14. August 2009
By Gerald Celente Pak Alert Press – KINGSTON, NY — The natives are restless. The third shot of the “Second American Revolution” has been fired. History is being made. But just as with the first two shots, the third shot is not being heard. America is seething. Not since the Civil War has anything like this happened. But the protests are either being intentionally downplayed or ignorantly misinterpreted.
The first shot was fired on April 15, 2009. Over 700 anti-tax rallies and “Tea Parties” erupted nationwide. Rather than acknowledge their significance, the general media either ignored or ridiculed both protests and protestors, playing on “tea bagging” for its sexual innuendo.
Initially President Obama said he was unaware of the tea parties. The White House later warned they could “mutate” into something “unhealthy.”
Shot #2 was fired on the Fourth of July, when throngs of citizens across the nation gathered to again protest “taxation without representation.” And as before, the demonstrations were branded right-wing mischief and dismissed.
The third volley, fired in early August, was aimed point blank at Senators and House members pitching President Obama’s health care reform package to constituents. In fiery town hall meetings, enraged citizens shouted down their elected representatives. It took a strong police presence and/or burly bodyguards to preserve a safe physical space between the politicians and irate townspeople.
The White House and the media have labeled protestors “conservative fringe elements,” or as players in staged events organized by Republican operatives that have been egged on by Fox news and right-wing radio show hosts.
In regard to this latest wave of outbursts, health industry interests opposed to any reform are also being blamed for inciting the public. But organized or spontaneous is not the issue. While most protestors exhibit little grasp of the complex 1000 page health care reform document (that nary a legislator has read either), their emotion is clearly real and un-staged.
Rightly or wrongly, the legislation is regarded as yet another straw on the already overloaded camel’s back. A series of gigantic, unpopular government-imposed (but taxpayer-financed) bailouts, buyouts, rescue and stimulus packages have been stuffed down the gullet of Americans. With no public platform to voice their opposition, options for citizens have been limited to fruitless petitions, e-mails and phone calls to Congress all fielded by anonymous staff underlings.
Now, with Congress in recess and elected representatives less than a stone’s throw away, the public is exploding. The devil is not in the details of the heath care reform, the devil is the government mandating health care. Regardless of how the plan is pitched or what is being promised, to the public the legislation is yet another instance of big government taking another piece out of their lives and making them pay for it; again telling them what they can or cannot do.
Though in its early stages, the “Second American Revolution” is underway. Yet, what we forecast will become the most profound political trend of the century the trend that will change the world is still invisible to the same experts, authorities and pundits who didn’t see the financial crisis coming until the bottom fell out of the economy.
Trend Forecast: Conditions will continue to deteriorate. The global economy is terminally ill. The recession is in a brief remission, not the early stages of recovery. Cheap money, easy credit and unrestrained borrowing brought on an economic crisis that cannot be cured by monetary and fiscal policies that promote more cheap money, easy credit and unrestrained borrowing.
Nevertheless, Washington will continue to intervene, tax and exert control. Protests will escalate and riots will follow.
Fourth Shot of the “Second American Revolution”: While there are many wild cards that could light the fuse, The Trends Research Institute forecasts that if the threat of government-forced Swine Flu vaccinations is realized, it will be the fourth shot. Tens of millions will fight for their right to remain free and unvaccinated.
Publisher’s Note: The power of the Internet and new technologies is inexorably fermenting the “Second American Revolution.” However widespread and emotionally charged, had the tax rallies, tea parties and healthcare reform protests occurred in years past, they might have been covered by the local media, but might not have made national headline news and thus would have died stillborn.
Now, with the ubiquitous camera-equipped cell phone, universal access to YouTube, and millions of twitters and tweets, the uprisings cannot be ignored, contained, managed, spun or edited down. The revolutionary fervor will prove contagious.
Can anything stop it?
Trend Forecast: Before the momentum of the “Second American Revolution” becomes unstoppable, it could be derailed through some false flag event designed to deceive the public, or a genuine event or crisis capable of rallying the entire nation behind the President. In a worst-case scenario, according to Trends Research Institute Director, Gerald Celente, “Given the pattern of governments to parlay egregious failures into mega-failures, the classic trend they follow, when all else fails, is to take their nation to war.”
A false flag attempt, a genuine crisis, or a declaration of war, may slow the momentum of the “Second American Revolution,” but nothing will stop it.
To schedule an interview with Gerald Celente, please contact:
Laura Martin The Trends Research Institute lmartin@trendsresearch.com www.trendsresearch.com 845.331.3500 Ext. 1
Monday, August 31, 2009
Friday, August 28, 2009
Roubini Sees Big 'Double-Dip' Risk: Report
Reuters
24 Aug 2009 12:20 AM ET
Nouriel Roubini, one of the few economists who accurately predicted the magnitude of theworld's recent financial troubles, sees a "big risk" of a double-dip recession, according to an opinion piece posted on the Financial Times' Web site on Sunday. Roubini, a professor at New York University's Stern School of Business, said it appears the global economy will bottom out in the second half of this year, and that U.S. and westernEuropean economies will likely experience "anemic" and "below trend" growth for at least a couple of years. Yet he warned that policymakers face a "damned if they do and damned if they don't" conundrum in trying to unwind their massive fiscal and monetary stimuli to keep the global economy from toppling into a depression. He said that if policymakers try to fight rising budget deficits by raising taxes and cutting spending, they could undermine any recovery. On the other hand, he said if they maintain large deficits, worries about excessive inflation will grow, causing bond yields and borrowing rates to rise and perhaps choking off economic growth. Roubini said another reason to worry is that energy, food and oil prices are rising faster than fundamentals warrant, and could be driven higher by speculation or if excessive liquiditycreates artificially high demand. He said the global economy "could not withstand another contractionary shock" if speculation drives oil rapidly toward $100 per barrel. U.S. crude oil futures traded Friday at about $73.83. Roubini said the anemic growth he expects would follow a couple of quarters of rapid growth, as inventories and production levels recover from near-depression levels.
24 Aug 2009 12:20 AM ET
Nouriel Roubini, one of the few economists who accurately predicted the magnitude of theworld's recent financial troubles, sees a "big risk" of a double-dip recession, according to an opinion piece posted on the Financial Times' Web site on Sunday. Roubini, a professor at New York University's Stern School of Business, said it appears the global economy will bottom out in the second half of this year, and that U.S. and westernEuropean economies will likely experience "anemic" and "below trend" growth for at least a couple of years. Yet he warned that policymakers face a "damned if they do and damned if they don't" conundrum in trying to unwind their massive fiscal and monetary stimuli to keep the global economy from toppling into a depression. He said that if policymakers try to fight rising budget deficits by raising taxes and cutting spending, they could undermine any recovery. On the other hand, he said if they maintain large deficits, worries about excessive inflation will grow, causing bond yields and borrowing rates to rise and perhaps choking off economic growth. Roubini said another reason to worry is that energy, food and oil prices are rising faster than fundamentals warrant, and could be driven higher by speculation or if excessive liquiditycreates artificially high demand. He said the global economy "could not withstand another contractionary shock" if speculation drives oil rapidly toward $100 per barrel. U.S. crude oil futures traded Friday at about $73.83. Roubini said the anemic growth he expects would follow a couple of quarters of rapid growth, as inventories and production levels recover from near-depression levels.
Thursday, August 27, 2009
Can the souffle rise again?
Ambrose Evans-Pritchard
The Daily Telegraph, August 26, 2009
Ambrose Evans-Pritchard has covered world politics and economics for 25 years, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels. He is now International Business Editor in London.
Two facts that should give pause for thought.
(1) Japanese data released on Thursday showed that exports fell yet again in July. They are down 39.5pc to the US, and 26.5pc to China. Japan is the world’s second biggest economy. It lives on exports. It is also a key part of the supply chain for the Chinese economy. How can this hard data be reconciled with the extreme V-shaped recovery already priced in by the markets?
By the way, Toyota is suspending a key production line at its Takaoka plant in central Japan. It is cutting global capacity by 1m vehicles.
(2) The Baltic Dry Index measuring freight rates for bulk goods and commodities has been falling almost continuously for eleven weeks, dropping from 4,290 to 2,778 on Thursday. Is this just a glut of ships or is this telling us what the Shanghai market is also telling us, that credit tightening by the Chinese government is pulling the rug from underneath the latest commodity bubble?
There is something wrong with the entire recovery tale, which ignores the fact that excess plant is still at the highest level since the Great Depression (capacity use is 70pc in Europe, 68pc in the US, 65pc in Japan, and as low as 50pc in some countries, according to the World Bank’s Justin Lin). Companies will have to cut jobs and investment. Soaring “confidence” indicators have decoupled from reality. The world economy is still prostrate. GDP has shrunk 4pc, 6pc, 8pc, even 12pc or more in a large group of countries. There it more or less sits, like a deflated soufflé. An end to technical recession in France, Germany, and Japan because Q2 ( and undoubtedly Q3 to come) ekes out a rise from a collapsed base does not mean anything – except that zero interest rates worldwide, and a massive fiscal stimulus that is pushing public debts towards 100pc across the OECD states (and cannot easily be repeated once the first sugar rush subsides), has mercifully prevented the Great Contraction from turning into an immediate catastrophe. As the Bank of England’s Governor Mervyn King puts it: “It’s the level, stupid”. The level of economic activity is years away from full recovery. The Bundesbank’s Axel Weber says it will take until 2013 for Germany to get back to where it was. He also warns, by the way, that there will be a second wave of the credit crisis as Germany’s home-grown troubles come to the fore. Round one was imported havoc from the US: round two will be rising defaults at home and a credit squeeze as ratings downgrades force banks to set aside fresh capital. (I enclose the Weber link for German readers http://www.sueddeutsche.de/finanzen/916/484353/text/) I have no idea when stock markets and commodities – especially base metals – will reflect the hard facts on the ground (ie, an end to the Chinese construction bubble). Timing is not my forte. Nor is the market. But I am absolutely convinced that those who think we can return to the status quo ante of the credit bubble as if nothing has happened are delusional. As almost every central banker in Jackson Hole reminded us over the weekend, it is going to be a very long hard slog.
Wednesday, August 26, 2009
Meltdown 101: Unemployment by State rising
WASHINGTON (AP) - Texas added the third-highest number of jobs among the states last month—but its unemployment rate still jumped because thousands of jobless people streamed into the work force. That's typical of the Labor Department's July state employment report, which includes a wealth of good news and bad news—often from the same state. Another example from the July report, released Friday: Michigan added 38,100 jobs, just ahead of Texas but behind New York, and its unemployment rate fell. That's clearly good news, but its jobless rate is still a sky-high 15 percent. That's bad news. Overall, 17 states and the District of Columbia reported lower unemployment rates in July—a significant improvement from June, when only 5 states experienced drops. But in the bad news category, 26 states saw their jobless rates rise. Fifteen states and the district have unemployment rates above 10 percent. Good news: Twenty-one states and the district added jobs last month, compared to only 10 in June. Bad news: Twenty-nine states still lost jobs. These and other tidbits can be found in the Regional and State Employment and Unemployment report. Here are some other interesting details, by the numbers.
STATES OF PAIN
15 percent: Michigan's unemployment rate, the nation's highest
12.7 percent: Rhode Island's unemployment rate, the second highest
12.5 percent: Nevada's rate
11.9 percent: California's rate
11.9 percent: Oregon's rate
STATES OF CONTENTMENT
4.2 percent: North Dakota's unemployment rate, the nation's lowest
4.9 percent: Nebraska's rate, the second lowest
4.9 percent: South Dakota's rate
6 percent: Utah's rate
6.5 percent: Wyoming's rate
6.5 percent: Oklahoma's rate
JOB GAINERS
62,100: Jobs added in New York in July
38,100: Jobs added in Michigan
37,900: Jobs added in Texas
15,600: Jobs added in Tennessee
13,200: Jobs added in District of Columbia
JOB LOSERS
35,800: Jobs lost in California
26,400: Jobs lost in North Carolina
25,200: Jobs lost in Florida
13,000: Jobs lost in Illinois
WESTERN WOES
10.5 percent: Unemployment in the Western region
10.2 percent: Unemployment in the Midwest
9.3 percent: Unemployment in the South
8.7 percent: Unemployment in the Northeast Copyright 2009
The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
STATES OF PAIN
15 percent: Michigan's unemployment rate, the nation's highest
12.7 percent: Rhode Island's unemployment rate, the second highest
12.5 percent: Nevada's rate
11.9 percent: California's rate
11.9 percent: Oregon's rate
STATES OF CONTENTMENT
4.2 percent: North Dakota's unemployment rate, the nation's lowest
4.9 percent: Nebraska's rate, the second lowest
4.9 percent: South Dakota's rate
6 percent: Utah's rate
6.5 percent: Wyoming's rate
6.5 percent: Oklahoma's rate
JOB GAINERS
62,100: Jobs added in New York in July
38,100: Jobs added in Michigan
37,900: Jobs added in Texas
15,600: Jobs added in Tennessee
13,200: Jobs added in District of Columbia
JOB LOSERS
35,800: Jobs lost in California
26,400: Jobs lost in North Carolina
25,200: Jobs lost in Florida
13,000: Jobs lost in Illinois
WESTERN WOES
10.5 percent: Unemployment in the Western region
10.2 percent: Unemployment in the Midwest
9.3 percent: Unemployment in the South
8.7 percent: Unemployment in the Northeast Copyright 2009
The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Fed offical admits US unemployment rate is actually 16%
The real US unemployment rate is 16 percent if persons who have dropped out of the labor pool and those working less than they would like are counted, a Federal Reserve official said Wednesday. "If one considers the people who would like a job but have stopped looking -- so-called discouraged workers -- and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart. He underscored that he was expressing his own views, which did "do not necessarily reflect those of my colleagues on the Federal Open Market Committee," the policy-setting body of the central bank. Lockhart pointed out in a speech to a chamber of commerce in Chattanooga, Tennessee that those two categories of people are not taken into account in the Labor Department's monthly report on the unemployment rate. The official July jobless rate was 9.4 percent. Lockhart, who heads the Atlanta, Georgia, division of the Fed, is the first central bank official to acknowledge the depth of unemployment amid the worst US recession since the Great Depression. Lockhart said the US economy was improving but "still fragile," and the beginning stages of a sluggish recovery were underway. "My forecast for a slow recovery implies a protracted period of high unemployment," he said, adding that it would be difficult to stimulate jobs through additional public spending.
