Sunday, July 4, 2010

The U.S. Economy is Falling. Towards another Credit Collapse?

The Fed says US unemployment is likely to stay high for a long time, and that justifies zero interest rates indefinitely.

The June Chicago Purchasing Managers Index was 59.1 vs. 59.7 in May. The employment component rose to 54.2 from 49.2 in May. New orders fell to 59.1 from 62.7.

Homebuilder Lennar is cutting new home prices 15% as new orders fell 10%. KB Builders said new orders fell 23%, as new home sales fell 32%.

The MBA Purchasing Applications Index fell another 3.8% week-on-week and was 36% lower year-on-year.

The housing market is in serious freefall with builders scheduled to increase units by 535,000 this year. As sales fall so will big bank balance sheets. That means we are facing another credit collapse.

The US stock market seems to have a case on indigestion. The Dow continues to struggle just above 10,000 and is getting ready for another test of recent lows, which we believe could very well be broken. Markets worldwide share the downward pressure. We predicted a lower Chinese market in September and it has since fallen 23%, as China prepares for the bursting of their recent real estate bubble caused by the injection of $1.8 trillion into the economy. It could be that debt restructuring could be needed by the five PIIGS of the euro zone. The elitists are talking in terms of five years when that problem may have to be faced over the next six months to a year. There is the call for great fiscal centralization and the final death of sovereignty. Europe did not do well for ten years; they just hid their problems, much as other nations have. The euro has proven to be another unnatural creation engineered to bring about a world currency.

As sovereign debt problems rage across the world financial scene, the prices of stocks and commodities are fading and bonds could be topping out. Who would be willing to accept a yield of slightly under 3% for a US Treasury note? In addition, commodity currencies are under pressure. The dollar remains relatively firm after having fallen to 85.42 on the USDX from a recent high of 89. In that process the dollar cold be completing a head and shoulders, which could in time portend a much lower dollar. There are certainly lots of uncertainties out there, as volume increases each time the market falls, a sign that the natural direction is downward. AAA companies have done well in the recent past in part due to plenty of cheap money. In the second half of the year their earnings should begin to fade as GDP falls into the minus column. That fall can be stopped if more stimulus is added or if the Fed injects $2 trillion more into the economy.

The unemployed won’t get extended benefits, but the bankers and Wall Street got most of what they wanted in the financial reform package. That includes making the Fed, which is privately owned, into a tyrannical, financial monopoly. The unemployed don’t contribute to campaigns, Wall Street and banking does. The reality is special interest money controls our House and Senate, and that is why incumbents have to be kicked out of office in November.

The $8,000 real estate stimulus is gone and sales are falling in spite of 30-year fixed rate loans at 4.69%. Inventory and shadow inventory grows with each passing day. It should be noted that Fannie, Freddie, Ginnie and FHA are buying and guaranteeing 95% of mortgages, a good part of which are subprime. The $860 billion stimulus looked good and sounded good, but in part it was neutralized by cutbacks in state spending. It simply wasn’t strong enough to overcome underlying negative factors. That left the Fed with the job of keeping the recovery going. Even spending more than $2 trillion couldn’t ignite a permanent stage of growth. Worse yet, the refusal of the Senate to extend unemployment benefits will put 1.3 million Americans in a dire situation. It’s food stamps and nothing else. Americans for years have been just weeks from being broke. Now many of then are broke. Finding a place under a bridge is going to become more difficult.

GDP for the first quarter was 2.7%. That is half of the 5.6% posted in the 4th quarter and 1.7% of that 2.7% gain was due to stimulus. Final sales were 0.8% of that 1%. YOY real final sales grew only 1.2%, making this the weakest recovery in 100 years. The foundations of the economy are trembling. The 2nd quarter’s official GDP growth should be ½% to 1-1/2%, the 3rd quarter could be even and the 4th quarter zero to minus 2%. The Congress and Senate probably won’t approve more stimuli, so the Fed now has the entire job of keeping the economy in 2011 from collapsing. If the G-20 meeting told us anything it’s that it is now every man for himself. Europe is at least for now not cooperating with the US. In Europe it’s austerity and bailouts along with higher taxes. That will bring on depression and bankruptcy. In the US it’s the Fed injecting money and credit and higher taxes that will bring on higher inflation and then collapse and that won’t work either.

The US should cut taxes and have government cut costs 30%. Yes, we know unemployment will rise, but it is going to rise anyway. This would cause a much slower slide into depression, which would be far more manageable. That may be small consolation, but it beats plunging. Under classical economics the system has to be purged and so it will be. The trick is to make it as palatable and less damaging as possible. We have to laugh watching the “experts waving their magic wands and blaming the austere Europeans for the wavering in the US economy. Most of these pundits are legends only in their own minds. What is absent is dissenting opinion and that is the way it will always be until GE goes under and with it CNBC. Then we can return to the framework of FNN and get objective reporting instead of an elitist controlled cheering section. Some of the players are now doing ads for the Council on Foreign relations. The experts and CNBC are all well aware of what the message is and that is propaganda. All are nothing but word merchants. This attempt at recovery was vastly different than a normal manufacturing recovery. It is a financial recovery. Incidentally, if you didn’t notice we have hardly any manufacturing left. That became the victim of free trade, globalization, offshoring and outsourcing. That has caused us the loss of 8 million jobs and has allowed transnational conglomerates to hide $1.4 trillion in profits offshore depriving America of taxing those slave labor profits, which aggregate about $500 billion. Remember readers that this exercise is to enrich these companies and the financial sector and to keep Illuminist companies solvent. The economy is rolling over and even the public realizes it. Consumer confidence figures just fell from 62 to 52, so that should tell you something. The FOMC is running in circles not knowing what new trick to pull out of the hat. We have just experienced almost three years of de-leveraging and the problem is yet to be solved. All the Fed has done is give companies money to keep them solvent. The problem is still there and the economy is more fragile than before. CNBC parades their guru’s across the stage telling us how everything will be all right. Last Wednesday they had on Jon Corzine, former CEO of Goldman Sachs, who as governor of New Jersey left the state in a shambles, after being ejected from office due to his involvement with unions and disgusting personal affairs. These are the kind of people the elitists want us to listen to and follow. The stock market is finally figuring out what is going on and is heading down with giant justification. The corporate earnings will fall and economic activity will slow dramatically.

It wasn’t long ago we saw the US 10-year T-note at 4%. It was then apparent to professionals that the market was in trouble and that funds would be escaping into bonds and gold. That is what has happened. We do not find this a reason to buy dollar denominated bonds. We expect the dollar to fall in value against other currencies and gold. For those who follow technical patterns the dollar USDX chart is in a massive head and shoulders, which will prevail to the downside in the intermediate future.

May saw $1 trillion in the value of stocks wiped out in minutes. The market action has been so volatile over the last 1-1/2 years that once the market rallied back the public began to leave. Millions began an exodus that has since been filled by black box trading and government’s blatant intervention. As we write the S&P and Dow are in the process of breakdown, which should soon carry them lower. During May we saw the largest outflow in 18 months. Who can blame them shares have lost 55% of their value in 22 months despite the bear market rally of the past year. We are sure the game that was being played by Wall Street and banking, which on May 8th, plunged the market almost 1,000 Dow points in a half hour, had to have terrified investors. $1 trillion was lost in 30 minutes and regulators are still “investigating.” We spent 28 years on Wall Street; they knew within 5 minutes what was going on.

Another factor pulling the market lower is not only lower GDP and earnings, but also the specter of higher taxes in 2011, particularly an increase of 5% in long term capital gains taxes from 15% to 20%. It is insanity the Democrats want to go ahead with the increases.

Weakness is becoming more apparent in the US economy. Retail sales fell 1.2% in May. Business conditions in NYC from ISM fell to 69.3 from 89.9 in May, the largest one-month decline on record. The six-month outlook fell to 69.6 from 84.2. NYC debt and deficit are very high as are those of many cities and states.

As the market falls the opportunities for capital gains disappear and with them the chance for business investment. Business is in fear and are not hiring. Why should they as productivity increases 3% to 6%. Besides getting money from banks is very difficult if not impossible. The lenders and financial institutions have been bailed out, but the citizen hasn’t been. If Main Street doesn’t prosper neither can Wall Street.

On the exterior we see the BP false flag operation and all the negativity it engenders. Hundreds of thousands have lost their jobs and businesses. State, County and cities are broke. After doing little or nothing about the BP episode the President pushes hard for carbon taxes and Cap & Trade. We have the pending passage of financial reform, which makes the Federal Reserve a financial dictatorship. A planned unnecessary war that will engulf the whole world is about to begin in the Middle East. Unless the Fed soon re-liquefies the economy it will collapse into deflationary depression.
We need not tell you about US residential and commercial real estate, which is still falling.

Unemployment increases relentlessly. These warning signs cannot be missed, they are all around you. Do not be fooled by smoke and mirrors, stick with reality.

The federal debt will represent 62% of the nation's economy by the end of this year, the highest percentage since just after World War II, according to a long-term budget outlook released today by the non-partisan Congressional Budget Office.

