All Entries in the "Economy - Labor" Category

The dangers of deficit reduction

Joseph E. Stiglitz:  -

A wave of fiscal austerity is rushing over Europe and America. The magnitude of budget deficits — like the magnitude of the downturn — has taken many by surprise. But despite protests by yesterday’s proponents of deregulation, who would like the government to remain passive, most economists believe that government spending has made a difference, helping to avert another Great Depression.

Most economists also agree that it is a mistake to look at only one side of a balance sheet (whether for the public or private sector). One has to look not only at what a country or firm owes, but also at its assets. This should help answer those financial-sector hawks who are raising alarms about government spending. After all, even deficit hawks acknowledge that we should be focusing not on today’s deficit, but on the long-term national debt. Spending, especially on investments in education, technology and infrastructure, can actually lead to lower long-term deficits.

Faster growth and returns on public investment yield higher tax revenues, and a 5 to 6 percent return is more than enough to offset temporary increases in the national debt. A social cost-benefit analysis (taking into account impacts other than on the budget) makes such expenditures, even when debt-financed, even more attractive.

Full Story: Joseph E. Stiglitz: The dangers of deficit reduction.

Senate-passed health care bill would cut deficit

Congressional budget referees say Senate legislation that’s now the foundation for President Barack Obama’s health care plan would cut the federal deficit by $118 billion over 10 years.

Full Story: Senate-passed health care bill would cut deficit.

Business regulation – EU hits back at Geithner on regulation

Hedge fund rules ‘in line’ with G20 push on transparency

Top European Union officials hit back on Thursday at criticism from Tim Geithner, US Treasury secretary, who has accused Brussels of pushing ahead with rules to regulate managers of hedge funds and other alternative investment funds that could be protectionist.

A spokesman for Michel Barnier, the new EU internal market commissioner who is responsible for financial services regulation and to whom Mr Geithner addressed his concerns, said that the EU decision to act on hedge funds was in line with a G20 decision to reinforce transparency in the financial system.

Full Story: FT.com / Brussels / Business regulation – EU hits back at Geithner on regulation.

Inside Alan Greenspan’s nightmare

Mark Weisbrot

News that wages are rising in China is greeted with dread by those who share Greenspan’s unwarranted fear of rising inflation

Alan Greenspan had a dream, or rather a nightmare. Greenspan seems to have woken up in a cold sweat one morning in fear that the period of “disinflationary pressures” that had kept inflation low since the 1990s was about to end. This was 2007, when he published his autobiographical economic treatise, The Age of Turbulence. Despite his well-known love for economic data, and poring over the latest reports from every statistical agency, he did not realise that he was sitting on a housing bubble of epic proportions. Not seeing the bubble (he also missed the prior stock market bubble that accumulated and burst on his watch, causing the 2001 downturn), he could not know that it would soon collapse and cause a very ugly recession, in which inflation would be irrelevant.

This by itself should be enough to question the wisdom of central bankers, since the evidence for both of these world-historic asset bubbles was blindingly obvious once they had reached a certain size. But Greenspan’s nightmare is scary for other reasons, some of which will become increasingly relevant as the world economy recovers.

As Greenspan details in his book, the reason for his nightmare is that the world was depleting its stock of hundreds of millions of unemployed people, including those of the former Soviet Union and also in rural China. In other words, “too many” of them had become employed, and this was allowing for wages of factory workers in China to rise. So long as China had a huge mass of unemployed, wages were held in check, and – according to Greenspan – competition from low-wage production there held down wages in the rest of the world, including even rich countries like the United States. All good! Until the nightmare started.

Full Story: Inside Alan Greenspan’s nightmare | Mark Weisbrot | Comment is free | guardian.co.uk.

Max Keiser Report №24:

This time Max Keiser and co-host Stacy Herbert look at the scandals behind psychic scams, money heaven and credit default swap bans. Keiser talks to Business Insider’s Joe Wiesenthal about derivatives, hedge funds, the economy and day trading politicians.

12 Industries That Will Be Adding Jobs Very Soon

Are we nearing a rebound in hiring? If the anecdotal evidence is any indication, we certainly are. According to Manpower’s quarterly Employment Outlook Survey, hiring in almost every sector is about to get better.

The staffing company’s assessment, which surveys employers in thirteen industries, found that twelve of the thirteen have net positive employment outlooks for the second quarter of this year. Even in the lone sector with a net negative outlook — government — 10 percent of employers said they expected to hire more people next quarter.

Here’s Manpower:

Of the more than 18,000 employers surveyed across the nation, 16% anticipate an increase in staff levels during Quarter 2 2010, while 8% expect a decrease in payrolls, resulting in a Net Employment Outlook of +8%. When seasonally adjusted, the Net Employment Outlook becomes +5%…

Full Story: 12 Industries That Will Be Adding Jobs Very Soon (PHOTOS).

GMAC Bailout Could Cost Taxpayers $6.3 Billion, Says Watchdog

The Treasury Department sank billions into auto finance giant GMAC Inc. without an exit strategy or proof the company was viable – a decision that could cost taxpayers $6.3 billion, a new watchdog report says.

The government said the $17.2 billion bailout was a necessary step to save troubled automakers General Motors and Chrysler. GMAC provides critical financing to auto dealers, who borrow to finance their fleets until the cars can be sold to consumers.

Yet GMAC faced far fewer conditions than the bailed-out automakers, the report says. When the automakers were rescued, they were forced into bankruptcy. Shareholders lost their investments, creditors took a hit and executives were forced to detail plans for making the companies viable.

Full Story: GMAC Bailout Could Cost Taxpayers $6.3 Billion, Says Watchdog.

OPS: New Rule – The Sr Management and Board of Directors of any Corporations that requires a government bailout receives an automatic 10 year jail sentence (no parole, no pardons)

Unemployment insurance continuing claims spike

The number of Americans filing continuing claims for unemployment insurance spiked last week, the Labor Department said Thursday, as sluggish hiring continues to drag on the labor market’s recovery.

The number of people filing continuing claims jumped to 4,558,000 in the week ended Feb. 27, the most recent data available. That was up 37,000 from the preceding week’s upwardly revised 4,521,000 claims.

Economists were expecting continuing claims to remain unchanged at 4,500,000.

Full Story: Unemployment insurance continuing claims spike – Mar. 11, 2010.

Time for the U.S. to Join the Value-Added Tax Bandwagon

The value-added tax allows nations to build revenue through taxation, and thus guarantees their financial stability, but it builds revenue on foreigners as well as domestic residents. In the U.S. we tax our own citizens and then ask foreign countries to loan us the difference.

The value-added tax, or VAT, is the most widespread and successful taxation scheme in use around the world today. More than 140 nations utilize the value-added tax system as a means of building government revenue.

Unfortunately, the VAT also acts as a means of unofficially blockading imported goods. The value-added tax is plugged on to every good and service inside the economy. In so doing it makes domestic alternatives more fiscally or economically responsible as consumer items.

Every time a nation joins the World Trade Organization, or signs into a new free trade agreement, it almost always replaces the now illegal “import tariffs” with a completely legal national consumption tax – almost always in the form of a VAT. The new national consumption tax acts just like a tariff, but it does so within the legal confines of the WTO and other international accords.

Full Story: Time for the U.S. to Join the Value-Added Tax Bandwagon | Economy In Crisis.

China’s Exports Surge 46%

Since 2005, Americans have spent $1.1 trillion on Chinese products; Chinese consumers have bought just $272 billion worth of goods over that same time.

For the third consecutive month, China’s exports rose, suggesting demand may be picking up in the U.S. and Europe, and leading some to believe that China may soon face increasing pressure to let its currency appreciate against the dollar.

China’s February exports rose nearly 46 percent compared with the same period last year, to $94.5 billion, beating most expectations, officials announced Wednesday. China’s export figures last month are all the more impressive given the fact that many businesses shut down for a week for the nation’s Lunar New Year.

Overall for the month, China held a $7.6 billion trade surplus with the rest of the world, much of which was driven by the Asian nation’s trade surplus with the U.S.

The better than expected export report, however, could cause other nation’s to demand that China allows its currency, the yuan, which has been pegged to the dollar for 18 months, to appreciate to appropriate levels.

Full Story: China’s Exports Surge 46% | Economy In Crisis.

You’re still keeping your money in a big bank? What the hell is WRONG with you?

Excuse me, but can I have a word with the 70% of Americans who continuing keeping their money in big banks, like Bank of America, CitiBank, Wells Fargo and such? Come closer. A little closer. I want to be able to give you a well-earned dope-slap while I ask;

WHAT THE HELL’s THE MATTER WITH YOU? ARE YOU STUPID!?

Jesus H. Christ, what’s it going to take before you people stop doing business with the enemy? You’re like abused spouses who are slapped around and slapped around again and again by your big bank and keep crawling back for more. If this behavior didn’t hurt the rest of us I’d be delighted to just let you get the shit beat out of you until your big bank bleeds you white. That would be Darwinism at it’s most effective.

But, thanks to the fact that 90% of America’s household savings are deposited in these big banks means that your self-destructive banking habits are fueling the very financial services juggernauts that have repeatedly devastating the lives, homes, families and savings of average working Americans. And not just once, but time and time and time again.

Are you listening goddamnit!

Full Story: You’re still keeping your money in a big bank? What the hell is WRONG with you? | The Smirking Chimp.

  The Financial Crisis Changed Nothing

Principles Before Heroes

Robert Reich -

y taking steps to prevent the financial crisis of 2008 from turning into a broader financial meltdown, President Obama prevented another Great Depression. For that, we should be thankful. Yet ironically, a larger-scale economic crisis might have summoned the political will to reverse the long-term trend of increasing concentration of wealth and power, as it did in 1933. Now, with the immediate crisis contained, political support for major reform has slackened. Consequently, we find ourselves almost as far from meeting the progressive ideals of equal opportunity and robust democracy as we were before the crisis began.

If anything, the Great Recession has accelerated the trend toward greater concentration. Under its pressure, more firms have discovered how easily they can increase profits by shrinking their payrolls and laying off their workers, and how cheaply jobs can be done using computers and advanced software or using the Internet to outsource jobs to foreign workers who have become nearly as productive as Americans, but charge far less. This means many more Americans are facing the Hobson’s choice of joblessness or lower wages. At the other end of the income ladder, top corporate and Wall Street executives and traders with reputed “talent” and connections–those charged with discovering more ways to increase profits–are commanding ever higher salaries and bonuses.

Meanwhile, the political power that comes with wealth has shown no sign of abating. The Great Recession notwithstanding, Wall Street’s generous campaign donations, its ubiquitous lobbyists, and its numerous revolving doors into the Treasury and other economic posts have all but assured the Street that financial “reform” will not drastically cut into its profits or the take-home pay of its denizens. Big Pharma and Big Insurance, likewise, are running victory laps around the deal they struck on health care, which virtually guarantees them big payouts in future years. And although marginal tax rates on the very wealthy are slated to rise, they will barely nick incomes that are rising even faster.

Full Story: Robert Reich for Democracy: A Journal of Ideas.

Whose Bank? Public Investment, Not Private Debt

While bank bailouts fatten Wall Street, states continue to battle the credit crisis. In the search for innovative solutions, some political candidates are proposing that states generate their own credit by setting up their own banks.