"Further fiscal stimulus has been mentioned, but the full effects of the first stimulus package are not yet clear, and the concern over adding to the federal deficit and the resulting national debt is warranted," he said. President Barack Obama's administration has resisted calls for more public spending, arguing that the 787-billion-dollar stimulus passed in February needs time to work its way through the economy. Lockhart noted that construction and manufacturing had been particularly hard hit in the recession that began in December 2007 and predicted some jobs were gone for good. Prior to the recession, he said, construction and manufacturing combined accounted for slightly more than 15 percent of employment. But during the recession, their job losses made up more than 40 percent of all US job losses. "In my view, it is unlikely that we will see a return of jobs lost in certain sectors, such as manufacturing," he said. "In a similar vein, the recession has been so deep in construction that a reallocation of workers is likely to happen -- even if not permanent." Payroll employment has fallen by 6.7 million since the recession began.
"Further fiscal stimulus has been mentioned, but the full effects of the first stimulus package are not yet clear, and the concern over adding to the federal deficit and the resulting national debt is warranted," he said. President Barack Obama's administration has resisted calls for more public spending, arguing that the 787-billion-dollar stimulus passed in February needs time to work its way through the economy. Lockhart noted that construction and manufacturing had been particularly hard hit in the recession that began in December 2007 and predicted some jobs were gone for good. Prior to the recession, he said, construction and manufacturing combined accounted for slightly more than 15 percent of employment. But during the recession, their job losses made up more than 40 percent of all US job losses. "In my view, it is unlikely that we will see a return of jobs lost in certain sectors, such as manufacturing," he said. "In a similar vein, the recession has been so deep in construction that a reallocation of workers is likely to happen -- even if not permanent." Payroll employment has fallen by 6.7 million since the recession began.
Tuesday, August 25, 2009
White House, CBO debt forecasts challenge Obama
Tue Aug 25, 2009 12:49pm EDT
*White House sees 10-year deficit at $9 trillion
*Grim news for Obama's healthcare push
*Slow recovery seen hurting tax revenues as spending soars (Recasts, adds reaction)
By Alister Bull and Andy Sullivan
WASHINGTON, Aug 25 (Reuters) - The U.S. national debt will nearly double over the next 10 years, government forecasts showed on Tuesday, challenging President Barack Obama's economic and healthcare overhaul agenda. The White House midsession budget forecast and the non-partisan Congressional Budget Office both forecast that government revenues will be crimped by a slow recovery from the worst recession since the 1930s Great Depression, while spending on retirement and medical benefits soars. The White House projected a cumulative $9 trillion deficit between 2010 and 2019, while the CBO took a more optimistic view, pegging the deficit at $7.1 trillion because it assumed higher revenues as tax cuts expire. [ID:nN25198577]
The spending blitz could push the national debt, now more than $11 trillion, to close to $20 trillion. The debt is the sum the government owes, while the deficit is the yearly gap between revenues and spending. "The alarm bells on our nation's fiscal condition have now become a siren," said Senator Mitch McConnell, the Republican leader in the Senate. "If anyone had any doubts that this burden on future generations is unsustainable, they're gone," McConnell said, adding that economic stimulus funds should be diverted to pay down U.S. debt. However, both the White House and CBO estimates anticipate that the deficit, now at its highest level as a percent of economic output since World War Two, will decline relatively swiftly in the next three years as growth resumes and federal bailout programs shrink. White House budget director Peter Orszag said the deficit was too high and cited this as a reason to pass Obama's healthcare overhaul plan, which is in trouble with lawmakers while opinion polls show it losing popular support. "I know that there will be some who say this report proves that we cannot afford health reform. I think that has it backward," Orszag told reporters on a conference call.
"The size of the fiscal gap is precisely why we must enact well-designed and fiscally responsible health reform now. Obama's healthcare plan, his policy priority, has run into opposition from critics who complain its $1 trillion price tag is too high and who worry it will limit consumer choice. The debate is gaining steam as Republicans seek momentum for next year's mid-term elections, where they hope to chip away the dominant position Obama's Democrats enjoy in both the House of Representatives and the Senate.
The White House forecasts a record $1.58 trillion deficit in fiscal 2009, matching the numbers of the CBO, while it shows the deficit at $1.5 trillion in 2010, a touch higher than the $1.48 trillion projected by CBO. But both estimates show annual deficits staying above $500 billion every year until 2019, compared with a then-record $459 billion last year. The White House shows the gap averaging 5.1 percent through 2019, compared with 3.2 percent last year.
By 2019, it estimates that the ratio of national debt to gross domestic products will rise to 69 percent from 48 percent in 2009. "The administration has always said that you have to get deficits under 3 percent of GDP to be safe. They now admit that they will not in the next 10 years," said Douglas Holtz-Eakin, a CBO director under Bush and chief economic adviser to Republican Senator John McCain for his 2008 presidential bid. The budget news was overshadowed by Obama's surprise announcement on Tuesday to renominate Ben Bernanke to a second four-year term as Federal Reserve chairman, a move seen as aiming for continuity at the central bank during a tentative stage of recovery. "I'm stunned at how hard they have worked to bury this", Holtz-Eakin said of the White House's budget estimate timing.
DIFFERING ASSUMPTIONS
One reason CBO and OMB can end up with different numbers is technical. The CBO employs a baseline method which only takes into account policies that have already become law. On the other hand, the administration's forecasts can reflect the economic impact of policies it hopes to implement, even if they have not yet been approved by lawmakers. For example, the CBO assumes the there would be no "patch" for the Alternative Minimum Tax, meaning millions more Americans would have to pay higher taxes, even though Congress has agreed to a temporary reprieve every year to prevent this happening. In addition, CBO assumes the tax cuts delivered by former President George W. Bush will expire at the end of 2010. Orszag said that the White House numbers also assumed that some of the Bush tax cuts would be extended. Obama has pledged not to raise taxes on U.S. households earning less than $250,000 a year. (Writing by David Lawder, Editing by Vicki Allen)
*White House sees 10-year deficit at $9 trillion
*Grim news for Obama's healthcare push
*Slow recovery seen hurting tax revenues as spending soars (Recasts, adds reaction)
By Alister Bull and Andy Sullivan
WASHINGTON, Aug 25 (Reuters) - The U.S. national debt will nearly double over the next 10 years, government forecasts showed on Tuesday, challenging President Barack Obama's economic and healthcare overhaul agenda. The White House midsession budget forecast and the non-partisan Congressional Budget Office both forecast that government revenues will be crimped by a slow recovery from the worst recession since the 1930s Great Depression, while spending on retirement and medical benefits soars. The White House projected a cumulative $9 trillion deficit between 2010 and 2019, while the CBO took a more optimistic view, pegging the deficit at $7.1 trillion because it assumed higher revenues as tax cuts expire. [ID:nN25198577]
The spending blitz could push the national debt, now more than $11 trillion, to close to $20 trillion. The debt is the sum the government owes, while the deficit is the yearly gap between revenues and spending. "The alarm bells on our nation's fiscal condition have now become a siren," said Senator Mitch McConnell, the Republican leader in the Senate. "If anyone had any doubts that this burden on future generations is unsustainable, they're gone," McConnell said, adding that economic stimulus funds should be diverted to pay down U.S. debt. However, both the White House and CBO estimates anticipate that the deficit, now at its highest level as a percent of economic output since World War Two, will decline relatively swiftly in the next three years as growth resumes and federal bailout programs shrink. White House budget director Peter Orszag said the deficit was too high and cited this as a reason to pass Obama's healthcare overhaul plan, which is in trouble with lawmakers while opinion polls show it losing popular support. "I know that there will be some who say this report proves that we cannot afford health reform. I think that has it backward," Orszag told reporters on a conference call.
"The size of the fiscal gap is precisely why we must enact well-designed and fiscally responsible health reform now. Obama's healthcare plan, his policy priority, has run into opposition from critics who complain its $1 trillion price tag is too high and who worry it will limit consumer choice. The debate is gaining steam as Republicans seek momentum for next year's mid-term elections, where they hope to chip away the dominant position Obama's Democrats enjoy in both the House of Representatives and the Senate.
The White House forecasts a record $1.58 trillion deficit in fiscal 2009, matching the numbers of the CBO, while it shows the deficit at $1.5 trillion in 2010, a touch higher than the $1.48 trillion projected by CBO. But both estimates show annual deficits staying above $500 billion every year until 2019, compared with a then-record $459 billion last year. The White House shows the gap averaging 5.1 percent through 2019, compared with 3.2 percent last year.
By 2019, it estimates that the ratio of national debt to gross domestic products will rise to 69 percent from 48 percent in 2009. "The administration has always said that you have to get deficits under 3 percent of GDP to be safe. They now admit that they will not in the next 10 years," said Douglas Holtz-Eakin, a CBO director under Bush and chief economic adviser to Republican Senator John McCain for his 2008 presidential bid. The budget news was overshadowed by Obama's surprise announcement on Tuesday to renominate Ben Bernanke to a second four-year term as Federal Reserve chairman, a move seen as aiming for continuity at the central bank during a tentative stage of recovery. "I'm stunned at how hard they have worked to bury this", Holtz-Eakin said of the White House's budget estimate timing.
DIFFERING ASSUMPTIONS
One reason CBO and OMB can end up with different numbers is technical. The CBO employs a baseline method which only takes into account policies that have already become law. On the other hand, the administration's forecasts can reflect the economic impact of policies it hopes to implement, even if they have not yet been approved by lawmakers. For example, the CBO assumes the there would be no "patch" for the Alternative Minimum Tax, meaning millions more Americans would have to pay higher taxes, even though Congress has agreed to a temporary reprieve every year to prevent this happening. In addition, CBO assumes the tax cuts delivered by former President George W. Bush will expire at the end of 2010. Orszag said that the White House numbers also assumed that some of the Bush tax cuts would be extended. Obama has pledged not to raise taxes on U.S. households earning less than $250,000 a year. (Writing by David Lawder, Editing by Vicki Allen)
Senator warns of hyperinflation rivaling the 1980s
August 25, 2009
Michael O'Brien
The Hill's Blog: Briefing Room
The economy could spiral into hyperinflation not seen since the early 1980s if the Federal Reserve does not tighten its monetary policy soon, Sen. Chuck Grassley (R-Iowa) warned Tuesday. Grassley, speaking about the renomination of Federal Reserve Chairman Ben Bernanke to a second term as head of the Fed, asserted that Bernanke's ability to hold down inflation would be the metric by which the Fed's success would be measured. "We won't know for a year if he's done a good job so far, because he shoveled money out of an airplane to save banks and the financial system," Grassley said in a conference call with Iowa reporters. "But shoveling money out of an airplane to solve problems can be inflationary — in this case, hyperinflationary — if he doesn't start mopping up some of the money that's out there." Grassley, the ranking member of the Senate Finance Committee, said that inflation as a result from government spending on bailouts could result in inflation rivaling rates in 1980, when it hit a peak of 13.5 percent. "The Fed has the ability to put money out, it's got the ability to take money back in, and if they don't do that, we will have hyperinflation worse than we had in 1980 and '81," Grassley said. "And I hope he demonstrates that ability." Grassley argued that while it would be a year until lawmakers will know whether Bernanke has been successful at bringing inflation under control, it would probably be best to keep the chairman on board for a second term as head of the Federal Reserve. "I would suggest that right now, when everybody's nervous about the economy, that you don't change horses in the middle of the stream, and consequently, it would probably be detrimental to not have him reappointed," he said.
