Friday, July 1, 2011

Debt Increased More Under Geithner Than Under Any Treasury Secretary in U.S. History

Treasury Secretary Tim Geithner testifies in the House Small Business Committee on Wednesday, June 22, 2011.
( – Treasury Secretary Timothy Geithner oversaw the largest increase in the national debt of any Treasury secretary in American history, presiding over a $3.7 trillion increase in the debt.
According to data from the Treasury Department’s Bureau of the Public Debt, the national debt has increased $3,723,575,990,130.10 from Jan. 26, 2009 until June 30, 2011, Geithner’s entire tenure to date as Treasury secretary.
When Geithner took office the total national debt stood at $10.6 trillion. As of June 30, 2011, it had risen to $14.3 trillion.
In fact, the debt accrued under Geithner is greater than all federal debt accrued in the first 204 years of the nation’s history. The national debt did not reach $3.7 trillion until October 1991, according to historical Treasury data that reaches back to 1791.
Geithner, who reportedly may step down from his position soon, has overseen the accrual of more federal debt (in only 2.5 years) than every Treasury secretary combined from Alexander Hamilton to Nicholas Brady, who was Treasury secretary in October 1991 when the national debt reached $3.7 trillion.
Since then, the federal debt has increased by historically large amounts under each Treasury secretary since Brady but not to the level it is today under Geithner. The debt increases under those secretaries are presented below.
Nicholas Brady (9/15/88-1/17/93): $1,564,862,000,000.00
Lloyd Bentsen (1/20/93-12/22/94): $559,880,257,144.59
Robert Rubin (1/11/95-7/2/99): $815,560,432,731.13
Lawrence Summers (7/2/99-1/20/01): $109,651,004,604.88
Paul O’Neill (1/20/01-12/31/02): $677,930,718,549.89
John Snow (2/3/03-6/30/06): $2,040,609,369,491.81
Henry Paulson (7/10/06-1/20/09): $2,218,644,118,047.16

US Fed's QE2 stimulus ends with a fizzle

The US Federal Reserve wound up its $600-billion
"QE2" program to boost the ailing economy
with easy liquidity
© AFP/File Karen Bleier

NEW YORK - The US Federal Reserve wound up its $600-billion "QE2" program to boost the ailing economy with easy liquidity on Thursday, having generated more controversy than jobs and growth.

Without fanfare the US central bank's New York branch paid banks $4.9 billion for US Treasury bonds in the program's last step Thursday morning, as economists and bankers continued to argue its effect.

Critics of the Fed's second "quantitative easing" program -- hence QE2 -- say it fueled surging food and fuel prices, pumped up asset bubbles in emerging economies like China and Brazil, and devalued the dollar.

Even sympathizers say it didn't have much impact, noting that US employment remains stubbornly high at 9.1 percent and growth remains depressed.

James Bullard, the head of the Federal Reserve's St. Louis branch, acknowledged in a speech Thursday that economists and policymakers were "fragmented" over the Fed's program, launched last November.
But, he insisted, "QE2 worked in reality."

The Fed at the time had already reduced interest rates to near zero and the economy, growing sluggishly, was at risk of plunging into a disinflationary spiral like that that sank the Japanese economy in the 1990s.

"These developments left the US at risk of a Japanese-style outcome," he said.

Now, with that threat past, "QE2 has shown that the Fed can conduct an effective monetary stabilization policy even when policy rates are near zero."

But many reject that stance.

"QE2 was a terrible mistake, and I think it has been counterproductive for economic growth," said John Ryding, chief economist of RDQ Economics.

"It has gotten inflation up, and that has squeezed the people most in need of paying off their debts."

The idea behind QE2 was that the Fed would pump a vast amount of money into the economy by buying Treasuries from banks, giving them more cash to lend and pushing down long-term interest rates.

That in turn would encourage companies to borrow and invest in factories, equipment and workers.
Despite a fierce backlash from conservative economists and politicians, the Fed began its QE2 bond purchases in November, spending about $75 billion per month.