State budgets for 2010 face the largest shortfalls on record, totaling $194 billion or 28 percent of state budgets; and 2011 is expected to be worse. Unemployment has already officially hit 10 percent, and many economists expect it to rise higher. Continued high unemployment will keep state income tax receipts at low levels and increase demand for Medicaid and other essential services states provide. The existing alternatives are spending cuts or tax increases, but both will just serve to make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. The result is a reduction in overall demand. Tax increases also remove demand, by reducing the amount of money people have to spend.

Amanda Paulson, writing in The Christian Science Monitor, quotes Arturo Pérez, fiscal analyst with the National Conference of State Legislatures, which released its survey of state budget situations in December: “Unless you’re North Dakota, you’re probably a state that has had some degree of difficulty or crisis involving finances. It’s the worst situation states have faced in decades, perhaps going as far back as the Great Depression in some states.”

Full Story: Whose Bank? Public Investment, Not Private Debt by Ellen Brown — YES! Magazine.

Structural Weakness of the US Dollar. The Dollar Rally will not last

Every important factor we see is working against the dollar and we believe that trend is irreversible. That means the present dollar rally probably cannot endure and it could well be the time to short the USDX.

Most observers discuss Europe’s problems and the plight of the euro, pound, and the Danish and Swedish koronas. They believe these European currencies will plunge lower versus the dollar and that the dollar will maintain, even after a dollar rally from 74 to 81 on the USDX. As we have said before the euro was unnatural creation born of a desire to usher in a world currency. As we shall see in the future the euro will fail. In spite of that the dollar is certainly no bargain, because next year America will be totally bankrupt. As a result of the terrible conditions among currencies, gold makes great gains. Last year and so far this year gold is up 10% to 24% against many major currencies. This kind of action of course proves again that gold is the world’s strongest currency. We might add here that we believe that it is only a matter of time before the LBMA, or Comex, or the ETFs, GLDs and SLVs are enveloped in scandal. As so often has happened in history fiat currencies have collapsed. Thus, it will happen again. Those of you not in gold and silver related assets will lose most of what you have worked for your entire lives.

The collapse of currencies and nations won’t happen overnight, because their demise has been planned, and a subtle collapse is in process. Our guess is that next year is when the collapse will finally take place followed by one of the greatest deflationary depressions of all time. During the last 2-1/2 years all the toxic investments have been and will continue to be transferred from the Illuminist banks, brokerage houses, insurance companies and transnational conglomerates to the public. The Federal Reserve is the repository for this junk, which includes Treasuries and Agencies. That means the public foots the bill. Every government and bank in the world will be affected. This magical game of 3-card-Monte will never work and the Illuminists know it won’t work. That is why they have war on demand to distract the public and to escape punishment for the devastating thing they have brought upon mankind. What we are facing is as bad if not worse than the collapse of the Lombard system in Venice in 1348, the year of the plague and the collapse of the Hanseanic League in the 1600s, the creation of the Medici’s. For starters we already have 19 bankrupt or near bankrupt major countries and many others that will be pulled into the vortex of financial and economic calamity. In each country we see the Illuminists doing their evil work, legends in their own minds, in a system that they know cannot survive. They are waiting for orders to pull the plug in each and every country. These masters of the universe all know that prosperity cannot be created by printing money and issuing credit indefinitely. They know full well that such a system cannot survive.

Full Story: Structural Weakness of the US Dollar. The Dollar Rally will not last.

Unemployment Rises In 30 States In January

Unemployment rose in 30 states in January, the Labor Department said Wednesday, evidence that jobs remain scarce in most regions of the country.

The data is somewhat better than December, when 43 states reported higher unemployment rates, but worse than November, when rates fell in most states.

Still, five states reported record-high joblessness in January: California, at 12.5 percent; South Carolina, 12.6 percent; Florida, 11.9 percent; North Carolina, 11.1 percent; and Georgia, 10.4 percent.

Full Story: Unemployment Rises In 30 States In January.

Obama Foreclosure-Prevention Plan Lagging, New Data Shows (EXCLUSIVE)

Only about a third of the homeowners who have successfully completed the trial period of the Obama administration’s mortgage modification program have been offered permanent relief, according to new federal data obtained by the Huffington Post.

The conversion rate — about 33 percent — is woefully short of what the Treasury Department had forecast. Treasury thought the rate would be “ranging up to 75 percent,” Herbert M. Allison Jr., assistant secretary for financial stability, told the Congressional Oversight Panel in October.

The other two-thirds of homeowners who have gone through the trial program and made the necessary payments remain in limbo. Some of those homeowners — more than 350,000 of them — will ultimately lose out on the kind of relief the administration has repeatedly promised: averting foreclosure through lower monthly payments.

Full Story: Obama Foreclosure-Prevention Plan Lagging, New Data Shows (EXCLUSIVE).

“Today is a Big Day in America” Real Unemployment Rate Over 21%

“Today is a big day in America. Only 36,000 people lost their jobs today, which is really good,” Senate Majority Leader Harry Reid gleefully proclaims on the Senate floor.

Harry Reid is not really happy with the loss of 36,000 jobs. He is just happy if the American people are silly enough to accept this as really good news.

Come on folks. Is it really good news to keep losing tens of thousands of jobs each month (the number is likely higher than whatever they are telling us).

Full Story: OpEdNews – Article: “Today is a Big Day in America” Real Unemployment Rate Over 21%.

America’s Outsourcing Epidemic

Outsourcing is a huge problem for the United States economy. Allowing companies to shift jobs across national boundaries in a search for cheaper labor, and wider profit margins, has been at the vanguard of economic reform for more than a decade. Unfortunately, the U.S. has yet to take a tough stance on companies that move jobs overseas, and it has never officially discouraged the practice as many other nations have.

According to AmericanEconomicAlert.org, not only is the U.S. not taking a stance against outsourcers, in some cases we are actually encouraging them. Alan Tonelson believes that President Obama’s decision to put the chairperson of an outsourcing giant on a bipartisan debt/deficit commission is a clear signal that we are not nearly tough enough on companies that take jobs away from the U.S.

Tonelson, a Research Fellow at the USBIC and former Associate Editor of Foreign Policy, has long been a proponent of discouraging outsourcing. During the presidential campaign, then Senator Barack Obama talked about putting penalties on outsourcing and doing all it could to bring jobs back. Now, after having been smothered by the health care debate, the administration has taken no steps to stop the job losses.

Full Story: America’s Outsourcing Epidemic | Economy In Crisis.

U.S. Productivity Gains Misleading

While data shows that American productivity has increased exponentially in the past three decades, that is nothing more than a façade given that most of those production gains are driven by offshoring, according to two fair trade advocates.

Writing in The New York Times, Alan Tonelson and Kevin Kearns, members of the U.S. Business and Industry Council, claim that for years the U.S. Labor Department has been leading the American people to believe that the productivity of its workers has been skyrocketing.

The problem is, the Labor Department fails to differentiate between American and foreign workers when calculating productivity.

Full Story: U.S. Productivity Gains Misleading | Economy In Crisis.

Bank Of America Overdraft Fees Dropped: Bank Will End Fees By Summer 2010

Bank of America customers will soon be unable to spend more than they have in the accounts linked to their debit cards. It’s a step that may become a common move ahead of new regulations limiting overdraft fees.

Rules set by the Federal Reserve that will ban banks from charging such fees, without first getting permission from the customer, are set to take effect July 1.

But Bank of America is going a step further than the regulations require. It will simply no longer allow debit card purchases to go through if there isn’t enough money in the account.

Full Story: Bank Of America Overdraft Fees Dropped: Bank Will End Fees By Summer 2010.

Shorting America Rocks

! – Matt Taibbi -

Lower credit risk means a lower price for protection. Zero implies zero risk. The higher the basis points, the higher the implied risk. When U.S. credit default swaps were first introduced, the price of protection was around two basis points. According to Bloomberg, the price for five-year protection was around 38 basis points (per annum) on Friday. But the price in the over-the-counter market — where this stuff actually trades — was almost double or around 75 basis points.

Since most traders in U.S. credit default swaps don’t think the U.S. will default any time soon, why are they trading U.S. credit default swaps? They are speculating on price movements the way a day trader buys and sells stocks to speculate on stock price movements.

via Janet Tavakoli: Washington Must Ban U.S. Credit Derivatives as Traders Demand Gold.

Another Janet Tavakoli piece, this one about the market for CDS on the United States.

Full Story: Shorting America Rocks! – Matt Taibbi – Taibblog – True/Slant.

Senate Drops Funding For Summer Jobs Program And Enhanced Subsidies For Poor Families With Children

Just a week after Senate Republican Jim Bunning’s infamous obstruction of an unemployment benefits extension, the GOP is taking another stand that pits deficit reduction against aid to the poor and jobless.

On Tuesday, Senate Republicans — along with some Democrats — defeated a measure to provide $1.3 billion for summer jobs for young people this year and a $1.3 billion extension of enhanced subsidies for poor families with children.

Sen. Patty Murray (D-Wash.), who introduced the amendment along with Sen. John Kerry (D-Mass.), pleaded with her colleagues not to object.

Full Story: Senate Drops Funding For Summer Jobs Program And Enhanced Subsidies For Poor Families With Children.

U.S. millionaire ranks up 16 percent last year: study

The number of U.S. households with a net worth of at least $1 million jumped 16 percent last year after dipping sharply during the financial crisis, an industry consulting group said on Tuesday.

Households with a net worth of $1 million or more, excluding their primary residence, totaled 7.8 million in 2009, up from 6.7 million in 2008, according to Spectrem Group.

The number of millionaire households shrank by 27 percent in 2008, it said.

The current total is still well below the record 9.2 million millionaire households reported in 2007, Spectrem said.

Last year’s spike came as U.S. stock markets rallied. The S&P 500 Index rose 28 percent, and the largest wealth management firms reported strong earnings as their clients’ accounts recovered from the 2008 meltdown.

Full Story: U.S. millionaire ranks up 16 percent last year: study | Reuters.

Green Jobs Are ‘Greatest Market Opportunity Of Our Generation,’ Senator Says

Flanked by forced-out former green jobs czar Van Jones, Sen. Kirsten Gillibrand (D-N.Y.) said Monday that creating new jobs in green industries presents the “greatest market opportunity of our generation.”

Comparing the call to create “green jobs” to former President John F. Kennedy’s call for landing a man on the Moon, Gillibrand said at a forum that the nation needs to act in order to inspire the next generation of scientists.

“Green jobs” are those in industries that promote environmental protection and energy independence, like energy efficiency, renewable energy and smart energy. With millions of Americans unemployed and global warming threatening the globe, the burgeoning field of green technology could be the nation’s next great job creation vehicle.

Full Story: Green Jobs Are ‘Greatest Market Opportunity Of Our Generation,’ Senator Says.

Unemployment Insurance Extension Faces Test Vote In Senate

Legislation extending unemployment insurance for the long-term jobless faces a key test vote in the Senate, its momentum helped by about 60 popular tax breaks for individuals and businesses that expired at the end of last year.

The measure also prevents doctors from absorbing a crippling cut in Medicare payments, extends health insurance subsidies for the unemployed and gives cash-starved states help with Medicaid, the federal-state program providing health care to the poor and disabled.

The unemployment insurance alone – to provide weekly unemployment checks averaging above $300 to people whose core 26-week benefit package has run out – will cost $66 billion through December. In some states people are eligible to receive benefits for up to 99 weeks.

Full Story: Unemployment Insurance Extension Faces Test Vote In Senate.

