Thursday, February 24, 2011

ACLU Wins Battle In War Over Protester's Rights

We all thought it was unbelievably obvious that to make protesters protest far, far away, out of eye- and ear-shot of The Powers That Be (for whose benefit the protest, at least in theory) was, uh, missing the point. Criminal would also be an apt description. Thank whoever you thank for your blessings that on our side we have the ACLU.

From the ACLU's blog:

We argued that this discriminatory treatment violated the First Amendment right to free speech. More specifically, we contended that it was a form of viewpoint discrimination. The Supreme Court has written that "the First Amendment forbids the government to regulate speech in ways that favor some viewpoints or ideas at the expense of others." That is what happened when our clients' messages criticizing the president were blocked while the pro-Bush supporters were allowed to express their views unimpeded. Some of the defendants in the case — a Secret Service agent and a couple of officers from the sheriff's department — asked the judge to terminate our case before it reached a jury.
Today, the district court held that our clients' case deserves to move forward. It held that "First Amendment law forbidding viewpoint-based restrictions on speech was...clearly established at the time of the event and would put a reasonable official on notice that disparate treatment of protesters based on their viewpoint was unlawful." After devoting 20 pages to carefully reviewing the facts, it concluded that a reasonable jury could conclude that law enforcement engaged in viewpoint discrimination.
The case is not over. To win, we will need to convince a jury to believe our clients' story of what happened rather than law enforcement's version. Also, it is possible the defendants will try to appeal at this point. However, today's decision is an important one not just to vindicate the rights of the clients in this case, but to bring home once again that where the rare opportunity arises to express our views directly to our most powerful officials, we all have an equal right to do so, no matter how vehemently we may disagree with them. (Read more)

END FED: Bernanke Admits QE Raises Stock Prices, Force Investors Into Other Assets--Commodities?

US unions housecats to EU's labor tiger

War on unions

KC Fed President Issues New Report Calling For 'Break Up' Of J.P. Morgan, Goldman, Citigroup & Bank Of America

In a report just released today, Kansas City Fed President Thomas Hoenig lays it all out in black in white: Dodd-Frank has done absolutely nothing about Too Big To Fail, and for that reason "[w]e must break up the largest banks" (2).

A screenshot from the report:

This isn't the first time Hoenig has suggested breaking up the largest TBTF banks, but his earlier statements were made during the course of interviews. This latest call comes in an official report and carries the imprimatur of the Federal Reserve system. That's a shot across your bow, Jamie Dimon.


Hear from Hoenig himself...

This is Hoenig's best public speech.

Video: Hoenig speaks to a local Kansas City Tea Party group - Sep. 23, 2010


Ratigan: "We Spent Four Times More On Clinton's Blowjob Than We Did Investigating The Financial Crisis"

This summary is not available. Please click here to view the post.

MERS Can Foreclose in California, State Appeals Court Rules

Merscorp Inc., operator of the electronic-registration system that contains about half of all U.S. home mortgages, has the right to foreclose on defaulted borrowers in California, a state appeals court ruled.

U.S. courts have differed in recent years on whether Merscorp’s Mortgage Electronic Registration Systems, or MERS, unit has the right to bring a foreclosure action.

“Under California law MERS may initiate a foreclosure as the nominee, or agent, of the noteholder,” California Court of Appeal Justice Joan K. Irion in San Diego wrote in a Feb. 18 ruling.

Merscorp, based in Reston, Virginia, and owned by Fannie Mae, Freddie Mac, JPMorgan Chase & Co. and other mortgage- industry companies, said in a Feb. 16 announcement that it will propose a rule change to stop members from foreclosing in its name.

“It’s incorrect,” Ehud Gersten, the San Diego lawyer who brought the suit on behalf of the borrower, Jose Gomes, said of the ruling in a phone interview today. “I disagree with it completely.”

Gersten said he will appeal the decision.

Flood of Transfers

Merscorp was created in 1995 to improve servicing after county offices couldn’t deal with the flood of mortgage transfers, Karmela Lejarde, a MERS spokeswoman, said in an interview last year. MERS tracks servicing rights and ownership interests in mortgage loans on its electronic registry, allowing banks to buy and sell the loans without having to record the transfer with the county.

“The California decision validates the MERS process and procedures that we’ve used in nonjudicial states for many years,” Lejarde said in a statement today, referring to states such as California that don’t require court intervention to conduct foreclosures.

John L. O’Brien, the register of deeds for the southern part of Massachusetts’s Essex County, said in a statement yesterday that MERS has cost his district $22 million in recording fees, based on 148,663 MERS mortgages since 1998. O’Brien said he would forward that information to state Attorney General Martha Coakley. Coakley is investigating MERS, according to the Boston Globe in December. Amie Breton, a spokeswoman for Coakley, declined to comment.

Upheld Ruling

The California appeals court upheld a ruling that went against Gomes, who sued in 2009 to have the court declare that MERS couldn’t foreclose because the noteholder didn’t authorize it to. Gomes borrowed $331,000 in 2004 and was sent a notice of default in 2009, according to Irion’s decision.

The court, which heard arguments on the Gomes case the same day it released its decision, said that under the state’s “nonjudicial scheme” Gomes can’t bring such a lawsuit.

“Nowhere does the statute provide for a judicial action to determine whether the person initiating the foreclosure process is indeed authorized, and we see no ground for implying such an action,” wrote Irion, who was joined in her decision by the two other judges on the panel.

Asking MERS to demonstrate it has the right to foreclose “would be inconsistent with the policy behind nonjudicial foreclosure of providing a quick, inexpensive and efficient remedy” and would allow lawsuits to delay foreclosures, the judge wrote.

‘Speculative Suit’

Gomes didn’t allege any facts to suggest MERS lacked the right to foreclose, Irion said, calling his case “a speculative suit.” The state legislature would have to act to allow such litigation, she said.

Gomes also agreed, by signing the deed of trust securing the promissory note for the loan, that MERS had the authority to foreclose, the court said.

“Essentially, the Court of Appeal is saying that once somebody starts to foreclose,” borrowers “can’t seek any right from or question that person,” Gersten said in the interview. “The beneficiary under the deed of trust can authorize MERS to foreclose but they never did that. We don’t know who the beneficiary is.”

On Feb. 15, the appeals court ruled for MERS in a similar case brought by borrower Nancy G. Jimenez. Gersten, who also represents Jimenez, said he will appeal that decision.

MERS members have moved away from closing in MERS’s name because of confusion over its standing, Christopher L. Peterson, a law professor at the University of Utah in Salt Lake City who has written several articles on MERS, said in an interview last week.

‘Created Confusion’

MERS halted foreclosures in its name in Florida in 2006, according to rules on its website. Violation of the rule, which remains in effect, costs $10,000. Former Merscorp Chief Executive Officer R.K. Arnold said in a September 2009 deposition in an Alabama foreclosure case that MERS made that change because of a Florida court decision that “created confusion about whether we could” foreclose.

Merscorp announced Arnold’s retirement on Jan. 22.

The case is Gomes v. Countrywide Home Loans Inc., D057005, California Court of Appeal (San Diego).