Michael O'Brien
The Hill's Blog: Briefing Room
The economy could spiral into hyperinflation not seen since the early 1980s if the Federal Reserve does not tighten its monetary policy soon, Sen. Chuck Grassley (R-Iowa) warned Tuesday. Grassley, speaking about the renomination of Federal Reserve Chairman Ben Bernanke to a second term as head of the Fed, asserted that Bernanke's ability to hold down inflation would be the metric by which the Fed's success would be measured. "We won't know for a year if he's done a good job so far, because he shoveled money out of an airplane to save banks and the financial system," Grassley said in a conference call with Iowa reporters. "But shoveling money out of an airplane to solve problems can be inflationary — in this case, hyperinflationary — if he doesn't start mopping up some of the money that's out there." Grassley, the ranking member of the Senate Finance Committee, said that inflation as a result from government spending on bailouts could result in inflation rivaling rates in 1980, when it hit a peak of 13.5 percent. "The Fed has the ability to put money out, it's got the ability to take money back in, and if they don't do that, we will have hyperinflation worse than we had in 1980 and '81," Grassley said. "And I hope he demonstrates that ability." Grassley argued that while it would be a year until lawmakers will know whether Bernanke has been successful at bringing inflation under control, it would probably be best to keep the chairman on board for a second term as head of the Federal Reserve. "I would suggest that right now, when everybody's nervous about the economy, that you don't change horses in the middle of the stream, and consequently, it would probably be detrimental to not have him reappointed," he said.
Obama Raises ‘10 Deficit Outlook 19% to $1.5 Trillion
By Roger Runningen and Brian Faler
Aug. 25 (Bloomberg) -- U.S. unemployment will surge to 10 percent this year and the budget deficit will be $1.5 trillion next year, both higher than previous Obama administration forecasts because of a recession that was deeper and longer than expected, White House budget chief Peter Orszag said. The Office of Management and Budget forecasts a weaker economic recovery than it saw in May, as the gross domestic product shrinks 2.8 percent this year before expanding 2 percent next year, according to the administration’s mid-year economic review issued today. The Congressional Budget Office, in a separate assessment, forecast the economy will grow 2.8 percent next year. Both see the GDP expanding 3.8 percent in 2011. “While the danger of the economy immediately falling into a deep recession has receded, the American economy is still in the midst of a serious economic downturn,” the White House report said. “The long-term deficit outlook remains daunting.” The budget shortfall for 2010 would mark the second straight year of trillion-dollar deficits. Along with the unemployment numbers, the deficit may weigh on President Barack Obama’s drive for his top domestic priority, overhauling the U.S. health care system. “It throws a wrench in health-care reforms,” Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, said in an interview. “No matter the specific numbers, they’re a constant reminder that we’re in bad, bad shape.”
Spending Caps
House Republican Leader John Boehner of Ohio seized on the numbers to call for the Democrat-controlled Congress to impose “strict annual caps on federal spending.” The health-care overhaul “is just the latest in a long line of expensive Democratic experiments that will add to the deficit, raise taxes on families and small businesses and cost more American jobs,” Boehner said in a statement. The two budget agencies say the shortfall is being driven by the recession as outlays rise for unemployment compensation, food stamps or other programs meant to stabilize the economy rise and tax receipts fall. Administration and congressional budget officials expect the unemployment rate, which was 9.4 percent last month, to keep rising. White House officials said the rate likely will rise to 10 percent by the end of 2009, averaging 9.3 percent for the entire year. It will worsen to a 9.8 percent average in 2010, instead of the 7.9 percent estimate in May. The CBO report also estimates the 2009 jobless rate at 9.3 percent. It puts next year’s average at 10.2 percent.
Deficit Projections
The OMB raised its deficit projection for fiscal 2010, which begins Oct. 1, from the $1.26 trillion forecast in May, reflecting slower economic growth this year and next because of “the severity of the crisis in the U.S. and in our trading partners,” said Christina Romer, White House chief economist, who along with Orszag briefed reporters on the report. The median estimate of 31 economists in a Bloomberg News survey completed Aug. 21 was for a fiscal year 2010 deficit of $1.3 trillion. The outlook for the 2009 fiscal year is slightly better than the previous forecast. The government’s shortfall will peak this year at $1.58 trillion before narrowing over next decade. That is less than the $1.84 trillion projected in May because budget officials were able to delete hundreds of billions of dollars that had been set aside for bank bailouts. Last year’s deficit was $459 billion.
Bailout Money
“The Obama White House deserves some credit for managing the financial situation so that the additional bailout wasn’t necessary,” said Stan Collender, a former budget analyst for the House and Senate budget committees. Orszag said reining in the deficit is a “top priority” of the administration. He said the budget blueprint Obama submits to Congress in February will “include proposals to put the nation back on a fiscally sustainable path.” He declined to give specifics. The OMB added almost $2 trillion to the 10-year deficit from its May forecast, to $9.05 trillion. The nonpartisan CBO lowered its long-range projection to $7.14 trillion. “The market will view this as a very consensus-oriented forecast” and there won’t be any significant reaction, said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.
Stimulus
Zandi predicted Congress will pass a second “mini” stimulus bill next year of about $250 billion to aid jobless workers, state governments and home buyers. “The economy will be growing at an uncomfortably slow rate, not enough to bring down unemployment, and of course it’s an election year” for Congress, he said. Orszag defended the trillion-dollar deficits during a recession and said they shouldn’t be used to block the administration’s health-care initiative. Revising the way the nation pays for medical care will help save money, he said. “I know there are going to be some who say this report proves we can’t afford health reform,” Orszag said. “I think that has it backwards,” because savings must be squeezed from the system. Even with economic conditions worse that originally forecast, Romer said “we do expect positive GDP growth by the end of this year” for the fourth quarter, as the economy reaches “a turning point.” “A return to employment growth will take longer,” Romer said, adding that the jobless rate likely will peak in the fourth quarter of this year.
Inflation
Romer said the economic stimulus package probably is adding “between 2 and 3 percentage points” to economic growth in the second quarter of this year, blunting conditions that would have been worse. A report on the effect of the stimulus program is due to Congress next month, she said. Inflation will remain subdued. Projections for the consumer price index show a contraction to 0.7 percent this year, rising to 1.4 percent next year and 1.5 percent in 2011, Romer said. The economic assumptions were compiled by the Council of Economic Advisers, Treasury Department and the Office of Management and Budget. The estimates reflect conditions as of early June.
To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.netBrian Faler in Washington at bfaler@bloomberg.net Last Updated: August 25, 2009 13:19 EDT
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Aug. 25 (Bloomberg) -- U.S. unemployment will surge to 10 percent this year and the budget deficit will be $1.5 trillion next year, both higher than previous Obama administration forecasts because of a recession that was deeper and longer than expected, White House budget chief Peter Orszag said. The Office of Management and Budget forecasts a weaker economic recovery than it saw in May, as the gross domestic product shrinks 2.8 percent this year before expanding 2 percent next year, according to the administration’s mid-year economic review issued today. The Congressional Budget Office, in a separate assessment, forecast the economy will grow 2.8 percent next year. Both see the GDP expanding 3.8 percent in 2011. “While the danger of the economy immediately falling into a deep recession has receded, the American economy is still in the midst of a serious economic downturn,” the White House report said. “The long-term deficit outlook remains daunting.” The budget shortfall for 2010 would mark the second straight year of trillion-dollar deficits. Along with the unemployment numbers, the deficit may weigh on President Barack Obama’s drive for his top domestic priority, overhauling the U.S. health care system. “It throws a wrench in health-care reforms,” Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, said in an interview. “No matter the specific numbers, they’re a constant reminder that we’re in bad, bad shape.”
Spending Caps
House Republican Leader John Boehner of Ohio seized on the numbers to call for the Democrat-controlled Congress to impose “strict annual caps on federal spending.” The health-care overhaul “is just the latest in a long line of expensive Democratic experiments that will add to the deficit, raise taxes on families and small businesses and cost more American jobs,” Boehner said in a statement. The two budget agencies say the shortfall is being driven by the recession as outlays rise for unemployment compensation, food stamps or other programs meant to stabilize the economy rise and tax receipts fall. Administration and congressional budget officials expect the unemployment rate, which was 9.4 percent last month, to keep rising. White House officials said the rate likely will rise to 10 percent by the end of 2009, averaging 9.3 percent for the entire year. It will worsen to a 9.8 percent average in 2010, instead of the 7.9 percent estimate in May. The CBO report also estimates the 2009 jobless rate at 9.3 percent. It puts next year’s average at 10.2 percent.
Deficit Projections
The OMB raised its deficit projection for fiscal 2010, which begins Oct. 1, from the $1.26 trillion forecast in May, reflecting slower economic growth this year and next because of “the severity of the crisis in the U.S. and in our trading partners,” said Christina Romer, White House chief economist, who along with Orszag briefed reporters on the report. The median estimate of 31 economists in a Bloomberg News survey completed Aug. 21 was for a fiscal year 2010 deficit of $1.3 trillion. The outlook for the 2009 fiscal year is slightly better than the previous forecast. The government’s shortfall will peak this year at $1.58 trillion before narrowing over next decade. That is less than the $1.84 trillion projected in May because budget officials were able to delete hundreds of billions of dollars that had been set aside for bank bailouts. Last year’s deficit was $459 billion.
Bailout Money
“The Obama White House deserves some credit for managing the financial situation so that the additional bailout wasn’t necessary,” said Stan Collender, a former budget analyst for the House and Senate budget committees. Orszag said reining in the deficit is a “top priority” of the administration. He said the budget blueprint Obama submits to Congress in February will “include proposals to put the nation back on a fiscally sustainable path.” He declined to give specifics. The OMB added almost $2 trillion to the 10-year deficit from its May forecast, to $9.05 trillion. The nonpartisan CBO lowered its long-range projection to $7.14 trillion. “The market will view this as a very consensus-oriented forecast” and there won’t be any significant reaction, said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.
Stimulus
Zandi predicted Congress will pass a second “mini” stimulus bill next year of about $250 billion to aid jobless workers, state governments and home buyers. “The economy will be growing at an uncomfortably slow rate, not enough to bring down unemployment, and of course it’s an election year” for Congress, he said. Orszag defended the trillion-dollar deficits during a recession and said they shouldn’t be used to block the administration’s health-care initiative. Revising the way the nation pays for medical care will help save money, he said. “I know there are going to be some who say this report proves we can’t afford health reform,” Orszag said. “I think that has it backwards,” because savings must be squeezed from the system. Even with economic conditions worse that originally forecast, Romer said “we do expect positive GDP growth by the end of this year” for the fourth quarter, as the economy reaches “a turning point.” “A return to employment growth will take longer,” Romer said, adding that the jobless rate likely will peak in the fourth quarter of this year.
Inflation
Romer said the economic stimulus package probably is adding “between 2 and 3 percentage points” to economic growth in the second quarter of this year, blunting conditions that would have been worse. A report on the effect of the stimulus program is due to Congress next month, she said. Inflation will remain subdued. Projections for the consumer price index show a contraction to 0.7 percent this year, rising to 1.4 percent next year and 1.5 percent in 2011, Romer said. The economic assumptions were compiled by the Council of Economic Advisers, Treasury Department and the Office of Management and Budget. The estimates reflect conditions as of early June.
To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.netBrian Faler in Washington at bfaler@bloomberg.net Last Updated: August 25, 2009 13:19 EDT
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Monday, August 24, 2009
The risk of a double-dip recession is rising
By Nouriel Roubini
August 23 2009
T he global economy is starting to bottom out from the worst recession and financial crisis since the Great Depression. In the fourth quarter of 2008 and first quarter of 2009 the rate at which most advanced economies were contracting was similar to the gross domestic product free-fall in the early stage of the Depression. Then, late last year, policymakers who had been behind the curve finally started to use most of the weapons in their arsenal. That effort worked and the free-fall of economic activity eased. There are three open questions now on the outlook.
When will the global recession be over?
What will be the shape of the economic recovery?
Are there risks of a relapse?
On the first question it looks like the global economy will bottom out in the second half of 2009. In many advanced economies (the US, UK, Spain, Italy and other eurozone members) and some emerging market economies (mostly in Europe) the recession will not be formally over before the end of the year, as green shoots are still mixed with weeds. In some other advanced economies (Australia, Germany, France and Japan) and most emerging markets (China, India, Brazil and other parts of Asia and Latin America) the recovery has already started.
