pace to surpass that level.

Regulators Resist Volcker Wandering Warning of Too-Big-to-Fail
Dec. 15 (Bloomberg) -- Paul A. Volcker visited nine cities in five countries in the past eight weeks to warn that bankers and regulators “have not come anywhere close to responding with necessary vigor” to the worst economic crisis in 70 years.

“There is a lot of evidence that financial weaknesses brought us to the brink of a great depression,” Volcker, 82, said Dec. 8. at a conference in West Sussex, England. He told executives there that the changes they’ve proposed are “like a dimple.”

Two years after the start of the deepest recession since the 1930s, no U.S. or European authority has put in force a single measure that would transform the financial system, based on data compiled by Bloomberg. No rule- or law-making body is actively considering the automatic dismantling of banks that Volcker told Congress are sheltered by access to an implicit safety net.

There’s little evidence that policy makers are heeding Volcker, the former chairman of the U.S. Federal Reserve. More than 50 regulatory overhaul proposals have been submitted in the U.S. and Europe, the data compiled by Bloomberg show. Lawmakers and regulators have debated new rules for capitalization and leverage, central clearing for derivatives trading, oversight of hedge funds and ways to monitor systemic risk.

While the U.S. House of Representatives has approved a financial regulation bill, authorities in the U.S. and Europe have sidelined measures that would automatically force changes in the structure of financial companies that Bank of England Governor Mervyn King called “too important to fail.” Volcker is leading a chorus arguing for restricting the size or primary functions of financial institutions.

Gold again today thumbed it's nose at the US Dollar, and got angry. The U.S. dollar index reversed notable early losses and ended only slightly lower while treasuries reversed early gains and ended with minor losses after the fed’s semi-positive remarks about the job market increased speculation that they may indeed be starting to move towards raising interest rates around the middle of next year.

Has the Fed been right about anything yet since this global financial crisis began? So the Fed said pressure on the jobs market was abating. Yeah, and the subprime mortgage blow up would not affect the "whole" of the economy. And the Fed claims that consumer spending is "picking up". Hardly, the cost of consumer spending is the only thing picking up. Consumers are NOT buying more, they're spending more and getting less. That's the TRUTH that Gold exposes for anyone that cares to see it.

Gold is pissed, and it's intentions are clear. Gold is going to break the back of the US Federal Reserve. Gold, ultimately, is going to destroy the US Federal Reserve.