Wednesday, September 21, 2011

Taleb Says Obama's Stimulus 'Made Economic Crisis Worse'

Originally published in Sep. 2010.
That makes 3 racist tea partiers in the last 10 days telling Obama to stop the stimulus.
U.S. President Barack Obama and his administration weakened the country’s economy by seeking to foster growth instead of paying down the federal debt, said Nassim Nicholas Taleb, author of “The Black Swan.”
  • “Obama did exactly the opposite of what should have been done,” Taleb said yesterday in Montreal in a speech as part of Canada’s Salon Speakers series. “He surrounded himself with people who exacerbated the problem. You have a person who has cancer and instead of removing the cancer, you give him tranquilizers. When you give tranquilizers to a cancer patient, they feel better but the cancer gets worse.”
Today, Taleb said, “total debt is higher than it was in 2008 and unemployment is worse.”
Obama this month proposed a package of $180 billion in business tax breaks and infrastructure outlays to boost spending and job growth. That would come on top of the $814 billion stimulus measure enacted last year. The U.S. government’s total outstanding debt is about $13.5 trillion, according to U.S. Treasury Department figures.
“Today there is a dependency on people who have never been able to forecast anything,” Taleb said. “What kind of system is insulated from forecasting errors? A system where debts are low and companies are allowed to die young when they are fragile. Companies always end up dying one day anyway.”

Must see:

Israel Has Dumped 46 Percent of Its U.S. Treasury Bills; Russia 95 Percent

( - Foreign ownership of U.S. government debt declined in July for the second straight month, according to Treasury Department data released Friday.
Overall, foreign holdings of U.S. debt dropped from an all-time high of $4.5115 trillion in May to 4.4956 trillion in June and then to $4.478 trillion in July.
In June and July, President Barack Obama and congressional leaders were negotiating legislation to increase the legal limit on the U.S. government’s debt. In August, Obama signed legislation that will permit the Treasury to borrow up to another $2.4 trillion.
Among major foreign creditors of the U.S. government, entities in Russia led the way in divesting from U.S. Treasury securities, with Russian holdings of U.S. debt dropping by $9.6 billion from June to July.
In fact, Russian-based owners of U.S. debt have dropped about 43 percent of their overall U.S. debt holdings over the past year. Those holdings peaked at $176.3 billion in October 2010, according to Treasury Department data, and dropped to $100.2 billion by July.
More dramatically, since March 2009, according to historical Treasury Department data, the Russians have dumped about 95 percent (94.94 percent) of their holdings in Treasury bills, which are short-term U.S. Treasury securities that mature in periods of one-year or less.
Russian ownership of U.S. Treasury bills peaked at $73.15 billion in March 2009 and had declined to $3.7 billion by July.
Israelis have also been decreasing their ownership of U.S. government debt.
Total Israeli holdings of U.S. Treasury securities peaked at $22.0 billion in April 2010. That had dropped to $17.2 billion by this July, a decline of about 22 percent.
Like the Russians, the Israelis have dramatically decreased their ownership of short-term Treasury bills, according to Treasury Department data. Israeli ownership of Treasury bills peaked at $15.638 billion in March 2009 and declined to $8.375 billion in July, a drop of about 46 percent.
Entities in mainland China countered the worldwide trend, and reversed their own previous trend, by increasing their holdings of U.S. government debt in recent months.
From October 2010 through March 2011, Chinese holdings of U.S. debt had dropped from an all-time peak of 1.1753 trillion to $1.1449 trillion. But in April, May, June and July, overall Chinese holdings of U.S. debt increased, reaching $1.1735 trillion in July--nearly back to their peak of the previous October.
In June and July, the Chinese also started increasing their ownership of short-term U.S. Treasury bills--after having dramatically drawn them down between May 2009 and May of this year.
Chinese ownership of short-term U.S. Treasury bills hit an all-time peak of $210.417 billion in May 2009. It then dropped to a low of $2.978 billion in May 2011—a decline of almost 99 percent over two years. This June, however, the Chinese increased their ownership of Treasury bills to $4.546 billion; and, in July, they increased them again to $10.122 billion.
(The $10.122 billion in U.S. Treasury bills that the Chinese held at the end of July--while an increase from the two previous months--still represented a 95-percent decrease in Chinese T-bill holdings from their peak in 2009.)
The publicly held portion of the U.S. government debt primarily consists of Treasury bonds that mature in 30 years, Treasury notes that mature in 2 to 10 years, and Treasury bills that mature in one year or less.
Even though foreign ownership of U.S. government debt declined in June and July, the $4.478 trillion in U.S. government debt that was still held by foreign interests at the end of July equaled about 46 percent of the U.S. government debt held by the public--which was $9.7558 trillion at the end of July. The Treasury also owed another $4.586 trillion as of the end of July in what it calls "intragovernmental" debt--which is the money the Treasury has borrowed and spent out federal trust funds such as the Social Security trust fund and has replaced with the equivalent of IOUs that the Treasury  can only redeem by taxing or borrowing more money.