Republicans, who have been talking a lot about the debt in recent months, pounced on the report. "The driver of this debt is spending," said New Hampshire Sen. Judd Gregg, the top Republican on the Senate Budget Committee. "Our existing debt will be worsened by the president's new health care entitlement programs…as well as an explosion in existing health care and retirement entitlement spending as the Baby Boomers retire."
At the end of 2008, the debt equaled about 40% of the nation's annual economic output, according to the CBO.

The report comes as the National Commission on Fiscal Responsibility and Reform meets today. The group, created by President Obama, is expected to issue recommendations in December to curb the debt – a point Democrats raised today.

The CBO report "reinforces the importance of the work being done right now by the president's fiscal commission," said Sen. Kent Conrad, D-N.D., who chairs the Senate Budget Committee. "We simply cannot allow the federal debt to explode as envisioned under CBO's projections. The economic security of the country and the quality of life for our children and grandchildren are at stake."

Thirty minutes after the NYSE open the Confidence Board reported that US consumer confidence plunged to 52.9 in June from May’s 62.7; 62.5 was expected. But that’s not the entire story. May consumer confidence was revised lower, to 62.7 from 63.3. So the June decline is dramatic.

The magnitude of the confidence decline shocked investors and traders on Tuesday. Hopefully the Confidence Board didn’t miscalculate previous US consumer confidence like they did with China.
Consumers’ short-term outlook, which had improved significantly last month, turned more pessimistic in June. Those anticipating an improvement in business conditions over the next six months decreased to 17.2 percent from 22.8 percent, while those expecting conditions will worsen rose to 14.9 percent from 11.9 percent.

Today’s ADP Report does not include the effects of federal hiring for the 2010 Census. Hiring for the census may have peaked in May. For this reason,

Friday’s figure for the change in nonfarm total employment reported by the BLS might be weaker than today’s estimate for nonfarm private employment in the ADP Report.

If final demand is lacking, the inventory buildup that accounted for 69% of Q1 GDP will drag the economy lower in Q2 and perhaps Q3.

The NY Time’s Gretchen Morgenson and Louise Story: Unknown outside of a few Wall Street legal departments, the A.I.G. waiver was released last month by the House Committee on Oversight and Government Reform amid 250,000 pages of largely undisclosed documents…

The documents also indicate that regulators ignored recommendations from their own advisers to force the banks to accept losses on their A.I.G. deals and instead paid the banks in full for the contracts.
On Nov. 6, 2008 after a New York Fed official spoke with Lloyd C. Blankfein, Goldman’s chief executive, about the Fed’s A.I.G. plans, the official noted in an e-mail message to Mr. Blankfein that he appreciated the Wall Street titan’s patience. “Thanks for understanding,” the regulator said.

For its part, the Treasury appeared to be opposed to any options that did not involve making the banks whole on their A.I.G. contracts. At Treasury, a former Goldman executive, Dan H. Jester, was the agency’s point man on the A.I.G. bailout. Mr. Jester had worked at Goldman with Henry M. Paulson Jr., the Treasury secretary during the A.I.G. bailout.
Mr. Jester, according to several people with knowledge of his financial holdings, still owned Goldman stock while overseeing Treasury’s response to the A.I.G. crisis. According to the documents, Mr. Jester opposed bailout structures that required the banks to return cash to A.I.G.

In the end, the Fed successfully kept most of the details about its negotiations with banks confidential for more than a year, despite opposition from the media and Congress.
But two people with direct knowledge of the negotiations between A.I.G. and the banks, who requested anonymity because the talks were confidential, said the legal waiver was not a routine matter — and that federal regulators forced the insurer to accept it.

Unless A.I.G. can prove it signed the legal waiver under duress, it cannot sue to recover claims it paid on $62 billion of about $76 billion of mortgage securities that it insured. It was not until a Congressional committee issued a subpoena in January that the New York Fed finally turned over more comprehensive records. The bulk remained private until May, when some committee staff members put them online, saying they lacked the resources to review them all.

U.S. private-sector firms created 13,000 more jobs in June, according to the ADP employment report released Wednesday. Job growth was "disappointingly weak," said Joel Prakken, chairman of Macroeconomic Advisers, which produces the report from anonymous payroll data supplied by ADP. Private-sector job growth was revised higher in May to 57,000 from 55,000 earlier. Economists are expecting nonfarm payrolls to fall by 130,000 when the government reports its estimates on Friday, including the loss of some 250,000 temporary workers at the Census Bureau. Private-sector employment has increased five months in a row.

Homebuyers would get an extra three months to complete their purchases and qualify for a generous tax credit under a bill overwhelmingly passed by the House yesterday.

Under current law, buyers who signed purchase agreements by April 30 have until today to close on the sale to qualify for tax credits of up to $8,000. The bill would give buyers until Sept. 30 to complete their purchases.
The extended deadline only applies to people who signed purchase agreements by April 30. The National Association of Realtors estimates that about 180,000 home buyers who already signed purchase agreements are likely to miss today’s deadline.

“We owe this to the people who have essentially followed the rules who are caught by a closing date,’’ said Representative Sander Levin, Democrat of Michigan and chairman of the House Ways and Means Committee.

The bill passed 409 to 5. It now goes to the Senate, where majority leader Harry Reid, Democrat of Nevada, has sponsored a similar measure.

The popular tax credit has helped to stabilize the nation’s slumping housing market.

We are now at the point where one can only sit back and cackle as the insanity unravels. The president earlier agreed with his supervisor that the Economy is doing swell on a day when the market posted the 5th highest TRIN rating in history, the ECB is saying all is well even as Europe is about to implode, and now, S&P has just announced it has put Moody's on credit watch negative, the reason: "We believe there may be added risk to U.S.-based credit rating agency Moody's business profile following recent U.S. legislation that may lower margins and increase litigation related costs for credit rating agencies." Just so you understand what is going on here - S&P: a credit rating agency, is downgrading Moody's, a credit rating agency, on concerns financial regulations will impair credit rating agencies. Well, if "suiciding" your chief competitor is the best way to approach this situation, whatever works... Next week, Moody's downgrades S&P, followed by another downgrade of Moody's by S&P, until both companies bankrupt each other with a mutual D rating.

The latest IMF Currency Composition of Official Foreign Exchange Reserves report was just released. In the quarter ending March 31, the biggest relative drop occurred in central bank holdings of Dollars, declining as a percentage of total reserves from 62.2% in Q4 2009 to 61.5% in Q1 2010. This is the lowest ever relative holding of US Dollars by foreign banks. Oddly enough, the euro was not the biggest beneficiary of this loss of confidence in the dollar (it also declined on a relative basis by 0.1% as a % of total holdings to 72.2% in Q1), but the "Other" currency category. We assume that the Chinese Yuan is the dominant currency in this particular basket. Other reserves increased from 3.1% of total to 3.7% in just one quarter. Central banks are starting to rotate holdings out of Dollars (and after this quarter, certainly out of euros) and into non-traditional, non-developed currencies. Are China and Russia slowly becoming reserves?

Crunchtime for mutual funds has arrived. On one hand they are getting slammed with the S&P now almost -8% YTD causing a collapse in the funds' own equity values. On the other hand, investors have now withdrawn $30 billion in cash, forcing a feedback loop where selling begets selling, and even more redemptions. Ah, the beauty of a Keynesian system falling apart. And let's not forget that fund cash levels are at all near record lows to begin with. If the market slide can not be contained, and if consumers who already have zero faith in the market retrench even more, it could be the beginning of the end for the fund industry. More relevantly, ICI has just reported $1,248 million in outflows from domestic equity mutual funds: this is the eighth sequential week of outflows since the Flash Crash, and a period during which $32 billion has been redeemed.

Stephen Friedman, a former Goldman chairman who was then head of the audit committee of its board of directors. Goldman’s stock was down 65 percent from its 52-week high during an accelerating global financial breakdown.

Friedman, 72, who is still a Goldman director, bought 37,300 shares at an average of $80.78 each on Dec. 17. Five weeks later, he picked up 15,300 more at an average of $66.61. By yesterday, the stock had doubled to $133.76, giving Friedman a paper profit of $3 million.

Now, the U.S. House Oversight and Government Reform Committee is investigating Friedman’s stock purchases. It wants to know why he was permitted to buy stock in a bank he was regulating as chairman of the New York Fed.

Friedman held both that post and his Goldman board seat when the firm became a bank holding company in September 2008. The Federal Reserve Act forbids an official at the New York Fed in his position from also being a director of a bank or buying its stock.

The same bankers who sold Massachusetts interest-rate swaps that blew up the debt financing for the so-called Big Dig road and tunnel project in Boston costing taxpayers $100 million are getting even more money to fix what they broke.

UBS AG bankers showed up at the Massachusetts Turnpike Authority in 2001 with a solution to a growing deficit at the state agency overseeing the $15 billion project. The bank gave the authority $29.1 million for an interest-rate swap linked to $800 million of Big Dig bonds, an agreement meant to cut the cost of paying back the debt and cover part of the budget shortfall. JPMorgan Chase & Co. and Lehman Brothers Holdings Inc. made similar deals.

