Why This Crises Is Worse Than the Last Debt Crises

A. Too many volatile variables to predict exactly how long $200 billion in stopgap will last…..

B. Tax forms and 2013 Tax laws are in limbo, paralyzing the financial acquiring process, so that all projections for the next 5 years are now thrown off.

C. The crash of the world’s financial markets triggered by a downgrading this second time, could create a massive depression possibly four times worse than the crash of 2008. For one, the US Treasury being broke, is powerless to intervene. Treasury interference is credited with stopping the collapse last time.

There are four extra-ordinary means that will be used to borrow $200 billion.

One. Borrow out of the federal employee’s pension fund.

Two. Suspend the G-Fund. The G fund is part of the federal employees’ retirement system thrift savings plan. This provides $155 billion out of the $200 billion available.

Three. The Treasury will also temporarily stop issuing state and local government securities… shutting most of the emergency income state and local governments have.

Four. The Treasury will stop contributing to the exchange stabilization fund, which it uses to buy foreign currencies to keep the American Dollar stable.

These monies will have to be paid back if and when the Tea Party Republicans cave in an allow taxes to go up on the wealthy.

Money Runs Out December 31

Tim Geithner said today, that the Treasury runs out of money on December 31st. That day we cross the $16.4 trillion debt limit.

Extraordinary measures can be expended to provide a stopgap… The Federal Treasury can raise $200 billion as a stopgap which provides 2 months leeway…

We were here once before, and learned nothing.

This crises is caused by a holdout band of renegade Republicans who for better or worse are out to destroy the United States of America.

There is no other scenario.

2000

This is post number 2000.

The only real significance is it is 150 posts more than where Tommywonk stopped exactly one year and fifteen days ago…

If some future historian looks back, I can only guess they may kindly make some note of the quality of thought that underlies these efforts, but my guess, is no one will ever notice…

Irregardless, as long as the urge to put thoughts down for others continues, we will go on. As usual, with no goal, no direction, and no ulterior motive. Probably upon reflection, my biggest surprise, right here, right now … is that I still enjoy it so much, and can’t wait to jot my thoughts down, click the button, and send them off to where ever cyberspace and the vast internet ocean, lets them drift….

For each of you who have become regular over the years, … thank you friend…

Bite Down On Wall Street

One of the items in the Wall Street Reform Act, a bill Mitt Romney says he wants to scrap on day one, makes executives pay for messing up.

Investors now are given a heads up on their CEO’s compensation plans and golden parachutes.  That information used to be only privy to the board.

Secondly, if a public traded company restates its earnings because of accounting errors,  it must seek compensation by any past, present executive office in excess of what was under reported.  Which means it comes out of the bosses pay…. Hooray! Rejoice. Rejoice.

Third,  if a large financial company is put into receivership, the FDIC can take back ANY compensation over the past two years, received by any senior executive or director, past or present, who was substantially  responsible of the loss of the firm…..

These are teeth you can’t get put in by a Republican.  Only Democrats have the balls to take on big banks and big financial firms.  We don’t need a goofy  Republican president with a pair of marbles.

Delaware Footnote…

From Bloomberg….

On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank’s lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street’s financial condition. Geithner was copied on these reports, based on a sampling of e- mails released by the Financial Crisis Inquiry Commission.

At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says. According to Kaufman, Geithner said he preferred that bank supervisors from around the world, meeting in Basel, Switzerland, make rules increasing the amount of money banks need to hold in reserve. Passing laws in the U.S. would undercut his efforts in Basel, Geithner said, according to Kaufman.

Anthony Coley, a spokesman for Geithner, declined to comment.

How To Keep A Bank From Failing

Mandate it keeps enough cash reserves to cover the liabilities that may fail.

Gee, that was real hard to figure out…..

Fraud and Incompetence in the First Degree

Republican speaker of the House, invited Jim Plante to Obama’s job speech as an example of how federal regulations stymied business.

Apparently Mr. Plante’s company, Pathway, was about to land a contract with Walgreens to sell it’s kits nationwide, and then was violently attacked by the FDA and Walgreen’s pulled out….. “Oh what a horrible crime it was…”

Republicans just licked it up……. “Despite being in compliance with all available FDA regulations, the FDA attacked Pathway in the media following the announcement of the partnership. (Walgreens) consequently backed out, and Pathway was unable to create those 100 new high-paying jobs.”

And now…. the other side of the story……

The kit, sold under the brand name Insight, comes with a vial and a shipping envelope. Buyers send a sample of their saliva to a Pathway Genomics laboratory and receive their genetic health report online.

“GAO investigators sent samples taken from the exact same person to four companies, the report said. In one case, the companies told the same donor he was at below-average, average and above-average risk for the same diseases.”

In another case, a patient implanted with a pacemaker to control irregular heart beat was told he was at decreased risk of developing the heart condition…….

An undercover investigation by the Government Accountability Office found that four genetic testing companies delivered contradictory predictions based on the same person’s DNA. Investigators also found that test results often contradicted patients’ actual medical histories.