On the second issue the debate is between those – most of the economic consensus – who expect a V-shaped recovery with a rapid return to growth and those – like myself – who believe it will be U-shaped, anaemic and below trend for at least a couple of years, after a couple of quarters of rapid growth driven by the restocking of inventories and a recovery of production from near Depression levels. There are several arguments for a weak U-shaped recovery . Employment is still falling sharply in the US and elsewhere – in advanced economies, unemployment will be above 10 per cent by 2010. This is bad news for demand and bank losses, but also for workers’ skills, a key factor behind long-term labour productivity growth. Second, this is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest. Third, in countries running current account deficits, consumers need to cut spending and save much more, yet debt-burdened consumers face a wealth shock from falling home prices and stock markets and shrinking incomes and employment. Fourth, the financial system – despite the policy support – is still severely damaged. Most of the shadow banking system has disappeared, and traditional banks are saddled with trillions of dollars in expected losses on loans and securities while still being seriously undercapitalised. Fifth, weak profitability – owing to high debts and default risks, low growth and persistent deflationary pressures on corporate margins – will constrain companies’ willingness to produce, hire workers and invest. Sixth, the releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending. The effects of the policy stimulus, moreover, will fizzle out by early next year, requiring greater private demand to support continued growth. Seventh, the reduction of global imbalances implies that the current account deficits of profligate economies, such as the US, will narrow the surpluses of countries that over-save (China and other emerging markets, Germany and Japan). But if domestic demand does not grow fast enough in surplus countries, this will lead to a weaker recovery in global growth. There are also now two reasons why there is a rising risk of a double-dip W-shaped recession. For a start, there are risks associated with exit strategies from the massive monetary and fiscal easing: policymakers are damned if they do and damned if they don’t. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stag-deflation (recession and deflation). But if they maintain large budget deficits, bond market vigilantes will punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation. Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand. Last year, oil at $145 a barrel was a tipping point for the global economy, as it created negative terms of trade and a disposable income shock for oil importing economies. The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel. In summary, the recovery is likely to be anaemic and below trend in advanced economies and there is a big risk of a double-dip recession.
The writer is professor of economics at the Stern School of Business, NYU
August 23 2009
T he global economy is starting to bottom out from the worst recession and financial crisis since the Great Depression. In the fourth quarter of 2008 and first quarter of 2009 the rate at which most advanced economies were contracting was similar to the gross domestic product free-fall in the early stage of the Depression. Then, late last year, policymakers who had been behind the curve finally started to use most of the weapons in their arsenal. That effort worked and the free-fall of economic activity eased. There are three open questions now on the outlook.
When will the global recession be over?
What will be the shape of the economic recovery?
Are there risks of a relapse?
On the first question it looks like the global economy will bottom out in the second half of 2009. In many advanced economies (the US, UK, Spain, Italy and other eurozone members) and some emerging market economies (mostly in Europe) the recession will not be formally over before the end of the year, as green shoots are still mixed with weeds. In some other advanced economies (Australia, Germany, France and Japan) and most emerging markets (China, India, Brazil and other parts of Asia and Latin America) the recovery has already started.
On the second issue the debate is between those – most of the economic consensus – who expect a V-shaped recovery with a rapid return to growth and those – like myself – who believe it will be U-shaped, anaemic and below trend for at least a couple of years, after a couple of quarters of rapid growth driven by the restocking of inventories and a recovery of production from near Depression levels. There are several arguments for a weak U-shaped recovery . Employment is still falling sharply in the US and elsewhere – in advanced economies, unemployment will be above 10 per cent by 2010. This is bad news for demand and bank losses, but also for workers’ skills, a key factor behind long-term labour productivity growth. Second, this is a crisis of solvency, not just liquidity, but true deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest. Third, in countries running current account deficits, consumers need to cut spending and save much more, yet debt-burdened consumers face a wealth shock from falling home prices and stock markets and shrinking incomes and employment. Fourth, the financial system – despite the policy support – is still severely damaged. Most of the shadow banking system has disappeared, and traditional banks are saddled with trillions of dollars in expected losses on loans and securities while still being seriously undercapitalised. Fifth, weak profitability – owing to high debts and default risks, low growth and persistent deflationary pressures on corporate margins – will constrain companies’ willingness to produce, hire workers and invest. Sixth, the releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending. The effects of the policy stimulus, moreover, will fizzle out by early next year, requiring greater private demand to support continued growth. Seventh, the reduction of global imbalances implies that the current account deficits of profligate economies, such as the US, will narrow the surpluses of countries that over-save (China and other emerging markets, Germany and Japan). But if domestic demand does not grow fast enough in surplus countries, this will lead to a weaker recovery in global growth. There are also now two reasons why there is a rising risk of a double-dip W-shaped recession. For a start, there are risks associated with exit strategies from the massive monetary and fiscal easing: policymakers are damned if they do and damned if they don’t. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stag-deflation (recession and deflation). But if they maintain large budget deficits, bond market vigilantes will punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation. Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand. Last year, oil at $145 a barrel was a tipping point for the global economy, as it created negative terms of trade and a disposable income shock for oil importing economies. The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel. In summary, the recovery is likely to be anaemic and below trend in advanced economies and there is a big risk of a double-dip recession.
The writer is professor of economics at the Stern School of Business, NYU
Friday, August 21, 2009
Bernanke at London School of Economics
by Terry Easton (more by this author)
January 16, 2009
Human Events
Federal Reserve Chairman Ben Bernanke flew into London to meet with Governor Mervyn King, his counterpart at the Bank of England, and Prime Minister Gordon Brown at #10 Downing Street on Tuesday. He then went on to deliver the annual Joseph Charles Stamp Memorial Lecture entitled “The Crisis and the Policy Response” to our current global financial system meltdown. Human Events was there to cover the event -- and to quiz Dr. Bernanke in the Q&A session on his Keynesian approach to the systemic money problem. The world’s media covered the event live, including the BBC, CNBC, Fox News, CNN, and Bloomberg. For a clip of our Q&A, see: CNBC Video.OK. So here’s the problem. Keynesian solutions just don’t work. Throwing money from helicopters (or more likely C-17’s today) might just pull us out of the Great Depression II, but as we stretch the rubber band, eventually the block of deadweight banking system credit will finally spring to life and violently overshoot way before future Fed and Treasury Secretaries can reel in the excess money. The result? Massive inflation from 2010 onwards. 25-30% would not be surprising through the teens. Yikes! (That’s a techno-speak economist term for holy s***, it’s that bad…)So if you think gold is high at $850 today, wait until it reaches $3,000 a troy ounce. Ditto commodities (especially agriculture). Jim Rogers has been warning about this probability for the past year. He’s been riding the commodity prices all the way down in the process -- and he’s still positive about their future. I, for one, wouldn’t easily bet against the co-founder (along with George Soros) of the Quantum Fund.At the London School of Economics, former home (1931-1950) of Austrian-school founder and Nobel Prize winner Fredrich von Hayek, Dr. Bernanke went on to point out all the Keynesian goodies he has in his “toolkit” which the Fed is using to overcome the crisis.Chairman Bernanke acknowledges that the bottom line problem -- which began with the funny-money mortgages politically made to underqualified borrowers -- has seqway’d into a full-blown global loss of trust by just about everyone, consumers and bankers alike, in the present financial system. Or, in FedSpeak: “Rising credit risks and intense risk aversion have pushed credit spreads to unprecedented levels…Heightened systemic risks, falling asset values and tightening credit have in turn taken a heavy toll on business and consumer confidence and participated a sharp slowing in global economic activity. The damage, in terms of lost output, lost jobs, and lost wealth, is already substantial”.Of course, the unspoken statement is that the reason that the people don’t trust the present fractional banking system -- and are hording their precious cash -- is that the entire system is a house of cards, or more like the game of chairs where the last person standing when the music stops doesn’t have a chair to sit on. And nobody wants to be that last person standing when the music stops.Bernanke goes on to observe, chillingly: “the global economy will recover, but the timing and strength of the recovery are highly uncertain”. That’s telling it like it is.The Fed’s toolkit -- which has been newly invented over the past 18 months -- has three groups. They “all make use of the asset side of the Federal Reserve’s balance sheet”. This means, they consist of creating more money out of thin air.“The first set of tools, which are closely tied to the central bank’s traditional role as the lender of last resort, involve the provision of short-term liquidity”. It’s important to note that the reason the central bank is known as the “lender of last resort” is that when it collapses, the entire edifice falls and a new system must be built to replace the old. In these cases, the political system often falls as well. Whether a free-market-oriented democracy or a socialist-oriented totalitarian system springs up to replace the former ruin depends on the people -- both the average citizen and the elite.The question is, what kind of new system will arise from the Federal Reserve ashes? Another Keynesian Ponzi-scheme or a solid hard-money-based Austrian-school bank? The reason, of course, that Austrians like gold is it can’t easily be counterfeited by the government. It’s quite a “barbaric metal”. In the people’s hands, it can’t easily be controlled by the bureaucrats. Darn.It may just be possible, however, that Bernanke and colleagues can begin to move the Federal Reserve away from a fiat-based money system. You don’t really think there’s money in the banks to cover all your deposits, do you? And what do you mean by money, anyway: “legal tender IOU notes”? Bernanke knows this all too well. And if he can get us through this Keynesian-induced hell with just one more dose of Keynesian money printing, then maybe he’ll have the time somewhere in the future to move the system back to a gold-standard dollar. Hmmm…The tools in the first set are: 1) cutting fed funds and “discount window” interest rates, 2) increasing the length of the overnight “discount window” from 24 hours to 90 days, 3) the new “Term Auction Facility” which lends more money to the banks for “good” assets, 4) the new “Term Securities Lending Facility” which allows certain stock brokers to borrow money from the Fed for “less-liquid collateral”, and 5) the “Primary Dealer Credit Facility”, yet another bail-out loan facility for otherwise bankrupt stock brokers.In addition to the above “short term” loan programs to US banks and stock brokers, the Fed has printed up more US dollars to convert into foreign currency using “bilateral currency swap agreements with 14 foreign central banks”. Why? Because the world has run out of dollars to spend in paying its bills! No problem, we’ll print up some more dollars for you too. Happy to oblige!The second set of policy tools “involve the provision of liquidity directly to borrowers and investors in key credit markets”. They are: 1) money printed up to purchase commercial paper, 2) money printed up to purchase money-market funds, and 3) a Fed-Treasury joint money printing program to buy up AAA-rated student loans, auto loans, credit card loans, and SBA loans. Finally, the third set of new “policy tools” includes creating more money to buy up longer-term securities including $600 billion in Government-Sponsored Enterprises (GSE’s like Freddie Mac and Fannie Mae) and GSE-backed securities. The home mortgage market “dropped significantly on the announcement of this program”. The message: don’t bet against the Fed’s ability to print mountains of dollars -- at least in the short term. The result of all this newly-created money is that the Fed’s own balance sheet -- which took 90 years to reach the first $800 billion -- is now well on the way to $3 trillion, and that’s all money created out of thin air. Consequently over the next 6 months, look for the Fed to bail out ever more failing financial institutions -- starting with another multi-billion-dollar kick to the near-bankrupt Bank of America. This second round of funny money will be followed by a third and perhaps more, until we’ll all be swimming in a sea of dollar bills. As the recession bites deeper, the velocity of money -- how fast we spend it -- slows precipitously, and huge doses of more raw money are perceived by the money controllers as the only way to pull us out of this government-created mess. What else can they do? The Austrian economist Murray Rothbard revealed the simple answer in his History of Money and Banking. Politicians everywhere need to read it immediately.Professor Bernanke is a genuinely likeable person with a good sense of humor and a deep knowledge of how the financial world really works. He was warmly received by the LSE students and faculty in London. Unfortunately, he is also the head of the biggest fiat-banking scheme ever devised by mankind. And he knows it. (Thank you John Pierpont Morgan for your Jekyll Island creation.)The tell is that his voice waivers when he is saying something that he hopes will come true but is unsure of. Listen to his speeches yourself and you’ll hear what I mean immediately. It’s the giveaway of a basically honest and decent man. Bernanke still needs to fully master the “FedSpeak” of his predecessor, Alan Greenspan. Alan could easily tell the House Banking Committee about how the Fed was fully in control - and there was nothing to worry about. And they believed it. Yet he was a protégé of Ayn Rand and the author of a marvellous essay on the need for gold-backed central banking in his youth. Years before he too became the head of the Fed.I truly hope that Chairman Bernanke can pull it all off just one more time. Like a junky hooked on ever-increasing doses of the good stuff, I need just a little more money, please. The withdrawal is too painful and I don’t want to hurt that much. I promise to go straight and reform in the future. Trust me. In fact, trust all of us. We’re all in this together.