The deal with UBS backfired as credit markets faltered two years ago, costing toll payers $36.3 million in extra interest and leading the Zurich-based bank to demand as much as $400 million to end the arrangement when the Big Dig bonds’ insurer lost its top credit ratings.

“There was really no mention of any downside of these swaps,” said Christy Mihos, a turnpike board member from 1999 to 2004 who voted for the UBS agreement. “It was portrayed as a no-brainer that we could not lose.”

Unemployment is likely to stay high for a long time, two Federal Reserve officials said on Wednesday, suggesting the U.S. central bank is in no rush to raise its ultra-low interest-rate policy.
The dovish comments, from Chicago Federal Reserve President Charles Evans and Federal Reserve Governor Elizabeth Duke, came two days before a government report expected to show that U.S. non-farm payrolls fell in June. If that occurs, June will mark the first decline in monthly non-farm payrolls this year.

The Chicago Fed's Evans said the economic recovery is "definitely on," with growth expected at 3.5 percent this year.

But inflation is dropping, and he expects it to run below his guideline of 2 percent for the next three years or more.

Meanwhile, unemployment is at 9.7 percent, "and it's going to be a number of years before it's going to get down to any type of rate that we might almost say is acceptable," he said in a rare 30-minute live interview on CNBC.

Taken together, low inflation and high unemployment mean that the Fed's current accommodative monetary policy is still needed, he said.

The Fed cut interest rates to near zero in December 2008 to help reverse the worst economic downturn in decades, and pumped more than $1 trillion into the financial system with purchases of mortgage-backed assets. Last week, it reiterated a vow to keep interest rates low for "an extended period."

Just before sunset on April 10, 2006, a DC-9 jet landed at the international airport in the port city of Ciudad del Carmen, 500 miles east of Mexico City. As soldiers on the ground approached the plane, the crew tried to shoo them away, saying there was a dangerous oil leak. So the troops grew suspicious and searched the jet.

They found 128 black suitcases, packed with 5.7 tons of cocaine, valued at $100 million. The stash was supposed to have been delivered from Caracas to drug traffickers in Toluca, near Mexico City, Mexican prosecutors later found. Law enforcement officials also discovered something else.

The smugglers had bought the DC-9 with laundered funds they transferred through two of the biggest banks in the U.S.: Wachovia Corp. and Bank of America Corp., Bloomberg Markets magazine reports in its August 2010 issue.
This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers -- including the cash used to buy four planes that shipped a total of 22 tons of cocaine.

The admission came in an agreement that Charlotte, North Carolina-based Wachovia struck with federal prosecutors in March, and it sheds light on the largely undocumented role of U.S. banks in contributing to the violent drug trade that has convulsed Mexico for the past four years.

Refinancing drove total U.S. mortgage applications to an eight-month peak, as loan rates fell to or near record lows, but demand to buy homes sank toward 13-year lows last week, the Mortgage Bankers Association said on Wednesday.

The U.S. housing market continued to deflate after a spring sales spree, fueled by now-expired federal tax credits of up to $8,000, robbed from summer home buying.

The upside is now limited by unemployment stuck near 10 percent, heavy foreclosure supply and pent-up selling from owners just waiting for the right time to put their homes back on the market.
Mortgage refinancing requests jumped 12.6 percent in the week ended June 25 to the highest level since May 2009, as average 30-year mortgage rates slid 0.08 percentage point to 4.67 percent, the industry group said.

In its just released Long-Term Budget Outlook, the CBO has come out with the most dire warnings on the US projected debt to date. In summary, the healthcare spending and the Social Security will consume an increasing portion of the budget and will push the national debt up sharply unless lawmakers act, CBO Director Douglas Elmendorf warned. "CBO projects, the aging of the population and the rising cost of health care will cause spending on the major mandatory health care programs and Social Security to grow from roughly 10 percent of GDP today to about 16 percent of GDP 25 years from now if current laws are not changed." While this does not sound too dramatic, the way it is attained is with the following ludicrous assumptions (which Paul Krugman would certainly call perfectly normal): "government spending on everything other than the major mandatory health care programs, Social Security, and interest on federal debt—activities such as national defense and a wide variety of domestic programs—would decline to the lowest percentage of GDP since before World War II." Good luck with that. In the more realistic, alternative fiscal scenario, the CBO observes that "with significantly lower revenues and higher outlays, debt would reach 87 percent of GDP by 2020, CBO projects. After that, the growing imbalance between revenues and non-interest spending, combined with spiraling interest payments, would swiftly push debt to unsustainable levels. Debt as a share of GDP would exceed its historical peak of 109 percent by 2025 and would reach 185 percent in 2035." The CBO's conclusion is a nightmare to each and every hard-core Keynesian fundamentalist (you know who you are): "the sooner that long-term changes to spending and revenues are agreed on, and the sooner they are carried out once the economic weakness ends, the smaller will be the damage to the economy from growing federal debt. Earlier action would require more sacrifices by earlier generations to benefit future generations, but it would also permit smaller or more gradual changes and would give people more time to adjust to them."

A month ago, Sarkozy was disturbed that Merkel had dared to take the initiative over him and to ban naked CDS trading. Being a stubborn reactionary, this action only prolonged his inevitable decision to do the same (because politicians, being the wise Ph.D's they are, realize fully all the nuances of screwing around with the financial ecosystem). However, looking at this week's DTCC data, we have a feeling he may accelerate his decision to join the CDS-ban team. With a total of 456 million in net notional de-risking, France was the top entity in which protection was sought in the past week. In a very quiet week, where the 5th most active name did not even make it past the $100 mm threshold, France was more than double the number two sovereign - Mexico (we are unclear if this is some sort of contrarian move to the Yuan, which Goldman was pitching as MXN positive, which means traders likely hedged by loading up on Mexican CDS). But what is probably most notable, is the sudden and dramatic appearance of China in the top 3rd position. Welcome China! And after tonight's surprise PMI miss and the resulting market drubbing, we are confident within a week or two, China will promptly become a mainstay of the top 3, and will quickly rise to the top position, where it rightfully belongs. We are also confident those perennial Eastern European underdogs, Romania and Bulgaria will shyly make an entrance in the top 10 next week.

Some interesting action was also seen on the re-risking end, where Italy saw a whopping $1 billion+ in bearish positions get unwound. This is probably the single biggest weekly sovereign re-risking we have seen in months. Nonetheless, without any concrete news out of the boot, we assume this is merely profit taking after numerous week of consistent de-risking. Greece, which nobody cares about, continues to see re-risking, which however in light of this week's new record widened in 5 Year CDS, was somewhat unexpected.

Not shown on the table, but certainly in need of noting, was our very own state of California, which with 377 million in net de-risking, was the 3rd most shorted entity of all. Is the last bastion of "all is well" propaganda about to fall?

In 2004, Bagdikian's revised and expanded book, The New Media Monopoly, shows that only 5 huge corporations -- Time Warner, Disney, Murdoch's News Corporation, Bertelsmann of Germany, and Viacom (formerly CBS) -- now control most of the media industry in the U.S. General Electric's NBC is a close sixth.

The number of people filing first-time claims for unemployment benefits jumped by 13,000 in the latest week to 472,000, the Labor Department reported Thursday. Economists surveyed by MarketWatch had expected initial claims to fall to 455,000. The four-week average of initial claims -- a better gauge of employment trends than the volatile weekly number - rose by 3,250 to 466,500, the highest level since early March.

“With NY State budget woes garnering headlines, some interesting municipal data arrived from New York City yesterday: ISM Business New York City Conditions Index figures for June showed a nasty decline to 69.3 from 89.9 in May, the largest one month decline on record, with the Six Month Outlook index declining to 69.6 from 84.2 (note that May's figures were unusually strong, in large part accounting for this distortion). The employment index rose for the month while working capital data improved. Last night the NY City Council passed a $63.1B budget including $8.92 of bond issuance and significant capital spending cuts. Debt Services for fiscal 2011 are projected at $5.35B and rising to $6.59 by 2014 with a projected deficit of $5.34B in that year. NYC is the largest individual city municipal issue in the US, and, as the going gets tougher there it reflects the looming national municipal debt issues on the horizon.”

As if one needed additional fears about the Chinese bubble popping, with overnight reports that various Chinese provinces are rising minimum wages to quell social unrest, following last night's surprising decline in the China PMI. Here comes CEBM with a very scary outlook on China trade in general, and exports in particular. Well, if nothing else it will sure help the US push its world's worst trade deficit a little higher now that it will have much less to import. From the report: "Our CEBM China export leading indicator has already peaked, indicating that China’s exports are likely to peak soon. Our export model suggests that China’s exports may decelerate from 3Q due to weakening domestic and foreign demand." And here are some bad news for Obama's plan to double US exports in the next 5 years: "As the government has unofficially adopted normalization strategy away from the stimulus we are likely to see property, infrastructure, and manufacturing investments lose steam in the second half. The deceleration of FAI may put downward pressure on China’s imports." Have no fear - with its record budget spending, NASA will soon discover intelligent and wealth life on Mars, which will be more than glad to import all of America's financial innovation and three other things we export.