The Betrayal of Public Workers

The Great Recession and its aftermath are entering a new phase in the United States, which could bring even more severe assaults on the living standards and basic rights of ordinary people than we have experienced thus far. This is because a wide swath of the country’s policy- and opinion-making elite have singled out public sector workers—including schoolteachers, healthcare workers, police officers and firefighters—as well as their unions and even their pensions as deadweight burdens sapping the economy’s vitality.

The Great Recession did blow a massive hole in state and municipal government finances, with tax receipts—including income, sales and property taxes—dropping sharply along with household incomes, spending and real estate values. Meanwhile, demand for public services, such as Medicaid and heating oil assistance, has risen as people’s circumstances have worsened. But let’s remember that the recession was caused by Wall Street hyper-speculation, not the pay scales of elementary school teachers or public hospital nurses.

Nonetheless, a rising chorus of commentators charge that public sector workers are overpaid relative to employees in comparable positions in the private sector. The fact that this claim is demonstrably false appears not to matter. Instead, the attacks are escalating. The most recent proposal gaining traction is to write new laws that would allow states to declare bankruptcy. This would let them rip up contracts with current public sector employees and walk away from their pension fund obligations. Only by declaring bankruptcy, Republican luminaries Jeb Bush and Newt Gingrich argued in the Los Angeles Times, will states be able to “reform their bloated, broken and underfunded pension systems for current and future workers.”

But this charge is emanating not only from the Republican right; in a front-page story on January 20, the New York Times reported on a more general trend spreading across the country in which “policymakers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.”

Considered together, state and local governments are the single largest employer in the US economy. They are also the country’s most important providers of education, healthcare, public safety and other vital forms of social support. Meanwhile, the official unemployment rate is stuck at 9 percent—a more accurate figure is 16.1 percent—a full eighteen months after the recession was declared over. How have we reached the point where the dominant mantra is to dismantle rather than shore up state and local governments in their moment of crisis?

Why States Need Support During Recessions

The Wall Street–induced recession clobbered state and local government budgets. By 2009, state tax revenues had fallen by fully 13 percent relative to where they were in 2007, and they remained at that low level through most of last year. By comparison, revenues never fell by more than 6 percent in the 2001 recession. Even during the 1981–82 recession, the last time unemployment reached 9 percent, the decline in state tax revenues never exceeded 2 percent. These revenue losses, starting in 2008, when taken together with the increased demand for state services, produced an average annual budget gap in 2009–11 of $140 billion, or 21 percent of all state spending commitments.

Unlike the federal government, almost all state and local governments are legally prohibited from borrowing money to finance shortfalls in their day-to-day operating budgets. The state and local governments do borrow to finance their long-term investments in school buildings, roads, bridges, sewers, mass transit and other infrastructure projects. They have established a long record of reliability in repaying these debt obligations, even during the recession. Nevertheless, these governments invariably experience a squeeze in their operating budgets during recessions, no matter how well they have managed their finances during more favorable economic times.

If, in a recession, states and municipalities are forced to reduce their spending in line with their loss in tax revenues, this produces layoffs for government employees and loss of sales for government vendors. These cutbacks, in turn, will worsen conditions in the private market, discouraging private businesses from making new investments and hiring new employees. The net impact is to create a vicious cycle that deepens the recession.

As such, strictly as a means of countering the recession—on behalf of business interests as well as everyone else in the community—the logic of having the federal government providing stimulus funds to support state and local government spending levels is impeccable. The February 2009 Obama stimulus—the American Recovery and Reinvestment Act (ARRA)—along with supplemental funds for Medicaid, has provided significant support, covering about one-third of the total budget gap generated by the recession. But that leaves two-thirds to be filled by other means. ARRA funds have now run out, and the Republican-controlled House of Representatives will almost certainly block further funding.

In 2010 roughly another 15 percent of the budget gap was covered by twenty-nine states that raised taxes and fees-for-services. In general, raising taxes during a recession is not good policy. But if it must be done to help fill deepening budgetary holes, the sensible way to proceed is to focus these increases on wealthier households. Their ability to absorb such increases is obviously strongest, which means that, unlike other households, they are not likely to cut back on spending in response to the tax hikes. In fact, ten states—New York, Illinois, Connecticut, North Carolina, Wisconsin, Oregon, Hawaii, Vermont, Rhode Island and Delaware—have raised taxes progressively in some fashion.

Of course, the wealthy do not want to pay higher taxes. But during the economic expansion and Wall Street bubble years of 2002–07, the average incomes of the richest 1 percent of households rose by about 10 percent per year, more than three times that for all households. The richest 1 percent received fully 65 percent of all household income growth between 2002–07.

One charge against raising state taxes in a progressive way is that it will encourage the wealthy to pick up and leave the state. But research on this question shows that this has not happened. We can see why by considering, as a hypothetical example, the consequences of a 2 percent income tax increase on the wealthiest 5 percent of households in Massachusetts. This would mean that these households would now have $359,000 at their disposal after taxes rather than $370,000—hardly enough to affect spending patterns significantly for these households, much less induce them to relocate out of the state. At the same time, a tax increase such as this by itself will generate about $1.6 billion for the state to spend on education, healthcare and public safety.

The forces against independent journalism are growing. Help Truthou...

But even with the ARRA stimulus funds and tax increases, states and municipalities have had to make sharp cuts in spending. More severe cuts will be coming this year, with the ARRA funds now gone. These include cuts that will reduce low-income children’s or families’ eligibility for health insurance; further cuts in medical, homecare and other services for low-income households, as well as in K–12 education and higher education; and layoffs and furloughs for employees. The proposed 2012 budgets include still deeper cuts in core areas of healthcare and education. In Arizona, the governor’s budget would cut healthcare for 280,000 poor people and reduce state support for public universities by nearly 20 percent. In California, Governor Brown is proposing to bring spending on the University of California down to 1999 levels, when the system had 31 percent fewer students than it does today.

State and Local Government Workers Are Not Overpaid

Even if state and local government employees are not responsible for the budgetary problems that emerged out of the recession, are they nevertheless receiving bloated wage and benefits packages that are holding back the recovery? Since the recession began, there has been a steady stream of media stories making such claims. One widely cited 2009 Forbes cover article reported, “State and local government workers get paid an average of $25.30 an hour, which is 33 percent higher than the private sector’s $19…. Throw in pensions and other benefits and the gap widens to 42 percent.”

What figures such as these fail to reflect is that state and local government workers are older and substantially better educated than private-sector workers. Forbes is therefore comparing apples and oranges. As John Schmitt of the Center for Economic Policy Research recently showed, when state and local government employees are matched against private sector workers of the same age and educational levels, the public workers earn, on average, about 4 percent less than their private counterparts. Moreover, the results of Schmitt’s apples-to-apples comparison are fully consistent with numerous studies examining this same question over the past twenty years. One has to suspect that the pundits who have overlooked these basic findings have chosen not to look.

State Pension Funds Are Not Collapsing

Not surprisingly, state and local government pension funds absorbed heavy losses in the 2008–09 Wall Street crisis, because roughly 60 percent of these pension fund assets were invested in corporate stocks. Between mid-2007 and mid-2009, the total value of these pension funds fell by nearly $900 billion.