#OccupyWallStreet Yahoo Censorship in action

How Far Can Gold and Silver Climb?

Dees Illustration
Jeff Clark
Casey Research

With gold a stone’s throw away from $2,000 and already up 27% on the year, the objective investor might begin wondering how much higher both it and silver can climb. After all, gold is nearing its inflation-adjusted 1980 high – and that peak was a spike that lasted only one day.

So, how much return can we realistically expect in each metal at this point? And is one a better buy than the other? There are dozens of ways to calculate price projections, but I’m going to use data based strictly on past price behavior from the 1970s bull market.

First, let’s measure what today’s inflation-adjusted price would be if each metal matched their respective 1980 highs, along with the return needed to reach those levels:

War – The Fiscal Stimulus of Last Resort

“War! Good God, ya’ll. What is it good for? Absolutely nothin’!” So went the Bruce Springsteen pop hit of the 1980s, first produced as an anti-Vietnam War song in 1969. The song echoed popular sentiment. The Vietnam War ended. Then the Cold War ended. Yet military spending remains the government’s number one expenditure. When veterans’ benefits and other past military costs are factored in, half the government’s budget now goes to the military/industrial complex. Protesters have been trying to stop this juggernaut ever since the end of World War II, yet the war machine is more powerful and influential than ever.

Why? The veiled powers pulling the strings no doubt have their own dark agenda, but why has our much-trumpeted system of political democracy not been able to stop them?
The answer may involve our individualistic, laissez-faire brand of capitalism, which forbids the government to compete with private business except in cases of “national emergency.” The problem is that private business needs the government to get money into people’s pockets and stimulate demand. The process has to start somewhere, and government has the tools to do it. But in our culture, any hint of “socialism” is anathema. The result has been a state of “national emergency” has had to be declared virtually all of the time, just to get the government’s money into the economy.
Other avenues being blocked, the productive civilian economy has been systematically sucked into the non-productive military sector, until war is now our number one export. War is where the money is and where the jobs are. The United States has been turned into a permanent war economy and military state.
War as Economic Stimulus
The notion that war is good for the economy goes back at least to World War II. Critics of Keynesian-style deficit spending insisted that it was war, not deficit spending, that got the U.S. out of the Great Depression.
But while war may have triggered the surge in productivity that followed, the reason war worked was that it opened the deficit floodgates. The war was a huge stimulus to economic growth, not because it was a cost-effective use of resources, but because nobody worries about deficits in wartime.
In peacetime, on the other hand, when the government was not supposed to engage in competitive enterprise. As Nobel Prize winner Frederick Soddy observed:
The old extreme laissez-faire policy of individualistic economics jealously denied to the State the right of competing in any way with individuals in the ownership of productive enterprise, out of which monetary interest or profit can be made . . . .
In the 1930s, the government was allowed to invest in such domestic ventures as the Tennessee Valley Authority, but this was largely because private sector investors did not believe they could turn a sufficient profit on the projects themselves. The upshot was that the years between 1933 and 1937 proved to be the biggest cyclical boom in U.S. history. Real gross domestic product (GDP) grew at a 12 percent rate and nominal GDP grew at a 14 percent rate. But when the economy appeared to be back on its feet in 1937, Roosevelt was leaned on to cut back on public investment. The result was a surge in unemployment. The economic boom died and the economy slipped back into depression.
World War II reversed this cycle by re-opening the money spigots. “National security” trumped all, as Congress spent with reckless abandon to “preserve our way of life.” The all-out challenge of World War II allowed Congress to fund a flurry of industrial activity, as it ran up a tab on the national credit card that was 120% of GDP.
The government ran up the largest debt in its history. Yet the hyperinflation, currency devaluation, and economic collapse predicted by the deficit hawks did not occur. Rather, the machinery and infrastructure built during that booming period set the nation up to lead the world in productivity for the next half century. By the 1970s, the debt-to-GDP ratio had dropped from 120% to less than 40%, not because people sacrificed to pay back the debt, but because the economy was so productive that GDP rose to close the gap.
Stimulus Without War
World War II may have created jobs; but like all wars, it took a terrible toll. Economist John Maynard Keynes observed:
Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better. [Emphasis added.]
War was the economic stimulus of last resort when politicians were so confused in their understanding of economics that they would not allow the government to go into debt except for national emergencies. But Keynes said there are less destructive ways to get money into people’s pockets and stimulate the economy. Workers could be paid to dig ditches and fill them back up, and it would stimulate the economy. What a lagging economy needed was simply demand (available purchasing power). Demand would then stimulate businesses to produce more “supply”, creating more jobs and driving productivity. The key was that demand (money to spend) must come first.
The Chinese have put workers to work building massive malls and apartment buildings, many of which are standing empty for lack of customers and purchasers. It may be a wasteful use of resources, but it has succeeded in putting wages in workers’ pockets, giving them the purchasing power to spend on products and services, stimulating economic growth; and unlike wasteful war spending, the Chinese approach has not involved death and destruction.
A less costly alternative would be Milton Friedman’s hypothetical solution: simply drop money from helicopters. This has been linked to “quantitative easing” (QE), but QE as currently applied is not what Friedman described. The money has not been showered on the people and the local economy, putting money in people’s pockets, stimulating spending. It has been dropped into the reserve accounts of banks, where it has simply accumulated without reaching the productive economy. “Excess” reserves of $1.6 trillion are now sitting in reserve accounts at the Federal Reserve. A helicopter drop of the sort proposed by Friedman has not been tried.
A Better Solution
War, digging ditches, and dropping money from helicopters could all work to stimulate demand and increase purchasing power, but there are better alternatives. Today we have major unmet needs -- infrastructure that is falling apart, overcrowded classrooms, energy systems waiting for development, research labs in need of funding. The most cost-effective solution today would be for the government to stimulate the economy by spending on work that actually improves the standard of living of the people.
This could be done while actually reducing the national debt. In a recent article, David Swanson cites a study by Robert Greenwald and Derrick Crowe, looking at the $60 billion lost by the Pentagon to waste and fraud in Iraq and Afghanistan. They calculated that this money could have created 193,000 more jobs than its military use created, if diverted to domestic commercial purposes. Swanson goes on:
There are some other calculations in the same study . . . . If we had spent that $60 billion on clean energy, we would have created (directly or indirectly) 330,000 more jobs. If we'd spent it on healthcare, we'd have created 480,000 more jobs. And if we'd spent it on education, we'd have created 1.05 million more jobs. . . .
Let's say we want to create 29 million jobs in 10 years. That's 2.9 million each year. Here's one way to do it. Take $100 billion from the Department of Defense and move it into education. That creates 1.75 million jobs per year. Take another $50 billion and move it into healthcare spending. There's an additional 400,000 jobs. Take another $100 billion and move it into clean energy. There's another 550,000 jobs. And take another $62 billion and turn it into tax cuts, generating an additional 200,000 jobs. Now the military spending in the Department of Energy, the State Department, Homeland Security, and so forth have not been touched. And the Department of Defense has been cut back to about $388 billion, which is to say: more than it was getting 10 years ago when our country went collectively insane.
Labor and resources are sitting idle while the bogeyman of “deficits” deprives the population of the goods and services they could create. Diverting a portion of our massive war spending to peaceful use could add jobs, improve living standards, and add infrastructure, while reducing the national debt and balancing the government’s budget by increasing the tax base and government revenues.
Prepared for “The Military Industrial Complex at 50”, a conference in Charlottesville, VA, September 16-18, 2011
Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her earlier books focused on the pharmaceutical cartel that gets its power from “the money trust.” Her eleven books include Forbidden Medicine, Nature’s Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health (co-authored with Dr. Richard Hansen). Her websites are and
Ellen Brown is a frequent contributor to Global Research.  Global Research Articles by Ellen Brown
© Copyright Ellen Brown , Global Research, 2011
Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.