Many world leaders, especially in emerging markets, complained that the increased supply of dollars devalued the currency, making US exports cheaper and their own exports less competitive.

"It serves no purpose to go throwing money from a helicopter," Brazilian Finance Minister Guido Mantega said. Russian Prime Minister Vladimir Putin denounced QE2 as "hooliganism."

QE2's effects were not all intended. Stocks rallied, with the Dow Jones Industrial Average surging more than 20 percent from when Bernanke proposed QE2 in August until its peak in May.

Commodities prices rose too, hurting consumers as they spent more on food and fuel. US consumer inflation grew to 3.6 percent, while in many developing countries it raced ahead even faster.

But economists debate how much of this was caused by the Fed's policies and how much was driven by surging demand and tighter supplies.

Bullard acknowledged those side effects. "The financial market effects of QE2 looked the same as if the (Fed) had reduced the policy rate substantially," he said.

But meanwhile bank lending did not take off as planned. Still weakened by the crisis, the banks held much of the money as reserves, and potential borrowers were either too cautious or did not need the money.

"Monetary policy... does not have much impact if big US companies are already flush with trillions in cash but don't want to invest and hire," said Peter Morici, an economist at the University of Maryland.

And it only had a modest effect on long-term interest rates, lowering them by only 0.2-0.3 percentage points.

The end of the program is not expected to be felt quickly in the economy, which was still growing at a slow 2-2.5 percent rate in the second quarter.

The Fed says that as the bonds it bought mature, it will recycle the proceeds into new bond purchases -- not adding to the liquidity in the system, but also not reducing it.

The banks will still have the extra cash until next year, when the Fed is expected to begin retiring the bonds without new purchases.

The Fed has strongly suggested it will not launch any new such program, but critics of the government's allegedly weak stimulus efforts were already calling for QE3.

© AFP -- Published at Activist Post with license

Fed's Massive Stimulus Had Little Impact: Greenspan

Alan Greenspan
Getty Images
Alan Greenspan

The Federal Reserve's massive stimulus program had little impact on the U.S. economy besides weakening the dollar and helping U.S. exports, Federal Reserve Governor Alan Greenspan told CNBC Thursday.
In a blunt critique of his successor, Fed Chairman Ben Bernanke, Greenspan said the $2 trillion in quantative easing over the past two years had done little to loosen credit and boost the economy.
"There is no evidence that huge inflow of money into the system basically worked," Greenspan said in a live interview.
"It obviously had some effect on the exchange rate and the exchange rate was a critical issue in export expansion," he said. "Aside from that, I am ill-aware of anything that really worked. Not only QE2 but QE1."
Greenspan’s comments came as the Fed ended the second installment of its bond-buying program, known as QE2, after spending $600 billion. There were no hints of any more monetary easing—or QE3—to come.
Greenspan said he "would be surprised if there was a QE3"  because it would "continue erosion of the dollar."
The former Fed chairman himself has been widely criticized for the low-interest rate policy in the early and mid 2000s that many believe led to the 2008 credit crisis.
Bernanke, who took over for Greenspan in 2006, began implementing the quantitative easing program in 2009 in an attempt to unfreeze credit and prevent a collapse of the US financial system. The strategy has gotten mixed reviews so far.
On Greece, Greenspan a default is likely and will  "affect the whole structure of profitability in the U.S." because of this country's large economic commitments to Europe, which holds Greek debt. Europe is also where "half the foreign [U.S.] affiliate earnings" are generated, he added.
"We can’t afford a significant drop in foreign affiliate earnings," Greenspan said.
Greenspan was also pessimistic about the U.S. deficit talks, saying he didn’t think Congress would reach an agreement on raising the debt ceiling by the Aug 2 deadline.

“We’re going to get up to Aug 2 and I think on that night, we are not going to have the issue solved,” he said.