Mr. Easton teaches University economics and is passionate about technology and entrepreneurship. He is rosy about the long-term future: �The glass isn�t half full, it�s overflowing!�
January 16, 2009
Human Events
Federal Reserve Chairman Ben Bernanke flew into London to meet with Governor Mervyn King, his counterpart at the Bank of England, and Prime Minister Gordon Brown at #10 Downing Street on Tuesday. He then went on to deliver the annual Joseph Charles Stamp Memorial Lecture entitled “The Crisis and the Policy Response” to our current global financial system meltdown. Human Events was there to cover the event -- and to quiz Dr. Bernanke in the Q&A session on his Keynesian approach to the systemic money problem. The world’s media covered the event live, including the BBC, CNBC, Fox News, CNN, and Bloomberg. For a clip of our Q&A, see: CNBC Video.OK. So here’s the problem. Keynesian solutions just don’t work. Throwing money from helicopters (or more likely C-17’s today) might just pull us out of the Great Depression II, but as we stretch the rubber band, eventually the block of deadweight banking system credit will finally spring to life and violently overshoot way before future Fed and Treasury Secretaries can reel in the excess money. The result? Massive inflation from 2010 onwards. 25-30% would not be surprising through the teens. Yikes! (That’s a techno-speak economist term for holy s***, it’s that bad…)So if you think gold is high at $850 today, wait until it reaches $3,000 a troy ounce. Ditto commodities (especially agriculture). Jim Rogers has been warning about this probability for the past year. He’s been riding the commodity prices all the way down in the process -- and he’s still positive about their future. I, for one, wouldn’t easily bet against the co-founder (along with George Soros) of the Quantum Fund.At the London School of Economics, former home (1931-1950) of Austrian-school founder and Nobel Prize winner Fredrich von Hayek, Dr. Bernanke went on to point out all the Keynesian goodies he has in his “toolkit” which the Fed is using to overcome the crisis.Chairman Bernanke acknowledges that the bottom line problem -- which began with the funny-money mortgages politically made to underqualified borrowers -- has seqway’d into a full-blown global loss of trust by just about everyone, consumers and bankers alike, in the present financial system. Or, in FedSpeak: “Rising credit risks and intense risk aversion have pushed credit spreads to unprecedented levels…Heightened systemic risks, falling asset values and tightening credit have in turn taken a heavy toll on business and consumer confidence and participated a sharp slowing in global economic activity. The damage, in terms of lost output, lost jobs, and lost wealth, is already substantial”.Of course, the unspoken statement is that the reason that the people don’t trust the present fractional banking system -- and are hording their precious cash -- is that the entire system is a house of cards, or more like the game of chairs where the last person standing when the music stops doesn’t have a chair to sit on. And nobody wants to be that last person standing when the music stops.Bernanke goes on to observe, chillingly: “the global economy will recover, but the timing and strength of the recovery are highly uncertain”. That’s telling it like it is.The Fed’s toolkit -- which has been newly invented over the past 18 months -- has three groups. They “all make use of the asset side of the Federal Reserve’s balance sheet”. This means, they consist of creating more money out of thin air.“The first set of tools, which are closely tied to the central bank’s traditional role as the lender of last resort, involve the provision of short-term liquidity”. It’s important to note that the reason the central bank is known as the “lender of last resort” is that when it collapses, the entire edifice falls and a new system must be built to replace the old. In these cases, the political system often falls as well. Whether a free-market-oriented democracy or a socialist-oriented totalitarian system springs up to replace the former ruin depends on the people -- both the average citizen and the elite.The question is, what kind of new system will arise from the Federal Reserve ashes? Another Keynesian Ponzi-scheme or a solid hard-money-based Austrian-school bank? The reason, of course, that Austrians like gold is it can’t easily be counterfeited by the government. It’s quite a “barbaric metal”. In the people’s hands, it can’t easily be controlled by the bureaucrats. Darn.It may just be possible, however, that Bernanke and colleagues can begin to move the Federal Reserve away from a fiat-based money system. You don’t really think there’s money in the banks to cover all your deposits, do you? And what do you mean by money, anyway: “legal tender IOU notes”? Bernanke knows this all too well. And if he can get us through this Keynesian-induced hell with just one more dose of Keynesian money printing, then maybe he’ll have the time somewhere in the future to move the system back to a gold-standard dollar. Hmmm…The tools in the first set are: 1) cutting fed funds and “discount window” interest rates, 2) increasing the length of the overnight “discount window” from 24 hours to 90 days, 3) the new “Term Auction Facility” which lends more money to the banks for “good” assets, 4) the new “Term Securities Lending Facility” which allows certain stock brokers to borrow money from the Fed for “less-liquid collateral”, and 5) the “Primary Dealer Credit Facility”, yet another bail-out loan facility for otherwise bankrupt stock brokers.In addition to the above “short term” loan programs to US banks and stock brokers, the Fed has printed up more US dollars to convert into foreign currency using “bilateral currency swap agreements with 14 foreign central banks”. Why? Because the world has run out of dollars to spend in paying its bills! No problem, we’ll print up some more dollars for you too. Happy to oblige!The second set of policy tools “involve the provision of liquidity directly to borrowers and investors in key credit markets”. They are: 1) money printed up to purchase commercial paper, 2) money printed up to purchase money-market funds, and 3) a Fed-Treasury joint money printing program to buy up AAA-rated student loans, auto loans, credit card loans, and SBA loans. Finally, the third set of new “policy tools” includes creating more money to buy up longer-term securities including $600 billion in Government-Sponsored Enterprises (GSE’s like Freddie Mac and Fannie Mae) and GSE-backed securities. The home mortgage market “dropped significantly on the announcement of this program”. The message: don’t bet against the Fed’s ability to print mountains of dollars -- at least in the short term. The result of all this newly-created money is that the Fed’s own balance sheet -- which took 90 years to reach the first $800 billion -- is now well on the way to $3 trillion, and that’s all money created out of thin air. Consequently over the next 6 months, look for the Fed to bail out ever more failing financial institutions -- starting with another multi-billion-dollar kick to the near-bankrupt Bank of America. This second round of funny money will be followed by a third and perhaps more, until we’ll all be swimming in a sea of dollar bills. As the recession bites deeper, the velocity of money -- how fast we spend it -- slows precipitously, and huge doses of more raw money are perceived by the money controllers as the only way to pull us out of this government-created mess. What else can they do? The Austrian economist Murray Rothbard revealed the simple answer in his History of Money and Banking. Politicians everywhere need to read it immediately.Professor Bernanke is a genuinely likeable person with a good sense of humor and a deep knowledge of how the financial world really works. He was warmly received by the LSE students and faculty in London. Unfortunately, he is also the head of the biggest fiat-banking scheme ever devised by mankind. And he knows it. (Thank you John Pierpont Morgan for your Jekyll Island creation.)The tell is that his voice waivers when he is saying something that he hopes will come true but is unsure of. Listen to his speeches yourself and you’ll hear what I mean immediately. It’s the giveaway of a basically honest and decent man. Bernanke still needs to fully master the “FedSpeak” of his predecessor, Alan Greenspan. Alan could easily tell the House Banking Committee about how the Fed was fully in control - and there was nothing to worry about. And they believed it. Yet he was a protégé of Ayn Rand and the author of a marvellous essay on the need for gold-backed central banking in his youth. Years before he too became the head of the Fed.I truly hope that Chairman Bernanke can pull it all off just one more time. Like a junky hooked on ever-increasing doses of the good stuff, I need just a little more money, please. The withdrawal is too painful and I don’t want to hurt that much. I promise to go straight and reform in the future. Trust me. In fact, trust all of us. We’re all in this together.
Mr. Easton teaches University economics and is passionate about technology and entrepreneurship. He is rosy about the long-term future: �The glass isn�t half full, it�s overflowing!�
US Economy's Future is Controlled by 3 Companies, and They’re Not Goldman Sachs, JP Morgan or CitiCorp
by Terry Easton
Human Events
June 12, 2009
If the United States were Japan back in the 1998, its credit rating would too have been downgraded by now from its AAA credit risk to AA+ or lower. Indeed, the once-stellar credit ratings of European countries Ireland, Italy, and Spain have already been shown the axe. Spain’s unemployment is now edging upward towards 20%. Ireland’s recent loss of its coveted ‘Triple-A’ status has touched off a financial crisis which is rapidly deteriorating into a political crisis. As a result, the center-left party will probably be swept away and replaced with a pro-business center-right party when the voters next get their chance. As the say in Europe, “we like to vote in the socialists when we’re feeling fat and full of cash, but when times get tough economically, we like to replace them with the ‘grown ups’ who won’t run our country into the ground fiscally”.The UK is also teetering on the brink of losing its cherished AAA status. And with it will go the pound (down) and unemployment (up).How does the credit worthiness of a country affect its fiscal health? And why should the politicians and bureaucrats in the White House, the Treasury and the Fed be quaking in their boots right now?Simple. If a country, like the US, should lose its pristine credit rating, it will instantly lose the ability to sell its bonds to many potential buyers. And, God knows, with all the monster deficits being wrung up by the White House these days, the US government needs all the newly minted Treasury Bills – in the tens of billions of dollars - to be safely sold, without fail, week after week. The fate of the US government hangs in the balance by the analysts at the three global credit rating agencies who daily measure the financial health of 125 countries. They’re akin to the 3 personal credit bureaus whose “Fico scores” compiled by the Fair Isaacs company determine whether you can get a credit card or car loan or even a decent home mortgage. With a really good Fico score, like 800 or above, you’ll be offered the lowest loan interest rates. As you score drops down to the 700’s and 600’s, your credit risk goes up, and borrowers begin to disappear. Those that remain will charge higher interest to make the same loan. Your risk of defaulting on the loan jumps. Drop below 600, and you probably can’t get a loan from anyone except, perhaps, the local loan shark – at 10% interest – per month.Unfortunately, many major buyers of bonds -- government or corporate, US or overseas – have restrictions on what they can legally buy. US Treasury bonds are often owned by central banks of other countries -- like China -- and retirement programs, mutual funds and pension funds. Many are only allowed to own only ultra-safe ‘Triple-A’ rated ‘paper’. Lose that rating, and the next day, the market will see hundreds of billions of dollars of US government Treasury bonds dumped as ‘secondary sales’ -- perhaps at fire sale prices.. When such an oversupply of sellers dumps T-bills, their price will fall smartly, and the Treasury bond interest rates will skyrocket, as many of the potential buyers are forced to sell too. So the cost of borrowing money both short and long term will spike up. Then, almost immediately afterwards, the interest rates on credit cards, corporate borrowing, and most importantly, home mortgages will shoot up as well. The rating agencies are terrified to tell the truth. Because the US is the principal money center on the planet, and because the US dollar is the world’s reserve currency, such a lowering of the US AAA rating -- which it has maintained for over a century -- will ripple through the global economy as bond and stock markets recoils in shock and follow the US downward. Credit rating agency fees will soon follow. They have not yet downgraded the UK pound-based ‘Gilts’ (government bonds). These are on the ropes as the UK has been faithfully following in the US footsteps by taking over its banks, printing up funny money to pay the bills, and running massive government deficits to add its own ‘stimulus’ package to the economy. Naturally, the UK’s unemployment rate is shooting upwards as well.The UK’s Labour (socialist) government is teetering on collapse with the lowest voter rating in over 100 years. The fall of their government, due to the fiscal incompetence of Prime Minister Gordon Brown, the former “wunderkind” Chancellor (their equivalent to the Treasury Secretary) and his decade long spend-and-spend policy, is predicted to occur this autumn, if not sooner. When that happens, the dam will likely break, and the UK will be stripped of its AAA rating. The pressure will immediately shift to the US as overseas money -- now funding 50% of government bond sales -- begins to flee. Interest rates will go up as the Treasury must continue to conduct ever-bigger weekly bond sales to fewer and fewer buyers. Eventually, the other show will drop, and the US will lose its Triple-A rating as well.This is uncharted territory. Over the past few decades. countries like Mexico, Argentina, and Zimbabwe have seen their ratings plummet – along with their standard of living. Unemployment figures have recently reached 25% or more in other developed countries. But not yet in the US.Faced with the problem of declining bond sales and raising interest rates killing the economic recovery, and unable to turn to the Chinese or Japanese to bail out the government, the only course of action left will be for the Federal Reserve to “re-liquify” the market. That is, the Fed will simply ‘print up’ more money to use to buy the non-selling Treasury bills itself. And when this new money hits the marketplace, the amount of overall money in circulation will quickly increase. The dictionary defines “inflation” as simply an increase in the money supply. When you increase the total amount of money -- but not correspondingly increase any more goods or services being produced -- the cost of everything you buy denominated in the unit of money (in this case, the dollar) will go up. It takes more of the pieces of paper called ‘dollars’ to buy the same goods and services.Real wealth and hard-assets such as commodities (food, metals, gold) will go up in dollar terms. Other stronger currencies will go up too. Fixed-interest-rate loans (like 30-year fixed mortgages) will be a disaster for the lender and a magical liability for the borrower, who will be able to repay the loans years later in dollars that will be worth far less, if not worthless. Those lenders will be forced out of business by rising costs, reducing the supply of consumer and business credit even more.This negative-reinforcing downward spiral, once started, cannot be easily stopped short of a massive depression. Interest rates could shoot up to 30-50% per year. In the worst-case scenario, hyperinflation, or monthly inflation above 50%, could occur. Such an event nearly always ends with a war or internal revolution. The above scenario is what the strategic planners at the White House, the Treasury and the Federal Reserve desperately fear. And we are now likely on the knife edge, as Gerald Celente of Trends Research Institute has recently predicted.I too, see this as an exceptional time. Fortunately, the White House is quite good at twisting both the arms of powerful people on Wall Street and Main Street. They’ve fired the Chairmen of General Motors and Chrysler and AIG. They’ve forced major solvent banks like Wells Fargo to take the so-called ‘Tarp’ bailout money even when they didn’t need to and didn’t want to. They’ve taken over 80% of all home mortgages with the nationalization of FreddyMac and FannieMae. And they’ve gotten gentle press treatment from those “main stream media” outlets (with the exception of CNBC’s Rick Santelli). I expect that the 3 New York-based bond rating agencies will go along with the US government and maintain the charade of its AAA rating for as long as possible, hoping that a miracle occurs and the fabled “green shoots” quickly grow into a sustained recovery, rather than a man-eating plant. But I’m not optimistic, and I invite any reader to argue against my position. While I am hopeful in the future of humankind and the wonders that the free market and science can bring over the long term, in the short term I fear that the light I see at the end of this tunnel is, in fact, an oncoming train.