Way Too Big to Save

Listening to US officials, talking to legal experts, and waiting for an intense Senate debate on financial reform to begin, you can easily form the impression that “too big to fail” adequately describes our most serious future systemic banking problems. It does not.

In September 2008, the large banks and quasi-banks at the heart of our financial system faced failure — and they were saved in the most immediate sense through actions taken by the Federal Reserve, but TARP (passed by Congress and run Treasury) also played a significant supporting role.

The Bush administration threw a small fiscal stimulus into the mix in early 2008, hoping to stave off recession; the Obama administration committed a much larger package at the start of 2009, aiming to prevent anything like a Second Great Depression. This fiscal policy response was in direct reaction to problems caused by the overextension and near failure of the financial system

Full Story: Simon Johnson: Way Too Big to Save.

Washington’s Job Fraud

Former Senator Ernest F. Hollings -

Washington engages in the grandest fraud on jobs. An important part of the job fraud is to make the people feel like the loss of jobs is due to the recession, not off-shoring.

Washington engages in the grandest fraud on jobs. The people are led to believe that tax cuts stimulate growth and jobs and that borrowing and spending money stimulates jobs.

I’ll never forget as Chairman of the Budget Committee briefing Ronald Reagan with Alan Greenspan in the Blair House just before Reagan was sworn in as president. The economy was not good, and I can hear Reagan exclaiming now: “I promised to balance the budget in a year, and there’s no way to do it.” I explained it would take three years, and I would be glad to help in a bi-partisan effort to try to bring it in balance. The rest is history. President Reagan launched the policy of “growth” to stimulate the economy by cutting taxes, giving the United States its first trillion dollar debt in his first term, with another trillion dollar growth in debt in his second term. President George W. Bush, bragged that he was a Reaganite, stimulated the economy by cutting taxes, which increased the national debt $5 trillion. Instead of growth, the economy lost 673,000 private jobs in eight years under President George W. Bush.

Full Story: Washington’s Job Fraud | Economy In Crisis.

Move Your Money, But Don’t Forget About Credit Unions

Banking behemoths don’t deserve your business. But your local credit union could be the right financial fit.

Horrific news surrounding the too-big-to-fail banks continues to march onward into absurdity. A rapacious Bank of America forecloses on a house that’s already paid for. Goldman Sachs hides Greece’s hundreds of billions in debt until the entire country is a toxic asset to the global economy. Henry Paulson baldly admits that his tenure as Goldman Sachs’ CEO helped him rob American taxpayers of trillions. Media, political and financial hypocrites hilariously continue to insist that homeowners shouldn’t walk away from underwater mortgages as banks walk away with cash stuffed in their high-end underwear. The frustrated public would laugh, but it’d have to pull the financial gun out of its mouth first.

Full Story: Move Your Money, But Don’t Forget About Credit Unions | Economy | AlterNet.

Wall Street Journal Lies About Teen Unemployment

I want to start today by pointing to a post by Jonathan Chait at The New Republic. Chait attempts to refute the suggestion the Wall Street Journal put forth in an editorial claiming that the minimum wage increase was to blame for rising youth unemployment numbers. The chart to the left appeared in the Journal to augment the editorial board’s argument.

Chait draws on analysis from University of Michigan political scientist Brendan Nyhan explaining that the unemployment increase in ALL age demographics undoes the Journal’s argument. The Journal can’t seem to distinguish between correlation and causation, Nyhan writes.

Full Story: Wall Street Journal Lies About Teen Unemployment | Future Majority.

Newsom orders layoffs for 15,000 S.F. workers but plans to hire back most on part-time basis

Action is part of ongoing effort to trim city’s $522-million budget deficit

San Francisco Mayor Gavin Newsom cut the workweek for 15,000 full-time city employees to 37.5 hours Friday as a cost-cutting measure.

The mayor’s office also clarified that approximately 15,000 of the city’s 26,000 workers were to start receiving layoff notices Friday and over the weekend, and not 20,000 as it said earlier.

Newsom said the plan will save the city $50 million from its general fund, and $100 million from the entire city budget.

The city has an estimated budget deficit of $522 million for the coming fiscal year.

“This is a very defensible thing, in a very difficult time,” Newsom insisted.

Newsom said the layoff notices are a “technical” measure, and that the “overwhelming majority” of the noticed workers will be rehired immediately, should they so choose, but at a part-time status, working a half-hour less each day. That would amount to an approximately 6.25-percent pay cut, he said.

Full Story: Pleasanton Weekly : Newsom orders layoffs for 15,000 S.F. workers but plans to hire back most on part-time basis.

Blame it on the bubble

| Dean Baker -

The financial crisis is just a sideshow – the real reason for the economic downturn is the rise and demise of the housing bubble

Politicians and the media continue to refer to the economic downturn as being the result of a financial crisis. This is wrong. We have 15 million people out of work because the housing bubble that drove the economy since the last recession finally burst. The financial crisis may have been good entertainment for those who like to see huge banks collapse, but it was a sidebar. The real story was the rise and demise of the housing bubble.

Those who claim that the real problem was the financial system and its faulty regulation can be disproved with a single word: Spain.

Spain is noteworthy because it now has an unemployment rate of more than 19%, the highest rate in any of the wealthy countries. Spain did not have a financial crisis. In fact, its well-regulated financial system is often held up as model for the United States.

Full Story: Blame it on the bubble | Dean Baker | Comment is free | guardian.co.uk.

Pennsylvania helps jobless residents pay their mortgages

The jobless may not be getting much help from President Obama’s loan modification program, but those in Pennsylvania have another place to turn.

The Pennsylvania Housing Finance Agency offers the jobless and those suffering financial hardship loans of up to $60,000 for as long as three years to cover their monthly payments or take care of their arrears. Created in 1983, the program boasts an 80% success rate in preventing foreclosures.

“If you allow people some time to find a job, they can keep their home, which saves their family, their neighborhood and their communities,” said Brian Hudson, the agency’s executive director.

Full Story: Pennsylvania helps jobless residents pay their mortgages – Yahoo! Finance.

Corker And Alexander Place Hold On Aviation Funding Bill To Prevent FedEx Drivers From Unionizing

Last year, the House of Representatives passed a bill reauthorizing the Federal Aviation Administration and devoting $70 billion to airport infrastructure through 2012. The bill also changed an inequity in labor law which has allowed FedEx to operate under the Railway Labor Act (RLA), while other shipping companies like UPS are governed by the National Labor Relations Act (NLRA).

The RLA poses larger barriers to organizing than the NLRA, which has enabled FedEx to prevent its drivers from collectively bargaining. So the company has invested a lot of time and effort into blocking the change, including characterizing it as a “bailout” for UPS.

And FedEx has an ally in Sen. Bob Corker (R-TN), who is preventing the FAA reauthorization from moving in the Senate, until he receives assurance that the change in labor law won’t occur:

Full Story: Think Progress » Corker And Alexander Place Hold On Aviation Funding Bill To Prevent FedEx Drivers From Unionizing.

Short-Sale Program Will Pay Homeowners to Sell at a Loss

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

Full Story: Short-Sale Program Will Pay Homeowners to Sell at a Loss – NYTimes.com.

Green Jobs here?…or China?

Thom Hartmann -

Our “green” stimulus here in the US is creating jobs in Denmark and China.

A group of Democratic senators is concerned that the Obama administration’s efforts to promote economic stimulus, aimed at financing renewable energy, is creating jobs in foreign countries.

The four senators, led by Chuck Schumer of New York, wrote to Treasury Secretary Timothy Geithner on Tuesday to request a moratorium on the Recovery Act program. They asked that the moratorium remain in place until they can pass legislation mandating stimulus aid flow only to projects which preserve and create U.S. jobs.

Here’s what’s happening that nobody wants to talk about: Huge solar and wind projects are being funded with stimulus dollars in Texas, Oregon, and other states. That would seem like a good thing – and is creating jobs installing the solar panels and wind turbines.

Full Story: Green Jobs here?…or China? | Economy In Crisis.

Game Changers to Alter the Economy

In Saving Capitalism Dr. Choate outlines six “game changing” proposals to meet the challenge presented by global competition and get America back on its feet.

Economist and best-selling author Pat Choate has crusaded for fiscal responsibility and long-term management in government for many years. He campaigned as the 1996 Reform Party vice-presidential candidate on a platform of responsible spending, balanced international commerce, and government encouragement for domestic employment. He has written several books and news articles on the topic, and his most recent work Saving Capitalism: Keeping America Strong may be his best to date.

In Saving Capitalism Dr. Choate outlines six “game changing” proposals to meet the challenge presented by global competition and get America back on its feet. The first is to impose strict federal supervision of financial markets, refurbishing the regulatory framework destroyed during each presidency from Reagan to George W. Bush.

The second is to replace most income and corporate taxes with a consumption based value-added tax. This would be in line with the practices of every other country on earth and allow the U.S. to raise enough revenue to fund itself and pay down its debt.

Full Story: Game Changers to Alter the Economy | Economy In Crisis.

The Foreign Value Added Tax: Making Our Exports Uncompetitive

Unknown to most Americans, the United States is losing the ability to compete in global trade because of the little known foreign Value-Added Tax (VAT).

Foreign governments use this tax against United States producers as a means to prevent the importation and consumption of U.S. goods, while providing incentives for their countries to export their goods to the U.S. The foreign VAT was a subsidy created after World War II to speed up beneficial other countries' recovery. However, it is still used today by 149 countries to exploit this advantageous position against American trade. We have not used it domestically to off set theirs as a benefit to ourselves.

The foreign VAT gives the companies of other nations and their exports the upper-hand by providing incentives in the form of rebates equal to the indirect tax on the exported product. For example, the VAT rate is 19 percent in Germany; therefore the Germans receive a 19 percent rebate from their government on each product exported to the U.S. This acts as a subsidy for a product while encouraging the exportation of products to the U.S. However, the VAT imposes a punishment on U.S. exports by placing a VAT equivalent to the Value Added Tax rate of the importing country. This means all U.S. exports that enter into Germany are taxed 19 percent on top of another 19 percent for the transportation fees of the goods into the country. The VAT destroys American industries’ ability to promote exports, while encouragi

Full Story: The Foreign Value Added Tax: Making Our Exports Uncompetitive | Economy In Crisis.

Finance Superstars Talk About the Massive Fraud in Our Economic System

“Make Markets Be Markets” conference of financial reform all-stars offers an alternative to Washington’s disastrous oversight of the economy.

Last Wednesday, I attended a conference initiated by the Roosevelt Institute on the financial mess, called Make Markets Be Markets. The conference’s speakers included people with experience on Wall Street, the banking industry, government and academia; Nobel Prize-winning economist Joe Stiglitz, Elizabeth Warren, and other luminaries who have offered an alternative and reformist narrative to our recent financial crisis.  At two and half hours, it was relatively short, giving each speaker the opportunity to make their points and providing a sharp focus. One underlying theme of the event was fraud, the great elephant in the room, that neither the press or our government officials acknowledge, though it is a fundamental element to the financial crisis and its solutions.

Joe Stiglitz started the conference and stated how reducing transparency and hiding information was an essential element to the crisis. Stiglitz concluded, “Innovation was regulator and tax arbitrage.” Wall Street and the banks deliberately added opacity and complexity to confuse clients and consumers. Elizabeth Warren pointed out, “complexity made a lot of profits,” for example, she showed how the average credit card contract in 1980 was one page, today it is thirty.