If that happens, he said, the U.S. would have to continue paying debt holders or risk major damage in global financial markets. As a result, “we will default on everything else.”

He added: “At that point, I think we’ll all come to our senses.”

Prospects for Minn. budget deal dim; shutdown near

Minnesota Gov. Mark Dayton, center, House Speaker Kurt Zellers, left, and Senate Majority Leader Amy Koch are seen through a window as they meet in the Governor's office at the state Capitol in St. Paul Thursday morning, June 30, 2011 to discuss the state budget impasse. A wide-ranging state government shutdown bore down on Minnesota on Thursday, threatening to shutter state parks on the brink of a holiday weekend and lay off thousands of workers if a budget deal wasn't struck by midnight.       MANDATORY CREDIT Photo: Star Tribune, Jim Gehrz / AP
Minnesota Gov. Mark Dayton, center, House Speaker Kurt Zellers, left, and Senate Majority Leader Amy Koch are seen through a window as they meet in the Governor's office at the state Capitol in St. Paul Thursday morning, June 30, 2011 to discuss the state budget impasse. A wide-ranging state government shutdown bore down on Minnesota on Thursday, threatening to shutter state parks on the brink of a holiday weekend and lay off thousands of workers if a budget deal wasn't struck by midnight. MANDATORY CREDIT (Star Tribune, Jim Gehrz / AP)
ST. PAUL, Minn. (AP) — Minnesota marched toward its second government shutdown in six years on Thursday, with a partisan divide over taxes and spending to close a $5 billion deficit becoming only more bitter as a midnight deadline approached and negotiations foundered.
Any hope of a last-minute budget deal between Democratic Gov. Mark Dayton and Republican legislative leaders evaporated around 10 p.m., when Dayton appeared to say he and Republicans were still fundamentally divided over how much the state should spend the next two years and that he saw no chance of avoiding a shutdown.
"It's significant that this shutdown will begin on the Fourth of July weekend," Dayton said. "On that date we celebrate our independence. It also reminds us there are causes and struggles worth fighting for."
Republicans appeared again minutes later, and tried to hang blame for the shutdown around the governor's neck. They said the two sides were closer than he admitted, and they criticized his refusal to call a special session so lawmakers could pass a "lights on" budget bill to keep government running. Dayton refused, saying he's been clear for months that he would only agree to a total budget approach.
"I think the governor's insistence that we pass a full budget is not going to be of much comfort to Minnesotans who are going to see delays on the highways because construction projects stop," said Senate Majority Leader Amy Koch, R-Buffalo. "It's not going to comfort people who can't use our state parks, or who can't get a driver's license."
A shutdown would force thousands of layoffs, bring road projects to a standstill and close state parks just ahead of the Fourth of July weekend. The effects were already being felt hours ahead of the deadline, as people rushed Thursday to get driver's and fishing licenses, and park officials began warning campers to pack their gear and leave.
Though nearly all states are having severe budget problems this year, Minnesota stood alone on the brink of a shutdown, thanks to Dayton's determination to raise taxes on high-earners to close a $5 billion deficit and the Republican Legislature's insistance that the gap should be closed by cutting spending.
Negotiations between Dayton and legislative leaders were fitful Thursday, starting and stopping with no outward signs of progress. After talks broke down for the last time, Dayton and GOP leaders gave conflicting accounts of the last few rounds of offers.
Republican Sen. Michelle Benson said earlier in the day she wasn't budging, a position that Republican leaders held to even after it became clear the shutdown was coming.
"If we don't start taking a different approach to how we manage our government, we're going to swing from one bad economic circumstance to another," Benson said. "We can't just keep throwing more money at government and hoping that makes things better."
The showdown was something of a small-stage version of the drama taking shape in Washington between President Barack Obama and the Republicans over taxes and the nation's debt ceiling.
Though many states are having budget difficulties this year, those where political power is concentrated in a single party easily passed budgets. Some of those with divided government had healthy reserves, including Alaska, Iowa and Montana; Minnesota's rainy-day accounts are drained. Others such as Louisiana and Nevada used one-time money or federal dollars to patch things together. Nevada and Missouri renewed taxes.
In New Jersey, Republican Gov. Chris Christie used the line-item veto Thursday to pare a budget from the Democratic-controlled Legislature before signing it into law, preventing a shutdown.
Only four other states — Michigan, New Jersey, Pennsylvania and Tennessee — have had shutdowns in the past decade, some lasting mere hours.