President Barack Obama will guarantee former Afghanistan commander General Stanley McChrystal a four-star pension despite firing him last week over comments disparaging civilian leaders.
McChrystal was sacked about a year after receiving his fourth star -- half the time normally necessary to qualify for a four-star general's retirement income of $12,475 per month, before taxes, according to Pentagon estimates based on his 34 years of service.

"We will do whatever is necessary to ensure that he, somebody who has served the country as ably as he has, can retire at a four-star level," White House spokesman Robert Gibbs told reporters.
It was unclear whether Obama might need to issue a waiver.

McChrystal informed the Army of his planned retirement on Monday, a widely expected move after he and his aides enraged the White House by mocking the president and top civilian advisers in an article in Rolling Stone magazine.

In the piece, McChrystal himself made belittling remarks about Vice President Joe Biden and the U.S. special envoy to Afghanistan and Pakistan, Richard Holbrooke. His aides were quoted calling White House national security adviser Jim Jones a "clown."

Had Obama not been willing to assist McChrystal, he would have retired on a three star general's salary of $11,736 per month, before taxes, according to Pentagon estimates, taking into consideration McChrystal's time in the military.

Obama named General David Petraeus to replace McChrystal. During his confirmation hearing before a Senate committee on Tuesday, Petraeus played down hopes for a swift turnaround after nine years of war.

The Baltic Dry Index has fallen for 25 days, the longest decline since August 2005.

Professor John B. Taylor, the highly respected creator of ‘The Taylor Rule’, which calculates an optimal Fed Funds rate, in a WSJ op-ed: The Dodd-Frank Financial Fiasco - The bill all but guarantees bailouts as far as the eye can see, while failing to address real problems like Fan and Fed and our outdate bankruptcy code.

The sheer complexity of the 2,319-page Dodd-Frank financial reform bill is certainly a threat to future economic growth. But if you sift through the many sections and subsections, you find much more than complexity to worry about.

The main problem with the bill is that it is based on a misdiagnosis of the causes of the financial crisis, which is not surprising since the bill was rolled out before the congressionally mandated Financial Crisis Inquiry Commission finished its diagnosis.

The biggest misdiagnosis is the presumption that the government did not have enough power to avoid the crisis. But the Federal Reserve had the power to avoid the monetary excesses that accelerated the housing boom that went bust in 2007. The New York Fed had the power to stop Citigroup's questionable lending and trading decisions and, with hundreds of regulators on the premises of such large banks, should have had the information to do so. The Securities and Exchange Commission (SEC) could have insisted on reasonable liquidity rules to prevent investment banks from relying so much on short-term borrowing through repurchase agreements to fund long-term investments. And the Treasury working with the Fed had the power to intervene with troubled financial firms, and in fact used this power in a highly discretionary way to create an on-again off-again bailout policy that spooked the markets and led to the panic in the fall of 2008…

People may be waking up to the fact that the bill does not do what its supporters claim. It does not prevent future financial crises. Rather, it makes them more likely and in the meantime impedes economic growth.
Because this was not expiration week, Bernanke contracted the Fed’s balance sheet by $13.642B by selling $10.534B of MBS.

Goldman Sachs Group Inc. executives sought to defend the firm’s pricing of illiquid mortgage derivatives during two days of hearings as investigators questioned whether the firm accelerated the financial crisis.
Gary Cohn, Goldman Sachs’s president and chief operating officer, and Chief Financial Officer David Viniar argued that the firm’s prices in 2007 and 2008 reflected what it saw in the market. Financial Crisis Inquiry Commission members questioned whether the investment bank deliberately discounted prices to push markets lower because it had bet on a decline in the value of subprime mortgage-backed debt.

“You guys are net short and you’re driving down prices, are you creating a self-fulfilling prophecy?” Philip N. Angelides, chairman of the FCIC, asked Viniar during yesterday’s hearing. “Were you in fact pushing the market down?”
Viniar, 54, replied that “we never instruct people to mark things down. We mark where the market is.”

Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania, said the episode demonstrates the need for a “neutral, independent source for deriving prices for illiquid securities” that can be accepted by both sides of a transaction and free from the perception that they’re driven by ulterior motives.

Goldman Sachs prices could have been tainted by “subjectivity and self-dealing, because it’s in their interest to mark those prices as low as possible in this case,” Egan said. “Goldman was not only protecting their own position but actually benefiting.”

The federal debt will represent 62% of the nation's economy by the end of this year, the highest percentage since just after World War II, according to a long-term budget outlook released today by the non-partisan Congressional Budget Office.

Republicans, who have been talking a lot about the debt in recent months, pounced on the report. "The driver of this debt is spending," said New Hampshire Sen. Judd Gregg, the top Republican on the Senate Budget Committee. "Our existing debt will be worsened by the president's new health care entitlement programs…as well as an explosion in existing health care and retirement entitlement spending as the Baby Boomers retire."
At the end of 2008, the debt equaled about 40 % of the nation's annual economic output, according to the CBO.

Gov. Arnold Schwarzenegger on Thursday ordered about 200,000 state workers to be paid the federal minimum wage this month because the state Legislature has not passed a budget, but the state controller is refusing to comply.

Department of Personnel Administration Director Debbie Endsley sent the order in a letter to the state controller, who refused a similar order two years ago. The matter is tied up in the appellate courts, leading the controller to say he will abide by whatever final ruling emerges, which could be years down the road. He said he can't follow the order now due to technical and legal issues.

Most state employees will be paid the federal minimum of $7.25 per hour for the July pay period.

Goldman Sachs Group Inc., already under scrutiny from regulators, faced new questions from a congressional commission about whether it aggressively marked down the value of its mortgage-securities positions to benefit a bet Goldman made against the mortgage market.

A bipartisan panel reviewing causes of the financial crisis grilled Goldman executives about valuations of mortgage assets the Wall Street firm provided American International Group Inc. and other trading partners in the mortgage crisis of 2007 and 2008. Documents released by the panel showed Goldman repeatedly valued these securities lower than rivals did, demanding additional money from AIG, which was insuring against losses in the securities. These and other banks' collateral demands strained AIG, which was bailed out by the U.S. government in September 2008.

At the time, Goldman had placed a trading bet with the firm's money against the mortgage market. Lower valuations, or "marks," would have made that bet more profitable. Goldman executives defended their practices. "Our marks were based on actionable prices, informed by market information from comparable transactions," David Lehman, a Goldman managing director, told members of the Financial Crisis Inquiry Commission.
In any case, the questions underscored an unnerving reality in the financial world: Investors have no way of knowing with any certainty the value of many securities. Fewer than half of all securities these days trade on exchanges with readily available price information, making large parts of the U.S. financial markets essentially a hall of mirrors.

Fannie Mae and Freddie Mac, the mortgage financiers seized by the US government during the financial crisis, have paid $635m in fees to banks this year, making them Wall Street’s biggest capital markets customers in the first half of 2010, according to recent analysis.

Fannie and Freddie are now providing financing for more than 90 per cent of the US mortgage market, following the collapse of the market for bonds backed by private sector mortgages.

Fannie and Freddie fund their activities in two ways – by selling their own debt and by buying mortgages and packaging them into securities sold to investors. In doing so, they pay underwriting fees to banks, which amounted to $635m in the first half, according to Thomson Reuters analysis.

As a result, Fannie and Freddie ranked first and second respectively in the Thomson Reuters’ ranking of payers of underwriting and advisory fees in the debt and equity capital markets.

The two entities have often topped the list of fee-payers in recent years. During 2009, however, Fannie and Freddie had ranked behind banks such as Citigroup, Bank of America and Wells Fargo, Thomson Reuters said.
The way Fannie and Freddie sell debt has not changed in spite of the changes in their status. The US government took control in 2008 but does not explicitly guarantee the debt. Decisions on their longer-term status have been delayed until next year.

The status of Fannie and Freddie remains a politically charged issue. Republicans repeatedly tried to refocus the financial reform debate on the need to bring changes to the two mortgage financiers.
The entities sell longer-dated debt in a similar way to banks or companies by hiring banks to distribute the bonds. This is in contrast to US government bonds, which are sold through auctions.

Reflecting the huge volume of debt sold by Fannie and Freddie, the fees are lower than those paid by other financial institutions or companies. Lam Nguyen at Freeman Consulting, which analyses fees for Thomson Reuters, said the agencies paid an estimated five to seven basis points in fees. Companies paid 20-80 basis points, with banks paying somewhere in between, he said.

Mr. Nguyen said in some cases the actual amounts received by banks might differ from the stated fees because of the prices at which underwriters buy or sell the bonds, but this effect could not be properly estimated.
Freddie said it had not made any changes to its fee structures since being taken over by the government. Fannie declined to comment. The biggest underwriters of Fannie and Freddie debt this year were Barclays Capital, JPMorgan, Bank of America Merrill Lynch, Deutsche Bank and Goldman Sachs.

Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in “assets” the government agreed to purchase in the rescue of Bear Stearns Cos. were “investment-grade.” They didn’t share everything the Fed knew about the money.

The so-called assets included collateralized debt obligations and mortgage-backed bonds with names like HG-Coll Ltd. 2007-1A that were so distressed, more than $40 million already had been reduced to less than investment-grade by the time the central bankers testified. The government also became the owner of $16 billion of credit-default swaps, and taxpayers wound up guaranteeing high-yield, high-risk junk bonds.

Private non-farm payrolls rose 83,000, May was revised to +33,000 from 41,000. Manufacturing payrolls rose 9000 and May was revised from 29,000 to 32,000. Unemployment was 9.5% under U3. Payrolls in the service sector rose 91,000 after rising 20,000 in May. Temporary help rose 20,500, while retail hiring fell 6,600. In the goods-producing sector payrolls fell 8,000 and manufacturing unemployment rose 9,000, down from 32,000 in May. The average workweek fell from 34.2 to 34.1 hours.

NY Attorney General Eliot Spitzer sued Marsh & McLennan Cos., the world’s biggest insurance brokerage, alleging the company took “lucrative payoffs’ for steering unsuspecting clients to certain insurers.

Spitzer’s suit also names insurers American International Group Inc., Hartford Financial Services Group Inc., Ace Ltd. and Munich Re as participants in ‘steering and bid rigging.’ Two insurance executives pleaded guilty to criminal charges, Spitzer said in a news release. Insurance shares tumbled.

From the American Bankruptcy Institute: Consumer Bankruptcy Filings up 14 percent through First Half of 2010.

U.S. consumer bankruptcy filings totaled 770,117 nationwide during the first six months of 2010 (Jan. 1-June 30), a 14 percent increase over the 675,351 total consumer filings during the same period a year ago, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). The consumer filings for the first half of 2010 represent the highest total since 2005, when Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act to try and stem the tide of filings, although the number of monthly consumer filings has been steadily decreasing since March.

"Years of rising consumer debt and low savings rates, combined with the housing and unemployment crises, are causing bankruptcy levels not seen since the 2005 amendments to the Bankruptcy Code," said ABI Executive Director Samuel J. Gerdano. "We expect that there will be more than 1.6 million new bankruptcy filings by year end."

The overall June consumer filing total of 126,270 was 8.5 percent more than the 116,365 consumer filings recorded in June 2009.

Excluding 2005, when the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" was enacted (really a pro-lender act), the record year was in 2003 when 1.62 million personal bankruptcies were filed. This year will be close to that level.

California budget nightmare

in 1970 California took in 28 percent of state revenues from personal income taxes. Today, the state pulls in 52 percent from personal income taxes. Massive shift to service oriented state.

The problems for the California state budget are deep and significant and will provide fodder for another politically charged year. California faces a $19 billion budget deficit brought on by falling fund revenues and expenses that still reflect a time of better days. The Governor last week announced that 200,000 state employees would see their wages cut to the minimum of $7.25 (that is, for the exception of practically every group with special benefits so the number dwindles to a handful). The act in itself is merely a political move since pay will be retroactive once a budget is enacted. Yet this is how the gimmicks are played in California. There was also a recent focus on state benefit debit cards being used at strip clubs and casinos although this only reflected a tiny fraction, less than 1 percent of 1 percent of 1 percent this is how the state handles priorities and sensationalizes pennies to ignore the dollars.

The real issues are deeper and no one in Sacramento has come to the table with solutions. First, let us look at the general revenues of California:

The largest source of revenues for the state comes from personal income taxes. This wasn’t always the case. Over half of all revenues come from personal income taxes (52%). With the California unemployment rate at over 12 percent (real unemployment + underemployment is closer to 23 percent) the amount of payroll taxes has plummeted. Sales taxes, which indirectly benefitted from the extraordinary California housing bubble, have now fallen drastically as well. If we go back to even the 2008 fiscal year, we will find that sales taxes came in at $35 billion. Today they stand at $25 billion (a drop of 28 percent). This is to be expected given the high dependence of California on all things housing related.

If we want to examine the decline in the trend, let us look at housing sales at different points and time in the state:

Now this is an interesting chart showing how quickly things changed for California. From 2000 to 2006 the pattern was very clear and held steady. What you need to remember is that during this time, the vast majority of home sales (90+ percent) were organic home sales. That is, these were not distress sales. So each home sold, in many cases also generated another buy. For example, say a family was selling their starter home and moved up to a bigger place. This churn produced new taxes each time (i.e., new assessment on the property, taxes on sales commission, spending from new income etc). Today close to 40 percent of all homes sold were foreclosure resales. This number has trended lower but the amount of funds being generated are much lower.

We also need to remember that the median home price in the state fell from over $500,000 to $250,000. So commissions just by the price cut were halved. This is reflected in spending but also the unemployment rate in the state which is still very high. If we look at select sectors we see clear signs of a minor depression:

Constructions jobs have fallen by over 30 percent from their peak. The finance sector in the state has lost close to 200,000 jobs from the peak. These were high paying jobs based on the housing bubble. Since we know that option ARMs paid good commissions and half are here in the state, how much money in commissions was generated during this past decade? These loans are not coming back and prices are not going to the peak level so structurally the state needs to find other income sources to plug the budget. But the question is, where is this money going to come from?

The state is left with two roads to travel. In one, they can increase taxes to raise revenues but raising taxes without surgical precision will cut deeper into the economy. You can cut more into the budget but this also will cause pain in the real economy since the private sector in the state isn’t hiring at all. In the end, these are the questions California state leaders will need to wrestle with in the summer. Yet the fact that we are already late once again and the gimmicks are out, we know that it is going to be another long and drawn out summer.

People don’t usually pay attention to longer term trends. Yet these happen slowly and progressively. Look at how the California tax structure has changed over the last 40 years:

What does the above shift account to? A large part of the shift occurred because California shifted to a large service oriented state. Many of these services are not taxed through the sales revenue channel. The housing bubble was the perfect culmination of this all. A large portion of the state income shifted from those in the industry churning home sales at higher and higher prices. Yet this was unsupportable and that is why the state finds itself in deeper problems than many other states. No doubt, this recession is impacting the country but few states have the deep structural problems that California will be facing going forward.

The state has increased spending in many areas:

Interesting to see how much money now goes simply to service current debt. Some areas grew way beyond the normal rate of inflation (i.e., corrections, infrastructure debt service , etc) and this has caused spending to jump off the charts. Much of this was hidden with a once in a generation housing boom but now with that gone, where will the money come from? That is the major question that will need to be answered in the second half of 2010.

House Democrats ‘Deem’ Faux $1.1 Trillion Budget ‘as Passed’

Last night, as part of a procedural vote on the emergency war supplemental bill, House Democrats attached a document that "deemed as passed" a non-existent $1.12 trillion budget. The execution of the "deeming" document allows Democrats to start spending money for Fiscal Year 2011 without the pesky constraints of a budget.

The procedural vote passed 215-210 with no Republicans voting in favor and 38 Democrats crossing the aisle to vote against deeming the faux budget resolution passed.

Never before -- since the creation of the Congressional budget process -- has the House failed to pass a budget, failed to propose a budget then deemed the non-existent budget as passed as a means to avoid a direct, recorded vote on a budget, but still allow Congress to spend taxpayer money.

House Budget Committee Ranking Member Paul Ryan (R-Wisc.) warned this was the green light for Democrats to continue their out-of-control spending virtually unchecked.

"Facing a record deficit and a tidal wave of debt, House Democrats decided it was politically inconvenient to put forward a budget and account for their fiscal recklessness. With no priorities and no restraints, the spending, taxing, and borrowing will continue unchecked for the coming fiscal year," Ryan said. "The so-called ‘budget enforcement resolution’ enforces no budget, but instead provides a green light for the Appropriators to continue spending, exacerbating our looming fiscal crisis."

As we reported on HUMAN EVENTS, CBO issued a dire warning about the long term outlook for the budget.

"Yesterday, the Congressional Budget Office rang the latest fiscal alarm with the release of The Long-Term Budget Outlook," Ryan said. "Today, Congress again hit snooze. To avert a fiscal and economic calamity, Washington needs to wake up."

Key points from the House Republican Budget staff on the House Democrats’ deeming resolution:

- This is not a budget. The measure fails to meet the most basic, commonly understood objectives of any budget. It does not set congressional priorities; it does not align overall spending, tax, deficit, and debt levels; and it does nothing to address the runaway spending of Federal entitlement programs.
- It is not a ‘congressional budget resolution.’ The measure does not satisfy even the most basic criteria of a budget resolution as set forth in the Congressional Budget Act.
- It creates a deception of spending ‘restraint.’ While claiming restraint in discretionary spending, the resolution increases non-emergency spending by $30 billion over 2010, and includes a number of gimmicks that give a green light to higher spending.
- It continues relying on the flawed and over-sold pay-as-you-go [pay-go] procedure. Pay-go – which Democrats have used mainly to raise taxes, and have ignored when it was inconvenient – does nothing to reduce deficits or restrain spending growth in existing law.
- Outsourcing fiscal responsibilities. The measure is another hand-off by the Democratic Majority of Congress’s power of the purse – this time relying on the Fiscal Commission created by the President to do Congress’s job.
A full Republican Budget Committee staff analysis of the Majority’s Budget Deemer: "An Admission of Fiscal Failure"

The Real Unemployment Rate: 21.5%

If you’re only paying attention to President Obama, the Bureau of Labor Statistics and the mainstream media, you’d think that the employment situation in America was getting much better.