This collapse in the pension funds’ asset values has increased their unfunded liabilities—that is, the total amount of benefit payments owed over the next thirty years relative to the ability of the pension funds’ portfolio to cover them. By how much? In reality, estimating the total level of unfunded liabilities entails considerable guesswork. One simply cannot know with certainty how many people will be receiving benefits over the next thirty years, nor—more to the point—how much money the pension funds’ investments will be earning over this long time span. The severe instability of financial markets in the recent past further clouds the picture.

Thus, these estimates vary by huge amounts, depending on the presumed rate of return for the funds. The irony is that right-wing doomsayers in this debate, such as Grover Norquist, operate with an assumption that the fund managers will be able to earn returns only equal to the interest rates on riskless US Treasury securities. Under this assumption, the level of unfunded liabilities balloons to the widely reported figure of $3 trillion. To reach this conclusion, the doomsayers are effectively arguing that the collective performance of all the Wall Street fund managers—those paragons of free-market wizardry—will be so anemic over the next thirty years that the pension funds may as well just fire them and permanently park all their money in risk-free government bonds. It follows that the profits of private corporations over the next thirty years will also be either anemic or extremely unstable.

But it isn’t necessary to delve seriously into this debate in order to assess the long-term viability of the public pension funds. A more basic consideration is that before the recession, states and municipalities consistently maintained outstanding records of managing their funds. In the 1990s the funds steadily accumulated reserves, such that by 2000, on average, they were carrying no unfunded liabilities at all. Even after the losses to the funds following the previous Wall Street crash of 2001, the unfunded share of total pension obligations was no more than around 10 percent. By comparison, the Government Accountability Office holds that to be fiscally sound, the unfunded share can be as high as 20 percent of the pension funds’ total long-term obligations.

A few states are facing more serious problems, including New Jersey, Illinois and California. New Jersey is in the worst shape. But this is not because the state has been handing out profligate pensions to its retired employees. The average state pension in New Jersey pays out $39,500 per year. The problem is that over the past decade, the state has regularly paid into the system less than the amount agreed upon by the legislature and governor and stipulated in the annual budgets. For 2010 the state skipped its scheduled $3.1 billion payment altogether. However, even taking New Jersey’s worst-case scenario, the state could still eliminate its unfunded pension fund liabilities—that is, begin running a 100 percent fully funded pension fund—if it increased the current allocation by about 4 percent of the total budget, leaving 96 percent of the state budget allocation unchanged.

In dollar terms, this worst-case scenario for New Jersey would require the state to come up with roughly $4 billion per year to cover its pension commitments in an overall budget in the range of $92 billion. Extracting this amount of money from other programs in the budget would certainly cause pain, especially when New Jersey, like all other states, faces tight finances. But compare this worst-case scenario with the bankruptcy agenda being discussed throughout the country.

To begin with, seriously discussing a bankruptcy agenda will undermine the confidence of private investors in all state and municipal bonds—confidence that has been earned by state and municipal governments. When the markets begin to fear that states and municipalities are contemplating bankruptcy, this will drive up the interest rates that governments will have to pay to finance school buildings, infrastructure improvements and investments in the green economy.

Then, of course, there is the impact on the pensioners and their families. For the states and municipalities to walk away from their pension fund commitments would leave millions of public sector retirees facing major cuts in their living standards and their sense of security. Something few Americans understand is that roughly one-third of the 19 million state and local employees—i.e., those in fifteen states, including California, Texas and Massachusetts—are not eligible for Social Security and will depend exclusively on their pensions and personal savings in retirement. In addition, public sector pensions are not safeguarded by the federal Pension Benefit Guaranty Corporation. Unlike Wall Street banks, state pensioners will receive no bailout checks if the states choose to abrogate their pension fund agreements.

Getting Serious About Reforming State Finances

Of course, there are significant ways the public pension systems, as well as state and local finances more generally, can be improved. The simplest solution, frequently cited, involves “pension spiking”—that is, practices such as allowing workers to add hundreds of hours of overtime at the end of their careers to balloon their final year’s pay and their pensions. This has produced serious additional costs to pension obligations in some states and municipalities, but it is still by no means a major factor in explaining states’ current fiscal problems.

But states and municipalities also have to follow through on the steps they have taken to raise taxes on the wealthy households that are most able to pay. They should also broaden their sources of tax revenue by taxing services such as payments to lawyers, as well as by taxing items purchased over the Internet. And they have to stop giving out large tax breaks to corporations as inducements to locate in their state or municipality instead of neighboring locations. This kind of race to the bottom generates no net benefit to states and municipalities.

Finally, state and local governments are in the same boat as the federal government and private businesses in facing persistently rising healthcare costs. As was frequently noted during the healthcare debates over the past two years, the United States spends about twice as much per person on healthcare as other highly developed countries do, even though these other countries have universal coverage, longer life expectancies and generally healthier populations. These costs weigh heavily on the budgets of state and local governments, which finance a large share of Medicaid and health benefits for state employees. The problem is that we spend far more than other countries on medications, expensive procedures and especially insurance and administration. We also devote less attention to prevention. It remains to be seen how much the Obama healthcare reform law—the 2010 Patient Protection and Affordable Care Act—will remedy this situation. It is certainly the case that more must be done, especially in establishing effective controls on the drug and insurance industries.

These are some of the long-run measures that must be taken to bolster the financing of education, healthcare, public safety and other vital social services, as well as to support investments in infrastructure and the green economy. If states declare bankruptcy they will break their obligations to employees, vendors, pensioners and even bondholders, which will undermine the basic foundations of our economy. As we emerge, if only tentatively, from the wreckage of the Great Recession, this is precisely the moment we need to strengthen, not weaken, the standards of fairness governing our society.

Robert Pollin is a professor of economics and co-director of the Political Economy Research Institute (PERI) at the University of Massachusetts. One of his most recent books (co-written) is A Measure of Fairness: The Economics of Living Wages and Minimum Wages in the United States.

Jeffrey Thompson is an assistant research professor at the Political Economy Research Institute (PERI) at the University of Massachusetts.

Inside the Wisconsin protests

The Police State Knows No Limits

LINKS - J.P. Morgan Said Lehman Left It 'Goat Poo Collateral;' Barney Frank Screaming ''F You!" At Paulson; NAR Overstates Housing; Japan Downgraded;

Ten links inside.


Bernanke, You Stupid Bastard - Karl Denninger

Especially you, Bernanke. There's dumb and then there's really dumb. Let's take a short walk back down history lane. You were sure there was no housing bubble. Then you were sure it wouldn't pop. Then you were sure when the subprime problem hit, that it wouldn't cause a recession. Then you were sure you had it under control with Bear Stearns' hedge funds. Then you were sure you had it under control with Bear Stearns itself. Then you were sure it was under control with Lehman, even though you had to know Citibank and others were refusing their collateral in the repo market.

You were sure QE would support higher bond prices - and lower yields. The exact opposite thing happened. You were sure QE2 would suppress long end yields. The exact opposite thing happened. Oh yeah, you made excuses both times, but in fact you publicly said that in both cases the exact opposite thing would happen that did.

Now let's look at what happened just today.

Oil went up almost $7 today for the WTI contract. For each dollar that crude oil rises, we transfer roughly $95 billion (estimates vary from $90-100) outside of the United States. That's a direct hit to GDP. In ONE DAY the entire impact of your so-called "QE2" was ERASED.