© 2005-2011 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

OBAMA STIMULUS WATCH: $800,000 Goes To African HIV Genital-Washing Program

Further evidence that we are Rome.  The American empire is burning, bankrupt and primarily stupid.  We have spent $814 billion that belongs to future generations, all so that Obama's party (which is quite similar to the other useless party) might hold onto a few more seats in November.  Sounds about right.  What time is American Idol on tonight?
Politicians have huge egos, bankrupt souls, and don't care much about anything beyond re-election.  They hate recessions ultimately because they fear a voter backlash and the possibility of being sent back home from cozy Washington.  So they are generally prepared to do anything to avoid/prevent/mitigate the process.  Such is why they will vote to spend money whether they have it or not.  Throw trillions in cash at the problem, shy away from fixing the structural issues, and maybe it can be held together long enough to be re-elected for another term.
Too bad the trillions are coming from you and your kids (and grandkids) and they never asked for your permission. Throw the bums out in 2010.  That is the only option.
The study is ongoing and if successful will lead to more studies:
If most of the men in the study wash their genitals after sex, are willing to do so after the study ends, and report that their partners accept the regimen, the researchers will develop another study to see if the “penile cleansing procedure” actually works to prevent HIV infections.
“If we find that men are able to practice consistent washing practices after sex, we will plan to test whether this might protect men from becoming HIV infected in a later study,” the grant says.
The study’s lead investigator Dr. Thomas J. Coates was the fourth highest-funded researcher in the country in 2002 and is currently conducting HIV research on three continents.
More detail:
( – The National Institute of Mental Health (NIMH), a division of the National Institutes of Health (NIH), spent $823,200 of economic stimulus funds in 2009 on a study by a UCLA research team to teach uncircumcised African men how to wash their genitals after having sex.
The genitalia-washing program is part of a larger $12-million UCLA study examining how to better encourage Africans to undergo voluntary HIV testing and counseling – however, only the penis-washing study received money from the 2009 economic stimulus law. The washing portion of the study is set to end in 2011.
“NIH Announces the Availability of Recovery Act Funds for Competitive Revision Applications,” the grant abstract states. “We propose to evaluate the feasibility of a post-coital genital hygiene study among men unwilling to be circumcised in Orange Farm, South Africa.”
Because AIDS researchers have been unsuccessful in convincing most adult African men to undergo circumcision, the UCLA study proposes to determine whether researchers can develop an after-sex genitalia-washing regimen that they can then convince uncircumcised African men to follow.
“The aim of the proposed feasibility study is to evaluate the feasibility and acceptability of a post-coital male genital hygiene procedure, which participants will be asked to practice immediately post-coitus or at least 12 hours after,” reads the abstract.
The study’s lead investigator Dr. Thomas J. Coates was the fourth highest-funded researcher in the country in 2002 and is currently conducting HIV research on three continents. asked both Coates and NIMH the following question: “The Census Bureau says the median household income in the United States is $52,000. How would you explain to the average American mom and dad -- who make $52,000 per year -- that taxing them to pay for this grant was justified?”

Denver’s Self-Reliance Expo 2011

This last weekend we attended the National Self-Reliance Organization’s Semi-annual Expo in Denver, Colorado. It was held at the National Western Complex and accommodated thousands of interested attendees, from near and far. We spoke with dozens of individuals and families who traveled from all over the United States and Canada in order to attend. One of the fascinating aspects of their travels was that they came from varied backgrounds and means. Their interests were also particular, ranging from the following reasons:
We thoroughly enjoyed meeting with so many of you and appreciate your support at the Expo and Online. We were happy to give away more than $2,000 worth of Berkey Water Purification Products as well as other preparedness items we carry. We showcased our newest addition, The Country Living Grain Mill and hundreds of adults and children were able to try their hand at milling hard-red wheat the easy way with that mill.
The most significant value of attending the Expo was our ability to connect and begin relationships with the attendees and the exhibitors, and to strengthen existing relationships with like-minded folk. Some of the exhibitors we really enjoyed were:
We will be attending the next Expo in Salt Lake City on October 7-8, 2011 at the South Towne Expo…Hope to see you there!!!

-The Berkey Guy

STIMULUS TRUTH -- Intel CEO Smacks Down Obama & Democrats: They Don't Get It! The Stimulus Won't Work! Stop Trying! (VIDEO)