Mr. Easton teaches University economics and is passionate about technology and entrepreneurship. He is rosy about the long-term future: �The glass isn�t half full, it�s overflowing!�
Human Events
June 12, 2009
If the United States were Japan back in the 1998, its credit rating would too have been downgraded by now from its AAA credit risk to AA+ or lower. Indeed, the once-stellar credit ratings of European countries Ireland, Italy, and Spain have already been shown the axe. Spain’s unemployment is now edging upward towards 20%. Ireland’s recent loss of its coveted ‘Triple-A’ status has touched off a financial crisis which is rapidly deteriorating into a political crisis. As a result, the center-left party will probably be swept away and replaced with a pro-business center-right party when the voters next get their chance. As the say in Europe, “we like to vote in the socialists when we’re feeling fat and full of cash, but when times get tough economically, we like to replace them with the ‘grown ups’ who won’t run our country into the ground fiscally”.The UK is also teetering on the brink of losing its cherished AAA status. And with it will go the pound (down) and unemployment (up).How does the credit worthiness of a country affect its fiscal health? And why should the politicians and bureaucrats in the White House, the Treasury and the Fed be quaking in their boots right now?Simple. If a country, like the US, should lose its pristine credit rating, it will instantly lose the ability to sell its bonds to many potential buyers. And, God knows, with all the monster deficits being wrung up by the White House these days, the US government needs all the newly minted Treasury Bills – in the tens of billions of dollars - to be safely sold, without fail, week after week. The fate of the US government hangs in the balance by the analysts at the three global credit rating agencies who daily measure the financial health of 125 countries. They’re akin to the 3 personal credit bureaus whose “Fico scores” compiled by the Fair Isaacs company determine whether you can get a credit card or car loan or even a decent home mortgage. With a really good Fico score, like 800 or above, you’ll be offered the lowest loan interest rates. As you score drops down to the 700’s and 600’s, your credit risk goes up, and borrowers begin to disappear. Those that remain will charge higher interest to make the same loan. Your risk of defaulting on the loan jumps. Drop below 600, and you probably can’t get a loan from anyone except, perhaps, the local loan shark – at 10% interest – per month.Unfortunately, many major buyers of bonds -- government or corporate, US or overseas – have restrictions on what they can legally buy. US Treasury bonds are often owned by central banks of other countries -- like China -- and retirement programs, mutual funds and pension funds. Many are only allowed to own only ultra-safe ‘Triple-A’ rated ‘paper’. Lose that rating, and the next day, the market will see hundreds of billions of dollars of US government Treasury bonds dumped as ‘secondary sales’ -- perhaps at fire sale prices.. When such an oversupply of sellers dumps T-bills, their price will fall smartly, and the Treasury bond interest rates will skyrocket, as many of the potential buyers are forced to sell too. So the cost of borrowing money both short and long term will spike up. Then, almost immediately afterwards, the interest rates on credit cards, corporate borrowing, and most importantly, home mortgages will shoot up as well. The rating agencies are terrified to tell the truth. Because the US is the principal money center on the planet, and because the US dollar is the world’s reserve currency, such a lowering of the US AAA rating -- which it has maintained for over a century -- will ripple through the global economy as bond and stock markets recoils in shock and follow the US downward. Credit rating agency fees will soon follow. They have not yet downgraded the UK pound-based ‘Gilts’ (government bonds). These are on the ropes as the UK has been faithfully following in the US footsteps by taking over its banks, printing up funny money to pay the bills, and running massive government deficits to add its own ‘stimulus’ package to the economy. Naturally, the UK’s unemployment rate is shooting upwards as well.The UK’s Labour (socialist) government is teetering on collapse with the lowest voter rating in over 100 years. The fall of their government, due to the fiscal incompetence of Prime Minister Gordon Brown, the former “wunderkind” Chancellor (their equivalent to the Treasury Secretary) and his decade long spend-and-spend policy, is predicted to occur this autumn, if not sooner. When that happens, the dam will likely break, and the UK will be stripped of its AAA rating. The pressure will immediately shift to the US as overseas money -- now funding 50% of government bond sales -- begins to flee. Interest rates will go up as the Treasury must continue to conduct ever-bigger weekly bond sales to fewer and fewer buyers. Eventually, the other show will drop, and the US will lose its Triple-A rating as well.This is uncharted territory. Over the past few decades. countries like Mexico, Argentina, and Zimbabwe have seen their ratings plummet – along with their standard of living. Unemployment figures have recently reached 25% or more in other developed countries. But not yet in the US.Faced with the problem of declining bond sales and raising interest rates killing the economic recovery, and unable to turn to the Chinese or Japanese to bail out the government, the only course of action left will be for the Federal Reserve to “re-liquify” the market. That is, the Fed will simply ‘print up’ more money to use to buy the non-selling Treasury bills itself. And when this new money hits the marketplace, the amount of overall money in circulation will quickly increase. The dictionary defines “inflation” as simply an increase in the money supply. When you increase the total amount of money -- but not correspondingly increase any more goods or services being produced -- the cost of everything you buy denominated in the unit of money (in this case, the dollar) will go up. It takes more of the pieces of paper called ‘dollars’ to buy the same goods and services.Real wealth and hard-assets such as commodities (food, metals, gold) will go up in dollar terms. Other stronger currencies will go up too. Fixed-interest-rate loans (like 30-year fixed mortgages) will be a disaster for the lender and a magical liability for the borrower, who will be able to repay the loans years later in dollars that will be worth far less, if not worthless. Those lenders will be forced out of business by rising costs, reducing the supply of consumer and business credit even more.This negative-reinforcing downward spiral, once started, cannot be easily stopped short of a massive depression. Interest rates could shoot up to 30-50% per year. In the worst-case scenario, hyperinflation, or monthly inflation above 50%, could occur. Such an event nearly always ends with a war or internal revolution. The above scenario is what the strategic planners at the White House, the Treasury and the Federal Reserve desperately fear. And we are now likely on the knife edge, as Gerald Celente of Trends Research Institute has recently predicted.I too, see this as an exceptional time. Fortunately, the White House is quite good at twisting both the arms of powerful people on Wall Street and Main Street. They’ve fired the Chairmen of General Motors and Chrysler and AIG. They’ve forced major solvent banks like Wells Fargo to take the so-called ‘Tarp’ bailout money even when they didn’t need to and didn’t want to. They’ve taken over 80% of all home mortgages with the nationalization of FreddyMac and FannieMae. And they’ve gotten gentle press treatment from those “main stream media” outlets (with the exception of CNBC’s Rick Santelli). I expect that the 3 New York-based bond rating agencies will go along with the US government and maintain the charade of its AAA rating for as long as possible, hoping that a miracle occurs and the fabled “green shoots” quickly grow into a sustained recovery, rather than a man-eating plant. But I’m not optimistic, and I invite any reader to argue against my position. While I am hopeful in the future of humankind and the wonders that the free market and science can bring over the long term, in the short term I fear that the light I see at the end of this tunnel is, in fact, an oncoming train.
Mr. Easton teaches University economics and is passionate about technology and entrepreneurship. He is rosy about the long-term future: �The glass isn�t half full, it�s overflowing!�
Exclusive Interview with Future Prediction Expert Gerald Celente
by Terry Easton
Human Events
June 5, 2009
It’s the end of the world as the Greater Depression hits after 2010’s failed “W-recovery”Human Events had the opportunity to interview forecaster extraordinaire Gerald Celente, President of Trends Research Institute, several days ago -- and the future he predicts looks bleak indeed. In fact, as Mr. Celente sees it, the Great Depression will seem like a mild recession as what waits for us in 2011 hits with the force of a Katrina financial hurricane.In case you’re wondering who Mr. Celente is (if this is still possible), he’s appeared -- along with his predictions -- on Oprah, CNBC, Reuters, NBC, PBS, BBC, the Glenn Beck Show -- the list goes on an on. His Trends Report has been successfully predicting the major future trends impacting our lives for 3 decades, including calling the dot com crash back in the 1990's.Mr. Celente's forecast on our impending future is based on his study of history. He says we are bent on destroying our currency, bankrupting our government, and unleashing a violent citizen-against-citizen eruption as the economy collapses into chaos and martial law fascism. Quite a claim. And God help us if he is right -- again.“We’re sounding the alarm about the ongoing downward economic cycle”, Gerald told Human Events. “In 2002, we predicted that the collapse of the American empire would fall like the World Trade Center in a thunderous crash -- in slow motion before our eyes. And now it’s happening.”Mr. Celente follows over 300 trends: family, crime, war, education, consumer & business patterns which TRI synthesizes to predict the future.“The US is becoming a shadow of what it used to be. Take education for example. The OECD group of developed countries ranks quality of life, education, health care of its member nations. The US is now falling down the table as one piece of data after another shows America is in decline. We’re no longer Win, Place or Show in quality of life, education, longevity… all the essentials where we used to be #1. And our economic underpinnings are failing.”Mr. Celente puts part of the blame squarely on the federal government, and especially FED Chairman Bernanke and Treasury Secretary Geithner, and warns us not to believe a word they say “They’re the same people who didn't see it coming - are now telling us the worst is over, that ‘green shoots are spouting upwards’. But they were wrong before. They’re wrong on this too”.“When you pump out tons of money manure into this system based on nothing – printing press paper, it’s like giving a patient with a chronic disease a pain killer -- it won’t cure the patient.”“But let’s go beyond the economics. Our whole Constitution has been abrogated. The president simply writes an Executive Order to do whatever he wants. Nationalize the banks, take over the insurance industry, automobile industry, health care industry…None of it is constitutional.”When did the problem begin?“After Dwight Eisenhower -- our last great president -- the Allied Supreme Commander in WWII – who warned us of the dangers of the military-industrial complex. We've become completely corrupted.”“We became enmeshed in foreign entanglements. We forgot the lesson of England - and how their global imperial overreach destroyed their empire.” Of course, the average American doesn’t think that we’re an empire. We’re not like the classical empires of old - raping, pillaging and stealing the wealth of invaded peoples. What does Mr. Celente have to say about this?“What we’re doing is squandering our wealth, our resources, the genius of our scientists and the future of our children. We’re over-consuming in every way -- but under consuming our education and focusing on the quantity, not the quality, of what we’ve built. So much of today’s culture is counter-productive to what American built it’s foundation on -- a high-quality producing nation building things, not pushing paper. "And we’ve become not only a consumer society but a low-quality consumer, as well as the most obese society in the world, eating low-quality high-carb, high-fat processed foods.” “We’re now focused on the lowest cost, the lowest common denominator. Not the best and highest quality. We advertise buying cheapest as the most important thing.”Mr. Celente argues that we’ve socially destroyed our productivity and have abandoned it to other countries.“And we have fallen into a moral vacuum. Look at how people used to dress. Smartly. Not like the cheap hoods of today. Fashion now copies the lowest common denominator. Our children wear clothes without belts, and shoes without shoelaces, to copy the styles of the violent criminals -- who have these items removed by the police in prison so they can’t be used as weapons. That’s become the fashion statement of today’s youth. Like rap music from the ghetto. We’ve become an underdeveloped nation.”Mr. Celente observes that "people used to think of America as that shining beacon on the hill with 'liberty and justice for all…' ." So what happened?"Morality is missing from our American public consciousness. Start with Wall Street. It’s run by a criminal gang. The only question is ‘how much can you make, how much can you steal?’ At the bottom, the welfare recipient says ‘how much can I take?’ And the government is in on the take."“Morality is absolutely the issue. We had a government where we were taught all our lives that we are a free enterprise system -- so we depend on our own strength, our entrepreneurial ideas. The world used to look to us for our innovative spirit.”“This is being destroyed before our eyes. And our government has become more interventionist than any of the old empires could imagine.”"Our society is now based on consumption -- 70% of the GDP. This is more than we produce. So to pay our bills, we use funny money invented in 1913 with the creation of the Federal Reserve and the fiat dollar based on credit (debt) -- the fractional reserve system. In 1930's you bought what you could afford. You saved up to buy your home. The easy credit of the 90's has destroyed the country. Now you borrow what you can’t afford - and the nation’s done the same."Mr. Celente predicts the use of printing press money will cause the "greater depression". "I predict continuing deflation of real estate, followed by extreme currency inflation -- ultimately becoming worthless. This is why gold is the only honest money -- the government can't counterfeit it. Look for it to top at least $2000 an ounce""Our unemployment numbers are also bogus. For example, the construction industry is really above 20% , and the government is creating low-level jobs, not real jobs. The US total real unemployment is more like 16%. Before the crisis is over, it will reach 25% - great depression numbers.""When people have lost everything they have nothing to lose. Violence and crime will explode. Look at the OECD figures. The number of people not graduating from high school is exploding -- they're wacked out on drugs. New York City will look like Mexico City in a few years. The collapse of morality from top down -- and especially in the government -- makes it inevitable.""What can we expect in the coming future", we asked."Washington has declared 'Economic Martial Law'. Wall Street is putting Main Street out of business. The key to watch is Christmas sales. They’ll fail. Christmas will be when reality sets in.""Another trend we wrote about over 2 years ago was the tax revolt. What’s happened? Tax revenues have collapsed by 33%. And the wealthy people are leaving.""We predict state secessionist movements will rival the breakup of the Soviet Union.""The only way we can ever recover is to return to individual community, personal responsibility, local government. Next, average will disappear, Quality will return. Look at GM. Junk cars financed by junk bonds. Now owned by a junk government. As a consumer, don’t consume quantity -- consume quality.""How will it all end?", we queried. Will the dollar survive?"The dot com bubble should have burst and gone away in a short sharp recession. But the boys at the Fed re-inflated the economy by lowering interest rates to a 46 year low -- and in turn created the real estate bubble -- much bigger than the dot com bubble. ""Now they’re creating the bailout bubble -- which will ultimately dwarf the real estate bubble. It will cause the implosion of the global economy world wide -- which will not be able to be repaired by creating yet another bubble. Every time the government fails, it tells a bigger lie and then a still bigger lie.""These previous bubbles were not allowed to pop -- but they didn’t destroy the infrastructure of the country. This bailout bubble will.""But this bubble will be the last one. After the final blowout of the bailout bubble, we are concerned that the government will take the nation into war. This is a historical precedent that’s been done over and over again.""So, it’s not that the dollar that will survive. We may not even survive. Look at the German mess after WWI. It gave rise to Fascism and WWII. The next war will be fought with weapons of mass destruction."American 'Liberal Fascism' ? Is it possible? Jonah Goldberg's bestseller raised the alarm two years ago.