Full Story: Finance Superstars Talk About the Massive Fraud in Our Economic System | Economy | AlterNet.

Men May Have It Bad, But Unemployment Statistics Obscure the Hit Taken By Single Moms

Break down today’s unemployment stats, and it looks like women are faring much better than men in the great recession. That is, unless they’re single and raising kids.

Much has been made of the fact that, when examined through the prism of gender, the Great Recession appears to have affected the employment of men far more than that of women. And, taken as a whole, that’s true. According to figures released on Friday by the Bureau of Labor Statistics, the unemployment rate for men (age 20 and over) stands at 10 percent, while 7.9 percent of women rank among the unemployed. (When the recession began in December 2007, the unemployment rate among men and women was the same: 4.4 percent.)

But spend some time rummaging among the unemployment statistics, and you’ll find a significant group of women struggling mightily against a brutal economic tide: single women with children. They, the breadwinners of their families, are more than twice as likely to be unemployed than married women who have a spouse present. While this has been true for the last ten years (PDF), its effects are amplified in the current economic crisis.

The Bureau of Labor Statistics, in a report released on Friday, showed the unemployment rate for married women at 6.1 percent, while that of single women “who maintain families,” in the parlance of the BLS, reached a whopping 11.6 percent — 68 percent higher than when the recession began. Add to that the fact that women, as a whole, earn only 77 cents for every dollar a man brings home, and you find many single women whose situation has gone from difficult to dire.

Full Story: Men May Have It Bad, But Unemployment Statistics Obscure the Hit Taken By Single Moms | Economy | AlterNet.

An Irish Mirror for the Financial Crisis

Paul Krugman -

Everyone has a theory about the financial crisis. These theories range from the absurd to the plausible — from claims that liberal Democrats somehow forced banks to lend to the undeserving poor (even though Republicans controlled Congress) to the belief that exotic financial instruments fostered confusion and fraud. But what do we really know?

Well, in a way the sheer scale of the crisis — the way it affected much, though not all, of the world — is helpful, for research if nothing else. We can look at countries that avoided the worst, like Canada, and ask what they did right — such as limiting leverage, protecting consumers and, above all, avoiding getting caught up in an ideology that denies any need for regulation. We can also look at countries whose financial institutions and policies seemed very different from those in the United States, yet which cracked up just as badly, and try to discern common causes.

So let’s talk about Ireland.

Full Story: Op-Ed Columnist – An Irish Mirror for the Financial Crisis – NYTimes.com.

OPS: “But what do we really know?”  What we know for sure is that nothing has changed.  What we know for sure is that Obama, and his gang of the Clinton and Bush retreads that created the collapse, have simply re-inflated the same bubble.  What we know for sure is that they have set us up for a second, and deeper, collapse.  And we know for sure that THEY will get rich from it.

DeLay: People are unemployed because they want to be

Former House Majority Leader Tom DeLay says that Sen. Jim Bunning was “brave” for blocking an extension in unemployment benefits.

DeLay subscribes to the notion that people only try to find jobs when their benefits run out.

“There is an argument to be made that these extensions, the unemployment benefits, keep people from going and finding jobs,” he told CNN’s Candy Crowley Sunday.

“In fact there are some studies that have been done that show people stay on unemployment compensation and they don’t look for a job until two or three weeks before they know the benefits are going to run out,” he argued.

“People are unemployed because they want to be? ” asked Crowley.

Full Story: DeLay: People are unemployed because they want to be | Raw Story.

Economist Lewis Black Tells It Like It Is

ADULT CONTENT WARNING: If you’re not familiar with Lewis Black, I’d turn back if I were you.

Lewis Black is funny. Dangerously funny. That he has such a large audience and still packs plenty of politics in his shtick gives one hope for the fate of our sorry species. So I figured it’s time I learned something from him.

What I’ve learned is that since a million more of you pricks out there watch him than will ever read my stuff, I’m done with all the painstaking research and putting in links to original sources so you can see that I’m not making it all up. I don’t have time any more. We’re killing people in more countries than I can count and YOU want me to be fair and balanced and plus show you where all this shit comes from. Well, I’m sorry…if you don’t believe me, LOOK THIS SHIT UP FOR YOURSELF!!

Here’s a perfectly good example.

Full Story: Economist Lewis Black Tells It Like It Is | The Smirking Chimp.

Reconciliation: Republican v Democratic

The Republican use reconciliation cost the American Taxpayer 2 TRILLION dollars during the Bush years alone.

Consider three bills — two of them passed under budget reconciliation, the third heading for budget reconciliation. Each had an effect on the fiscal health of the nation, calculated by the Congressional Budget Office. The first two, the tax cuts pushed by President George W. Bush, blew a hole in the budget. The third, the Senate’s health reform bill? As you can see from the CBO projection, that’s a different story.

These numbers are expressed in billions of FY2010 dollars.

Figure 1, in billions of FY2010 dollars.

The first bar is the impact on the unified budget balance of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001. The second is the impact on the budget balance of the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003. The third bar is the CBO estimated impact on the deficit of the Patient Protection and Affordable Care Act proposed in the Senate on November 19, for 2010-2019.

Full Story: Econbrowser: What Are These Three Numbers?.

Not till they’ve nothing left to lose?

Those calling for financial reform aren’t being upfront about its costs, making it impossible to achieve.

This was again evident at the Roosevelt Institute’s otherwise very good conference at Time Warner Center yesterday.

First the good. The purpose of the gathering was to galvanize support for deeper reforms than lawmakers have proposed. Roosevelt’s Chief Economist Rob Johnson and his murderer’s row of thinkers — including Simon Johnson, Elizabeth Warren, Frank Partnoy, Rick Carnell, Josh Rosner and others — presented a very good white paper outlining how best to clean up the financial system. Other attendees were George Soros, Brooksley Born, Jim Chanos, Joe Stiglitz. Even Eliot Spitzer showed up.

When it comes to reform, they all argued, nibbling around the edges ain’t gonna cut it.

Banks need more capital, Fannie and Freddie need to be wound down, banks’ risky activities must be corralled, tax incentives that encourage borrowing must be done away with. Most importantly, perhaps, we need to end the cycle by which the financial system lends too much and too easily only to be bailed out by a compliant Fed when things go wrong.

Full Story: Not till they’ve nothing left to lose? | Analysis & Opinion | Reuters.

US public ‘will pay Obama’s $90bn bank levy’

President Barack Obama’s $90bn (£59.5bn) bank levy will largely be paid for by customers and investors and not the institutions themselves, the US’s leading spending watchdog has found.

In a report on the White House’s plan to impose a 0.15pc fee on liabilities of banks with more than $50bn in assets in order to recoup money lost through the $700bn Troubled Assets Relief Programme, the Congressional Budget Office (CBO) said the impact on banks would be “small”.

“The cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees and investors, but the precise incidence among those groups is uncertain,” said the CBO in a letter to Senator Charles Grassley, a leading member of the Senate finance committee.

Full Story: US public ‘will pay Obama’s $90bn bank levy’ – Telegraph.

FDIC Closes Four Banks: Bank Of Illionois, Sun American, Waterfield, Centennial Bank

Regulators on Friday shuttered banks in Florida, Illinois, Maryland and Utah, boosting to 26 the number of bank failures in the U.S. so far this year following the 140 brought down in 2009 by mounting loan defaults and the recession.

The Federal Deposit Insurance Corp. took over Sun American Bank, based in Boca Raton, Fla., with $535.7 million in assets and $443.5 million in deposits. Also seized were Bank of Illinois of Normal, Ill., with $211.7 million in assets and $198.5 million in deposits; Waterfield Bank in Germantown, Md., with $155.6 million in assets and $156.4 million in deposits; and Centennial Bank in Ogden, Utah, with $215.2 million in assets and $205.1 million in deposits.

First-Citizens Bank & Trust Co., based in Raleigh, N.C., agreed to assume the assets and deposits of Sun American Bank and to share losses with the FDIC on $433 million of the failed bank's loans and other assets. It was First-Citizens' fourth acquisition of assets of a failed bank since last July; the others were First Regional Bank of Los Angeles, Venture Bank of Lacey, Wash., and Temecula Valley Bank of Temecula, Calif.

Full Story: FDIC Closes Four Banks: Bank Of Illionois, Sun American, Waterfield, Centennial Bank.

Jobs Report Exposes Plight Of Long-Term Unemployed

Friday’s jobs report showed some glimmers of a recovery but if you’re among the 8.8 million Americans still unemployed after nearly four months, you may have been left scratching your head.

“Whether you say the jobs market is improving or getting worse, there are people who will say you’re crazy,” said Lakshman Achuthan, managing director of Economic Cycle Research Institute. “That’s because there are two Americas, and they’re both right.”

Of the 8.8 million who have been unemployed for more than 3-1/2 months, there are 3.5 million more now than there were at this point last year. And for this group, the job market is looking grimmer by the day. According to the Labor Department, a stunning 58.9% of jobless Americans have now been unemployed for more than 15 weeks — an all-time high.

Full Story: Jobs: Short-term hope, long-term despair – Mar. 6, 2010.

Double-Dip Recession Directly Ahead

If history teaches us anything, it’s that when even ONE major government defaults on its debts, economic chaos follows. The crisis unfolds in four quick steps:

FIRST, since a sovereign debt default would inevitably cause ALL bonds to crash, investors stampede for the bond market exits, dumping as much as they can as fast as they can.

SECOND, as the bond market reels, interest rates skyrocket and credit tightens. The rates on 30-year fixed-rate mortgages, auto loans and other long-term debts soar. Rates tied to short-term money markets — on credit cards and variable mortgages — follow.

THIRD, consumers — whose spending represents fully 70% of the economy — snap their pocketbooks shut.

FOURTH, corporate earnings and stock prices crater. As the economy hits the skids, unemployment soars.

Full Story: OpEdNews – Article: Double-Dip Recession Directly Ahead.

U.S. Needs Industrial Policy

The U.S. has not had a coordinated national industrial policy in decades, and each new Congress simply puts the issue on the back burner.

The United States is currently absorbed in the highly partisan debate over health care reform. The president seems unwilling to pick a firm side in the discussion, but Republicans and Democrats have drawn lines in the sand. As we spend more and more effort on a health care issue, which is almost completely cut and dry at this point in terms of both fiscal and moral responsibility, we lose time and energy that should be spent on other issues.

[Woman working on an airplane motor at North American Aviation] One of the key issues that the Congress and the White House absolutely must address before a possible 2012 ouster is America’s manufacturing and industrial downfall.

The U.S. has not had a coordinated national industrial policy in decades, and each new Congress simply puts the issue on the back burner. They look only at the good and ignore the bad. For example, America is the world’s largest economy, it is one of the largest exporters, and its citizens are able to consume one-quarter of all the resources used on this planet in any given day.

Full Story: U.S. Needs Industrial Policy | Economy In Crisis.

Uncontrolled Lending to Consumers Spawned the Financial Crisis

“the broad claim that the financial crisis has nothing to do with fraud or consumer protection dissolves in the face of the facts: the crisis can be attributed to failures of consumer protection, including those that enabled lenders to make the loans Zywicki decries.”

Posted: 05 Mar 2010 The Baseline Scenario

This guest post was contributed by Norman I. Silber, a Professor of Law at Hofstra Law School, and Jeff Sovern , a Professor of Law at St. John’s University. They were principal drafters of a statement signed by more than eighty-five professors who teach in fields related to banking and consumer law, supporting H. 3126, which would create an independent Consumer Financial Protection Agency. Some of the research on which this essay is based is drawn from an article by Professor Sovern.