J.P. Morgan Said Lehman Left It 'Goat Poo Collateral' - Bloomberg

Lehman Brothers Holdings Inc. tricked JPMorgan Chase & Co. into holding onto collateral that the bankrupt investment firm internally described as “goat poo,” according to a court filing by JPMorgan.

JPMorgan was stuck with Lehman’s worst securities backing $25 billion of loans as Lehman was sold to Barclays Plc in September 2008, JPMorgan said in its filing yesterday in U.S. Bankruptcy Court in Manhattan. Lehman described the collateral as “toxic crap” and “goat poo” to be scattered “in other people’s backyards,” JPMorgan said.


Shock - NAR Realty Group Overstated Housing Sales

The housing crash may have been more severe than initial estimates have shown.

The National Association of Realtors, which produces a widely watched monthly estimate of sales of previously owned homes, is examining the possibility that it over-counted U.S. home sales dating back as far as 2007.


Emile Haddad, a former Lennar Corp. executive, sold 12,000 acres in California for a $277 million profit at the housing market’s peak four years ago. He and his partners then reacquired it at half the price in 2009. Now, Haddad says, it’s time to build.


Barney Frank Screams Repeatedly at Paulson 'Fuck You'

Barney Frank muscled his way past Harry Reid and started yelling. “F— you, Hank! F— you! Blow up this deal? We didn’t blow up this deal! Your guys blew up the deal! You better tell [GOP Rep. Spencer] Bacchus and the rest of them to get their s— together!” When Paulson tried to


A few more links...

Banks Find Loophole on Capital Rule - WSJ

Japan Cut to Negaitve by Moody's - BBC

When WalMart is in trouble, you know the economy sucks

Harvard Student writes in defense of Ron Paul

Dylan Ratigan - Glenn Greenwald targeted in Wikileaks attack

Americans' Economic Confidence Worsens in Mid-February

PRINCETON, NJ -- Gallup's Economic Confidence measure worsened to its lowest weekly level of 2011, -26, in the week ending Feb. 20. This essentially matches the -27 of the same week a year ago, giving up improvement seen earlier this year.

Economic Confidence Index, by Week, 2010 and 2011

Both measures that make up Gallup's Economic Confidence Index deteriorated during the week ending Feb. 20. In rating current economic conditions, 44% of Americans said they are "poor," a slight worsening from 40% the prior week and about the same as the 46% of the same week in 2010.

Percentage Saying Current Economic Conditions Are Poor, by Week, January-February 2010-2011

At the same time, 37% of Americans said future economic conditions are "getting better," down from 43% the previous week and matching the 38% of the same week in 2010.

Percentage Saying Current Economic Conditions Are Getting Better, by Week, January-February 2010-2011


Any number of factors could explain why consumers may be less optimistic about the future course of the economy. A deteriorating unemployment situation, increasing gas prices, expectations that food and energy prices may go higher, the battle over government spending in Washington, D.C., the confrontation over collective bargaining in Wisconsin, and the chaos in the Middle East could all be playing a role. Whatever the cause, Americans' decreased economic confidence last week reverses a more positive trend recorded earlier this year. It is worth noting that the Great Recession began with surging oil prices in early 2008.

Optimism is no better now than it was a year ago, also suggesting that little progress has been made economically over the past 12 months. Up to this point in 2011, there seems to have been a relatively great amount of optimism about the U.S. economy going forward. Whether last week's deterioration in consumer confidence is the beginning of a new trend or just a short-term aberration remains to be seen. reports results from these indexes in daily, weekly, and monthly averages and in stories. Complete trend data are always available to view and export in the following charts:

Daily: Employment, Economic Confidence and Job Creation, Consumer Spending
Weekly: Employment, Economic Confidence, Job Creation, Consumer Spending

Read more about Gallup's economic measures.

View our economic release schedule.

Survey Methods

Results are based on telephone interviews conducted with 3,434 respondents, aged 18 and older, as part of Gallup Daily tracking during the week ending Feb. 20, 2011, living in all 50 U.S. states and the District of Columbia, selected using random-digit-dial sampling.

For results based on the total weekly sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±2 percentage points.

Interviews are conducted with respondents on landline telephones and cellular phones, with interviews conducted in Spanish for respondents who are primarily Spanish-speaking. Each daily sample includes a minimum quota of 200 cell phone respondents and 800 landline respondents, with additional minimum quotas among landline respondents for gender within region. Landline respondents are chosen at random within each household on the basis of which member had the most recent birthday.

Samples are weighted by gender, age, race, Hispanic ethnicity, education, region, adults in the household, cell phone-only status, cell phone-mostly status, and phone lines. Demographic weighting targets are based on the March 2010 Current Population Survey figures for the aged 18 and older non-institutionalized population living in U.S. telephone households. All reported margins of sampling error include the computed design effects for weighting and sample design.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

For more details on Gallup's polling methodology, visit

Greek riot police, protesters clash during strike

ATHENS, Greece (AP) — Young demonstrators hurled rocks and fire bombs at riot police as clashes broke out Wednesday in Athens during a mass rally against austerity measures, part of a general strike that crippled services and public transportation around the country.

Police fired tear gas and flash grenades at protesters, blanketing parts of the city center in choking smoke. Thousands of peaceful demonstrators ran to side streets to take cover. A police officer was attacked and his uniform caught fire in the city's main Syntagma Square, and his motorcycle was burned.

At least two people were injured and another three arrested. One group of rioting youths smashed paving stones in front of the central Bank of Greece, but there were no immediate reports of any serious damage.

More than 30,000 protesters attended the Athens rally, which had been calm before the clashes. Protesters chanting "Don't obey the rich — Fight back!" marched to parliament as the city center was heavily policed. A brass band, tractors and cyclists joined the rally.

The rally was part of Greece's first major labor protest this year as Prime Minister George Papandreou's Socialist government faces international pressure to make more lasting cuts after the nation's debt-crippled economy was rescued from bankruptcy by the European Union and the International Monetary Fund.

The 24-hour strike halted trains, ferries and most public transport across the country, and led to the cancellation of more than 100 flights at Athens International Airport. The strike also the closed the Acropolis and other major tourist sites.

State hospital doctors, ambulance drivers, pharmacists, lawyers and tax collectors joined school teachers, journalists and thousands of small businesses as more middle-class groups took part in the protest than have in the past. Athens' main shopping district was mostly empty, as many small business owners shuttered their stores.

Unions are angry at the ongoing austerity measures put in place by the Socialist government in exchange for a euro110 billion ($150 billion) bailout loan package from European countries and the IMF.

Stathis Anestis, deputy leader of Greece's largest union, the GSEE, said workers should not be asked to make more sacrifices during a third straight year of recession.

"The measures forced on us by the agreement with our lenders are harsh and unfair. ... We are facing long-term austerity with high unemployment and destabilizing our social structure," Anestis told The Associated Press. "What is increasing is the level of anger and desperation ... If these harsh policies continue, so will we."