Mr. Easton teaches University economics and is passionate about technology and entrepreneurship. He is rosy about the long-term future: �The glass isn�t half full, it�s overflowing!�
Human Events
June 5, 2009
It’s the end of the world as the Greater Depression hits after 2010’s failed “W-recovery”Human Events had the opportunity to interview forecaster extraordinaire Gerald Celente, President of Trends Research Institute, several days ago -- and the future he predicts looks bleak indeed. In fact, as Mr. Celente sees it, the Great Depression will seem like a mild recession as what waits for us in 2011 hits with the force of a Katrina financial hurricane.In case you’re wondering who Mr. Celente is (if this is still possible), he’s appeared -- along with his predictions -- on Oprah, CNBC, Reuters, NBC, PBS, BBC, the Glenn Beck Show -- the list goes on an on. His Trends Report has been successfully predicting the major future trends impacting our lives for 3 decades, including calling the dot com crash back in the 1990's.Mr. Celente's forecast on our impending future is based on his study of history. He says we are bent on destroying our currency, bankrupting our government, and unleashing a violent citizen-against-citizen eruption as the economy collapses into chaos and martial law fascism. Quite a claim. And God help us if he is right -- again.“We’re sounding the alarm about the ongoing downward economic cycle”, Gerald told Human Events. “In 2002, we predicted that the collapse of the American empire would fall like the World Trade Center in a thunderous crash -- in slow motion before our eyes. And now it’s happening.”Mr. Celente follows over 300 trends: family, crime, war, education, consumer & business patterns which TRI synthesizes to predict the future.“The US is becoming a shadow of what it used to be. Take education for example. The OECD group of developed countries ranks quality of life, education, health care of its member nations. The US is now falling down the table as one piece of data after another shows America is in decline. We’re no longer Win, Place or Show in quality of life, education, longevity… all the essentials where we used to be #1. And our economic underpinnings are failing.”Mr. Celente puts part of the blame squarely on the federal government, and especially FED Chairman Bernanke and Treasury Secretary Geithner, and warns us not to believe a word they say “They’re the same people who didn't see it coming - are now telling us the worst is over, that ‘green shoots are spouting upwards’. But they were wrong before. They’re wrong on this too”.“When you pump out tons of money manure into this system based on nothing – printing press paper, it’s like giving a patient with a chronic disease a pain killer -- it won’t cure the patient.”“But let’s go beyond the economics. Our whole Constitution has been abrogated. The president simply writes an Executive Order to do whatever he wants. Nationalize the banks, take over the insurance industry, automobile industry, health care industry…None of it is constitutional.”When did the problem begin?“After Dwight Eisenhower -- our last great president -- the Allied Supreme Commander in WWII – who warned us of the dangers of the military-industrial complex. We've become completely corrupted.”“We became enmeshed in foreign entanglements. We forgot the lesson of England - and how their global imperial overreach destroyed their empire.” Of course, the average American doesn’t think that we’re an empire. We’re not like the classical empires of old - raping, pillaging and stealing the wealth of invaded peoples. What does Mr. Celente have to say about this?“What we’re doing is squandering our wealth, our resources, the genius of our scientists and the future of our children. We’re over-consuming in every way -- but under consuming our education and focusing on the quantity, not the quality, of what we’ve built. So much of today’s culture is counter-productive to what American built it’s foundation on -- a high-quality producing nation building things, not pushing paper. "And we’ve become not only a consumer society but a low-quality consumer, as well as the most obese society in the world, eating low-quality high-carb, high-fat processed foods.” “We’re now focused on the lowest cost, the lowest common denominator. Not the best and highest quality. We advertise buying cheapest as the most important thing.”Mr. Celente argues that we’ve socially destroyed our productivity and have abandoned it to other countries.“And we have fallen into a moral vacuum. Look at how people used to dress. Smartly. Not like the cheap hoods of today. Fashion now copies the lowest common denominator. Our children wear clothes without belts, and shoes without shoelaces, to copy the styles of the violent criminals -- who have these items removed by the police in prison so they can’t be used as weapons. That’s become the fashion statement of today’s youth. Like rap music from the ghetto. We’ve become an underdeveloped nation.”Mr. Celente observes that "people used to think of America as that shining beacon on the hill with 'liberty and justice for all…' ." So what happened?"Morality is missing from our American public consciousness. Start with Wall Street. It’s run by a criminal gang. The only question is ‘how much can you make, how much can you steal?’ At the bottom, the welfare recipient says ‘how much can I take?’ And the government is in on the take."“Morality is absolutely the issue. We had a government where we were taught all our lives that we are a free enterprise system -- so we depend on our own strength, our entrepreneurial ideas. The world used to look to us for our innovative spirit.”“This is being destroyed before our eyes. And our government has become more interventionist than any of the old empires could imagine.”"Our society is now based on consumption -- 70% of the GDP. This is more than we produce. So to pay our bills, we use funny money invented in 1913 with the creation of the Federal Reserve and the fiat dollar based on credit (debt) -- the fractional reserve system. In 1930's you bought what you could afford. You saved up to buy your home. The easy credit of the 90's has destroyed the country. Now you borrow what you can’t afford - and the nation’s done the same."Mr. Celente predicts the use of printing press money will cause the "greater depression". "I predict continuing deflation of real estate, followed by extreme currency inflation -- ultimately becoming worthless. This is why gold is the only honest money -- the government can't counterfeit it. Look for it to top at least $2000 an ounce""Our unemployment numbers are also bogus. For example, the construction industry is really above 20% , and the government is creating low-level jobs, not real jobs. The US total real unemployment is more like 16%. Before the crisis is over, it will reach 25% - great depression numbers.""When people have lost everything they have nothing to lose. Violence and crime will explode. Look at the OECD figures. The number of people not graduating from high school is exploding -- they're wacked out on drugs. New York City will look like Mexico City in a few years. The collapse of morality from top down -- and especially in the government -- makes it inevitable.""What can we expect in the coming future", we asked."Washington has declared 'Economic Martial Law'. Wall Street is putting Main Street out of business. The key to watch is Christmas sales. They’ll fail. Christmas will be when reality sets in.""Another trend we wrote about over 2 years ago was the tax revolt. What’s happened? Tax revenues have collapsed by 33%. And the wealthy people are leaving.""We predict state secessionist movements will rival the breakup of the Soviet Union.""The only way we can ever recover is to return to individual community, personal responsibility, local government. Next, average will disappear, Quality will return. Look at GM. Junk cars financed by junk bonds. Now owned by a junk government. As a consumer, don’t consume quantity -- consume quality.""How will it all end?", we queried. Will the dollar survive?"The dot com bubble should have burst and gone away in a short sharp recession. But the boys at the Fed re-inflated the economy by lowering interest rates to a 46 year low -- and in turn created the real estate bubble -- much bigger than the dot com bubble. ""Now they’re creating the bailout bubble -- which will ultimately dwarf the real estate bubble. It will cause the implosion of the global economy world wide -- which will not be able to be repaired by creating yet another bubble. Every time the government fails, it tells a bigger lie and then a still bigger lie.""These previous bubbles were not allowed to pop -- but they didn’t destroy the infrastructure of the country. This bailout bubble will.""But this bubble will be the last one. After the final blowout of the bailout bubble, we are concerned that the government will take the nation into war. This is a historical precedent that’s been done over and over again.""So, it’s not that the dollar that will survive. We may not even survive. Look at the German mess after WWI. It gave rise to Fascism and WWII. The next war will be fought with weapons of mass destruction."American 'Liberal Fascism' ? Is it possible? Jonah Goldberg's bestseller raised the alarm two years ago.
Mr. Easton teaches University economics and is passionate about technology and entrepreneurship. He is rosy about the long-term future: �The glass isn�t half full, it�s overflowing!�
Bernanke says US economy on cusp of recovery
Bernanke: US economy on verge of recovery and worst of crisis is over, but challenges remain
By Jeannine Aversa, AP Economics Writer
On Friday August 21, 2009
JACKSON, Wyo. (AP) -- Federal Reserve Chairman Ben Bernanke declared Friday that the U.S. economy is on the verge of a long-awaited recovery after enduring a brutal recession and the worst financial crisis since the Great Depression. Economic activity in both the U.S. and around the world appears to be "leveling out," and "the prospects for a return to growth in the near term appear good," Bernanke said in a speech at an annual Fed conference in Jackson Hole, Wyo.
The upbeat assessment was consistent with the Fed's observations earlier this month. The central bank has taken small steps toward pulling back some emergency programs to revive the economy. Still, Bernanke stressed Friday that despite much progress in stabilizing financial markets and trying to bust through credit clogs, consumers and businesses are still having trouble getting loans. The situation is not back to normal, he said. Restoring the free flow of credit is a critical component to a lasting recovery. "Although we have avoided the worst, difficult challenges still lie ahead," Bernanke told the gathering. "We must work together to build on the gains already made to secure a sustained economic recovery."
Strains in financial markets worldwide persist. Financial institutions face "significant additional losses" on soured investments and many businesses and households are experiencing "considerable difficulty" in getting loans, he said. The Fed chief's remarks come two years after the financial crisis broke out and nearly one year after it had deepened to the point of sending the nation into a near meltdown. The bulk of Bernanke's speech was a chronicle of the extraordinary events of the past year. Financial markets took a turn for the worst starting last September and into October, nearly shutting down the flow of credit. The crisis felled storied Wall Street firms and forced the government to take over mortgage giants Fannie Mae and Freddie Mac, as well as insurance titan American International Group Inc. Despite efforts to save it, Lehman Brothers failed. It filed for bankruptcy on Sept. 15, the largest in corporate history, which roiled markets worldwide. To prop up shaky banks, the government created a $700 billion bailout fund, a program that proved wildly unpopular with an American public suffering fallout from the recession. The Fed swooped in with unprecedented emergency lending programs to fight the crisis. It eventually slashed a key bank lending rate to a record low near zero. And Congress enacted programs to stimulate the economy, the most recent coming in February with President Barack Obama's $787 billion package of tax cuts and increased government spending. "Without these speedy and forceful actions, last October's panic would likely have continued to intensify, more major firms would have failed and the entire global financial system would have been at serious risk," Bernanke said. In recounting actions by the Fed and the government to battle the crisis, Bernanke didn't acknowledge any missteps by the central bank and other regulators. Critics have argued that the Wall Street bailouts in particular sent a message that companies that take reckless gambles will be rescued by the government. There's also the concern that the rescues put taxpayer's dollars at risk.