In other words, it was totally faked….

So, Republicans apparently think anyone should be able to sell anything medical with no oversight or regulation… In their mind, having a regulatory agency just say: “hey, this simply doesn’t match up to the claims it is making…” is bad for business…

As they used to say in Little Italy… “Yep, it might be bad for business, but that means it’s good for the rest of us…”

Republicans on the other hand, said: “Pathway was chosen because it and the others “exemplify businesses and sectors hurt by excessive Washington-imposed barriers preventing them from innovating, growing and creating more jobs.”

Duh… it would have been a whole different ballgame if the stupid kits had worked…. Before the era of Republicans, it used to be fraud to make claims that could not be backed up under testing….

The Republicans way around such blatant fraud? Eliminate the FDA as was done in Congressman Ryan’s budget…

Fact is, if only because of Republicans, we need the FDA, now more than ever. When all someone has to do is say they know the Republican Speaker of the House, to get approval to sell us all something that could possibly send us down a deadly dead end, making us fear we have a horrible condition we don’t have… All because someone hired for $7.25 in the office flipped a coin, and made it up on the spot, that we did have that severe medical condition.. ….

Republicans … “They are the personification of evil in the modern world”…– Ronald Reagan.

Synopsis: A medical company makes blatant claims that it’s product does good. It then misrepresents that it’s product has passed all necessary safety tests and is effective. When the agency in charge of testing says, “No! We weren’t given this product to test”, it correctly causes the retailer to pull out of poor business decision; Republicans cry and call it “excessive regulation”….

Obviously what we need is MORE excessive regulation…… preferably before we kill off all 100 million aged Americans.

Eric Cantor Puts His Pants On Backwards……

Eric Cantor was tipped off early that the firm of Standard and Poors was going to devalue the dollar, irregardless of whatever deal they came up with.

Prior to the devaluation of America’s Treasury bonds, Eric Cantor had sent a letter (how did he know…), warning the Tea Party Republicans that pressure to raise taxes would be ratcheted up by the upcoming Standard and Poor’s devaluation….

He was right… Thank goodness, after 12 years, with this devaluation, we are finally starting to hear a few of the common sense arguments on the main stream media, that illustrate for all… that raising taxes to “now” be our best economy grower.. .

If you read Standard and Poors correctly, their report implies that the Tea Parties line (the one about NOT raising taxes), IS the primary obstacle that prevents the fixing of America’s debt problems… By implication, that makes the election of Tea Party candidates, the sole reason our bonds were devalued. (On the other hand, according to the ratings agencies, Obama receives high marks for his part in trying to make a better life for all Americans.)

In a secret email, Eric Cantor says…..

“Over the next several months, there will be tremendous pressure on Congress to prove that S&P’s analysis of the inability of the political parties to bridge our differences is wrong. In short, there will be pressure to compromise on tax increases. We will be told that there is no other way forward. I respectfully disagree.” Eric Cantor

He knew well in advance…

He continues….

“We have said from the beginning of the year, the new Republican Majority was elected to change the way Washington does business. We were not elected to raise taxes or take more money out of the pockets of hard working families and business people. People understand Washington can’t keep spending money that it doesn’t have. They want to see less government – not more taxes.

Back up: we were not elected to…. take more money out of the pockets of hard working families and business people……..

No one said anything about more taxes for the 99% on the bottom… At issue is how much to tax the 1% on the top…

Taxing the top 1% at a marginal rate of 40% and increasing capital gains taxes to a rate of 40%…… actually PUTS MORE MONEY BACK INTO THE POCKETS OF HARD WORKING FAMILIES AND THOSE BUSINESS PEOPLE RUNNING THE ESTABLISHMENTS THOSE FAMILIES CHOOSE TO PATRONIZE……..

So you see, Mr. Cantor.. Raising taxes on the top 1% is not a conflict of interest for you… You said so yourself….. We’ll support you in not raising taxes on the bottom 99%…

Raising taxes on just the top 1%, is good.. WHAM!!!!! It jump-starts the economy…. Whereas,….

Cutting taxes for the top 1%, is bad… We all know this is fact. You don’t need me to explain it; you know just from living through the past 12 years of the Bush Tax cuts… The last 12 years have made the Clinton Tax Hike Years in comparison, seem like the true Guilded Age..Gosh, it seems like so, so long ago, when everything was perfect.

The Bush Tax cuts, collapsed the economy…..

Tax Cuts kill jobs. Always have… always will….

(but what is really, truly, profoundly sad, is this exhortation from Eric Cantor) “When given the choice between bettering the American economy, and getting more Republicans in power, you better vote for getting more Republicans in power…Our new motto: F*ck the economy!”)

Can Someone Please Tell Me How This Bill Will Create More Jobs?

You heard it from the Republicans from both sides of the rotunda. THIS BILL WILL CREATE JOBS.

Because it was said legitimately I took it hook, line, and sinker, and said… “good, we need more jobs….”

