Monday, December 27, 2010

notes & comments, week ending Dec 25th

as was apparent last week, there was no agreement on a budget for the federal government, so a "continuing resolution" to keep the show running was passed by the senate...what that does is fund all ongoing programs at the same level as they were funded for the fiscal year beginning Oct 09, until Mar 4 2011... that means no funds for any of the new programs passed this year, such as health care reform, or the Dodd-Frank financial regulation...the SEC has interviewed and needs to hire 800 new investigators to carry out their new duties under dodd-frank, but the money aint there, and one can surmise that other regulatory agencies are feeling a similar pinch...however, the senate was able to pass with "unanimous consent" the $725 billion bill to fund the pentagon for fiscal 2011, which included nearly $160 billion for war-funding...

there has been serious talk about the possibility that as part and parcel of the tax cuts for the rich package just passed, obama has agreed to include many of the budget cutting measures outlined by the simpson-bowles catfood commission in next years budget...robert kuttner, the editor of American Prospect & one of the co-founders of the Economic Policy Institute, wrote that cuts to social security would be included, and introduced in the state of the union address in january...according to economist brad delong, who has apparently talked to someone in the white house, the proposed social security package would be 2/3 cuts and 1/3 tax increases, and a Q & A on twitter with white house press secretary robert gibbs seemed to confirm that is the case...there is speculation that medicare is also on the table...

both consumers reports and huffington post had articles out quantifying how many taxpayers would actually do worse under the tax cut package passed last week; approximately 51 million workers make so little that they will actually see an increase in their taxes as of the result of the loss of the $400 making work pay tax credit, and another 20 million state and local workers, who dont pay into social security as they have separate pension plans, will lose that $400 credit and not gain anything in their pay from the payroll tax cut...this means approximately 1 in 3 workers, who are among the lowest paid, will see less take home pay resulting from these "tax cuts"...coincidentally, 1 in 3 working families were also found to be near poverty despite working full time by the working families project; this number included 22 million children...(a chart, with income by family size, is here)...a NYT story revealed that more than a quarter of the new private sector jobs added this year were temporary, compared to 10.9% and & 7.1% in the previous recessions...another study showed that 1.6 million americans at retirement age have put off retiring, and that 1.3 million were still working at 75...this was attributed to better health as we age, but i wonder if all those old walmart greeters are really working cause they want to, or if they see the connection between continuing to work and continuing to put food on the table...

you might have noted that i've been somewhat ambiguous as to how that 13 month extension to unemployment rations would play out in different situations and states; that's because, despite my searching, i couldnt lay my hands on an article that broke it down by all the categories...quite serendipitously, such an article was published this week by the WSJ; here it is: How Long Is Each State’s Unemployment Extension?; you'll see there’s a wide variance in how long an unemployed person can receive rations depending on state contributions & the unemployment rate in their state...

quite a bit of blog commentary followed the CBS 60 minutes segment on state budget problems that aired last weekend, (which i posted on MW666 as another crisis, coming soon to a state near you…); most of it was pushback against the segment, some was in defense of the muni-bond market (which had already been under pressure) after meredith whitney forecast 50 to 100 cities would go belly up next year, and some was just kneejerk reactions from the usual suspects who jump in to rant everytime any government spending is challenged; no one is served by that kind of uninformed commentary...i cant speak to problems facing the munibond market other than to observe the rising costs of borrowing, but i've been on the state/local budget case for almost a year (see here and here), and ive linked to at least two dozen articles each week on state or city budget problems, school district shortfalls, state difficulties with medicaid funding, or pension funding shortfalls on GGO almost every week this year...to be sure, the lion's share of those articles deal with the known problems of california, illinois, new jersey, new york or michigan cities, especially detroit, but i'd venture to say that ive seen at least 30 states mentioned in local papers as facing some kind of funding trouble over the past year...much is made of the california $28 billion deficit, but not too many realize that texas is also facing a $20 billion shortfall over the next two years...absent a return to exuberant growth, in the coming year states will have to find a way to make up for the expiring federal stimulus money which has sustained them for the duration of the recession, and cities and school districts will be facing declining revenue sharing and at least a few more years of declining property tax base, which typically lags the fall in housing prices by three years...at the very least, we can expect to see more "user fees" for city services going forward...