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This is meaningful for several reasons.  Otellini is a Democrat.  And he is not by nature an Obama basher.  He mentions having been invited to the White House for policy discussions more often in 20 months under Obama, than during the entire 8 years under Bush.
So the criticism is NOT politically based.  Further, Otellini is on the front lines of U.S. manufacturing and job creation as CEO of Intel.  He speaks with C-level executives on a regular basis.  In the clip above, he emphatically states the stimulus isn't working, and that Obama should cancel his new $350 billion infrastructure package and replace it with a cut in the corporate tax rate, which at 38% is over twice that found in semi-Socialist France.
More detail from CNN:
Intel CEO Paul Otellini doesn't buy into the idea that the White House is anti-business, but he does believe the administration "just doesn't get it" when it comes to creating jobs.
Otellini, in an exclusive interview with CNN Money at the Intel Developers Forum in San Francisco on Tuesday, said the U.S. should not only forgo spending the second half of Obama's $787 billion stimulus package, but completely axe Obama's newly proposed $350 billion economic recovery plan.
"The decisions so far have not resulted in either job growth or increased confidence. When what you're doing isn't working, you rethink it and I think we need to rethink some plans," Otellini told CNN Money. "Swimming pools in Mississippi are not going to create lasting jobs," he added.
Companies can't invest because they don't know what their health care, energy or tax costs will be in the coming years, Otellini said.
Otellini insisted the U.S. business world needs more certainty, but most of all, he said, the administration needs to take the first major step in attracting foreign investment and increasing the flow of capital back into the United States by reducing corporate taxes. "To attract a global-scale set of investments, you need to have globally competitive infrastructure -- and tax rates," argued Otellini.
In short, Otellini said America faces a cost problem. "As a global businessman, particularly if you're not based in the U.S., why would you come here?" Otellini said.

SR 27 Bank of California

Italy’s Credit Rating Cut, Downgrade Sparks Further Fears of Euro Soveriegn Debt Crisis Contagion

Standard and Poor’s has downgraded Italy’s credit rating sparking fears Europe’s sovereign debt crisis will spread across the entire Eurozone.

Breaking news alerts on Bloomberg, CNBC, and other financial news outlets report that Standard and Poor’s has cut Italy’s credit rating. Check back for a complete update shortly.

EuroCrisis - Italy Credit Rating Downgraded To Single A By Standard And Poors
EuroCrisis - Italy Credit Rating Downgraded To Single A By Standard And Poors
In the midst of speculation about French bank insolvency, issues with sovereign debt in the PIIGS nations (Portugal, Italy, Ireland, Greece and Spain) European leaders failed today to reassure the global investment community they had a plan in place to deal with the European sovereign debt crisis.
The lack of plan sent global financial markets tumbling today, although the sell-off just about tampered off in after hours trading following the U.S market close today.
That all of course changed as Standard and Poor’s pushed over the next domino to fall in the EU crisis by downgrading Italy’s credit rating to A from A+.
The full update from Zero Hedge below details the credit rating cut and the markets overseas reaction.