Could silver drop to $25 an ounce and then rebound to $60?

The problem with trying to make market calls about a highly volatile commodity like silver is that you get it right about as many times as you get it wrong.
ArabianMoney can happily point to our prediction back in December that silver might spike to $50 early in the New Year (click here). Brilliant, we got that absolutely right. But what about our warnings last summer that silver prices might fall? Ah, well they did not and if you sold then you missed the best silver rally in 30 years.
Buy and hold
Buy and hold your poor man’s gold! That is our best advice for investment in a highly volatile commodity. Leave the trading to George Soros who also makes big mistakes from time to time. Trying to time an entry point for new silver investments is another matter.
The ArabianMoney newsletter this month (subscribe here) points to the end of July as looking like a low-point for silver, and has some interesting ideas for subscribers on how to best profit from the price hike to come. That low may be close to the current price of $34 an ounce or the $25 cited by some keen chartists and followers of the fibonacci series.
At a more fundamental level the silver price probably comes down to what happens in Greece and the eurozone over the debt crisis like everything else. If financial markets rally on another temporary solution then silver will stay up. If financial markets turn down sharply silver will probably fall harder than most, unless we have a crisis of confidence in money and that is why you should still hold silver.
$60 target
However, we still think the shiniest of metals has the brightest outlook for 2011 as we did in January (click here) and will finish the year back above the $50 spike of April and most likely north of $60 an ounce.
This confidence comes from an observation that the world’s central banks are flooding the financial markets with cash while at the same time more and more investors are noting that they cannot print silver and deciding to buy it as a hedge against monetary inflation.
At some point the purchasing of physical silver is going to overpower the obvious and blatant price fixing in the pits of the Comex in Chicago, and silver prices will soar to unimaginable heights.
Then we will be writing articles about the silver bubble and how long will it last and how high will it go. It could be that this summer is the type of 50 per cent correction sometimes seen in precious metals – gold prices halved in 1976 before going up eight-fold by 1980. But if so that really will be the buying opportunity of the decade.

UK enters strike chaos: 750,000 public workers walk out

CBO And The Pentagon Are LYING - New Brown University Report Pegs The Real Cost Of Current Wars At $4 TRILLION

Here are the relevant links for this story:
The Watson Institute of Brown University Report
Business Insider Built An Excellent 1-Page Slideshow From The Report
And a summary from Yahoo:
new report out of Brown University estimates that the U.S. wars in Afghanistan and Iraq--together with the counterinsurgency efforts in Pakistan--will, all told, cost $4 trillion and leave 225,000 dead, both civilians and soldiers.
The group of economists, anthropologists, lawyers, humanitarian personnel, and political scientists involved in the project estimated that the cost of caring for the veterans injured in the wars will reach $1 trillion in 30 or 40 years. In estimating the $4 trillion total, they did not take into account the $5.3 billion in reconstruction spending the government has promised Afghanistan, state and local contributions to veteran care, interest payments on war debt, or the costs of Medicare for veterans when they reach 65.
The Congressional Budget Office, meanwhile, has assessed the federal price tag for the wars at $1.8 trillion through 2021. The report says that is a gross underestimate, predicting that the government has already paid $2.3 trillion to $2.7 trillion.
More than 6,000 U.S. troops and 2,300 contractors have died since the wars began after Sept. 11. A staggering 550,000 disability claims have been filed with the VA as of 2010. Meanwhile, 137,000 civilians in Afghanistan and Iraq have died in the conflict. (Injuries among U.S. contractors have also not yet been made public, further complicating the calculations of cost.) Nearly 8 million people have been displaced. Check out Reuters' factbox breaking down the costs and casualties here.