a top bush economic advisor, greg mankiw, took the census results to show that people are migrating to the states where the taxation is lowest, and sited a study on his blog backing this up; he doesnt allow comments on his blog, but if you check the census website http://2010.census.gov/2010census/data/index.php you will see that the state & regional growth mankiw ascribes to escaping from high taxes is no more than a continuation of the same migration trends that have been in effect since 1940 (click bottom bar on the interactive map)

it shouldnt surprise anyone who's read my takes on the effect that QE2 and the tax package have had on interest rates that mortgage applications were down 18.6% for the week, and re-financings were down nearly 25%...reported existing & new home sales for november were up slightly from october but were still dismal, even though the full brunt of the increase in borrowing costs have yet to hit...in light of the robo-signing scandal, foreclosures continue to decline, but since foreclosure sales are also declining, home inventories are still higher than last year at this time (housing is seasonal); declines are concentrated in states where specific action against robo-signing has been taken; in new york, for instance, where an attorney's signature on the paperwork is now required, foreclosures have declined from an 800 per week rate to 100 per week...

several cases having to do with foreclosures were also adjudicated this week, including a fraud ruling against wells fargo on MBS sales in minnesota, a ruling that a statistical sample could be used in a fraud suit by MBIA against BofA in new york, and a jersey supreme court's order that six major lenders show why their foreclosures in that state not be suspended...florida canceled all foreclosures for the rest of the year, and arizona and nevada joined in a suit against BofA alleging the bank misled homeowners regards loan modifications...

after a couple months of erosion in bond market prices, it finally started occurring to retail investors that they were rapidly losing money; as a result, mutual bond fund investors pulled the most money out of bond funds since the height of the crisis two years ago; the previously mentioned muni bond warnings didnt help...international bond markets were under pressure as well, as it became apparent that the european council meeting last week produced no concrete results; costs to insure spanish & portuguese debt were up 50 basis points, the irish ten year bond neared 9%, the highest since the "bailout", and greek ten year costs went over 12% for the first time since the may crisis, although the PIIGS borrowing costs fell back after the chinese vice-premier implied china would step in to assure european stability...russia pulled a sale of six year bonds for a second time this month after its rates rose to 7.78%; mention of a french downgrade raised the cost to insure french debt to more than that of the czech republic & twice that of germany...apparently the irish have learned nothing after 3 bank bailouts drove them to insolvency, as this week they nationalized a fourth, Allied Irish...& a lending freeze in britain is expected to lower mortgage debt issuance from a £110bn-a-year peak down to just £6bn next year, according to the Council of Mortgage Lenders ....

oil prices rose above $90 dollars a barrel this week for the first time since 2008, and continued to rise in london after domestic markets were closed for the holiday, briefly reaching $94.74 for brent crude before falling back below $94; OPEC ministers meeting in Cairo judged that prices had been temporarily inflated by cold weather in Europe, and saw no need to increase output; a couple moderate OPEC members switched previous positions, feeling that $100 oil was possible without adversely impacting consuming economies...other commodities also rallied, with coffee, soybeans, wheat and corn all near highs not seen in 2 to 20 years, and raw sugar hitting a 30 year high...several large food processors, including kraft, general mills, kelloggs, unilever, and nestle all either announced price increases, or signaled that increases are coming to some of their product lines; mcdonalds also indicated price increases were forthcoming....we are advised not to worry, though, because the core inflation rate omits food & energy because those prices are too volatile...we can be concerned, though, that cotton futures are at an all time high, up limit three days in a row this week, with the likelihood that another $1 increase will be seen in a pair of jeans; dont plan to switch to wool clothes, either, as wool prices are up about 50% over last year...rubber futures in tokyo hit a series of all time highs on bad weather in producing countries, & industrial metals were also at or near new highs; last week i mentioned that one trader controlled 90% of the copper in the warehouses of the london exchange; this week that trader was identified by zero hedge & barrons to be JP Morgan, as copper hit a new high when a major chilean mine declared it could not meet its contracts...according to the WSJ & barrons, one trader also holds as much as 90% of the LME aluminum, and over 50% of the tin, nickel & zinc as well...

the above are my weekly comments that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, mostly from the aforementioned GGO posts, contact me...