S&P Downgrades Italy; Euro, Futures Tumble

Tyler Durden's picture Submitted by Tyler Durden on 09/19/2011 18:34 -0400

As usual, a corrupt and pathetic Moody’s continues to boldly not go where everyone else has gone before. Luckily, S&P, which had the balls to cut the US, has just done so to Europe’s next domino, by downgrading Italy from A+ to A, outlook negative. Then again, this was pretty much telegraphed 100% earlier today as noted in “Italy Expected To Cut Growth Forecasts Further.” Anyway, those incompetents from Moody’s are next.Full report:
Italy Unsolicited Ratings Lowered To ‘A/A-1′ On Weaker Growth Prospects, Uncertain Policy Environment; Outlook Negative
  • Italy’s net general government debt is the highest among ‘A’ rated sovereigns. We have revised our projections of Italy’s net general government debt and now expect it to peak later and at a higher level than we previously anticipated.
  • In our view, Italy’s economic growth prospects are weakening and we expect that Italy’s fragile governing coalition and policy differences within parliament will continue to limit the government’s ability to respond decisively to domestic and external macroeconomic challenges.
  • In our view, weaker economic growth performance will likely limit the effectiveness of Italy’s revenue-led fiscal consolidation program.
  • We have revised our base-case medium-term projections of real GDP growth to an annual average of 0.7% between 2011 to 2014, compared with our previous projection of 1.3% (see “Credit FAQ: Why We Revised The Outlook On Italy To Negative,” published May 23, 2011). As part of our ratings analysis, we have also prepared upside and downside macroeconomic scenarios that could drive our future rating actions on Italy.
  • We are lowering our long- and short-term unsolicited sovereign credit ratings on Italy to ‘A/A-1′ from ‘A+/A-1+’.
  • The negative outlook reflects our view of additional downside risks to public finances related to the trajectory of Italy’s real and nominal GDP growth, and implementation risks of the government’s fiscal consolidation program.
Rating Action
On Sept. 19, 2011, Standard & Poor’s Ratings Services lowered its unsolicited long- and short-term sovereign credit ratings on the Republic of Italy to ‘A/A-1′ from ‘A+/A-1+’. The outlook is negative. The transfer and convertibility assessment remains ‘AAA’, as it does for all members of the eurozone.
The downgrade reflects our view of Italy’s weakening economic growth prospects and our view that Italy’s fragile governing coalition and policy differences within parliament will likely continue to limit the government’s ability to respond decisively to the challenging domestic and external macroeconomic environment.
Under our recently updated sovereign ratings criteria, the “political” and “debt” scores were the primary contributors to the downgrade. The scores relating to the other elements of our methodology–economic structure, external, and monetary–did not contribute to the downgrade.
More subdued external demand, government austerity measures, and upward pressure on funding costs in both the public and private sectors will, in our opinion, likely result in weaker growth for the Italian economy compared with our May 2011 base-case expectations, when we revised the outlook to negative.
We believe the reduced pace of Italy’s economic activity to date will make the government’s revised fiscal targets difficult to achieve. Furthermore, what we view as the Italian government’s tentative policy response to recent market pressures suggests continuing future political uncertainty about the means of addressing Italy’s economic challenges.
In our opinion, the measures included in and the implementation timeline of Italy’s National Reform Plan will likely do little to boost Italy’s economic performance, particularly against the backdrop of tightening financial conditions and the government’s fiscal austerity program (see “Italy Delivers”, published by the Italian Ministry of the Economy and Finance at
Our reduced expectations concerning Italy’s growth prospects also reflect key structural impediments that we have written about before:
Low labor participation rates and tightly regulated labor and services markets;
What we consider to be an inefficient public sector; and
Relatively modest foreign investment inflows.
In our view, the authorities remain reluctant to tackle these issues (see our full analysis on Italy, published Dec. 1, 2010, on RatingsDirect on the Global Credit Portal). For example, we note that in the July 2011 political discussions about the Decree Law No. 98/2011 (converted into Law No. 111/2011), several proposed supply-side measures, including the liberalization of professional services, were shelved or delayed because of opposition within the governing coalition and in parliament.
The government projects that its fiscal consolidation program will result in a cumulative fiscal consolidation of about €60 billion, overall, with the largest savings projected in 2012 and 2013 (see “Italy Delivers”,
However, we think that the government’s projection of a €60 billion savings may not come to fruition for three primary reasons:
First, as described below, we view Italy’s economic growth prospects as weakening;
Second, nearly two-thirds of the projected budgetary savings in the crucial 2011-2014 period rely on revenue increases in a country already carrying a high tax burden; and
Third, market interest rates are anticipated to rise.