Bernie Sanders "Military Budget Has Tripled Since 1997, But Obama Won't Do Anything About It!"

Video - Bernie Sanders with Keith Olbermann - June 27, 2011

VIDEO - Sarkozy Attacked By Member Of Greeting Crowd

Nothing huge but still not something one sees very often.  Perhaps he was mistaken for Tim Geithner who is rumored to be leaving Team Obama for Goldman Sachs.
A man in a crowd grabbed French President Nicolas Sarkozy by the shoulder and nearly knocked him to the ground before being tackled by security officers and detained.  The incident occurred as the president shook hands with a crowd in the town of Brax in southwest France.  The man was not armed, according to the national police service. An official with the service said the 32-year-old Frenchman lives in the Lot-et-Garonne region.

Geithner's Calendar: Meets With Future Boss Lloyd Blankfein More Often Than With All Of Congress

White House snubs McConnell invitation to Obama

(Reuters) - The White House effectively turned down an invitation by Republican Senate Leader Mitch McConnell for President Barack Obama to visit his members on Capitol Hill on Thursday to discuss raising the debt limit.
White House press secretary Jay Carney, while not directly saying the invitation had been rejected, said Obama did not need to hear Republicans tell him what they would not support.
That, Carney said, was "not a conversation worth having."
(Reporting by Alister Bull)

Wisconsin Schools To Lay Off 354 Teachers

Officials also plan to cut back on spending for textbooks, building maintenance.

Facing deep funding cuts, the Milwaukee public school district announced this week that it will lay off 519 employees, including 354 teachers.
The announcement comes after Wisconsin Gov. Scott Walker signed a two-year budget into law on Sunday that sharply curtailed funding across the state and rolled back about $84 million in aid to Milwaukee schools.

In addition to the layoffs, Superintendent Gregory Thornton indicated that the district would eliminate vacant positions and cut back on spending for textbooks, summer school options and building maintenance.

“We find it a difficult scenario,” Thornton said in a statement. “This is just the second time in 30 years that the district has laid off teachers, and we are parting with many valuable and qualified educators.”

At a news conference on Wednesday, Thornton made clear he was unhappy that most of the layoffs are for teachers in elementary schools. “Children are being caught in the middle,” he said. “They deserve better.”

The cuts in Wisconsin arrive as many states and local governments across the country face looming budget gaps. According to CNN, state and local governments are expected to shed 110,000 jobs in the third quarter of this year, which begins on Friday.

Walker and Wisconsin's teachers have been at odds since February, when teachers left work to protest an anti-union law that would severely limit their collective bargaining rights. After weeks of bitter debate and large protests at the state capital, Walker signed the bill into law in mid-March.

Photo by Mark Hirsch/Getty Images.


Fed sides with banks over debit card swipe fees

Lobbying pays off as it raises amount that merchants are charged after initial proposal lenders hated 