Sunday, December 19, 2010

notes & comments on the week ending Dec 18th

after gaining the support of JPMorgan CEO jamie dimon, who stands to save $1,179,000 next year from the tax cut, the GOP-obama tax cut package i discussed last week easily passed the senate 81 to 19, and passed the house thursday night, with 148 congressmen voting against it...moody's immediately warned that it might hurt our triple A credit rating...i dont have a handle on how much pork was ultimately attached, but with the broad acceptance it was probably minimal; the real pork was in the 6700 earmark $1.3 trillion bipartisan omnibus spending bill, which was pulled from the senate floor friday when the anti-porkers were caught with their hooves in the fiscal cookie jar...since a budget compromise seems impossible, it appears another non-specific two month extension of the Oct 1 continuing resolution will be funding the government for the next two months, at which time we hit the debt ceiling, & things could get interesting...

the unemployment rations extension that's part of the tax bill is just an extension till next Dec 31 of the qualifying dates for the four tiers of rations that have been on & off all year...it doesnt do anything for those who have been unemployed since the depth of the recession, the so-called 99ers, or for those living in a state not eligible for all four tiers of rations...i've included a graph below (click to enlarge) that is illustrative of this problem...as you can see from that graph, the majority of the layoffs started occurring just under 99 weeks ago, and as those laid off then reach that 99 week threshold, they will be without any safety net...

treasury bond prices continued to erode this past week, and the benchmark ten year yield is now nearly a percent higher than before QE was initiated...30 year mortgages now average 5 1/8 plus a point, which means that a home buyer's monthly payment on a fixed 30 yr mortgage on the same principal would be 9% higher than in october...here's a set of charts tracking those benchmark interest rates...the spread between corporate junk bonds and treasuries is now the lowest since 2007, but yields on top-rated tax-exempt securities due in 30 years are climbing twice as fast as those on U.S. Treasuries, reaching the highest level in almost 16 months; part of this is due to the expiration of the build america bonds program from the original stimulus package...for states & municipalities, this means the cost of their borrowing now averages 19% higher than october... i dont usually follow weekly wiggles in the markets, but im mentioning the T-bonds market again because they're the best litmus test i have for the effectiveness of QE, and because theyre a barometer for how the tax cuts are being received by the funders of the US debt...ie, foreign purchases of long term US assets totaled $27.6 billion during the month, compared with net buying of $77.2 billion in september...there are some apologists now opining that the higher interest rates are a sign of recovery, but none of them said that was what was supposed to happen when QE was introduced... if high interest rates are a sign of recovery, life must be a real bowl of cherries in greece & ireland...one would think they would see their scheme is producing unintended consequences, but the FOMC statement was unchanged, so the Fed is clearly not planning to reverse itself...

there was some celebration because retail sales ex-gasoline have now hit a new nominal high; yet we have ten percent unemployment, 20% if you count those underemployed...one out of six have been unemployed in the last 18 months, and 17% are working in a lower paying job out of their field...so who could be pushing retail sales back up?  for the most part, it must be the same people who will be getting an average of $129,000 in tax cuts when the bush cuts are renewed...maybe if we all get lucky, they'll trickle down on the rest of us...

the financial crisis inquiry commission, a bipartisan investigation created by an act of congress in may 2009, took an orwellian turn & splintered into partisan disarray this week when the republican members walked out after their attempt to ban the phrases “Wall Street” and “shadow banking” and the words “interconnection” and “deregulation” from the panel’s final report was defeated 6-4...they will publish their own report blaming the entire financial crisis on barney frank, fannie mae, and poor subprime borrowers who lied on loan applications, thus precipitating the housing bubble in the US, canada, spain, ireland, australia and the rest of the world, and taking down the unfortunate banks who had  bundled those mortgages into tranches of otherwise AAA products, thus necessitating a multi-trillion dollar bailout...the banksters were just innocent victims, the crisis was all was the result of a socialist conspiracy against the banks...apparently as salve for the banksters wronged by this dirty commie plot, the incoming financial services committee chairman baucus of alabama assured them that it was now washington's job "to serve the banks", and the SEC, which needs to hire 800 new investigators to handle its prescribed job under finreg, apparently will not be funded for those extra hires...