Did under-regulated lending to consumers play a big part in destabilizing the financial system? Many knowledgeable people say yes, but Professor Todd Zywicki disagrees. (“Complex Loans Didn’t Cause the Financial Crisis,” Wall Street Journal, February 19, 2010). He claims that the present troubles resulted from the “rational behavior of borrowers and lenders responding to misaligned incentives, not fraud or borrower stupidity.”

Professor Zywicki’s argument enjoys, at least, the modest virtue of technical accuracy, because many objectionable misleading sales practices and agreements that lenders used were, and continue to be, unfortunately, quite legal. Lending practices may have been regularly misleading and confusing and reckless-but fraudulent? Well, no, usually not unlawful by the remarkably low standards of the day. But that in itself is an argument for saying consumer protection laws failed.

Full Story: Uncontrolled Lending to Consumers Spawned the Financial Crisis « Wake-up Call.

A.I.G., Greece, and Who’s Next?

NY Times: Stop Secret Derivatives Trading Before It Kills Again

As Greece has tottered on the brink of fiscal chaos, threatening to drag much of Europe down with it, Wall Street’s role in the fiasco has drawn well-deserved scorn.

First came the news that Greece had entered into derivatives transactions with Goldman Sachs and other banks to hide its public debt. Then came reports that some of those same banks and various hedge funds were using credit default swaps — the type of derivative that kneecapped the American International Group — to bet on the likelihood of a Greek default and using derivatives to wager on a drop in the euro.

European leaders have called for an inquiry into the Greek crisis. Ben Bernanke, the Federal Reserve chairman, has told Congress that the Fed is “looking into” Wall Street’s deals with Greece, and the Justice Department is investigating the euro bets. That is better than turning a blind eye, but it is not nearly enough.

Full Story: Editorial – A.I.G., Greece, and Who’s Next? – NYTimes.com.

AARP: Unemployment For Older Americans Surged 331 Percent Over Past Decade

Unemployment for Americans 55 and older surged 331 percent over the past decade, according to a new analysis by the AARP Public Policy Institute.

“The data clearly shows that older workers have faced a devastating rise in unemployment, with far-reaching implications not only for their employment status but also for their health and retirement security,” said AARP spokeswoman Mary Liz Burns. Burns added that unemployment puts a particularly tough squeeze on middle-aged folks — who often have to provide for kids moving back home after college and elderly parents.

According to AARP, from January 2000 through December 2009, the total number of unemployed individuals 55 and older rose from 490,000 to 2,114,000. The number of unemployed 65 and up rose from 143,000 to 479,000. And the average duration of unemployment for people 55 and up increased 85.6 percent from 18.7 weeks to 34.7 weeks. For people older than 64, the duration went up almost a third, from 24.8 weeks to 32.9 weeks.

Full Story: AARP: Unemployment For Older Americans Surged 331 Percent Over Past Decade.

Wall Street Vet Involved In 1998 Long-Term Capital Management Bailout Says Nothing Has Changed

Ten years before this latest crisis, the U.S. government engineered the bailout of a financial firm that had borrowed billions of dollars to make big bets on exotic securities. The firm was a hedge fund called Long-Term Capital Management.

James G. Rickards, as the firm’s top lawyer, negotiated the terms of the $3.6 billion deal, organized by the Federal Reserve Bank of New York, that forced other Wall Street firms to bail out LTCM. And now, in an interview with a brokerage newsletter, he says the federal government has failed to apply any of the lessons learned from that epic 1998 bailout — a failure that led to the current crisis and could lead to more.

Rickards also says that megabanks should be broken up, all derivatives should be traded via a clearinghouse, Fannie Mae and Freddie Mac should be liquidated, and more financial regulation is needed.

Full Story: Wall Street Vet Involved In 1998 Long-Term Capital Management Bailout Says Nothing Has Changed.

OPS: Obama simply re-inflated the Bubble . THIS is why we are headed for another crash.

Benefits of the Value Added Tax

The VAT rewards exports while largely blocking imports. This guarantees domestic demand for domestically produced goods, thereby ensuring that the taxpaying citizens are gainfully employed

The United States still faces a major obstacle in international trade which most people simply know nothing about. This obstacle is the Value Added Tax (VAT) and it costs this economy hundreds of millions of dollars in extra fees every year. Making matters worse is the fact that over nearly 150 nations around the world use a VAT system to protect their economy while the United States remains idle.

The simple fact is that governments need money to operate, and they generate this revenue in many ways. In the United States our government operates only on funds generated through income and property taxation. The sales tax – a form of consumption tax – is marginal in the grand scheme. Most other countries put much more emphasis on consumption taxes like the VAT.

The VAT rewards exports while largely blocking imports. This guarantees domestic demand for domestically produced goods, thereby ensuring that the taxpaying citizens are gainfully employed.

Full Story: Benefits of the Value Added Tax | Economy In Crisis.

Deficit Fear Mongering

Wall Street Took Your House and Your Retirement, Now They’re After Your Social Security.  Wall Street tycoon Pete Peterson wants to bring IMF-style economic insanity to the U.S. The scary part? He might get away with it.

IMF-Style Austerity Measures Come to America: What “Fiscal Responsibility” Means to You.

In addition to mandatory private health insurance premiums, we may soon be hit with a “mandatory savings” tax and other belt-tightening measures urged by the president’s new budget task force. These radical austerity measures are not only unnecessary, but will actually make matters worse. The push for “fiscal responsibility” is based on bad economics.

When billionaires pledge a billion dollars to educate people to the evils of something, it is always good to peer closely at what they are up to. Hedge fund magnate Peter G. Peterson was formerly chairman of the Council on Foreign Relations and head of the New York Federal Reserve. He is now senior chairman of Blackstone Group, which is in charge of dispersing government funds in the controversial AIG bailout, widely criticized as a government giveaway to banks. Peterson is also founder of the Peter Peterson Foundation, which has adopted the cause of imposing “fiscal responsibility” on Congress. He hired David M. Walker, former head of the Government Accounting Office, to spearhead a massive campaign to reduce the runaway federal debt, which the Peterson/Walker team blames on reckless government and consumer spending. The Foundation funded the movie “I.O.USA.” to amass popular support for their cause, which largely revolves around dismantling Social Security and Medicare benefits as a way to cut costs and return to “fiscal responsibility.”

Full Story: t r u t h o u t | Deficit Fear Mongering.

Individual health insurance: Health insurance premiums for indivisuals skyrocket in Illinois

Illinois consumers to pay up to 60% more, data show

Consumers in Illinois who lose their jobs and have no other option but to buy their own health insurance will get socked this year with premium increases of up to 60 percent, according to state records.

That group of consumers has been growing, as the recession has created more uninsured Americans looking for ways to protect themselves and their families.Now, Illinois consumers will get a glimpse into just how wide-ranging rate increases among individual health plans can be. The data, obtained by the Tribune, also provide a window into the overall trend of premium increases at large and small employers.

For the state’s more than half-million consumers in individual health plans, base rates will go up from 8.5 percent to more than 60 percent, according to state data. Base rates do not take into consideration health status, gender, age, place of residence and length of a policy — all factors that could raise premiums further.

Full Story: Individual health insurance: Health insurance premiums for indivisuals skyrocket in Illinois – chicagotribune.com.

Fed Proposes Limits On Credit Card Penalty Fees

The Federal Reserve on Wednesday proposed strict limits on penalty fees and other charges that credit card companies can slap on customers for missteps such as late payments or going over credit limits.

The proposal outlines rules that would take effect on Aug. 22 as the third stage of credit card legislation signed by President Barack Obama last May. The majority of the new law took effect last week, and earlier provisions kicked in last August.

Among the biggest changes in the Fed proposal is capping penalty fees to no more than the dollar amount of the violation.

Full Story: Fed Proposes Limits On Credit Card Penalty Fees.

Outsourcing America’s Stimulus Jobs

Taxpayer dollars designed to boost the struggling American economy should not be used to create jobs overseas.

In lieu of a recent report that found that the vast majority of Recovery Act funds made available for wind energy projects are being used primarily to create jobs overseas, a group of four Democratic Senators is asking the Treasury Department to issue a moratorium on awarding grants until legislation can be written to rectify the problem.

In a letter sent to Treasury Secretary Timothy Geithner Tuesday, Sens. Chuck Schumer (D-NY), Sherrod Brown (D-OH), Bob Casey (D-PA) and John Tester (D-MT) said that taxpayer dollars designed to boost the struggling American economy should not be used to create jobs overseas.

“Companies located in New York, Pennsylvania, and elsewhere across the United States are fully capable of manufacturing the range of clean-energy components, and U.S. wind farms and other clean-energy projects financed with stimulus money should be buying American-built parts,” the letter reads.

Full Story: Outsourcing America’s Stimulus Jobs | Economy In Crisis.

Like Bush, Obama Moves to Bury Bad Economic Data

The U.S. is hemorrhaging jobs thanks to terrible trade policies. Instead of fixing the problem, Obama wants to hide the data.

The Bush administration had a nasty penchant for trying to bury bad economic news – a nasty penchant that I was intimately familiar with when working on the House Appropriations Committee. One of the most egregious examples of this came in 2003. Here’s the Washington Post on 1/2/03:

David Sirota :: Like Bush, Obama Moves to Bury Bad Economic Data

U.S. Drops Report On Mass Layoffs;
Data Helped States Track Patterns of Industrial Demise By Kirstin DowneyWashington Post Staff Writer
January 2, 2003

Citing a shortage of money, the Bureau of Labor Statistics will stop publishing information about factory closings across the country, a decision that some state officials and labor leaders are protesting.

The monthly Labor Department analysis, known as the Mass Layoffs Statistics report, detailed where workplaces with more than 50 employees closed and what kinds of workers were affected.

Luckily, because of progressive pressure and public outcry, this Bush move was overturned by Congress. But now, the same kind of thing is back. According to today's Washington Post, it looks like the Obama administration is reprising the same scheme:

Full Story: Open Left:: Like Bush, Obama Moves to Bury Bad Economic Data.

Obama Signs Extension of U.S. Unemployment Benefits

(Adds Medicare physician payments, flood insurance in fifth paragraph.)

March 3 (Bloomberg) — President Barack Obama signed a bill reinstating unemployment benefits after Republican Senator Jim Bunning ended his effort to block the measure.

The law extends access to health care benefits for workers who have lost their jobs and helps small business obtain loans, a statement by the White House said.

“During these difficult economic times, supporting American workers, their families and our small businesses must be everyone’s focus,” Obama said in a statement late yesterday, shortly after the Senate’s approval.

Full Story: Obama Signs Extension of U.S. Unemployment Benefits (Update2) – BusinessWeek.

The Taxpayer-Funded Cycle Of Moral Hazard

The obvious problem with the all-carrots-no-sticks approach to the bank bailout is that it’s done a lot to strip risk and consequence out of the financial system. Having failed to dole out real pain to those who nearly decimated the economy (and I remind you that $150-million penalties levied against banks that pay out failed CEOs to the tune of $83 million is the going rate of “real pain”), the circumstances which exist now are such that the big banks know that if they recklessly steer themselves off the rails again, the federal government will rush in to save them.

