A Good (and Depressing) Summary of the Economy

Leave it to Evan Ambrose-Pritchard to summarize what few other people will tell you. Do you think that things are getting better in the economy? Think again.

* Labor force conraction in December - 661,000

*True unemployment rate - 17.3%

*One million Americans lost their homes in the 4th quarter

*MZM contracting at 3% annual rate

*Broad money supply contracting at 5% annual rate

*Wall Street - Party on, baby!

Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck's Grapes of Wrath.

Vice Presidential Nitwittery

According to VP Joe Biden what we need to do to keep from going bankrupt is to spend more money.

“Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that's what I’m telling you.”

I'll bet he doesn't handle his personal finances this way. Or maybe he does!

Justice, Economic Growth, and the Pope

Apparently, no one has ever told the Pope that the absolute best way to help the poor and to lift people out of poverty is economic growth. Capitalism is imperfect at best and infected with greediness, but it is still the best method for helping the poor - through economic growth, not redistribution of wealth.

In his encyclical released last week titled "Caritas in Veritate," or Charity in Truth, Pope Benedict clearly cribbed from the Obama campaign's barrage of emails. "Grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution," warned the Supreme Pontiff.

Dear Mr. Pope, the best way to ensure economic contraction is to try to pursue justice through redistribution. This will do nothing more than cast a chill on entrepreneurship which is the engine for economic growth, which is [I will say again] THE BEST WAY TO GET PEOPLE OUT OF POVERTY, MR. POPE!

The Fed Can Put Lipstick on this Pig (of an economy), the States cannot.

While the Fed is monetizing as fast and as much as possible, the States are not able to do so. Zero Hedge has an excellent report on the implosion in States finances. The federal government can push fiscal calamity down the road a little bit, the states cannot, which will ultimately undermine all of the federal governments (pathetic) actions. "Green shoots" will lead inexorably to drought and disaster with the current government policies.

Out of Airspeed, Out of Ideas

It seems to be that we are rapidly approaching the endgame in our handling of the financial crisis, the endgame being buying our own debt (which simply means printing the money we need). Ben Bernanke, erstwhile head of the Fed, seems to think we can do that with no dire consequences. We shall see. Any situation in which one gets a quote like that appended below, cannot end well.

We just have to hope that G20 creditors agree to put a clothes peg on their nose and keep buying Western debt until the crisis passes, for the sake of the world.

Alrighty then. Sounds like a good plan to me.

How Depressing is This?

An animated map of job losses starting in 2007 (this is one depressing map!). Notice that Michigan was already in a recession at the beginning of 2007 and it isn't getting any better!

How the Fed Bypasses Congress

Interesting short article from Bloomberg explaining exactly how the Fed is doing an end run around democracy. This will not end well.

Alan Greenspan - Weasel

Sir Alan is desperately trying to weasel his way out of responsibility for the mess that we are in. Fortunately, facts and data preclude him from doing so.

Latest Trillion Dollar Plan-of-the-Week

This would be hilarious if it weren't sending us all down the road to serfdom.  The latest "bank bailout plan" is Monday's "Trillion Dollar Plan of the Week to Save the Economy."  No doubt sufficient bonuses are included so that the merry men who brought down our economy will be saved from ruin.  Too bad for the rest of us.

AIG: Thanks for the Bailout...Now for Our Bonuses

I have GOT to get a job in the financial industry. Where else can you be so incompetent that you threaten to bring the economy down, then get bailed out by the government, and then award yourselves millions of dollars in bonuses for your incompetence?!? Although to be honest, I'm not sure I could be as incompetent as these guys.

Has the Stock Market Hit Bottom?

Short answer: No. Comstock Partners has a good analysis.

Futile Housing Rescue Plan-of-the-Day

Got to love Caroline Baum, she cuts right to the chase.

Who Did President Obama Nominate to Head NIC?

You don't want to know. Okay, it was Charles Freeman. A pretty scary appointment. Interesting to see what he will recommend in regards to the inevitable public unrest in the United States that is coming.

Where Did All Those "Investment Bankers" Get Their Education?

A pretty clever article exploring where all those brilliant guys on Wall Street who imploded, not only their own firms, but the economy as well, were educated. First place? Harvard Business School.

Iceland in the Dumpster

Vanity Fair does a fascinating (long) article on ground zero of the global financial meltdown. At parts funny and sad. The worst hasn't hit for Iceland, but it is coming rapidly. From the article:

Yet another hedge-fund manager explained Icelandic banking to me this way: You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets.

And this hilarious anecdote on Alcoa's plan to build an aluminum smeltering plant in Iceland:

Alcoa, the biggest aluminum company in the country, encountered two problems peculiar to Iceland when, in 2004, it set about erecting its giant smelting plant. The first was the so-called “hidden people”—or, to put it more plainly, elves—in whom some large number of Icelanders, steeped long and thoroughly in their rich folkloric culture, sincerely believe. Before Alcoa could build its smelter it had to defer to a government expert to scour the enclosed plant site and certify that no elves were on or under it. It was a delicate corporate situation, an Alcoa spokesman told me, because they had to pay hard cash to declare the site elf-free but, as he put it, “we couldn’t as a company be in a position of acknowledging the existence of hidden people.”

Dollar Velocity Down Equals No Inflation

Wondering why all the money that the government is tossing at the economy isn't producing rampant inflation? The answer is that the velocity of money is slowing down faster than the Fed can pump, meaning people are saving money rather than spending it. A good discussion of this phenomenon can be read at Zero Hedge. The savings rate is at 5% which is a phenomenally fast jump, which goes back to my prior querie: What happens if no one wants to borrow more money? How do we stimulate then?

Stocks are Always Best in the Long Run

Stocks are always best in the long term...stocks are always best...stocks are...what? at 1997 levels? Wow, if they only would have defined what they meant by "long term." If you invested in 1997 your returns are flat for 12 years. Now that's a great investment!

Zombie Banks

Unsurprisingly, we are going down the same path that the Japanese did in the '90's, which is to say, not acknowledging the problems with our banks and killing off the unsolvent ones so that the healthy ones can prosper.

Huckabee on the (anti-religious) Stimulus Bill

I am a big supporter of Mike Huckabee. He is not given to fear-mongering, so when he calls the stimulus bill "anti-religious," I take it pretty seriously. He's right.

About That Bank Bailout

You know that 350 billion...no 700 billion...no 2 trillion dollar bailout. The new Treasury secretary is going to supply money without end. Should keep the boys on Wall Street in bonuses for years to come. Hope someone wants to borrow the money.