china announced it would further limit supplies & raise export tariffs on certain rare earths starting next year, renewing worries about a supply crunch or the materials necessary for various energy technologies including wind turbines and electric vehicles; facing a diesel fuel shortage, the world's largest energy user boosted net imports of crude oil 26% in november from a month earlier, as china's refiners increased crude processing to a new record; oil prices had been under pressure because it was assumed china would tighten, but they rose when china reversed itself & decided to raise inflation targets instead; copper prices hit a new all time high, as it was revealed that one unidentified company holds at least 90% of the london metal exchange inventory (LME rules force metal lending at fixed rates, so shortages will not occur)

the UN climate summit concluded with an agreement to curb climate change, with $100 billion a year in aid promised to developing nations by 2020, it protects forests and outlined methods to verify cuts in fossil fuel emissions, although no new targets for curbing greenhouse gases were set...the kyoto protocol was not renewed & the agreement is not binding; but they will meet again next december in durban, s.africa to try to make some further progress..the results remind me of similar conferences in the 80s, when it was always decided that further study was needed and a meeting was set for the next year...NASA determined that the 2010 meteorological year, which ended november 30th, was the warmest on land & worldwide in their 130-year record, surpassing the record set in 2005...worldwide, november was 0.96˚C warmer than the benchmark 1951 to 1980 average ...& in case you're wondering why its been so cold recently, we're under the influence of a negative arctic oscillation, which dumps cold air into the eastern US and drives the warmer air northward; hudson bay was still 90% ice-free at the end of november & greenland has been 18°F above normal...i've been on this case a while, but i cant get too excited about climate change anymore...there are more immediate problems facing us than the environment, and i think the climate change story is already written and irreversible, and whoever's still around just have to deal with it when manhattan floods in 50 years...

there was a major summit of the 27 members of the EU on thursday, where they pledged to do whatever is required to defend the euro, but no details of what that whatever might be were forthcoming; the E-bond proposal was blocked my the northern countries, & despite calls by ECB president trichet for maximum flexibility, no increases in the EU’s €440bn rescue fund were announced; operating autonomously, just like our Fed, the ECB stepped up purchases of peripheral country bonds by nearly 50% this past week and planned to double its capital base in preparation for dealing with nearly €300 billion ($400B) in total refinancing that will be needed by spain next year; portugal worried that with the "avalanche" of debt to be issued next year, it might get shut out of the bond market...moody's downgraded irish debt five notches, and put spain on credit watch...just about the time that the general strike in spain was winding down & air & ground traffic there was being restored, greece was hit with its seventh general strike this year, shutting down factories, bus & truck transport and the athens airport...widespread firebombing & clashes with police broke out in the city...similar riots broke out in rome when the conservative prime minister survived a vote of confidence in the italian parliament, with 90 people, including 50 police, treated for injuries...as words are insufficient to describe the rioting, here's a link to videos of Riots in Athens and Rome

Unemployment, here come the 99ers

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This graph shows the change in payroll jobs each month. The peak job losses were in early 2009 - and 99 weeks is just under two years - so many of those people will be exhausting their benefits over the next few months. click graph to enlarge>>>>>>

 

 

 

the above are my weekly comments that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, mostly from the aforementioned GGO posts, contact me...

plastic bag

This short film by American director Ramin Bahrani (Goodbye Solo) traces the epic, existential journey of a plastic bag (voiced by Werner Herzog) searching for its lost maker, the woman who took it home from the store and eventually discarded it. Along the way, it encounters strange creatures, experiences love in the sky, grieves the loss of its beloved maker, and tries to grasp its purpose in the world.
In the end, the wayward plastic bag wafts its way to the ocean, into the tides, and out into the Pacific Ocean trash vortex — a promised nirvana where it will settle among its own kind and gradually let the memories of its maker slip away.