The public and lawmakers on Capitol Hill were incensed by the repeated taxpayer bailouts of AIG, totaling more than $180 billion, and outraged after the company paid hefty bonuses to employees who worked in the very division that brought down the firm. The $700 billion taxpayer-funded bailout program used to prop up banks, AIG, General Motors, Chrysler and other companies also drew criticism from the public and politicians. But unlike in the 1930s, Washington policymakers this time acted aggressively and quickly to contain the crisis, said Bernanke, a scholar of the Great Depression. "As severe as the economic impact has been, however, the outcome could have been decidedly worse," he said. Global cooperation in battling the crisis was crucial, with central banks slashing interest rates and the U.S. and other governments delivering fiscal stimulus, he noted. "The crisis in turn sparked a deep global recession, from which we are only now beginning to emerge," the Fed chief observed.
Sponsored by the Federal Reserve Bank of Kansas City, the conference draws a virtual who's who of the financial world -- Bernanke's counterparts in other countries, academics and economists. This year's forum focused on lessons learned from the crisis and how they can be applied to prevent a repeat of the debacles.
To that end, Bernanke again called a rewrite of the U.S. financial rule book -- something Congress is currently involved in. He again pressed for stricter oversight of companies -- like AIG -- whose failure would endanger the entire financial system and the broader economy. Obama would tap the Fed for that job, something many lawmakers in Congress don't like.
Bernanke also said the U.S. needs a process to wind down big, globally interconnected companies, much like the Federal Deposit Insurance Corp. does for failing banks. "Looking forward, we must urgently address structural weaknesses in the financial system, in particular in the regulatory framework, to ensure that the enormous costs of the past two years will not be borne again," he said.
By Jeannine Aversa, AP Economics Writer
On Friday August 21, 2009
JACKSON, Wyo. (AP) -- Federal Reserve Chairman Ben Bernanke declared Friday that the U.S. economy is on the verge of a long-awaited recovery after enduring a brutal recession and the worst financial crisis since the Great Depression. Economic activity in both the U.S. and around the world appears to be "leveling out," and "the prospects for a return to growth in the near term appear good," Bernanke said in a speech at an annual Fed conference in Jackson Hole, Wyo.
The upbeat assessment was consistent with the Fed's observations earlier this month. The central bank has taken small steps toward pulling back some emergency programs to revive the economy. Still, Bernanke stressed Friday that despite much progress in stabilizing financial markets and trying to bust through credit clogs, consumers and businesses are still having trouble getting loans. The situation is not back to normal, he said. Restoring the free flow of credit is a critical component to a lasting recovery. "Although we have avoided the worst, difficult challenges still lie ahead," Bernanke told the gathering. "We must work together to build on the gains already made to secure a sustained economic recovery."
Strains in financial markets worldwide persist. Financial institutions face "significant additional losses" on soured investments and many businesses and households are experiencing "considerable difficulty" in getting loans, he said. The Fed chief's remarks come two years after the financial crisis broke out and nearly one year after it had deepened to the point of sending the nation into a near meltdown. The bulk of Bernanke's speech was a chronicle of the extraordinary events of the past year. Financial markets took a turn for the worst starting last September and into October, nearly shutting down the flow of credit. The crisis felled storied Wall Street firms and forced the government to take over mortgage giants Fannie Mae and Freddie Mac, as well as insurance titan American International Group Inc. Despite efforts to save it, Lehman Brothers failed. It filed for bankruptcy on Sept. 15, the largest in corporate history, which roiled markets worldwide. To prop up shaky banks, the government created a $700 billion bailout fund, a program that proved wildly unpopular with an American public suffering fallout from the recession. The Fed swooped in with unprecedented emergency lending programs to fight the crisis. It eventually slashed a key bank lending rate to a record low near zero. And Congress enacted programs to stimulate the economy, the most recent coming in February with President Barack Obama's $787 billion package of tax cuts and increased government spending. "Without these speedy and forceful actions, last October's panic would likely have continued to intensify, more major firms would have failed and the entire global financial system would have been at serious risk," Bernanke said. In recounting actions by the Fed and the government to battle the crisis, Bernanke didn't acknowledge any missteps by the central bank and other regulators. Critics have argued that the Wall Street bailouts in particular sent a message that companies that take reckless gambles will be rescued by the government. There's also the concern that the rescues put taxpayer's dollars at risk.
The public and lawmakers on Capitol Hill were incensed by the repeated taxpayer bailouts of AIG, totaling more than $180 billion, and outraged after the company paid hefty bonuses to employees who worked in the very division that brought down the firm. The $700 billion taxpayer-funded bailout program used to prop up banks, AIG, General Motors, Chrysler and other companies also drew criticism from the public and politicians. But unlike in the 1930s, Washington policymakers this time acted aggressively and quickly to contain the crisis, said Bernanke, a scholar of the Great Depression. "As severe as the economic impact has been, however, the outcome could have been decidedly worse," he said. Global cooperation in battling the crisis was crucial, with central banks slashing interest rates and the U.S. and other governments delivering fiscal stimulus, he noted. "The crisis in turn sparked a deep global recession, from which we are only now beginning to emerge," the Fed chief observed.
Sponsored by the Federal Reserve Bank of Kansas City, the conference draws a virtual who's who of the financial world -- Bernanke's counterparts in other countries, academics and economists. This year's forum focused on lessons learned from the crisis and how they can be applied to prevent a repeat of the debacles.
To that end, Bernanke again called a rewrite of the U.S. financial rule book -- something Congress is currently involved in. He again pressed for stricter oversight of companies -- like AIG -- whose failure would endanger the entire financial system and the broader economy. Obama would tap the Fed for that job, something many lawmakers in Congress don't like.
Bernanke also said the U.S. needs a process to wind down big, globally interconnected companies, much like the Federal Deposit Insurance Corp. does for failing banks. "Looking forward, we must urgently address structural weaknesses in the financial system, in particular in the regulatory framework, to ensure that the enormous costs of the past two years will not be borne again," he said.
Thursday, August 13, 2009
Federal deficit higher in July, $1.27T this year
Record federal deficit climbs higher, $180.7 billion in July, $1.27 trillion so far this year
By Martin Crutsinger, AP Economics Writer
On Wednesday August 12, 2009, 3:07 pm EDT
WASHINGTON (AP) -- The federal deficit climbed higher into record territory in July, hitting $1.27 trillion with two months remaining in the budget year. The Treasury Department said Wednesday that the July deficit totaled $180.7 billion, slightly more than the $177.5 billion economists had expected. The Obama administration is projecting that when the current budget year ends on Sept. 30, the imbalance will total $1.84 trillion, more than four times last year's record-high. The soaring deficits have raised worries among foreign owners of U.S. Treasury securities including the Chinese, the largest holder of such debt. Massive amounts of government spending to combat the recession and stabilize the U.S. financial system have pushed the deficit higher. The cost of wars in Iraq and Afghanistan, along with depleted government tax revenues, also are major factors. The July deficit reflected government spending of $332.2 billion, a record amount for any month and up from outlays of $263.3 billion in July 2008. Of that increase, about $25 billion reflected the fact that Aug. 1 was a Saturday this year, requiring many government benefit checks to be sent out earlier and counted as spending in July. Government receipts totaled $151.5 billion, down 5.6 percent from a year ago. It marked the 15th consecutive month that government receipts have been lower than the same month in the prior year, illustrating how deep the recession has cut into tax receipts. Through the first 10 months of the budget year, receipts total $1.74 trillion, down 16.9 percent from the same period in 2008. Outlays totaled $3 trillion over the past 10 months, up 21.1 percent from the same period in 2008. The resulting deficit of $1.27 trillion compares to an imbalance of $388.6 billion during the year-ago period. The deficit for all of 2008 was $454.8 billion, the current record holder in dollar terms. President Barack Obama's economic team sought to reassure the Chinese during high-level talks last month that the administration is committed to reducing the deficits once the current economic and financial crises have been resolved. So far, interest rates have remained low as the Federal Reserve has kept the federal funds rate, a key short-term interest rate at a record low near zero in an effort to jump-start the economy. At the end of a two-day meeting Wednesday, Fed officials repeated their view that the weak economy was likely to "to warrant exceptionally low levels of the federal funds rate for an extended period." The concern, however, is that rates could begin rising despite the Fed's efforts if foreigners suddenly lose confidence in the government's ability to manage its debt burden. In bond markets, prices fell Wednesday after a fairly weak auction of $23 billion in 10-year Treasury notes. The Treasury Department is auctioning a record $75 billion in debt this week. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.75 percent from 3.70 percent ahead of the auction results and 3.67 percent late Tuesday. Bond prices jumped Tuesday as stocks fell. Investors will track demand because a drop in buyers could force the government to increase its payout. The resulting rise in rates would raise borrowing costs for the government as well as consumers and businesses, and could end up slowing the economy. The total public debt now stands at $11.6 trillion. Interest payments on the debt cost $452 billion last year, the largest federal spending category after Medicare-Medicaid, Social Security and defense.
By Martin Crutsinger, AP Economics Writer
On Wednesday August 12, 2009, 3:07 pm EDT
WASHINGTON (AP) -- The federal deficit climbed higher into record territory in July, hitting $1.27 trillion with two months remaining in the budget year. The Treasury Department said Wednesday that the July deficit totaled $180.7 billion, slightly more than the $177.5 billion economists had expected. The Obama administration is projecting that when the current budget year ends on Sept. 30, the imbalance will total $1.84 trillion, more than four times last year's record-high. The soaring deficits have raised worries among foreign owners of U.S. Treasury securities including the Chinese, the largest holder of such debt. Massive amounts of government spending to combat the recession and stabilize the U.S. financial system have pushed the deficit higher. The cost of wars in Iraq and Afghanistan, along with depleted government tax revenues, also are major factors. The July deficit reflected government spending of $332.2 billion, a record amount for any month and up from outlays of $263.3 billion in July 2008. Of that increase, about $25 billion reflected the fact that Aug. 1 was a Saturday this year, requiring many government benefit checks to be sent out earlier and counted as spending in July. Government receipts totaled $151.5 billion, down 5.6 percent from a year ago. It marked the 15th consecutive month that government receipts have been lower than the same month in the prior year, illustrating how deep the recession has cut into tax receipts. Through the first 10 months of the budget year, receipts total $1.74 trillion, down 16.9 percent from the same period in 2008. Outlays totaled $3 trillion over the past 10 months, up 21.1 percent from the same period in 2008. The resulting deficit of $1.27 trillion compares to an imbalance of $388.6 billion during the year-ago period. The deficit for all of 2008 was $454.8 billion, the current record holder in dollar terms. President Barack Obama's economic team sought to reassure the Chinese during high-level talks last month that the administration is committed to reducing the deficits once the current economic and financial crises have been resolved. So far, interest rates have remained low as the Federal Reserve has kept the federal funds rate, a key short-term interest rate at a record low near zero in an effort to jump-start the economy. At the end of a two-day meeting Wednesday, Fed officials repeated their view that the weak economy was likely to "to warrant exceptionally low levels of the federal funds rate for an extended period." The concern, however, is that rates could begin rising despite the Fed's efforts if foreigners suddenly lose confidence in the government's ability to manage its debt burden. In bond markets, prices fell Wednesday after a fairly weak auction of $23 billion in 10-year Treasury notes. The Treasury Department is auctioning a record $75 billion in debt this week. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.75 percent from 3.70 percent ahead of the auction results and 3.67 percent late Tuesday. Bond prices jumped Tuesday as stocks fell. Investors will track demand because a drop in buyers could force the government to increase its payout. The resulting rise in rates would raise borrowing costs for the government as well as consumers and businesses, and could end up slowing the economy. The total public debt now stands at $11.6 trillion. Interest payments on the debt cost $452 billion last year, the largest federal spending category after Medicare-Medicaid, Social Security and defense.
Home foreclosure rates continue to rise
WASHINGTON – The number of U.S. households on the verge of losing their homes rose 7 percent from June to July, as the escalating foreclosure crisis continued to outpace government efforts to limit the damage. Foreclosure filings were up 32 percent from the same month last year, RealtyTrac Inc. said Thursday. More than 360,000 households, or one in every 355 homes, received a foreclosure-related notice, such as a notice of default or trustee's sale. That's the highest monthly level since the foreclosure-listing firm began publishing the data more than four years ago. Banks repossessed more than 87,000 homes in July, up from about 79,000 homes a month earlier. Nevada had the nation's highest foreclosure rate for the 31st-straight month, followed by California, Arizona, Florida and Utah. Rounding out the top 10 were Idaho, Georgia, Illinois, Colorado and Oregon. Among cities, Las Vegas had the highest rate, followed by the California cities of Stockton and Modesto. While there have been numerous recent signs that the ailing U.S. housing market is finally stabilizing after three years of plunging prices, foreclosures remain a big concern. Foreclosures are typically sold at a deep discount, hurting neighbors' home values. The mortgage industry has been slow to adapt to the surge in foreclosures. Many lenders have needed government prodding to get up to speed with the Obama administration's plan to stem foreclosures. The Treasury Department said last week that banks have extended only 400,000 offers to 2.7 million eligible borrowers who are more than two months behind on their payments. More than 235,000, or 9 percent, those borrowers have enrolled in three-month trials in which their monthly payments are reduced. "The volume of loans that are in distress simply overwhelms" those efforts, said Rick Sharga, RealtyTrac's senior vice president for marketing.
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