We have adopted a revised base-case macroeconomic scenario, which we view as consistent with the downgrade and negative outlook. Compared with the May 2011 base case, the revised base-case scenario assumes that annual real GDP growth will be 0.6 percentage points lower over the 2011-2014 forecast horizon because of more sluggish growth in exports, investment, and public- and private-sector consumption. Since May 2011, financial conditions in Italy have tightened and the pace of economic recovery of its principal global and eurozone trading partners has slowed. We also note that our revised base case is broadly similar to the downside (downgrade) scenario we published in May 2011.
We have also adopted a revised downside scenario, consistent with another possible downgrade. The revised downside assumes a mild recession takes hold next year, with real GDP declining by 0.6%, followed by a modest recovery in 2013-2014. The economic main drivers in our revised downside scenario are tighter financial conditions, with higher interest rates on government bonds, as well as weaker trajectories for private-sector consumption and exports.
We have also adopted a revised upside scenario, which, if it occurred, would be consistent with our view of a revision of the outlook to stable. Our revised upside scenario assumes that financial conditions will gradually improve, along with the trajectories for GDP growth, exports, and investment. For details of the revised base case and alternate scenarios, see our analysis on Italy, published Sept. 19, 2011.
Under all three scenarios, we expect that Italy’s net general government debt burden will remain the key rating constraint for the foreseeable future. We project that such net debt will be 117% of GDP at year-end 2011, up from 100% of GDP in 2007.
Under our revised base case, the net debt burden would fall only slightly to 115% of GDP by 2014, a similar rate to the May 2011 downside scenario.
Our macroeconomic analysis also illustrates Italy’s main credit weakness: Even under pressure, Italian political institutions, incumbent monopolies, public-sector workers, and public- and private-sector unions impede the government’s ability to respond decisively to challenging economic conditions. For example, union opposition to the privatization of Alitalia in 2008 ended prospects for a takeover by Air France. Moreover, resistance in parliament in July 2011 led the government to drop proposals to liberalize professional services from its legislative agenda. Nontariff barriers to foreign direct investment (FDI) are, in our view, the key reason behind Italy’s relatively low inbound FDI stock. At about 16% of GDP, it is less than one-half that of either France or Spain (36% and 43% of GDP, respectively) and lower than that of Germany (27%), despite Italy’s potential efficiency gains from economic scale within Europe’s common market.
With elections due in 2013, and the government’s parliamentary position tenuous, it is unclear what can be done to break the deadlock between these political institutions and the government. As a result, we believe that Italy remains vulnerable to heightened fiscal, economic, and financial downside risks.
As noted above, the application of three elements of our recently updated sovereign ratings criteria–economic structure, external, and monetary–did not materially change our view from May 2011, when we revised the outlook on Italy to negative. We continue to score Italy as a high-income sovereign with a diversified economy and few external imbalances, albeit one with what we see as weak growth prospects.
In addition, we view both household and corporate balance sheets as relatively strong, which should enable the government to tap local savings on a scale that could permit a more gradual fiscal adjustment than for some of its southern European neighbors. As of year-end 2010, Italy’s nonbank sector remains in a substantial net external creditor position, while the public sector’s net external liability is equivalent to €804 billion (52% of GDP). We note that Italy’s current account deficit has widened recently, to more than 10% of current account receipts, but we expect this to unwind.
We expect the government, given its tight fiscal position, will provide only limited direct assistance to the banking system in the near term, and we still expect most of the Tremonti bonds, which provided four banks’ Tier I capital during the 2008-2009 recession, to be repaid this year.
The negative outlook reflects Standard & Poor’s view of risks to the Italian government’s fiscal targets over 2011-2014, as well as the uncertainties on the timely implementation of growth-enhancing reforms. In our view, these risks would stem from weaker output growth than we currently assume in our revised base case. In addition, political gridlock could contribute to delayed policy responses to new macroeconomic challenges and result in significant fiscal slippage.
If one or more of these risks materializes, Italy’s net general government debt could increase from its already high level. In that event, we could lower the long- and short-term ratings again. We could also lower the ratings if, against our expectations, the current account deficit remained higher than 10% of current account receipts beyond 2013. This would occur if Italy’s trade balance did not improve or if the income deficits continued to widen because of rising refinancing costs.
On the other hand, if the government manages to gather political support for implementing growth-enhancing structural reforms, which in turn increase prospects for a material reduction in the net public debt burden in the medium term, we could affirm the ratings at the current level.
As is typical, ratings on issues and issuances dependent on these long- and short-term ratings may be revised as a result of today’s rating action.
Futures not happy:

Neither is the Euro:

Chris Whalen - 'It's Time For Bankruptcy, Bank Of America Is Doomed'

Watch Video

Whalen says, the government should just seize Bank of America and restructure its debt, equity, and legal obligations now.
Most recent clip from independent banking analyst Chris Whalen, recorded last week.
Source - Tech Ticker
Bank of America is doomed, says bank analyst Chris Whalen, the founder and managing director of Institutional Risk Analytics.
Importantly, this dour outlook as nothing to do with the company's operating businesses, which Whalen thinks are fine. In fact, says Whalen, there's no need for the bank to be restructuring them and firing thousands of employees to improve its bottom line.
The part of Bank of America that's not fine, in Whalen's view, is the ongoing liability from the mortgage underwriting that Bank of America's subsidiaries did during the housing bubble. The litigation exposure from this could be so humongous, Whalen argues, that it will bankrupt the company, forcing regulators to step in and restructure it.
And Whalen doesn't think the country should wait for that day.
Instead, Whalen says, the government should just seize Bank of America and restructure its debt, equity, and legal obligations now. The company's operating businesses--branches, commercial lending, wealth management, and so forth--should continue operating, and the company could then be refloated with a new ownership structure.
This would leave Bank of America clean, lean, and competitive--just like the strengthened GM after the forced auto-company bankruptcy.
But in the meantime, none of this is under discussion. Instead, says Whalen, Bank of America is rearranging chairs on the deck of the Titanic. And firing thousands of people who don't need to be fired.

Black Caucus chairman: If Obama wasn't president, we'd be 'marching on White House'

BlCleaver: If Obama wasn't president, we would be ‘marching on the White House’
By Alicia M. Cohn - 09/18/11 03:48 PM ET

Unhappy members of the Congressional Black Caucus “probably would be marching on the White House” if Obama were not president, according to CBC Chairman Rep. Emanuel Cleaver (D-Mo.).