(in case you’ve forgotten about the pacific ocean trash vortex, see here…)

Monday, December 13, 2010

the mcconnell-obama plan

unless you've been living under a rock all last week, you certainly must have heard of the tax cut plan obama (R-white house) negotiated with sen. mitch mcconnell, representing the 42 member republican majority in the senate; basically, GOP/obama plan is a agreement to renew all the bush tax cuts for the rich for two years so that they can be made permanent when there are fewer democrats around; it also keeps the dividend & capital gains taxes at 15%, exempts all estates under $5 million from the estate tax, allows businesses an upfront deduction for equipment purchases, in lieu of depreciation, for 2 years, extends some tax credits that were part of the 2009 stimulus, extends unemployment rations for those who have been unemployed for 26 weeks for up to 13 more months, and substitutes a 2% cut to payroll taxes for the expiring making work pay tax credit...it'll cost something in the neighborhood of $900 billion, which is more by itself than many of the deficit cutting plans so popular last month would have cut from the budget...

while i was somewhat ambivalent about it when it was first made public, the more i've learned as the week progress, the more bitter its taste has become... much of it disturbed me immediately, especially bush tax cuts & the estate tax exemption, but i vacillated, as it seemed there was no way we could have got unemployment benefits without some kind of deal... so many opportunities to act unilaterally were squandered before the midterms; everyone knew the bush tax cuts were to expire, so even a year ago this could have been taken up while everyone was otherwise distracted by healthcare reform, before we got backed into this corner, and an entirely middle class tax plan could have been put in place before the waters got muddy...

some promoters of the GOP/obama plan are calling it a stimulus & jobs creating bill...but when you think about it, it's really a status quo bill, in that it leaves in place much of the policy has been in place for this past year...you can argue that without it, GDP might decline and unemployment rise marginally, but to argue that it adds anything to what we already have in place is a stretch....we you consider that about $129 billion of it will go to the richest million americans, or about $129,000 for each, the jobs it might create are those for cleaning ladies, nannies, gardeners & upscale retail clerks...for the most part, its all going into consumption, which is the last thing we need...we'll be borrowing from china to fund this so that we can buy their merchandise...at least the unemployment rations stand a chance of being well spent, at midnight at walmart, on milk, bread and baby formula...

there are better ways to stimulate:  when the first stimulus was being discussed, Mark Zandi, chief economist for Moody’s, calculated which stimulus programs give the most bang for the buck in terms of the economy:

as you can see from his bar graph, except for the unemployment rations & the payroll tax cut, everything else in this GOP-obama plan has a negative economic return...

& there are other problems; one is the payroll tax cut, which will decrease funding for the social security trust fund by $120 billion annually, giving the next catfood commission more ammunition when they go after it next time...also, by substituting the payroll tax cut for the making work pay tax credit, those families making less than $40,000 annually will actually get less of a tax cut than they did these past two years...on the other hand, those making over $95,000 who were ineligible for 'making works pay' will now get that extra 2% cut..

another problem is that the stimulus funding to the states will be withdrawn, a stealth GOP plan to bankrupt populous democratic states and break their public employee unions...another problem for the states comes from the estate tax exemption; most states had written estate tax collection assumptions into their budgets, which now wont materialize' the tax foundation estimates just over 9000 estates will now be taxed next year under this bill, rather than the 82,000 that would have been taxed without this action..

when and if this bill is passed it will do nothing to help the million and a half americans who've been out of work for more than 99 weeks, and since there are 6 million who havent worked in a year, with a 13 month rations extension more could fall thru the safety net as the year progresses...estimates are that over 4 million will still lose their rations over the next year...

as of friday, democrats in the house were almost universally opposed to this bill, but many of the objectors in the senate had already been bought off with a raft of earmarks...so far, ive read of subsidies, grants or other benefits for wind and solar power, liquid coal fuels, online poker (to be run from nevada), ethanol (45c/gal), biodiesel ($1/gal); there are also benefits included for everything from the film and television industries to mining companies & rum producers...noone, not even congress staffers, really knows what's all in the first draft of the bill set to be voted on monday, but as far as i know, there isnt yet a cornhusker kickback or louisiana purchase, but with hundreds of congressmen who's votes have not yet been bought and paid for, who's to say what ornaments will be added to this tax cut tree before christmas...