The BLS reports that the unemployment rate dropped from 9.7% in May to just 9.5% in June. The recovery is well under way if you’re simply looking at headlines.

The fine print, however, tells a different story.

First, for those unaware of what the 9.5% reported rate for June means, it’s referred to by the BLS as the U3, or, the “official” unemployment rate. Here’s a basic definition of the U3:

The official definition of unemployment used by the BLS includes anyone age 16 or older who is not institutionalized and is not currently employed, but able to work, available for work, and actively seeking work.

The official definition of unemployment also excludes certain groups who are sometimes thought of as being unemployed or “underemployed.” Those who would like to work, but who have stopped looking for work - so-called discouraged workers - are not counted in the official definition because they are not actively seeking work. People working part time who would prefer full-time work are also not counted as unemployed because they are working - albeit fewer hours than they would like.

source: OLMIS

You can see the problem almost immediately with the “official” numbers touted by Washington and the talking heads on television. Most mainstream news you watch or read will provide information only on the U3.

They stop short of going to the next BLS number, referred to as the U6. According to John Williams, this is how the U6 is defined:

The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.

This month’s U6 unemployment number? Down from 16.6% in May to 16.5% in June.

Remember, though, that even the U6 is a government manipulated number, so we need to look a little bit deeper to see what the REAL unemployment rate is in America.

John Williams of Shadow Stats runs the numbers each month, and according to his most recent report, we’re actually hovering at around 21.5%. According to Williams, this is how the Shadow Stats “SGS Alternative” is calculated:

The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.

Williams’ unemployment numbers are more than double what Washington is telling us.

June Unemployment

For those intent on preserving their personal and financial well-being, who are you going to believe?

Will you believe that Government Actions Have Prevented Depression, Financial Meltdown, and Martial Law ?

Or are you preparing for the Greatest Depression and potential monetary and financial chaos yet to come?

UK mulling food vouchers distribution

The unemployed whose benefits have been cut off by government will receive food vouchers by charities supported by the government to make up for the cuts in welfare spending.

Secretary of State for Work and Pensions, Iain Duncan Smith, has given his department's executive arm, JobCentre Plus the go-ahead to distribute tickets that can be traded for food parcels.

The Christian charity, Trussell Trust will be in charge of giving out the donated parcels of foodstuffs through its 65 food banks across the country.

This comes as Duncan Smith's department has insisted the plan aims to encourage voluntary charity efforts rather than shirking the responsibility for the poor who are no longer supported by the welfare state to the private institutions.

According to the officials, the food vouchers program will hopefully lead to JobCentre Plus refer its poor clients to locally-based charities for aid.

The new scheme follows a revision of a former Labour policy by Duncan Smith which was designed to make sure JobCentre Plus does not act as a charity that hands out vouchers to people.

The minister reportedly said "Each JobCentre could point people to charities in the areas that are doing these sorts of schemes. That is what we would be looking at".

This is while, director of the Trussell Trust, Chris Mould said more and more of those who go there for help are "on the edge" as they have been deprived of a crisis loan or their welfare benefits in the reassessment process of their entitlement to such rights by the government.

According to food banks staff one reason behind the surge of claimants to charities like Trussell Trust is that the government suspends a person's benefits while his financial situation is being reviewed.

Meanwhile, Department of Work and Pensions has officially announced that it is revising the former regulations banning JobCentre Plus from handing out vouchers.


2.0! Canada: Billion Dollar Cops Take on the Nerf Army

It's Canada Day and raining; fitting for funerals always look better that way. I'm neither naive nor a romantic; I've written too many obituaries for Canadian soldiers needlessly killed fighting the 21st Century version of the Great Game in Afghanistan to harbour still the myths of Canada's good and peaceful intentions abroad.
I've witnessed enough too of the brutality and criminality now common among police forces across the nation to still believe they are a force designed to serve and protect the interests of any but Canada's slim elite, themselves seconded to rule in the interests of trans-national corporations.

We recently saw what amounts to a kind of coronation for the court of the faceless Corpocracy at the G20 summit in Toronto. There the police went to ridiculous lengths to convince the powers behind the thrones Canadian democracy would not prove a hindrance to the global dominion of the few, as represented by turnstile bureaucrats and the courtiers assembled.
The protection of these worthies was merited an expenditure that would, in days past, been sufficient for a NASA shuttle launch, (perhaps an idea for the next planned meetings?).

The three day confab price tag is said to be an amount that, as well as being the rough equivalent of the annual cost of running the state broadcast organ CBC, would also be sufficient to house, at market prices, the Greater Toronto Region's estimated 80,000 under and unhoused citizens for a year.
The majority of that public lucre doled out to as yet unidentified beneficiaries is said to be for "security costs." More than a billion dollars for a weekend's worth of safe conduct for a social soiree that could likely have accomplished better its stated goals using Skype and a laptop.

State and Stated Goals

How can we know if this meeting of ministers of finance and financiers was a success? The rabble, so assiduously kept a long arm's length of the law from the action, must read behind the lines to take any meaning away from this exercise.
The highlight declarations emanating the G20 summit are a commitment of sorts for the world's largest economies to eviscerate the public service, reducing their budget deficits by half, while raising taxes to make good the astronomical debt bubble created by unrestricted investment houses from New York and Toronto to Tokyo, Rome, Paris and London; an approach more than half the nations in attendance think is risky, given the precarious state of the global economy.
And, as with other G20 moments where motherhood funding promises are made, this time the rose-coloured promise is the mother of motherhood issues: Maternal health for the less rosy coloured untermensch. Though a salve looking good on paper, it is as with past summit promises to eliminate poverty in Africa, and to provide AIDS drugs to the poor, likely to be quietly forgotten before the next circus convenes.
So, what can we paying for this take away?

In Toronto: Police brutality, torture, illegal arrest and detention; busted limbs and heads; a trashing of the Charter of Rights and Freedoms; and, the great divide between We the People and They the State Police made painfully obvious.

On the other side: Police used the time and money to stock their already bristling arsenals; and, for intensive bonding and training sessions, where they could share new ways and means to humiliate and subjugate those they ostensibly joined up to serve and protect.

Laying Low the Nerf Army

While the corporate and state presses remained largely supportive of the gross excess of both the financial and social cost of the summit before and during the G20, they have been quick to enjoin criticism now, charging from their bunkers to snipe the wounded.
None are more wounded than Toronto's police chief, who the CBC exposed lying during a press conference about weapons seized from those attending demonstrations, both legal and less so.

Toronto PD called the press conference to reveal to the world why the billion dollars spent was necessary, displaying to the media a wide array of exotic weapons that would outfit nicely a Mad Max remake. There, police chief Bill Blair proudly displayed pistols, rifles, maces, mail armor, knives, gas masks, crossbows, and a chainsaw... Chainsaw!?

You may think you missed the television images of the black clad, masked horror wielding the whining chainsaw through the mass of horrified storm troopers; or perhaps been in the toilet when the chain-mail clad archer was firing crossbow bolts into fleeing crowds of terrified Torontonians during the "street riots." You missed them not; the chainsaws and crossbows were not actually taken from anyone at or near the G20. They were props added to the contraband arsenal, presumably for effect.
No crossbows, no chainsaws: Check.
So, the billion dollar question is: How much of what the Toronto police chief has to say is true? (For the media it seems: Who cares; what's the next story?)
But, as my favourite policeman used to say: "Just one more thing..."

Brian Barrett hails from the shire of Whitby, near Toronto. The 25 year old swain was on his way that cursed day to the city when all was commotion. He wasn't going there to protest, but was armed and ready for battle.
Alas, poor Brian ran afoul of Sheriff Blair's black guard whilst en route to his joust.

Verily, Brian belongs to one of those groups of gamer geeks who love nothing more than to live out their fantasy battles. Dressing up in Medieval costume, they meet in park settings to swing foam swords and axes at each other.

Rightly feeling a-feared for the safety and security of the land, the wise and clever guardians of good Fortress Toronto, on finding Brian furtively walking through Union Station, foam weapons in hand, clapped the rascal in irons, taking from him his vile instruments of destruction.
Poor Brian languished in the Big Smoke's dungeon for hours before his release, but his weapons remained.

On returning home to the shire, what should Brian see on yon boob tube but the wicked Sheriff of Hog Town displaying his wares of war for the world to see, saying of them they disturb the peace of the city.
Sayeth Brian to the scribes then;

"He turns around and states that they are specifically dangerous terrorist items that were solely intended to hurt police. That's unacceptable to me."