Elsewhere, about 15,000 people rallied and minor scuffles broke out in Greece's second largest city, Thessaloniki, while Anestis said around 60 demonstrations were being planned in cities and towns across Greece. He said the GSEE was in talks with European labor unions to try and coordinate future strikes with other EU countries.

Earlier this month, international debt monitors said Greece needed a "significant acceleration" of long-term reforms to avoid missing its economic targets. It also urged the Socialist government to embark on a euro50 billion ($68 billion) privatization program to pay for some of its mounting national debt that is set to exceed 150 percent of the GDP this year.

The IMF has said some of the frequent demonstrations against the Greek government's reforms were being carried out by groups angry at losing their "unfair advantages and privileges."


AP Television's Theodora Tongas and AP writer Costas Kantouris in Thessaloniki contributed to this report.

Associated Press

The Money Party on the Road to Ruin

COTO Report

Michael Collins

The Money Party is destroying the United States. For ten years, there have been no new jobs with flat income. Unemployment and poverty are making a big comeback. The party consists of those who own and control concentrations of great wealth and the select few who serve them (their Mandarins). Based on the efficiency of the demolition job, you have to wonder if this is by design. If greed, ignorance, and paranoia constitute a plan, then they are master planners. (Image)

Look at the glaring problems below. Then ask yourself, has there been one single program implemented to address any of these problems, just one? Our elected representatives enable the relentless process of driving down the United States. They bicker and fume at the edge of issues. However, when it comes to neglecting the real needs of citizens and the country, they are as one. All rewards and resources flow to their patrons and owners, the made men and women of The Money Party. We are nothing to them.

There have been no net new jobs since 2000. The minimal growth from 2000 to 2010 disappears when you factor in 10% population growth over the same period.

You would think that somebody in charge would take this seriously. New jobs with decent pay represent the key to many of the other problems we face. Yet nobody bothers to do anything about it or even start a serious effort to seek solutions.
Income has been flat for 10 years.

How are people supposed to survive, raise their families, pay their medical bills, etc. if income remains flat while inflation eats away at existing resources?
The following maps show the relative increase of unemployment since 2000 based on the official unemployment formula.

Real unemployment figure tops 20%. Employer payroll reports are the basis for the “official” figures. That rate is artificially low since it leaves out the self employed, discouraged workers, long term unemployed, and the underemployed. The government’s U6 unemployment rate, 17%, is a more accurate measure. When you add “estimated”long-term discouraged workers, who were defined out of official existence in 1994.” total unemployed is at 23% of the workforce.

Bankruptcies and individuals involved are up nearly by a factor of three since 2006. There are any number of reason so for a bankruptcy but no new jobs, increased prices, and flat incomes have a great deal to do with this trend.

At the end of 2010, 14% of US homes were either in foreclosure or delinquent in payments. People can’t make home payments if they are unemployed. Their ability to make payments will vanish as their flat salaries are eaten away over time. But nothing is done.
The poverty rate is up around 40% when you use a measure that factors in out of pocket medical expenses, not considered in the “official” poverty rate.

It only makes sense that people will descend into poverty. What else happens when you lose your job and are unable to find a new one?

Large sections of the country look like a wasteland due to extended neglect and hard times. Michigan’s Central Station in Detroit sat unused and abandoned as the city around it decayed. The Economist called California’s San Joaquin Valley “the Appalachia of the West” because of record high unemployment that reaches 30% to 40% range in some small towns. Described as the food basket of the world, the valley is collapsing in on itself.

Michigan Central Station, Detroit, abandoned and unused for years Image
In addition to completely failing the people, the Money Party let the nation’s infrastructure fall into ruin. The American Society of Civil Engineers graded the status of bridges, roads, etc. The Money Party gets a big fat “D” for their stewardship.

Fixing all this would provide a stimulus of phenomenal proportions. It would produce bonds that were actually worth something in the future. The Money Party can blow things up but building and repairing are beyond their abilities to comprehend.

We are led by fools.

**ALERT** FAKE Silver Coins/Bars/Ingots ARE on the market in U.S.!

Fake Morgan Silver Dollars ( photo by Peninsula Daily News)

I had posted about how Tungsten is up 70% in the last year and inserted a video showing fake gold and a video with David Morgan of Silver-Investor discussing fake gold and silver. Last week during the interview David Morgan did with me, he talked about fake gold and silver possibly being on the market, besides other information about it. He also said in the interview, if there will be any fake silver coins they will fake the old coins and not new ones. WOW - he got that one exactly right!

Gold has been a given in regards to possibly being fake due to the price of it! It is well worth an organization (ie: Fed, govt) to fake besides the price, they are pretending there is much more gold than there really is.

With silver, the cost of faking it compared to the cost of the metal itself has not made it such a likely candidate as gold is. But times have been changing and in my opinion will be really changing in the not too distant future! In fact this next month - March, there will hopefully be fireworks going off at the Comex. The physical Silver market is tight, all the experts are saying that. So it was simply a matter of time before fake silver began getting on the market.

We did not have to wait too long, Fake Silver is now here!

There is Fake Silver on the market now! The coins are Morgan Silver Dollars dating all the way back to the 1880's and are in pawn shops, besides who knows where else! I would assume it is not just the U.S. that has Fake Silver but also other places in the world too.

A pawn shop in Washington State got a shipment of Morgan Silver Dollars in and felt something was not right about them. They called in a policeman, who could not tell what was wrong with them, until he was told they were fake.

The silver has an iron core and so people WILL be able to tell a Fake Silver coin by using a magnet! If a strong magnet is attracted to the coin it is fake! A real silver coin will not attract a magnet but fake ones will! Also a Fake Silver coin will thud when dropped compared to a high pitched ring of a real one, dropped!


PORT ANGELES, Wash. - Counterfeit coins by the thousands are turning up in Washington state, and authorities are warning coin collectors to be on the lookout for them.

All or most of the counterfeits appear to be from China.

"Stacks of ingots, bars, all kinds of stuff - they make everything from pennies all the way up to silver dollars," says Port Angeles police officer Duane Benedict. "China is making these things by the thousands."

Several of the fake coins were recently sold to a Port Angeles business, EZ Pawn, for $400. They would have been worth more than $1,500 had they been real, Benedict said.

Officer Benedict got a call from EZ Pawn.

"They brought me in there to look at something they thought was fake. So I was pre-warned. But I picked it up and said, 'What's fake about it?'"

The 20 counterfeit U.S. Morgan silver dollars were supposedly from a century ago. Brian Winters of EZ Pawn has bought coins for years - and even he was fooled.

Unlike most counterfeits, the coins did not all have the same dates. One was a super rare 1893S, worth thousands and thousands.

It was at that time Brian pulled out a loupe and looked at a real coin and a suspect one. He found the "T" and the "I" too thick. All the coins were fake.

The real coin weighed in at 26.7 grams. The fake was two grams lighter.

For those of us without a gram scale - there are other tests for detecting the counterfeit coins.

The real ones have a high-pitched ring when they're dropped. The counterfeits land with a thud.

Also - a strong magnet will detect small amounts of iron in counterfeit U.S. coins. If a supposedly "silver" coin has even a little bit of attraction to the magnet, then it is a fake, Benedict says.

The counterfeits aren't just limited to silver dollars. Other coins - including Indian head pennies - also have turned out to be fakes.