[Fed]

krugman and others have pointed out that most of these tax cuts are now scheduled to expire in 2012, which poses the same problem congress has had with dealing with them this year; any attempt to rationally rescind them will run into election politics, and no one will want to take the blame for necessary tax increases going into the election; ... i have no idea what the outcome of our fiscal dilemma will be; but its hard to the believe the Fed will print money for congress to spend for all eternity...

and it was also obvious to the bond market that this mcconnell-obama plan is counter-productive to getting our fiscal house in order; in the two days after it was announced we experienced the worst sell-off of US notes & bonds since the lehman collapse; ill include here a chart for the movements in ten year Treasuries, which are the benchmark for mortgage rates and bonds worldwide, to show you the damage...5-year notes were similarly hit, up 63bp and 30-year notes were up 30bp; some mortgage rates are a full percent up from their october lows...similar losses were experience by japanese, british and european bonds (recall that bond prices go down when yields go up)...a german bond auction failed to attract sufficient buyers for the 4th time in 2 weeks as 20% of the proposed offer had to be withdrawn...

as you can also see on the chart to the right, interest rates have been rising almost since QE2 has begun; some apologists for QE2 say thats good, it means inflation expectations will spur growth...you can believe that if you want, but try telling it to a potential home buyer who is suddenly faced with the prospect of paying nearly a percent more for a home loan...

the above is from the weekly comments that accompany my sunday morning links mailing, which in turn is selected from my weekly blog post on the global glass onion; that blog contained nearly 100 links to news & commentary regarding that plan this past week; you can find those in the first third of that post…if you’d be interested in getting my weekly emailing of selected links, mostly from these GGO posts, contact me...

Monday, December 6, 2010

notes & comments on the week ended Dec 4th

i was almost stunned by the november unemployment report: only 39,000 jobs were added and the rate was up to 9.8%...im usually more bearish than the average bear, but i have to admit the severity of the reversal surprised me...new claims for unemployment had been trending down, almost all the regional Fed reports as well as ISM surveys had been positive, so at worst, i expected a neutral report...but i can still offer my usual positive spin; if you recall last months positive report, i noted that in part it was due to early seasonal retail hiring; well, this month that normalized and, due to the normal seasonal adjustment, 28,000 more jobs evaporated; there have really been something on the order of 300,000 season hires so far this year, and the adjustment parallels what BLS has determined to be normal, thereby reducing employment; this is all reversed in january, when those seasonal temps are let go, and the figures will adjust for that too, so january may well look positive even when all 300,000 are let go...anyway, the complete numbers & charts are among the first few links below, so you can get the details there...i just want to focus on one number; thats the 6.8 million american that have been unemployed for over 26 weeks...on nov 30th, the unemployment stipends for those long term jobless expired, and it's expected that rations will run out for 2 million of them by the end of the year...as the tiers of rations that each are in run out, more will be added each week thereafter...and to those without any safety net, we should add the 1.3 million who have been without work for more than the maximum 99 weeks, a number growing every week now that we've passed the 2 year mark for the crisis...as it stands this weekend, the democrats are trying to make a deal; the republicans get the bush tax cuts for the rich, the people get unemployment rations re-instated...if such a deal can be worked out, a million dollar CEO would get $46,000 in benefits, the richest 0.1% of taxpayers would get an average tax cut of $370,000 -- and the unemployed would get a $290 a week ration...but that aint even a done deal, as republicans have already said that they'll block all activity until the bush tax cuts a for the rich are extended...if the rations dont get passed, this would be a good time to start thinking about a donation to a food pantry, hunger center or homeless shelter, because they'll sure be needing all the help they can get...and it aint looking up either, because according to the challenger job firm, corporations are planning the most job cuts that they have in the past 8 months...

deficit-pig-eating-bush-tax-cuts

prior to the GOP imposed gridlock, the senate voted for the 11th time to postpone for one month a scheduled 23% cut to physicians treating patients under medicare, that would have been imposed under a 1997 law which attempted to tie doctor's pay to inflation; they also passed a food-safety bill pushed by agri-business which would control trade in home-grown produce, but due to a turf violation of a constitutional provision requiring that tax provisions originate in the house, house democrats are expected to block it by a legislative maneuver...oh well, at least there wasnt anything important congress had to do before the holiday recess..