Looks like all that lobbying worked out well for banks.
The American Bankers Association scored a victory today when the Federal Reserve agreed to increase the amount banks can collect from merchants each time a consumer swipes his debit card from its original proposal.
Originally, the Durbin amendment called to cap so-called interchange fees banks charge retailers at 12 cents per transaction, but the Fed announced today that it would up that cap to 21 cents. In addition, banks can also take an additional 1 cent per transaction fee if they adopt fraud prevention policies and procedures. The 10 best employers in retail
The new fees would go into place in October. The regulation was previously scheduled to take effect on July 21.
That’s good news for banks like JPMorgan Chase and Bank of America and card companies like VISA and Mastercard who get a significant chunk of revenue on those swipes fees but bad news for retailers who thought they’d be getting a major break on the fees bank and card companies collect from them.
Here’s what’s at stake: retailers like Starbucks, for instance, incur an interchange fee by your bank every time you swipe your debit card for a cup of coffee. The banks and card companies say the fees are important because they are put toward network connectivity, hardware and software labor and fraud prevention measures related to the transaction. Updates on America's most promising companies Class of 2009
Retailers argue that the money collected per transaction, which currently has no cap and averages about 44 cents, were excessive and hurting consumers. How? Retailers argued that they had to increase the cost of goods to make up for the money paid out to banks and card companies.
The Federal Reserve agreed with retailers and proposed to cap the fee.
Since then the ABA has been lobbying hard to do something about either getting rid of the cap or increasing it. Their argument: capping debit fee to 12 cents per transaction won’t cover the costs of fraud prevention on our end. We’ll have to charge customers through other measures to make up for the lost revenue. The companies hiring the most in sales right now
Today’s decision by the Fed to increase the cap from 14 cents to 21 cents reflects the costs banks face on each transaction including network connectivity, hardware, software and labor used for electronic debit transactions.
Of course retailers are not thrilled with the Fed for “bending to bank pressure” and increasing the cap.
“The Fed’s rule is an irresponsible abdication of its legal duty to implement the law as written in favor of doing the bidding of the nation’s largest banks,” said Lyle Beckwith, Senior Vice President of Government Relations at the National Association of Convenience Stores. The year's most memorable new products
“The Federal Reserve very clearly did not follow through on the intent of the law,” said Mallory Duncan, Chairman of the Merchants Payments Coalition. “This rule is unacceptable to Main street merchants and consumers, who were counting on the Fed to issue a fair rule that followed Congress’ law. Unfortunately, this rule does not meet those qualifications.”
It’s unclear now how this will affect consumers since the cap has been negotiated to consider both banks and retailers. For retailers, though they’re not pleased with the last minute increase, the cap alone means they’ll have a better idea of how much they’ll be facing in swipe fees each month, and for banks it means revenue losses on the swipe fees won’t be as harsh as initially anticipated.


Kissinger Tells Charlie Rose the Current Financial Crisis Can Be Used to Advance a New World Order

Henry Kissinger sits down in an interview with US talk show host, Charlie Rose, and bleats on about the great opportunity now in front of the Obama administration to seize the power of a crisis. Kissinger reflects with pride on America's leading role in advancing one-world governance and its working appendages; the UN, NATO, WHO, World Bank, IMF, etc. – all erected in the period immediately following WWII. Kissinger hopes that once again International Order can be advanced out of the current global financial crisis.

Kissinger Tells Charlie Rose the Current Financial Crisis Can Be Used to Advance a New World Order


IL - Johnston City all but shuts down

All but a skeleton crew of Johnston City employees are off work until further notice because of the city’s inability to guarantee future payroll.
Mayor Jim Mitchell said non-essential employees were told not to report to work today and were told not to come back until notified of a return date.
The city of about 3,650 people took the drastic step because city funds are depleted, he said.
“The city has borrowed and borrowed and borrowed and we can’t borrow anymore,” Mitchell said. “We are out of funds and when you reach the point where you can’t guarantee payroll, you cannot ask employees to work. We can’t guarantee payroll after this check and we’re going to have to do some juggling to do that.”
Only essential employees will remain on the job.
“We’ve cut everything to a skeleton crew. I tried to leave at least one person in each department and only the people who have to be here will be here,” he said.
Police will be cut to one officer per shift and overtime is eliminated. Any calls that would force overtime will be handled by the police chief or the Williamson County sheriff’s deputies, he said.
The fire department will run as usual for now although out-of-town first responder calls will be answered only if life is in peril.
“We’ve been warning people, telling them for a couple of years now, that we have to cut spending. There’s been a spending freeze for a year now but the spending continued. The chickens have come home to roost,” he said. “The spending is now over.”

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