And EZ Pawn says they're continuing to see fake coins brought in by other customers.

And Benedict warns businesses to be suspicious if someone uses only coins to pay for merchandise.

"Use caution if someone brings in a lot of coins to buy something, and look them over carefully," Benedict said.

Personally, I would beware of buying any metals on Ebay or any place I can not touch and feel the metals and completely check them out before purchasing them! Buyer Beware! Take precautions, check out listings on Craigslist in your area. Buy from local people and online metal companies who get their coins directly from the mints and guarantee the Silver content!

EDIT - I just looked on my local Craigslist and I believe there is an ad there for Morgan Silver dollars that are the fake Morgan Silver Dollars. The coins are in plastic holders and they are very shiny! So, people will be selling them on Craigslist too - but if you consider them - Take them OUT of the holders! If the owner does not want them taken out of the holders so you can check them out more thoroughly - then WALK AWAY!

Here is a local listing on craigslist - to me this fits the bill perfectly as being FAKE Morgan Silver Dollars! I am not saying they are fake for sure, as I do not know, but they simply look like they could be.

Edit - I just did a short youtube video about it, for those who would rather hear about it then read about it.

Edit to add video showing magnetic test on a Silver bar

Adding a Ring Test for Silver

February 22, 2011 - The White Hat Report #12 - UPDATED - Jew, Arab and Gentile leaders all have same criminal mentality.

We again feel it's very important to post an internal updated report. We are spending a lot of time collecting intelligence and what follows is an outline of what we know so far.
  • Josef Ackermann, Bush Senior and Deutsche Bank in collusion with Egypt's Mubarak, illegally sent Mubarak's substantial funds into Israel. The funds were moved into numbered accounts in Bank Leumi, Tel Aviv. Part of this money is EU funding from the G20 World Bank Aid Program allocated for Egypt to aid its economy. Since a lot of gold was stolen, the total figure of funds is estimated to be as high as $70B. The G20 and Egypt are victims of fraud, stolen funds and money laundering.

    Christine Legard, the French Finance Minister, has asked Interpol to investigate Deutsche Bank’s involvement in the movement of Mubarak's funds, set up by James Baker, John Podesta and Josef Ackermann, acting for Bush Senior who each got large kickbacks. Other parties associated includes President Obama, Hillary Clinton, Bush Junior, Jeb Bush, Josef Ackermann, and Benjamin Netinyahu.

    Some of Mubarak's funds were originally in Deutsche Bank and others. Also, major funds were represented in Property Trusts fronted by his son and nominees in London. Swiss Bank funds, planes loaded with cash and Gold, have been identified by the Egyptian authorities. All are now under investigation and will be frozen as confirmed.

  • Josef Ackermann, the Bushs (Senior, Junior, Jeb ...) and Deutsche Bank in collusion with President Obama, moved Obama's $1,000,000,000 Dollars, reported previously in Santander Bank, Spain, in one tranche into Deutsche Bank and then again in conjunction with HSBC and Barclays Bank Europe. Obama's corrupt use of his share of the stolen Falcone funds is now being lined up for a new Bank Trading Platform being set up with HSBC, Deutsche and Barclays Bank. Bush Senior will take the major profit share along with Josef Ackermann, for which Obama will be left in place until 2012. Is this Obama's golden parachute?

  • Except for the Clintons, all the funds previously reported and again listed below have been moved out of the Vatican Bank. At this time the Clintons have moved half of their funds out of the Vatican Bank.
List of Government Officials sent to the Supreme Court benefiting in the blocking of Falcone's Funds;

President Obama
Vatican Bank
One Billion
President Obama
Bank of Santander
One Billion
Vice President Joseph Biden
Vatican Bank
$100 Million
Tim Geithner
Vatican Bank
$700 Million
George Bush, Sr.
Vatican Bank
$700 Million
George Bush, Jr.
Vatican Bank
$200 Million
Alan Greenspan
Vatican Bank
$500 Million
Mitt Romney
Vatican Bank
$400 Million
Paul Guennette (associate of Bush, Sr.)
Vatican Bank
$700 Million
Michael Herzog
Vatican Bank
$500 Million
Bill & Hillary Clinton
Vatican Bank
$400 Million
  • Tropo USA is now approaching the Bank of Taiwan and China to cross investigate the stolen $700B of ACAT funds.
We are tracking this information with a lot of Global support from varying Intel Agencies and low profile US agency staff, along with Patriots who are sick of these Political and Banking criminals conspiring and looting with impunity. We know the holding banks and trading banks. Soon we expect the names of the Traders involved, who will then be exposed, investigated and arrested. Mass litigation will erupt against the Trading Banks involved and money laundering charges will be brought. The Bush's, Obama, Ackermann, Herzog, Baker and others are all now on a serious Watch List. We are building a full Global corruption list to expose them all, reaching back again to Geithner, Biden, the Bush's, Romney, Clinton, Emanuel, Herzog, Ackermann, and so many others.

The Arab world is bringing down their tyrants and crooks. Bush Senior, his entire crooked network of Government officials, Bankers, and Politicians is coming down next.

At this time we have collected approximately 60% of the information on where these corrupt individuals and government officials have moved their funds from the Vatican Bank. In the next few days, we will continue to report the location of these illegal and stolen funds. When confirmed, this information is supplied to the proper authorities.

The core objective of the White Hats is to inform and advise America’s population, and Global associates, of the transgressions being perpetrated by our governing entities, and their criminal Banking Cabal. Naming, shaming, outing and exposing them as the only voice of the people. Doing the job of our corrupt and shamefully sold out mainstream media. The US economy and World recovery is delayed while this corrupt President, controlled by the Bushes, dithers and obfuscates on redeeming the long overdue Settlements and Primary Investors funds, while filling his own pockets with Billions of dollars. The silence of the Supreme Court says it all. Truth they dare not declare. The world sees and knows. Truth will break free, and then watch the consequences.

Citigroup Saw Warning Signs, Knew Of Madoff Fraud; Picard Suit Wants $430M In Damages

Source - Bloomberg

Citigroup ignored warning signs of Bernard L. Madoff’s Ponzi scheme, and a bank executive knew the con man’s stated trading strategy couldn’t generate the reported returns, the trustee liquidating Madoff’s firm said in a lawsuit.

The unidentified Citibank executive, who was responsible for making recommendations to clients on derivatives, “concluded” by June 2007 that returns reported by a Madoff feeder fund, Fairfield Sentry Ltd., couldn’t have come from the strategy, trustee Irving Picard said in a complaint unsealed yesterday. The executive reached his conclusion after meeting with analyst Harry Markopolos, a whistleblower who also alerted U.S. regulators to the fraud, Picard said.

The Citibank official later communicated with Markopolos orally and in writing, specifically discussing the fraud before the Ponzi scheme was exposed in December 2008, Picard alleged.

“Citi knew, and was on notice of, irregularities and problems concerning the trades reported by BLMIS, and strategically chose to ignore these concerns in order to continue to enrich themselves,” Picard said in the complaint, referring to Madoff’s firm, Bernard L. Madoff Investment Securities LLC.