Yes, good Brian it is unacceptable to me too. And it is unacceptable Canadians allow liars, thieves, traitors, and blackamoors dismantle the law of the land, the ancient and good Common Law, the Great Charter many fought and died for over the centuries before we inheritors of the decent society arrived.
It is unacceptable we see Canada become a nation where the people are ruled not with justice but are lorded over as serfs, suffering the caprices of the high and mighty.

Enough is Enough

Click this link .......

S. Korea rejects N. Korea's call for joint inquiry into sinking

United Nations (CNN) -- North Korea has called for a joint investigation with South Korea into the sinking of a South Korean navy vessel last March, but the proposal was quickly rejected by Seoul.

In a letter to the president of the United Nations Security Council, the North Korean ambassador rejected the results of a U.S.-South Korean inquiry into the events of March 26, when the Cheonan went down in contested waters. That inquiry determined that the vessel sank because of a North Korean torpedo. Some 46 sailors died when the ship went down.

North Korean Ambassador Sin Son Ho insisted in the letter that his country had nothing to do with the incident.

Sin offered to send North Korea's own investigative team from its National Defense Commission. He went on to suggest that North and South Korea should work together on a joint investigation of the incident and asked for high-level military talks on the subject.

But South Korean Ambassador Park In-kook was quick to dismiss the suggestions. He sent his own letter to the president of the Security Council, expressing confidence in the results of the investigation conducted by the United States and South Korea.

Park also rejected the North Korean offer of high-level military talks. He said the mechanism for discussions between Seoul and Pyongyang has already been established. He added that South Korea has twice asked for talks on the incident through these pre-established channels, and was twice rebuffed by North Korea.

Additionally, Park said the sinking of the Cheonan was a violation of the 1953 Armistice Agreement and that North Korea is a threat to peace and stability on the peninsula.

The Recovery Is Losing Steam

Forget about the drop in the unemployment rate last month. The economic recovery has lost significant steam in the last few months.

Today’s employment report is clear on that score. Job growth in the private sector has slowed — to 83,000 last month and a three-month average of 119,000. From February to April, the private sector added 154,000 jobs a month. (With the Census winding down, the federal government cut jobs last month, which explains the drop in overall employment.)


And unlike in May, when private-sector job growth slowed but the workweek got longer, employers cut hours last month, too. Total hours worked last month fell in June for the first time since February.

Average hourly pay dropped, too, to $22.53 in June, from $22.55 in May. It’s still higher than it was a few months ago — and higher than it was when the recession began in December 2007, surprisingly enough — but it’s no longer moving in the right direction.

All these numbers come from the Labor Department’s survey of businesses, which is larger and more reliable than the survey of households. But the household survey gave essentially the same picture. It showed a big jump (more than 800,000) in the number of people outside the labor force — neither working nor looking for work. That’s the only reason that the unemployment rate fell, to 9.5 percent from 9.7 percent.

I want to reiterate this point: the unemployment rate fell last month even though actual unemployment did not fall. Only official unemployment — the share of people actively looking for work — fell.

To the extent that the report offered any silver linings, they included a drop in the number of people working part time because they could not find full-time work (to 8.6 million, from 8.8 million). The report also suggested that private-sector job growth isn’t quite as bad as last month’s report indicated. History suggests that true job growth may also be a bit better than the Labor Department is estimating; that’s the usual pattern in the early stages of a recovery.

The overall picture isn’t so much of a double-dip recession as it is of a badly wounded economy recovering at a slow pace.

But that’s not much to get excited about it. If the Senate and the Federal Reserve were waiting for more information to decide whether the economy needed more help, they just got it.

Not lovin' it: U.S. chicken McNuggets 'contain SILLY PUTTY chemical'

Chicken nuggets sold in U.S. branches of McDonald's contain a chemical used in Silly Putty.

'McNuggets' sold to American fast food lovers contain dimethylpolysiloxane, an anti-foaming agent used in Silly Putty.

They also have more calories and fat than those sold in the chain's British restaurants, according to a CNN study.

Four American McNuggets total 190 calories, 12 grams of fat and two grams of saturated fat. The equivalent portion in Britain clocks in at 170 calories, nine grams of fat and one gram of saturated fat.

Box of 6 chicken McNuggets from McDonalds

Transatlantic tastes: McDonald's Chicken McNuggets contain more calories, fat and chemicals than their British counterparts

U.S. McNuggets also contain a petrol-based chemical called tertiary butylhydroquinone (tBHQ) as well as dimethylpolysiloxane. British McNuggets contain neither.

A spokeswoman for McDonald's put the transatlantic differences down to the local methods of food preparation.

Lisa McComb, McDonald's global media relations manager, said that in the U.S. McNuggets are coated and then cooked, while in Britain they are cooked and then coated.

The result, she explained, is that British McNuggets absorb less oil and have less fat.

Labeling also plays a part in giving nuggets sold in Britain the appearance of being healthier than those sold in the U.S., she said, as ground celery and pepper are listed on the American packaging as simply 'spices'.

'You would find that if you looked at any of our core food items, you'd see little, regional differences,' she said. 'We do taste testing of all our food items on an ongoing basis.'

Ms McComb added that dimethylpolysiloxane is used for safety reasons to prevent the oil from foaming.

Marion Nestle, a New York University professor and author of What To Eat, told CNN that tertiary butylhydroquinone and dimethylpolysiloxane in the McNuggets probably pose no health risk to consumers.

Sri Lankan budget imposes IMF austerity demands

Sri Lankan deputy finance minister Sarath Amunugama presented a delayed interim budget for 2010 on Tuesday, outlining plans for austerity measures to meet the demands of the International Monetary Fund (IMF).

Amunugama claimed that the budget would reduce the fiscal deficit sharply from 9.9 to 8 percent of Gross Domestic Product (GDP), while providing for tax concessions and infrastructure programs to boost big business. The deficit will be cut at the expense of workers and the poor by increasing taxes on essentials, slashing subsidies to government corporations and extending a wage freeze on public sector employees.

The budget provided no details of specific revenue measures. Instead, the government plans to impose tax rises undemocratically via gazette announcements.

The government obtained a $2.6 billion IMF loan last July in order to avert a balance of payment crisis that was triggered by the world economic breakdown, which led to declining exports and foreign investment. The IMF withheld the third instalment in February when the government failed to meet the IMF’s 2009 deficit target of 7 percent of the GDP.

Amunugama declared that the government had not acceded to any IMF conditions. However, the day before it was presented to parliament, the government sent the budget to the IMF which promptly announced the release of the delayed instalment. The budget pledged to reduce the deficit to 6.8 then 5 percent over next two years, in line with the IMF’s conditions.

Responding to the budget, IMF deputy managing director Naoyuki Shinohara said: “Despite the weaker-than-programmed 2009 fiscal performance, the government’s 2010 budget proposal, if carried out, would significantly address past fiscal slippages, mainly through comprehensive tax reforms and sizeable cuts in recurrent spending.” He added, approvingly, that the government had plans to “promote private investment and growth” and reduce the “high cost of doing business in Sri Lanka”.

According to the budget, tax collections will rise to 17 percent of GDP from 14.5 percent in 2009, without affecting the corporate sector. Amunugama said the government would bring down “excessive tax rates on personal and corporate income as well as banking and financial institutions”.

The Bloomberg business website reported that the government “is streamlining taxes … as investors focus on government finances after Europe’s debt crisis threatened to undermine the global economy.” These comments point to the new stage of the global economic crisis. Across Europe and around the world, the financial markets are demanding that governments slash spending and impose the burden of the debts incurred in bailing out capitalism after the 2008 financial turmoil on the working class.

A few days before the budget, the government increased the price of powdered milk by 10 percent, and wheat flour by 16.6 percent, with the costs of bread and other flour products rising accordingly. Taxes on wine and cigarettes were raised by about 5 percent.

The public sector pay freeze exposes President Mahinda Rajapakse’s fraudulent pledge, during elections earlier this year, of a 2,500-rupee ($US22) monthly salary rise for public and private sector workers. Amunugama offered another empty promise to implement a new “salary structure” in 2011. He said that, as in the past, the trade unions would be asked to help prepare it. For the past five years of the Rajapakse government, the unions have played a crucial role in suppressing workers’ pay struggles.

The government is preparing to undermine the pension schemes of public sector workers. Currently pensions are funded by the government, but from 2011 new recruits and those temporary workers entitled to permanency will be compelled to pay into a newly-created pension fund that will be extended to the private sector.

The budget declared that state enterprises, including the Electricity Board, Petroleum Corporation, Postal and Railway Departments and Transport Board, would “be made commercially efficient” and profit-making industries. Cutting government subsidies to these institutions will mean higher prices and large-scale job losses.

Despite the rising cost of living, there was no additional allocation for the welfare schemes, such as the cash-for-work program (Samurdhi), fertiliser subsidies and nutritional programs. Total health and education expenditure was reduced by 10 billion rupees, while the military was allocated 186 billion rupees.