the biggest news this week was what happened over two years ago...to partially comply with the 'audit the Fed' provisions in the dodd-frank reform bill, the Fed released the details of three of the Fed’s six emergency facilities which were run by the Fed during the financial implosion of 2008...taking toxic junk as collateral, the Fed sent out it's worldwide fleet of money-dropping helicopters & loaned or otherwise made available $3.3 trillion to banks, hedge funds, the international wealthy & elite, and even corporations like Caterpillar, Harley-Davidson, General Electric, McDonald’s, Toyota and Verizon...of the top 11 recipients of Fed cash, 6 were foreign banks...as dirty as all this laundry is, the Fed is still keeping the details of three of its facilities secret, ostensibly because it would damage the reputations of some mega-banks...links to the articles detailing these programs are right at the beginning of this weeks blog post..

as was expected, the simpson-bowles deficit control plan failed to get enough votes to send it to congress, but all the press it has garnered over the past month has spawned a raft of proposals with the same general objective; last week the Rivlin-Domenici (Bipartisan Policy Center) plan was released; & this week, a consortium of progressive groups released their plan, the Citizens' Commission On Jobs, Deficits And America's Economic Future released theirs; Think 2040: a Blueprint for the Millennial America, a college based plan, was developed by young people, and Nobel prize winning economist joseph stiglitz also released an alternate budget plan...opposing any plans for immediate deficit reduction, both ben bernanke and vice-chairman janet yellen called for additional fiscal stimulus (without further elaboration), saying that quantitative easing alone couldnt be counted on to lift the country out of the recession....

investigations into mortgage fraud and MBS probes continued, with Fed governor tarullo testifying that she ees big put-back costs for banks, but declining to opine as to if the problems are a systemic risk... the double-dip in housing prices has officially begun with the release of the case-shuller index for sept, covering the 3 summer months, and finally gaging the impact of the end of tax credits...U.S. home prices fell 2% over the previous release, and indications are for further prices erosion going forward as the months of inventory on the market remains in double digits...

the EU imposed rescue of ireland was completed this week, and the irish were forced to pledge their €17.5 billion public pension fund as part of a €85 billion rescue package of irish banks to bail out british and german banks...there was no haircut for the bondholders as had previously been hinted at...part of the problem with bond haircuts is bank interconnectedness; a 20% haircut on greece, irish, spanish & portuguese bonds that french banks are exposed to would wipe out french bank equity....so the package didnt solve the contagion problem, as by mid-week bonds of ireland, portugal, spain, belgium and italy were all at new high yield spreads from the benchmark german bonds...by the end of the week pension funds in hungary & france were also seized by their respective governments...to break the panic in the bond markets, the ECB started buying peripheral debt & offered "unlimited cash" for 3 Months at 1%...analysts expected the intervention might eventually be as much as 1 to 2 trillion euros, or about $2.6 trillion dollars, four times the size of our Fed's QE2 program...but the ECB siad it's not the same as QE, as their bond purchases would be sterilized by otherwise removing liquidity from the markets...ive tried include a representative selection of links to this here, but there's probably at least six dozen on the euro-mess at the end of this week's blog post, if you want to see them all...overall, bond markets experienced their worst month in november since the lehman collapse, with even investment grade bonds such as walmart getting hit from euro-contagion

a new study of global feedback mechanisms published by the oxford physics department to coincide with the start of a new round of international climate talks in cancun predicted global temperatures could rise 4C, or 7.2F degrees by 2060...largely due to the rising release of greenhouse gases from the tundra & arctic ocean, this would cost up to a billion people their homes, disrupt weather, rainfall, & crop yields, and require an annual investment of $270 billion to protect major cities against rising sea levels...a lot of people are gonna be surprised when they find out that gaia doesnt do bailouts...

the above are my weekly comments that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, mostly from the aforementioned GGO posts, contact me...

200 countries, 200 years, 4 minutes

not to be continued…