But what gets little attention, comparatively, is the fact that bank lobbying (of the sort that’s going at the Consumer Financial Protection Agency with hammer and tongs) does little more than intensify and perpetuate this cycle of “moral hazard.” Over at the Washington Independent, Megan Carpentier has a crackerjack piece, demonstrating that “the most dangerous effect all this lobbying has had is on banks’ own behavior.”

Full Story: The Taxpayer-Funded Cycle Of Moral Hazard.

Santelli on Predatory Lending: ‘You can’t cheat an honest man’

- Matt Taibbi  -

Look at about the 5-minute mark of this video — Janet Tavakoli debating Rick Santelli about predatory lending. You basically have a whole panel of CNBC goons pooh-poohing the idea that predatory lending took place, setting up the inevitable revisionist history that the 2008 crash was caused by individual homeowners borrowing beyond their means.

My favorite part of this comes roughly at the six-minute mark. Tavakoli has just deftly explained how a lot of the predatory practices worked — people with limited financial literacy were presented with long and complicated mortgage deals, and told they would have a fixed payment in perpetuity or a guaranteed re-finance, or were nailed by fraudulent appraisals. Then she mentioned the big one, the fact that investment banks then took all these mortgages and with eyes wide open securitized them and sold them off as worthy investments to suckers on the other end of the chain.

While she’s saying all this stuff, Santelli, who is one of the fathers of the Tea Party movement, is shaking his head furiously, video-scoffing at everything she’s saying. When he finally does get a chance to speak, this is what he says:

Here’s my problem with this. It takes two to tango. You can’t cheat an honest man.

Full Story: Santelli on Predatory Lending: ‘You can’t cheat an honest man’ – Matt Taibbi – Taibblog – True/Slant.

Economists Warn Another Financial on Way to U.S. Economy

Nonpartisan Group Led by Nobel Winner Calls for Stronger Financial Reforms

Even as many Americans still struggle to recover from the country’s worst economic downturn since the Great Depression, another crisis – one that will be even worse than the current one – is looming, according to a new report from a group of leading economists, financiers, and former federal regulators.

In the report, the panel, which includes Rob Johnson of the United Nations Commission of Experts on Finance and bailout watchdog Elizabeth Warren, warns that financial regulatory reform measures proposed by the Obama administration and Congress must be beefed up to prevent banks from continuing to engage in high-risk investing that precipitated the near-collapse of the U.S. economy in 2008.

The report warns that the country is now immersed in a “doomsday cycle” wherein banks use borrowed money to take massive risks in an attempt to pay big dividends to shareholders and big bonuses to management – and when the risks go wrong, the banks receive taxpayer bailouts from the government.

“Risk-taking at banks,” the report cautions, “will soon be larger than ever.”

Full Story: Economists Warn Another Financial on Way to U.S. Economy – ABC News.

USPS has cut more than 100,000 jobs in five years

The U.S. Postal Service said on Tuesday that it would reduce its workforce by another 30,000 positions and slash overtime this year in an effort to reduce costs.

Together these staffing reductions will result in cost savings equivalent to eliminating 50,000 full-time positions, according to Chief Financial Officer Joseph Corbett.

Corbett said the agency expects 30,000 employees to retire during fiscal year 2010, which ends Sept. 30, 2010. More positions will be eliminated as other employees resign and those positions are not filled.

“We expect that we will be able to get to the right staffing levels through natural attrition,” he told CNNMoney.com.

Full Story: USPS has cut more than 100,000 jobs in five years – Mar. 2, 2010.

How the Trade Deficit Affects You

Trade Deficit: The means through which foreign countries are able to own and control our consumption.

Trade deficits are just like other debts in many respects. They must be repaid. When our country buys more than it sells from other countries, these other countries accept our dollars. These dollars must eventually return to the U.S. and be exchanged for something of value. Since we are producing less and less, in all likelihood, the trillions of dollars will come back to buy our assets and wealth producing companies. This has resulted in many of our core industries now being controlled and managed for the benefit of foreign companies and countries.

These loans by foreign governments have given them leverage over our decisions, forcing us to enter into agreements with them to allow them to control our key assets (technology, ports, natural resources, etc.). In fact, these loans place us in a disadvantageous position in all our negotiations abroad. Witness our inability to offset China’s currency manipulation that is making it nearly impossible for American exporters to compete.

Full Story: How the Trade Deficit Affects You | Economy In Crisis.

The New Recession Generation

As America slowly emerges from the edge of an economic catastrophe, the psychological effects of the downturn are only now coming to light.

In past recessions many predicted that the downturn would have the effect of reining in American consumerism. In each case, material accumulation came back with a vengeance.

This time however, many economists, scholars, and academics see things differently. Since World War II the United States has always chased its downturns with a time of lavish.

Americans witnessed this phenomenon just a few years ago, after the Internet boom went bust the economy sputtered before returning to its old ways. In a sense, the persistence of our spending mentality is both an economic engine and a built-in ticking time bomb. Our spending gets us into trouble, and our spending traditionally helps get us out of it.

Full Story: The New Recession Generation | Economy In Crisis.

Innovation Cannot Sustain the Economy

The idea that America can remain an economic powerhouse without its manufacturing base, by simply innovating, is ill-conceived.

In their push to knock down American trade barriers and usher in the era of globalization, free trade proponents often claimed that the lack of impediments to international trade would allow the nation to remain the leader in the 21st Century economy, providing the U.S. with the opportunity to focus on more highly specialized fields like research and development.

That, however, according NYU professor Ralph Gomory is simply not possible. Writing in the Huffington Post, he says that it is a mistaken belief to think that America can remain economically competitive without producing products in the U.S.

“Balancing trade on ideas and R&D simply cannot be done,” he writes. “The most elementary analysis shows that the scale is entirely wrong.

Full Story: Innovation Cannot Sustain the Economy | Economy In Crisis.

The GOP Hates Jobs

Through inaction and timid legislative negotiations, Congress just keeps letting the U.S. sink deeper and deeper into the economic abyss. Last week, Congress denied relief to the jobless and is currently poised to undercut a proposal that would rein in predatory lending. With unemployment out of control and banks pillaging citizens’ pocketbooks at every turn, the economy is in dire need of serious financial reform and a major jobs package.

More than one million have lost unemployment benefits

As James Ridgeway emphasizes for Mother Jones, over a million people receiving unemployment benefits ran out of financial rope on March 1 thanks to Sen. Jim Bunning’s (R-KY) self-righteousness. As a result of bizarre Senate procedural rules, Bunning’s sole “no” vote was enough to stop a bill that would have extended unemployment benefits for those who are out of work. Of course, Bunning had plenty of moral support from his fellow Republicans. Ridgeway highlights a Think Progress post on Rep. Dean Heller’s (R-NV) preposterous argument that it is time for the government to cut off unemployment benefits, since there are so many bums.

Full Story: The Media Consortium » Weekly Audit: The GOP Hates Jobs.

Economists Warn Another Financial on Way to U.S. Economy

Nonpartisan Group Led by Nobel Winner Calls for Stronger Financial Reforms

Even as many Americans still struggle to recover from the country’s worst economic downturn since the Great Depression, another crisis – one that will be even worse than the current one – is looming, according to a new report from a group of leading economists, financiers, and former federal regulators.

In the report, the panel, that includes Rob Johnson of the United Nations Commission of Experts on Finance and bailout watchdog Elizabeth Warren, warns that financial regulatory reform measures proposed by the Obama administration and Congress must be beefed up to prevent banks from continuing to engage in high risk investing that precipitated the near collapse of the U.S. economy in 2008.

Full Story: Economists Warn Another Financial on Way to U.S. Economy – ABC News.

Arizona Leads the Way in Combating Foreclosure

As the Obama administration works up its 12,487th plan for keeping underwater homeowners in their homes, Arizona’s legislation may have the courage and good sense to do the obvious: let foreclosed homeowners stay in their home as renters. A bill was just introduced in legislature that would allow homeowners in houses that sell for less than the median price to remain in their home as renters for at least one year following foreclosure.

With this simple gesture the Arizona legislature could do more for the nation’s underwater homeowners than all the brilliant DC policy wonks have managed to accomplish in the last three years with all their billions of dollars. The legislation would give low and moderate-income homeowners security in their homes. It doesn’t make them jump through hoops and prove to bureaucrats that they were worthy. It doesn’t require them genuflect before loans servicers or bankers.

This legislation would give homeowners the right to stay in their home. And bingo, every low and moderate-income homeowner in the state would know that the bank could not just throw them out on the street. If this passes the banks may also think more seriously about loan modifications, since they couldn’t just throw a foreclosed homeowner out on the street. The proposals doesn’t cost the taxpayers any money. It also doesn’t require any government bureaucracy. It’s easy to see why it’s a non-starter in Washington.

Full Story: t r u t h o u t | Arizona Leads the Way in Combating Foreclosure.

Ford’s U.S. Sales Up 43 Percent; Second-Quarter Production Up 144,000 Vehicles Versus Year Ago: PRNewswire Business News: F – MSN Money

Ford, Lincoln and Mercury February sales up 43 percent versus year ago and 22 percent higher than January

• Ford brand sales up 46 percent versus year ago, Lincoln up 19 percent and Mercury up 24 percent

• Cars up 54 percent versus year ago, utilities up 39 percent and trucks up 36 percent

• Ford’s U.S. market share for February estimated at 17 percent, up 3 percentage points versus a year ago

• Retail sales up 28 percent versus a year ago; fleet sales normalizing – up 74 percent versus last February’s depressed levels

• Second-quarter North American production plan is 595,000 vehicles, up 144,000 vehicles (32 percent) versus a year ago

Higher sales for every brand and in every product category propelled Ford Motor Company F to a 43 percent sales increase in February versus a year ago.  Compared with January, Ford’s February sales are up 22 percent.

“The strength of our new products and Ford’s leadership in quality, fuel efficiency, safety, smart design and value are resonating with customers,” said Ken Czubay, Ford vice president, U.S. Marketing Sales and Service.  ”The good news is we have even more new products and fuel-efficient powertrains coming this year, and we expect our progress to continue.”

Full Story: Ford’s U.S. Sales Up 43 Percent; Second-Quarter Production Up 144,000 Vehicles Versus Year Ago: PRNewswire Business News: F – MSN Money.

IMF “Economic Medicine” Comes to America

Ellen Brown -

In addition to mandatory private health insurance premiums, we may soon be hit with a “mandatory savings” tax and other belt-tightening measures urged by the President’s new budget task force. These radical austerity measures are not only unnecessary, however, but will actually make matters worse. The push for “fiscal responsibility” is based on bad economics.

When billionaires pledge a billion dollars to educate people to the evils of something, it is always good to peer closely at what they are up to. Hedge fund magnate Peter G. Peterson was formerly Chairman of the Council on Foreign Relations and head of the New York Federal Reserve. He is now senior chairman of Blackstone Group, which is in charge of dispersing government funds in the controversial AIG bailout, widely criticized as a government giveaway to banks. Peterson is also founder of the Peter Peterson Foundation, which has adopted the cause of imposing “fiscal responsibility” on Congress. He hired David M. Walker, former head of the Government Accounting Office, to spearhead a massive campaign to reduce the runaway federal debt, which the Peterson/Walker team blames on reckless government and consumer spending. The Foundation funded the movie “I.O.U.S.A.” to amass popular support for their cause, which largely revolves around dismantling Social Security and Medicare benefits as a way to cut costs and return to “fiscal responsibility.”