A major reason for high levels of public debt was massive military spending on Rajapakse’s communal war against the separatist Liberation Tigers of Tamil Eelam (LTTE). Even though the LTTE was defeated in May 2009, defence spending still accounts for 15 percent of budget expenditure. The government is maintaining the huge military apparatus because it is well aware that resistance by working people will emerge to its austerity measures. At the same time, it is strengthening the military occupation of the island’s north and east.

The budget speech falsely claimed that the government is providing war-battered Tamil families in the northern Vanni region with housing, schools, hospitals and other facilities. Billions of rupees are needed to rehabilitate the region, but no such allocations have been made.

Amunugama did, however, announce a “strategic infrastructure” plan worth 300 billion rupees to facilitate private sector investment. This will involve building highways and investment zones, designed to create cheap labour platforms in several parts of the country, including the north and east.

The largest budget allocations are for debt service payments. Interest payments alone account for 337 billion rupees, or 26 percent of total expenditure. In addition, the government has to find 565 billion rupees for debt repayments this year, raising its gross borrowing requirement to 980 billion rupees ($US8.5 billion).

According to the budget, 6 to 7 percent economic growth is expected this year after it declined to 4 percent last year. The government cited an increase in export earnings by 7.1 percent during the first three months of this year as an indicator that the target will be achieved. However, the fragility of these figures was shown by a 14.9 percent drop in the country’s main export, garments. During the same period, the import bill rose up by 39.5 percent, pushing the trade deficit to $1.46 billion, a 119 percent increase over the same period last year.

Remittances from overseas Sri Lankan workers, mainly working in the Middle East, increased by 14 percent in the first quarter this year. Economists have expressed concern, however, that high remittances will not be sufficient to cover the trade deficit.

A finance ministry survey cast doubt on the government’s optimistic forecasts, admitting: “Global imbalances resulting in lower than expected global economic growth could adversely affect external demand for Sri Lankan goods and services which will result in slowing down Sri Lankan economy.” The ministry warned: “Higher than expected oil and commodity prices in international markets could threaten the macroeconomic stability and growth targets while affecting government expenditure and revenue.”

The government’s economic policy is nakedly directed at enriching big business and foreign investors. In his budget speech, Amunugama spoke of a “road map” to provide investment opportunities in fields ranging from construction to higher education. He declared: “[T]he entire government machinery is being reorganised to respond to private sector investment proposals in the areas outlined in the road map.”

In order to impose these policies, Rajapakse is not only maintaining the military machine but also concentrating increasingly autocratic power in his hands. Major class battles lie ahead, in which working people can only defend their interests by mobilising independently on the basis of the fight for a workers’ and farmers’ government to implement socialist policies for the benefit of the majority, not the business elites.

Media Access Rules In Gulf Preventing Media From Covering Oil Spill

From last night AC360, here’s a rather disturbing report about new media access rules that seem to be making it nearly impossible for the press to cover the worst environmental disaster in American history:

While I agree that there needs to be some reasonable rules that allow clean-up crews to do their job, cutting off press access completely it totally uncalled for and, to the extent that it’s a government action, it comes very close to being a violation of the First Amendment

'US facing Soviet-like disintegration'

A senior Iranian lawmaker, Alaeddin Boroujerdi, has warned the US of imminent collapse, saying its approaches bring to mind soviet policies before disintegration.

"America's conduct toward the world bears great resemblance to that of the Soviet Union before its disintegration," Fars News Agency quoted the head of the Parliament's National Security and Foreign Policy Commission as saying on Friday.

"I believe the United States today is going through disintegration just like the former Soviet [Union] and this collapse is easy to see and sense."

On the US military presence in the Middle East, Boroujerdi called Washington a major "international thief" which pursues various goals by invading other nations.

He referred to the rising production of narcotics in Afghanistan years after the US-led invasion of the impoverished country, suggesting Washington's military presence has aggravated the situation.

Boroujerdi further cited Afghan President Hamid Karzai as saying that the United States has gained USD 100 billion through the production of narcotics in Afghanistan.


Jefferson changed 'subjects' to 'citizens' in Declaration of Independence


That's what Thomas Jefferson first wrote in an early draft of the Declaration of Independence to describe the people of the 13 colonies.

But in a moment when history took a sharp turn, Jefferson sought quite methodically to expunge the word, to wipe it out of existence and write over it. Many words were crossed out and replaced in the draft, but only one was obliterated.

Over the smudge, Jefferson then wrote the word "citizens."

No longer subjects to the crown, the colonists became something different: a people whose allegiance was to one another, not to a faraway monarch.

Scholars of the revolution have long speculated about the "citizens" smear -- wondering whether the erased word was "patriots" or "residents" -- but now the Library of Congress has determined that the change was far more dramatic.

Using a modified version of the kind of spectral imaging technology developed for the military and for monitoring agriculture, research scientists teased apart the mystery and reconstructed the word that Jefferson banished in 1776.

"Seldom can we re-create a moment in history in such a dramatic and living way," Library of Congress preservation director Dianne van der Reyden said at Friday's announcement of the discovery.

"It's almost like we can see him write 'subjects' and then quickly decide that's not what he wanted to say at all, that he didn't even want a record of it," she said. "Really, it sends chills down the spine."

The library deciphered the hidden "subjects" several months ago, the first major finding attributed to its new high-tech instruments. By studying the document at different wavelengths of light, including infrared and ultraviolet, researchers detected slightly different chemical signatures in the remnant ink of the erased word than in "citizens." Those differences allowed the team to bring the erased word back to life.

But the task was made more difficult by the way Jefferson sought to match the lines and curves of the underlying smudged letters with the new letters he wrote on top of them. It took research scientist Fenella France weeks to pull out each letter until the full word became apparent.

"It's quite amazing how he morphed 'subjects' into 'citizens,' " she said. "We did the reverse morphing back to 'subjects.' "

France said the possibility that the erased word was "subjects" came up during a talk she gave to library donors and visitors about how to study historical documents without harming them. France had determined that a word existed beneath "citizens," and she asked the group for ideas. One woman called out "subjects," and library staff members immediately realized that she was on to something. The intensive work on the document soon began.

The erased word is on the third of the draft's four pages, in the section that addressed grievances against King George III and outlined his incitement of "treasonable insurrections." The sentence is not found in the later Declaration of Independence, but "citizens" is used elsewhere in that document and "subjects" is not.

Scholars previously determined that Jefferson had been writing his early version based on the first draft of Virginia's constitution, where the words "our fellow subjects" appear.

Finding Jefferson's erased word is the library's greatest accomplishment using its new technology, but several other projects are in progress. The imaging device, for instance, found thumb and fingerprints on the Gettysburg Address using infrared light, and library researchers are seeking to determine whether they are President Abraham Lincoln's.

Light outside the visible range has also brought to life details of Pierre L'Enfant's design for Washington and notes on papers of Jefferson and Benjamin Franklin.

Van der Reyden said the research and discoveries illustrate why it's so important to keep and protect original documents. The erased "subjects," she said, could have been detected only from Jefferson's original draft.

UK banking customers targeted by data-stealing Trojan


Two UK-based botnets are zeroing in on British bank customers with new variants of the Zeus Trojan, according to a security firm.

The Zeus botnets, which consist of 20,000 to 30,000 compromised computers, are being used to send out regionally-specific infected spam to distribute links to the Trojans, according to Trusteer. Compromised UK websites are also being used in the attack on online banking users, it added.

"It looks like criminal gangs are focused on the UK market and are specialising in UK banks," Trusteer chief executive Mickey Boodaei said on Friday.

Boodaei declined to name the banks, saying only that customers of all of the major institutions had been targeted. Spam runs typically focus on customers from three to nine of the major banks at a time, according to Trusteer.

Zeus, also known as Zbot, steals data by installing a keystroke logger on the victim's machine. People who click on a link in an infected email or compromised website could end up exposing their online banking credentials.

Trusteer said it gained access to the command-and-control servers of the botnets, and this allowed it to pinpoint the location of the zombie computers from their IP addresses. The company then analysed attack commands from the servers to determine the targets of the Zeus variants.

In general, detection rates for the malware have been low, said Boodaei. Between zero and 20 percent of the Trojans is being picked up by antivirus companies, according to Trusteer.

To determine detection rates, the company ran the different Zeus variants through services like VirusTotal, which checks malware samples against different antivirus engines. It also performed forensics at its own labs.

Boodaei said that international antivirus companies may not detect the Trojans due to their localised nature. Antivirus companies normally deploy a network of sensors, including computers designed specifically to capture malware samples, in networks called 'honeynets'. The Trojans may not be hitting these sensors, said Boodaei.

"The malware is too local to see on the radar," he said.

In addition, heuristics designed to stop malware by identifying its behaviour may be circumvented by criminals testing their products in their own labs before unleashing them on the public, said Boodaei.

Trusteer also warned of two other pieces of financial malware, which it calls Silon.var2 and Agent.DBJP, that are tailored to British online banking customers. These use the same distribution methods as the Zeus variants: infected email and compromised websites.