Picard laid out in the complaint details of a lawsuit he filed under seal in December against New York-based Citigroup and other banks. He is demanding $425 million from Citigroup - money it received “in connection with” a loan to a Madoff feeder fund and a swap transaction with a Swiss hedge fund linked to a second feeder fund, Picard said.

Continue reading at Bloomberg...


We first got an inkling of Picard's filing from this Bloomberg story in December.

Citigroup, Bank of America Sued by Madoff Trustee

Citigroup Inc.’s Citibank, Bank of America Corp.’s Merrill Lynch unit and five other banks were sued by the trustee liquidating Bernard Madoff’s firm to recover more than $1 billion for the con man’s defrauded customers.

The banks, which include Natixis SA, Fortis Prime Fund Solutions Bank (Ireland) Ltd., ABN Amro Bank NV, Nomura Bank International Plc. and Banco Bilbao Vizcaya Argentaria SA, received money through Madoff feeder funds when they knew, or should have known, that Madoff’s investments were a fraud, the trustee, Irving Picard, said yesterday in a statement.

Picard, who faces a two-year legal deadline that runs out Dec. 11, has filed hundreds of suits in the past month, seeking more than $34 billion from banks, feeder funds, investors and others alleged to have profited from Madoff’s decades-long Ponzi scheme, the biggest in history. So far, Picard has recovered about $2.5 billion for victims of the fraud.


We have been unable to locate a copy of Picard's Citigroup suit, but did find the J.P. Morgan lawsuit.

Madoff Trustee Irving Picard's suit against J. P. Morgan...

Meanwhile, back in the joint, CNBC reports:

Allen Stanford and Bernie Madoff In Same Prison

Accused Ponzi schemer Allen Stanford has joined convicted Ponzi schemer Bernard Madoff at the federal prison complex in Butner, North Carolina.

CNBC first reported Tuesday week that Stanford would be transferred to the facility for drug treatment. In January, U.S. District Judge David Hittner ruled that Stanford was incompetent to stand trial and ordered the drug treatment. Hittner suggested it take place in Butner, which has a well-regarded prison hospital, and federal officials agreed.

Stanford and Madoff will likely never encounter each other. Madoff is serving a 150-year sentence in the complex's medium security unit.


From last week...

Public debt: unsustainable and simply unpayayable

Public debt has become a problem worldwide. What is becoming more and more evident is that it is unsustainable and simply unpayable. It could be compared to a giant Ponzi scheme. We see no meaningful debt reductions thus, government will have to raise taxes, which will further suppress the economy, or people and companies will be forced to buy such bonds, or perhaps pension and retirement funds will be seized to continue the game for a while longer.

The whole concept of government debt in the US, whether it’s federal, state, municipal, corporate or personal stands on very shaky ground. Debt is serviced with revenues and income and when both are falling it is difficult to service. We have begun to enter a period of slowly rising interest rates. In the US the Fed has managed interest rates to be as low as possible to both aid in a recovery and to keep the financial edifice from collapsing. Over the past six months the bench mark 10-year Treasury note yield has risen from a yield of 2.20% to 2.74% and presently stands at about 3.60%. That 1.4% rise in rates has been offset by GDP growth of 3%. The problem is that such GDP growth has been maintained by growth in debt. The two sources of debt are the Fed and government. The Fed has been buying the government debt by creating money out of thin air. That is called monetization and it causes inflation. The government demand comes from revenues that have fallen and continue to fall, and as a result government issues more debt. The lenders, the bond buyers, sell dilution in the value of debt and in the dollar and as a result demand a higher yield. At this stage you can see how important QE1 and 2 and fiscal stimulus have been over the past 2-1/2 years. Had they not been implemented the economic and financial system would have collapsed. The next question to be asked is will we have to have quantitative easing and stimulus indefinitely? The answer is yes, but unfortunately if that path is followed lenders will demand ever-higher interest rates and the dollar will continue to fall in value versus gold and silver and other currencies. We estimate GDP growth to be 2% to 2-1/4% in 2010, down from 3%, all of which were aided by quantitative easing, the creation of money and credit and fiscal stimulus the result of debt. Without these props there would have been little or no growth, and fairly quickly the economy would have faltered. That would have brought about a classical purge accompanied by a deflationary depression. There will soon come a time the creation of money and credit and fiscal stimulus will no longer work and the system will finally fail. That is inevitable. That will begin to happen when interest rates are rising faster than growth rates. Once that condition exists there is no further hope of servicing debt or creating more debt, because there will be no natural buyers and inflation will be raging if not hyperinflation. The US is not the only country staring into this abyss; most countries around the world have the same problem.

As you probably have already figured out such fiscal and monetary policies of many countries cannot continue. The issuance of new debt has to be curtailed, as well as the growth of future liabilities. On its present course the US is headed toward a deficit in excess of 100% of GDP in just 1-1/2 years.

These countries have experienced and most still do, profligate government spending, little fiscal restraint and outright criminal behavior. Such action in time cause markets to put pressure on governments to mend their ways. That is where the higher yields come into play and as we pointed out we are already witnessing that. In 1 to 1-1/2 years the cost of carrying debt will begin to reduce GDP, because government debt demands will crowd out private investment. Except for AAA corporations we have already seen that over the past two years, as lenders retain cash and generally refuse to lend to medium and small companies and individuals as well.

A product of these conditions is a perpetuation of unemployment, which we believe is 22.6% presently, for years into the future. In addition, we have had 20 years of free trade, globalization, offshoring and outsourcing that has lost America 8.5 million good paying jobs and the loss of 42,400 businesses. We have extended unemployment, but every month millions fall off leaving them on their own and food stamps. These transfer payments make up 20% of household income, which is also unsustainable. Our guess is that the current extended benefits will be extended further in spite of a projected $1.6 trillion deficit. Political types prefer an extension to revolution, but the cost is more debt, a falling dollar and rising gold and silver prices. In addition, an end to extended benefits will sap consumption that must be maintained at 70% of GDP in order to keep the economy from failure. Do not forget the US is not the only country with debt problems. In the same league are Greece, Ireland, Portugal, Belgium, Spain, Italy, England and above all Japan, which is more than 200% and growing exponentially. None of these countries are capable of growing out of their debt problems and thus, eventually we see a multilateral default of debt, which will probably entail a 2/3’s write off of debt. A jubilee of sorts.

If stabilization and growth have to be based on continued creation of money and credit and monetization then the system has to eventually collapse. It is no more a solution than extended unemployment benefits, federal government spending and hiring and food stamps. It throws the problems into the future at a terrible cost. In spite of this largess unemployment won’t improve and the monetary and fiscal effect on the economy will lesson. We call it the law of diminishing returns. Last year we saw 3% growth, or so we are officially told, and this year we believe it will be about 1% less at 2% to 2-1/4%. The effectiveness of the policy is losing momentum and strength. The next question is will a $1.7 trillion QE3 with $850 billion in additional fiscal spending be able to maintain 1% growth. Our answer is we do not think so. This fading monetary and fiscal policy will be accompanied by ever falling government revenues, unless ever more debt is created. Are you getting the feeling that governments are running around in circles with no solution in sight? If you are you are correct. The only answer is to purge the system and the sooner the better. The longer the problems are extended and individuals will be faced with unemployment and under employment and that means borrowing and the use of credit cannot be extended and that means the economy cannot grow. Even if spending cuts and higher taxes were implemented the economic and financial affects would not be felt for 6 months to a year. Government has waited too long.