The Peterson-Pew Commission on Budget Reform has pushed heavily for action to stem the federal debt. Bills for a budget task force were sponsored in both houses of Congress. The Senate bill was narrowly defeated, and the House bill was tabled; but that was not the end of it. In Obama’s State of the Union speech on January 27, he said he would be creating a presidential budget task force by executive order to address the federal government’s deficit and debt crisis, and that the task force would be modeled on the bills Congress had failed to pass. If Congress would not impose “fiscal responsibility” on the nation, the President would. “It keeps me awake at night, looking at all that red ink,” he said. The Executive Order was signed on February 17.

Full Story: IMF “Economic Medicine” Comes to America.

Nice work if you can share it: an unemployment solution

Dean Baker  -

If Congress is serious about addressing unemployment, it will act on bills that aim to strengthen work-sharing programmes

The housing bubble and subsequent crash were the result of extreme incompetence on the part of the country’s top economic policymakers. Somehow these people could not see, or did not care about, the dangers of an $8tn housing bubble.

Unfortunately, economic policymaking is not like most jobs where workers get fired when they make serious mistakes. In economics, they just keep getting promoted. Therefore, the people who sank the economy are for the most part the same group of people still designing policy today. Now this group of incompetent economists is telling the rest of us that we are going to have to endure five more years of high unemployment.

However, the rest of the country should not be forced to suffer even more just because those determining economic policy cannot do their jobs. We know how to get the unemployment rate down. Keynes taught us more than 70 years ago that we just have to spend money to eliminate mass unemployment. People work for money, if the government spends, people will work. It’s pretty straightforward.

Full Story: Nice work if you can share it: an unemployment solution | Dean Baker | Comment is free | guardian.co.uk.

New ghost towns: Industrial communities teeter on the edge

One-horse towns such as Ravenswood, whose downtown is seen here, are “one plant shutdown from oblivion,” says Tom Juravich, who co-wrote a history of the 1990 lockout at the local aluminum plant.

When Henry Kaiser arrived 55 years ago, this place was no place — “a rural problem area,” the government called it, so poor and isolated that the population had dropped 15% since 1940.

That all changed after Kaiser, the industrialist who’d turned out ships and planes at a record pace in World War II, built the nation’s largest consolidated aluminum works here on the banks of the Ohio River.

The plant paid Tim Shumaker his first living wage, and he won the right to keep it two decades ago after his union was locked out for 19 months.

Full Story: New ghost towns: Industrial communities teeter on the edge – USATODAY.com.

Postal Service expected to announce ’significant changes’

The U.S. Postal Service will release projections Tuesday that confirm for the first time the suspicion that mail volume will never return to pre-recession levels. In response, the agency is pushing anew for a dramatic reshaping of how Americans get and send their letters and packages.

Customers are continuing to migrate to the Internet and to cheaper standard-mail options, and away from the Postal Service’s signature product — first-class mail, Postmaster General John E. Potter will report in announcing the projections.

The Postal Service experienced a 13 percent drop in mail volume last fiscal year, more than double any previous decline, and lost $3.8 billion. The projections anticipate steeper drops in mail volume and revenue over the next 10 years, and mounting labor costs only complicate the agency’s path to firm fiscal footing.

Full Story: Postal Service expected to announce ’significant changes’ – washingtonpost.com.

A Budgetary SOS for 2011

A Titanic Budget in an Ocean of Icebergs
Will the USS Budget Go Down?

Send up a flare! The 2011 federal budget has sprung some leaks in the midst of a storm. Not sure there's enough money for life rafts! Forget women and children first!

Buffeted by economic hard times, the 2,585-page, $3.8 trillion document is already taking on water, though this won’t be obvious to you if you’re reading the mainstream media. Let’s start with the absolute basics: 59% of the budget’s spending is dedicated to mandatory programs like Medicaid, Medicare, Unemployment Insurance, Social Security, and now Pell Grants; 34% is to be spent on “discretionary programs,” including education, transportation, housing, and the military; 7% will be used to service the national debt.

A serious look at this budget document reveals some “leaks” — two in actual spending practices and two in the basic assumptions that undergird the budget itself. Ship-shape as it may look on the surface, this is a budget perilously close to an iceberg, and it’s not clear whether the captain of the ship will heed the obvious warning signs.

Full Story: Tomgram: Jo Comerford, A Budgetary SOS for 2011 | TomDispatch.

What Are Banks Doing with Their Depositors’ Money?

There have been numerous reports about the sharp decline in bank lending since the beginning of the financial crisis. The Wall Street Journal, for example, on Wednesday reported in an article entitled “Lending Falls at Epic Pace” that last year’s decline in lending is the biggest since 1942. It also provided the following chart to clearly make its point.

So if the banks are not making loans, what are they doing with depositor money?

Well, they are still lending, but not to businesses and consumers.  They are lending to the federal government.

Banks don’t lend directly to the federal government of course, but buying US government paper accomplishes the same thing in the end.  Depositor money is sent to the federal government, ether directly when banks purchase newly issued government paper or indirectly when they purchase US government paper from others, who in turn have used their dollars to purchase this paper.

Full Story: What Are Banks Doing with Their Depositors’ Money?.

Existing-Home Sales Plunged Unexpectedly in January

Sales of previously owned homes in the United States unexpectedly plunged in January, an industry survey showed Friday, fresh evidence the housing market has yet to find stable ground.

The National Association of Realtors said sales fell 7.2 percent from December’s level to an annual rate of 5.05 million units, sharply below market expectations for a 5.50 million unit pace.

December sales were revised slightly lower to a 5.44 million pace from 5.45 million units. Compared with a year ago, last month’s sales of existing homes were up 11.5 percent.

The median sales price was unchanged from a year earlier at $164,700.

“Today’s figure is certainly not good news in terms of sales,” said Lawrence Yun, chief economist for the NAR.

Full Story: Existing-Home Sales Plunged Unexpectedly in January – CNBC.

U.S. Consumer Spending Increases More Than Forecast

Spending by U.S. consumers increased in January for a fourth consecutive month, a sign that the biggest part of the economy may contribute more to growth in coming months.

The 0.5 percent increase in purchases was more than anticipated and followed a 0.3 percent gain in December that was larger than previously estimated, Commerce Department figures showed today in Washington. Incomes climbed 0.1 percent, short of expectations and reflecting declines in dividends and interest.

Retailers such as Home Depot Inc. and Macy’s Inc. are forecasting rising sales this year, even as they don’t foresee a robust economic recovery. An unemployment rate that’s projected to average 9.8 percent this year may restrain household purchases, which account for about 70 percent of the economy.

Full Story: U.S. Consumer Spending Increases More Than Forecast (Update3) – Bloomberg.com.

AIA Sold To Prudential: AIG’s Asian Unit Sold For $35.5 Billion

British insurer Prudential PLC said Monday it will buy the Asian unit of bailed out American International Group Inc. in a deal worth $35.5 billion that will allow AIG to pay back some of the money it owes U.S. taxpayers.

AIG, which was kept alive by a $182.5 billion rescue by the U.S. government in September 2008, will get $25 billion in cash – $20 billion of that from a Prudential rights issue – and $10.5 billion in new shares and securities for the sale of AIA Group Ltd.

The combined group will be the leading life insurer in Hong Kong, Singapore, Malaysia, Indonesia, Vietnam, Thailand and the Philippines, as well as the biggest foreign life insurer in China and India, Prudential said.

Full Story: AIA Sold To Prudential: AIG’s Asian Unit Sold For $35.5 Billion.

Arianna Discusses The Move Your Money Campaign On CBS Sunday Morning (VIDEO)

The “Move Your Money” campaign was featured on CBS Sunday Morning this week. Arianna appeared on the show to talk about why moving money out of big banks and into smaller banks is important:

“JP Morgan, Citi, Bank of America, Wells Fargo — these banks, that have received taxpayer money, that have been bailed out by the taxpayer, have not done their job at helping small businesses, at lending, so that the economy can start again, and start producing jobs.”

WATCH:

Full Story: Huff TV: Arianna Discusses The Move Your Money Campaign On CBS Sunday Morning (VIDEO).

Warren Buffett On CNBC: Health Care Is Like An ‘Economic Tape Worm’ (WATCH)

Billionaire Warren Buffett says health care costs are a major drain on U.S. businesses and act like an “economic tape worm.”

The head of the holding company Berkshire Hathaway Inc. said Monday on CNBC that America's health care system needs fundamental reform to attack costs because it's not practical to continue devoting roughly 17 percent of the nation's gross domestic product to health care.

Buffett says much of the rest of the world is paying about 9 percent of their GDP on health care and have more doctors and nurses per person.

He says he hopes Congress will develop a new health care reform proposal that will restrict costs more than any of the current plans would.

WATCH Warren Buffet talk health care On CNBC:

Full Story: Warren Buffett On CNBC: Health Care Is Like An ‘Economic Tape Worm’ (WATCH).

Thousands Of Federal Workers Are Furloughed Without Pay Today Because Of Sen. Bunning’s Partisanship

Over the weekend, approximately 400,000 laid-off workers may have lost their unemployment benefits, COBRA subsidies to help defray health care costs expired, and loans for small businesses ran out of time — all because of Sen. Jim Bunning (R-KY).

Last week, the House passed an extension of these benefits. Bunning, however, blocked the Senate from moving forward over “a dispute over how [the bill] should be funded,” and complained that the Democrats’ insistence on trying to ensure that unemployment benefits not expire had caused him to miss a college basketball game.

Several Republicans have defended Bunning’s destructive tactics, although Sen. Jim Inhofe (R-OK) called on him to move aside. Inhofe pointed out that since the bill also contained transportation funding, an expiration could lead to furloughs of employees of the Federal Highway Administration. Indeed, today, 2,000 federal transportation workers have been furloughed without pay. From a Department of Transportation press release, which lays the blame directly on Bunning:

Full Story: Think Progress » Thousands Of Federal Workers Are Furloughed Without Pay Today Because Of Sen. Bunning’s Partisanship.

The Truth About NAFTA

Few are aware that NAFTA (North American Free Trade Agreement) has rendered us uncompetitive in the world, has destroyed our industrial base, caused us to outsource most of our production and killed most of our manufacturing jobs.

Imagine if Congress enacted a special law only for the state of Michigan that:

* Dropped the minimum wage to $.50/Hour

* Exempted employers from child labor laws

* Expanded the work week

* Reduced health and work place safety laws

* Banned unions

* Allowed Michigan exporters full, duty-free access to Ohio and the rest of the states

Sounds crazy, huh?

Full Story: The Truth About NAFTA | Economy In Crisis.

OPS: Thanks Bill Clinton, the DLC, Blue Dogs and Republicans.

Senators Fighting NASA Outsourcing

Hidden under the headlines dominated by the health care debate in Congress, a line has been drawn in the sand by several Senators who hope to block second portions of President Obama’s spending and budgetary plans.

Foremost among these is his plan to cease NASA spaceflight operations and outsource payload transportation to private firms.

According to Andy Pasztor, writing for The Wall Street Journal, representatives from “space states” are vowing to block this plan and keep precious funding flowing to their constituents. The primary opposition is coming from Florida and Alabama, but Texas has been thrown in the mix too. As was the case when President Obama took on the F-22 fighter program, everyone with their hand already in the cookie jar is out to prove that their funding is absolutely essential to the nation.