"If [former President] Bill Clinton had been in the White House and had failed to address this problem, we probably would be marching on the White House," Cleaver told “The Miami Herald” in comments published Sunday. "There is a less-volatile reaction in the CBC because nobody wants to do anything that would empower the people who hate the president."

CBC members have expressed concern in recent months as the unemployment rate has continued to rise amongst African-Americans, pushing for Obama to do more to address the needs of vulnerable communities.

Banking, The Real Cause Of The American Revolution

The founding fathers knew the evils of a privately owned central bank.
They watched from our shores how the privately owned Bank of England ran the debt of that country up so high that Parliament was forced to levy taxes on the American colonies.
Like, big brother goes on a spending spree with borrowed money and little bro has to bust his butt to pay it off. Not fair. Sure way to piss someone off…

Degrees in Worthlessness?

Gene Burnett - Jump You F*#kers (A Song For Wall Street)

Italy's Debt Downgraded by S&P; Outlook Still Negative

Standard and Poor's downgraded its unsolicited ratings on Italy by one notch to A/A-1 and kept its outlook on negative, a major surprise that threatens to add to concerns of contagion in the debt-stressed euro zone.
Panoramic Images | Getty Images
Piazza Venezia, Rome, Italy

The single currency [EUR=  1.3672    -0.0001  (-0.01%)   ] skidded over half a cent to $1.3606 after S&P said the cut reflected its view of Italy's weakening economic growth prospects.
Italy's fragile governing coalition and policy differences within parliament will likely limit the government's ability to respond decisively to the challenging domestic and external macroeconomic environment, the agency said.
"In our opinion, the measures included in and the implementation timeline of Italy's National Reform Plan will likely do little to boost Italy's economic performance, particularly against the backdrop of tightening financial conditions and the government's fiscal austerity program," said S&P.
The move from S&P came as a surprise as the market had thought Moody's was more likely to downgrade Italy first. Moody's last week said it would take another month to decide on its action.
The downgrade came as Greece struggles to meet demands from lenders for yet more austerity measures.
"It's just more of the same negative news," said Stephen Roberts, a senior economist at Nomura in Sydney.
"It only adds to the contagion risk over Greece and has encouraged the flight to safety in markets here," he added, pointing to a sharp fall in the Australian dollar on the news.
S&P 500 futures also dropped 0.7 percent and early hopes for a bounce in Asian shares on Tuesday looked to be still-born now. (Click here for latest futures quotes)
European stocks had already slid on Monday
, while yields on Italian and Spanish bonds rose sharply on fears of a Greek default, compounded by the failure of EU finance ministers to agree new steps to resolve Europe's debt crisis at weekend talks.
International lenders told Greece on Monday it must shrink its public sector and improve tax collection to avoid running out of money within weeks as investors spooked by political setbacks in Europe dumped risky euro zone assets.
Finance Minister Evangelos Venizelos held what Greece termed "productive and substantive" talks by telephone with senior officials of the European Union and International Monetary Fund after promising as much austerity as necessary to win a vital next instalment of aid.
Before the talks, which will resume on Tuesday evening after meetings of experts through the day, the IMF representative in Greece spelled out steps Athens must take to secure the 8 billion euro loan payment it needs to pay salaries and pensions next month.

Trump Now Takes Gold as a Security Deposit

Trump Now Takes Gold as a Security Deposit

Donald Trump, chairman and president of The Trump Organization, explains why he will accept gold as a security deposit in lieu of U.S. dollars.
Thu 09/15/11 15:47 PM EST -- Alix Steel

SEC Rule Would Ban Banks and Hedge Funds From Betting on Investor Losses

In the lead-up to the 2008 sub-prime mortgage crisis, banks like Goldman Sachs bet against their clients with collateralized debt obligations and were rewarded handsomely. A new Securities and Exchange Commission (SEC) proposal would make this illegal.

In 2007, as the sub-prime mortage crisis was looming, Goldman Sachs and hedge funder manager John Paulson teamed up to bundle 3,000,000 sub-prime mortgage loans together into a collateralized debt obligation called ABACUS 2007-AC1, and then shorted mortgages to unwitting investors. John Paulson made $1 billion (Goldman took a $15 million cut) and investors lost $1 billion.

According to The New York Times, 25 such investment vehicles were created by Goldman Sachs in order to shield the firm from massive losses in mortgages. However, they turned out to be rather great investments instead of losses. (Deutsche Bank and Morgan Stanley also created these CDOs).

At issue in the SEC complaint was whether the firms who selected the mortgages intentionally chose those most likely to fail and shine the shit for their investors.