Projections for the future are very difficult if for no other reason than we do not know where interest rates will be. We assume they will be higher, but how much higher? We just do not know. We can tell you that in 1980 official inflation was 14-3/8% and the long bond yield was over 20%. Will that be repeated, we do not know, but we can say we could see something close to that. If we have hyperinflation we could see 30% inflation. Who knows – we won’t know until we approach getting there. Are we going to look like the German Weimar Republic of the early 1920s or today’s Zimbabwe? We don’t know but it is certainly possible and near the edge of probability.

What really gets our attention is that elitists that control all this really believe they can retain control. If they cannot they figure they will just have another major war, like they always have had. They know what we now. They know deficits are going to further rise precipitously, unless there are major policy changes, spending cuts and higher taxes. Even if the proper steps were taken we are probably looking at 30 or more years of depression. Debt cannot be kept within bounds, just look at what is going on today. The elitists have no intention of radically changing their ways. There will be more of the same until the system ceases to function.

We have written about rising interest rates in the whole spectrum of government and corporate bonds. The average has been 100% to 150%. Official rates have been raised in Brazil, India and China. In the US, bond buyers have already been pricing in yield increases, which they feel are necessary to offset inflation losses. Unfortunately for buyers they have not gotten nearly enough yield to compensate and are losing money on return and currency depreciation versus other currencies, but particularly versus gold and silver. In order to offset real losses, real yields will have to rise and they will. The first stop for the US 10-year note should be a move upward from 3.60% to 4% to 4.25%. That should happen this year. The next move in 2012 should be to 5% to 5.60% and the second move from 5.60% to about 7%. Mind you these are very conservative estimates. Any recovery in housing will be impossible with prices falling another 15% to 20%. Anyone with an ARM will be a dead duck. That means about a 60% plus failure rate. Bumping along the bottom could take 8 to 30 years and as we mentioned before government could end up with most of the housing eventually causing a process of nationalization.

These higher rates, which are inevitable, will raise havoc on the Federal budget and its debt service. Average maturities are 4.5 years – a very foolish move that began some 15 years ago. This means even if taxes are raised and the budget deficit cut, they will only serve as a damper on costs, which would lead to dollar depreciation and default. Worse yet, who will want to buy bonds and in particular US dollar denominated bonds as gold and silver are soaring and profits are falling along with the stock market? The Fed is buying and monetizing at least 80% of treasuries now. That means they will have to buy them all, including some from nations such as China, Japan and Middle Eastern owners. Long-term bond holders will be looking at 30% losses and the stock market 50% plus losses. The monetization process at this point will produce inflation from 14% to 40%, which could well be accompanied by hyperinflation. That hyperinflation could come quickly once inflation passes 14-3/8%, which it officially hit in 1980. At that time 30-year T-bond rates were more than 20%. We do not know exactly what the numbers will be, but we do know they will be terrible. Some time along the way the US will be forced to default and then China will own a goodly part of the US. We also believe that a major world war will be in progress. Again as a diversion from the massive economic and financial problems plus revolutions worldwide, which could short circuit having another world war. We do not know how these events will roll out, but we do know they are probable.

Higher interest rates will cause major problems for banks, private equity funds and hedge funds. The cost of borrowing and using leverage will be prohibitive. Many banks and funds will go under. Defaults will abound and cash flow to bond holders will diminish making outflows greater than inflows. This process of losses will in part mirror what we saw in the early 1930s, not only in reduced value but also in the doubling of gold prices and the increase in gold and silver shares of more than 500%. This also will be accompanied by a complete collapse in living standards.

Bob Chapman is a frequent contributor to Global Research. Global Research Articles by Bob Chapman

Kyle Bass With David Faber: Bernanke's ZIRP Is An 'Inescapable Trap;' Muni Bond Bloodbath Beckons But "States Will NOT Default"

CNBC Video - Kyle Bass with David Faber - Feb. 16, 2011


Video - Part 2

Source - CNBC

Municipal bond defaults on the local level are likely and investors would be better off avoiding them, according to Kyle Bass, managing director of Hayman Capital.

Bass said he generally agrees with the call by famed banking analyst Meredith Whitney, who said as many as 100 defaults are likely that will cost more than $100 billion in damage.

Though Whitney's call has prompted substantial backlash from her colleagues in the industry, Bass said the question is more a matter of degree.

"There are going to be a number of muni defaults, but it's where you draw the line. Will states be allowed to default? Will legislation be introduced to allow states to restructure? I don't believe that's the case. I believe states will not default."

Perpetual Treasury Roadshow Stops In London: Geithner Has The NY Fed NERVE To Criticize 'Light Touch U.K. Regulation' (BBC VIDEO)

Video - U.S. Treasury Roadshow makes a pit stop in London

Watch the hands; they are key to understanding Geithner. The more stupid he assumes you to be, the more he will use them to explain arcane concepts, like failed Treasury auctions. Listen for the line about the U.S. having gotten rid of weak firms, and try not to spit out your morning beverage.

Treasury Secretary Tim Geithner made some waves in England today by scolding British regulators for their light touch, which he says added to the turmoil of the global financial crisis. Speaking to the BBC, Geithner said that the strategy of luring financial activity to London away from New York gave the country's banking systems a unhealthily large share of the economy.


Geithner on Geithner...

PBS Video: Geithner on Finreg - Charlie Rose - July 22, 2010

Not sure how he keeps a straight face through the lies. He blames regulators in a general sense with no acknowledgement of the role he played as President of the New York Fed.


Payback time for first-time homeowners who took advantage of 2008 tax credit

Homeowners who took advantage of a tax credit in 2008 now have to pay it back.
Homeowners who took advantage of a tax credit in 2008 now have to pay it back.

For many people who purchased a home for the first time in 2008, it's payback time.

It sounded like a great deal: become a first-time homebuyer and pocket up to $7,500 in a tax credit. But if you bought that house in 2008 and received the credit, you're required to start paying it back - now.

That's because the credit was actually an interest-free loan provided by the government to stimulate a near-dead housing market.

Unlike the homebuyer credits of 2009 and 2010, this one must be paid back over 15 years beginning with this year's tax return.

For someone who got $7,500, that's $500 a year.

"This is not a freebie," said Jackie Perlman, a tax analyst at H&R Block's Tax Institute.

The 2008 credit was available to qualified homebuyers who purchased after April 8, 2008, through the end of that year. The IRS has sent letters reminding folks who fall into this category, including 45,865 taxpayers in New York State.

Many have been caught off-guard. They either forgot that the credit was a loan, or believed the loan had been forgiven as Congress subsequently passed different versions of the homebuyer credit that did not require a payback.

"I had one client who called me in a slight panic," said Jonathan Horn, a certified public accountant. "People are confused."

If you got the credit and have sold your house or it is no longer your primary residence, the total amount you owe is due on the return for the year those events took place, with some exceptions.

You can choose to accelerate your payments. While the loan is interest-free, some might want to pay it back sooner rather than later.

"A loan is still something hanging over your head," Perlman said.

"Some people will say, 'Let me get this over with.'"