Pasztor writes that many regard the Obama space budget to be a “radical” departure from established American precedents. To many, this opens the door to dominance by Russia, China, Japan and the European Union.

Full Story: Senators Fighting NASA Outsourcing | Economy In Crisis.

OPS: More than jobs. This is a matter of National Security.

Nevadans will feel impact of four-day government workweek

Most of Nevada’s government will soon transition to a four-day workweek. But the reasons for it go beyond filling the state’s $887 million deficit.

The plan, proposed by Gov. Jim Gibbons and broadly supported by legislators, will save $600,000 on energy costs, make it easier to implement a 10-hour-a-month furlough for state workers and lift their flagging morale.

But legislative sources point to another reason — even if they’re loath to admit it publicly — for this major change: The reduction in the availability of state services will make the public feel the effect of the revenue shortfall.

It’s a potentially controversial, if intriguing, strategy.

Full Story: Nevadans will feel impact of four-day government workweek – Friday, Feb. 26, 2010 | 2 a.m. – Las Vegas Sun.

Mortgage Modifications and You — Part 1

Earlier this month the bankruptcy courts of the Second Circuit here in New York put on an incredibly informative seminar called “The Intersection of the Bankruptcy Loss Mitigation Program with HAMP/HARP.”  It was presented for the education of bankruptcy practitioners and lawyers who represent consumers. It featured bankruptcy judges from the Southern and Eastern Districts of New York, a senior manager for Government Programs and New Initiatives for Fannie Mae (the Home Affordable Modification Program and the Home Affordable Refinance Program being “new initiatives”), a VP/Deputy General Counsel for Fannie Mae, and the Director of Foreclosure Prevention at Brooklyn Legal Services.

For those folks living in New York state, the best news is that a version of this same program was presented two weeks earlier to both bankruptcy court judges AND NYS judges who will be staffing the mortgage foreclosure parts. The program was live streamed into the courthouses, so nobody had to miss it.

The Bankruptcy Loss Mitigation Program was begun in the Southern District of New York in 2008 and was adopted in the Eastern District of New York in late 2009.

Full Story: Mortgage Modifications and You — Part 1 | Firedoglake.

Buffett: Execs should pay price for risky bets

“In my view a board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control,” Buffett wrote. “If he’s incapable of handling that job, he should look for other employment. And if he fails at it — with the government thereupon required to step in with funds or guarantees — the financial consequences for him and his board should be severe.”

Billionaire Warren Buffett, in his annual letter to shareholders, sternly urged companies to develop harsh penalties for executives who get into trouble with risky investments.

Buffett’s Berkshire Hathaway Inc. delivered a 61 percent jump in net income because the value of its investments and derivatives rose sharply in 2009 after taking a beating the year before. But its businesses’ exposure to housing construction helped keep it from outperforming the S&P 500 for the first time since 2004.

Buffett used most of his letter, released Saturday, to reiterate the business basics that have made his company a juggernaut. But it did include a section about how corporations should manage risk. Buffett said CEOs and the boards that hired them should pay a steep price if their companies get into trouble with risky investments.

Buffett lamented that shareholders, not CEOs and directors, have borne most of the burden of company failures during the economic crisis.

Full Story: Buffett: Execs should pay price for risky bets – Yahoo! News.

Bernanke’s ‘Naivete,’ Wall Street’s Publicly-Backed Bets

Who Will Rein In Those Credit Default Swaps?

“USING these instruments in a way that intentionally destabilizes a company or a country is — is counterproductive, and I’m sure the S.E.C. will be looking into that.”

That’s what Ben S. Bernanke, chairman of the Federal Reserve, said last week when lawmakers asked him about credit default swaps during his Congressional testimony. Concerns are growing about such swaps — securities that offer insurance-like protection and helped tip over the American International Group in 2008 when it couldn’t pay mounting claims on the contracts.

Now, there are fears that the use of these swaps may also help propel entire countries — think Greece — to the precipice.

First, Greece employed swaps to mask its true debt picture, with the help of Wall Street bankers, of course. And now it appears that some traders are using swaps to bet that Greece won’t be able to meet its debt payments and will face a possible default.

Full Story: Fair Game – Who Will Rein In Those Credit Default Swaps? – NYTimes.com.

Bernanke delivers blunt warning on U.S. debt

Stage is set in U.S. for a Greek tragedy

With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.

Recent events in Europe, where Greece and other nations with large, unsustainable deficits like the United States are having increasing trouble selling their debt to investors, show that the U.S. is vulnerable to a sudden reversal of fortunes that would force taxpayers to pay higher interest rates on the debt, Mr. Bernanke said.

“It’s not something that is 10 years away. It affects the markets currently,” he told the House Financial Services Committee. “It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today.”

Full Story: Bernanke delivers blunt warning on U.S. debt – Washington Times.

OPS: Bernanke pretending he’s the responsible adult. The terrorist bankerster threatening to blow himself up, and take the rest of us with him.  Congress should counter by taking over the FED and moving it under Treasury. ASAP.

In D.C., more evidence that commercial real estate headed for foreclosure crisis

A mortgage crisis like the one that has devastated homeowners is enveloping the nation’s office and retail buildings, and few places are likely to be hit as hard as Washington.

The foreclosure wave is likely to swamp many smaller community banks across the country, and many well-known properties, including Washington’s Mayflower Hotel and the Boulevard at the Capital Centre in Largo, are at risk, industry analysts say.

The new round of financial pain, which some had anticipated but hoped to avoid, now seems all but certain. “There’s been an enormous bubble in commercial real estate, and it has to come down,” said Elizabeth Warren, chairman of the Congressional Oversight Panel, the watchdog created by Congress to monitor the financial bailout. “There will be significant bankruptcies among developers and significant failures among community banks.”

Full Story: In D.C., more evidence that commercial real estate headed for foreclosure crisis – washingtonpost.com.

On the Edge with Max Keiser

Max Keiser talks to Stacy Herbert about the financial headlines

- 26 February 2010

NOTE: at about 6min in Max explains why the “Move your Money” campaign won’t is doomed.

Leveling the Playing Field

When every country in the world has a VAT, and the United States is unprotected by a similar system of its own, international trade swings toward imbalance.

The VAT is the most popular tax scheme on earth. Value-added consumption taxes are used by most countries around the world including Canada, China, and Mexico. When every country in the world has a VAT, and the United States is unprotected by a similar system of its own, international trade swings toward imbalance.

The Coalition for a Prosperous America posted a case study of the effects of value-added tax schemes in the United States. The article clearly expresses how foreign consumption taxes undermine American workers and the consumer economy.

The only way to level the playing field is to institute some sort of protection of our own. The United States cannot dictate tax policy to dozens of sovereign nations around the globe, but it can and should insulate itself by reorganizing its own tax policies.

Full Story: Leveling the Playing Field | Economy In Crisis.

Rash of Commercial Foreclosures on Horizon

The next shoe to drop in the ongoing financial crisis could be a rash of foreclosures in the commercial real estate market, the ramifications of which could be devastating nationwide.

The next shoe to drop in the ongoing financial crisis could be a rash of foreclosures in the commercial real estate market, the ramifications of which could be devastating nationwide, according to a report by the Congressional Oversight Panel.

“A significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American,” the report reads.

Between now and 2014, $1.4 trillion in commercial mortgages are expected to come due. Many of those borrowers will face difficultly trying to refinance at the end of the mortgage’s terms, causing countless property owners to default, the report warns.

Full Story: Rash of Commercial Foreclosures on Horizon | Economy In Crisis.

Fannie Mae Owes U.S. More Than $75 Billion After Latest Loss

Fannie Mae Posts 4Q Loss, Wants $15.3 Billion In Additional Government Aid

Fannie Mae needs another $15 billion in federal assistance, bringing its total to more than $75 billion. And worse, the mortgage finance company warned its losses will continue this year.

The rescue of Fannie Mae and sister company Freddie Mac is turning out to be one of the most expensive aftereffects of the financial meltdown. The new request means the total bill for the duo will top $126 billion.

And the pain isn’t over. Fannie warned Friday that it will need even more money from the Treasury, as unemployment remains high and millions of Americans lose their homes through foreclosure.

Full Story: Fannie Mae Posts 4Q Loss, Wants $15.3 Billion In Additional Government Aid.

Long-Term Joblessness “Off the Charts”

Hitting Middle Class Particularly Hard; Millions of Such Jobs Gone Forever, Reports John Blackstone

Even though many economists say the Great Recession ended over the summer, you’d never know it by the millions of Americans still struggling to find work. The once prosperous and gainfully-employed middle class is being hit especially hard, reports CBS News Correspondent John Blackstone.

The unemployment rate has backed off a touch from 10 percent to 9.7 percent, but that’s little comfort to the long-term unemployed – those out of work more than six months. They make up 40 percent of people collecting unemployment.

“These people, when you look at their unemployment rate, it’s just off the charts,” says Lakshman Achuthan, managing director of the Economic Cycle Research Institute. “It’s very different from earlier patterns that we’ve seen in recessions.”

Full Story: Long-Term Joblessness “Off the Charts” – The Early Show – CBS News.

Health insurance hikes stun small businesses

While Anthem Blue Cross has been taking the heat for proposing rate increases of up to 39 percent on individual consumers, other health insurers have stunned some small businesses with hikes that in some cases exceed 75 percent.

Tom Simmons, president of an Oakland design and consulting firm with four employees, said he had just read about the Anthem increases when he opened a letter from his insurer, Blue Shield of California, informing him his monthly family premium would go up to $1,596 a month from $908, a nearly 76 percent increase.

“This industry is getting out of control. It makes me fearful of future years and what could become of things if something doesn’t change,” said Simmons, whose business health insurance policy also covers his family of three.

He ultimately was able to reduce the increase to about 16 percent, but only after switching to a plan with a higher deductible and other higher out-of-pocket expenses.

Full Story: Health insurance hikes stun small businesses.

FDIC shuts down banks in Nevada and Washington

Regulators shut down banks in Nevada and Washington on Friday, marking the 21st and 22nd failures this year of federally insured banks.

The Federal Deposit Insurance Corp. was appointed receiver of Carson River Community Bank, based in Carson City, Nev. and Rainier Pacific Bank in Tacoma, Wash.

Carson River Community Bank had $51.1 million in assets and $50 million in deposits as of Dec. 31. Rainier Pacific Bank had $717.8 million in assets and $446.2 million in deposits as of Dec. 31.

Full Story: FDIC shuts down banks in Nevada and Washington – Yahoo! News.

Housing Recovery Is Looking A Lot Shakier Than Expected

The recent slump in housing is making some analysts uneasy about a recovery that many thought sustainable just a couple months ago and comes at a time when the Federal Reserve is nearing the end of a critical, year-long program to support the mortgage market.

“Housing is at a pivotal, ambiguous point,” says Ted Gayer, co-director of Economic Studies at the Brookings Institution.

A spate of recent reports from home sales to mortgage activity has been starkly negative. And, even if some of it can be written off to seasonal patterns, namely weather, the weakness is not what what people expected with the extension and expansion of the government's homebuyer tax credit that jacked sales for several months last summer and fall.

New homes sales fell to a record low in January, extending a two-month slide; pending and existing home sales were down in December; homebuilder sentiment in January fell back to where it was last June, and mortgage applications have fallen three of the past four weeks,

Full Story: Housing Recovery Is Looking A Lot Shakier Than Expected – Yahoo! Finance.

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