Four hours later, it came back up. Wait, a minute, how does trimming $100 billion a year out of our economy, create more jobs?

If the Fed cuts jobs, that’s fewer jobs. Who’s going to hire them? And if you create MORE jobs with this bill, you have to hire not only all the people you’ve cut, but many more besides…. Who’s hiring?

The same people who haven’t hired anyone back since 2008? After all, what incentive does corporate America have to hire people? They’re doing fine just as they are.. In a quarter where strong second-quarter earnings from companies like McDonald’s, General Electric and Caterpillar were just the latest proof that booming profits have allowed Corporate America to leave the Great Recession far behind, UNEMPLOYMENT WENT UP!

When the US Corporations banked $1.7 trillion in profits… UNEMPLOYMENT WENT UP!!!

Not to mention, when unemployment increases as the Fed itself begins to layoff workers, there will be less spending-money in those communities that experience layoffs.

Who hires when the revenue stream is predicted to collapse?

More than likely, those making a living off these same Federal employees, will be out of work too…..

Now we got, even more unemployment….

So how can Republicans stand in front of a microphone, and say this bill is a “job creator”… “It will grow more jobs”?

Someone explain it….. please!

Why I Read The Foreign Press Instead of The Crap Found In American Ones

I’m printing this article in full: tell me, where in America can you find journalism this “fair and balanced”?

Another crisis in the horizon?

A | A | A |
Winarno Zain, Jakarta | Tue, 07/19/2011 7:00 AM A | A | A |

It seems the world economy has faced endless threats preventing it from sailing smoothly into a strong recovery this year.

First there was the Greek debt crisis that jolted several major banks, and then a political uprising in the Middle East that pushed up oil prices, and then a tsunami in Japan that disrupted manufacturing activities in many countries.

The world economy has not fully dusted off the adverse impacts of these three events. Yet another headwind is looming large on the horizon. This time it is the possible default of the US government of its debt on Aug. 2, if the US Congress fails to approve an increase to its debt ceiling as requested by President Barack Obama. By that date, the US government debt would have reached its maximum allocated limit of US$14.3 trillion.

The current negotiation between representatives of Democratic and Republican parties on the US budget deficit has run into a deadlock, and so the possibility is real that there won’t be any substantial agreements reached, since the dateline is nearing. Major rating agencies such as Standard and Poor, and Moody’s have warned they are ready to downgrade the US government debt rating from top grade AAA.

This would be the first time in 90 years that the US government debt has been downgraded.

It is not hard to imagine what will happen if by Aug. 2 the US government has exhausted its credit ceiling and can not get additional debt to pay for its spending needs.

The US government would have to curb its spending, and because some of these relate to payments to government employees, pensioners and other social benefits, this would strike a severe blow to the consumer spending that is so essential to the US economic recovery.

With debt default and credit rating downgrades, it would be difficult for the US government to get loans. Faced with increasing risk, investors would ask for higher returns for US government bonds. This would push interest rate higher, further depressing the economic recovery.

The US dollar would plunge, triggering a surge in commodity prices and another round of inflation around the world. A deadly combination of inflation and economic stagnation could spin the world economy into a tailspin as happened in the early 1970’s.

How would this worst case scenario affect the Indonesian economy? As capital flows out of the US, investors have tended to seek safe havens elsewhere. Commodities, especially gold and oil, would be their first targets. Emerging markets could be the next destination of this capital flight, depending on the assessment of investors on the strength of its economy and their vulnerability and exposure to the US economic fallout.

But financial crises always result in a loss of confidence and produce negative sentiments in the financial markets. They put financial markets into disarray, and as investors panic, capital starts flowing out of emerging economies.

During the global financial crisis in 2008-2009, capital moved out from emerging economies back to the advanced economies. At that time, the US government bonds and commodities like gold were considered safe havens.

If the US government defaults on its debt payment this time, the question is will the situation change? Will the US government bonds still be considered a safe haven for investors? If not, then where else will they put their money? Or maybe they would prefer to keep their money in the same place and not move it anywhere. If so, the Indonesian economy could get some benefit and may not have to face another shock.

In the longer term, however, the situation may change. No country is immune to the negative ripples of a US economic crisis. As US imports plunge from weakening domestic demand, exports from emerging countries will also suffer. The extent to which these negative impacts affect each country will depend on their trading and banking exposure to the US economy.

What is disturbing about this debt talk is the use of this debate as a political game. This is especially apparent in the Republican stance.

Economist, market analyst and CEOs of financial institutions and even the IMF itself have warned that if Congress fails to raise the ceiling of the US government debt, the world economy would slip into deep recession.

The Republicans did not fully accept Obama’s proposal to raise the debt ceiling. They only agree on a smaller number, but even it was given with some conditions. The Republicans asked Obama not to raise taxes, especially for the wealthy, and Obama should cut social spending, a sacred cow for the Democrats.

By using tit for tat tactics in the negotiation and by seemingly ignoring the impending consequences and dangers, the Republicans were trying to push Obama into an intricate political dilemma.

If the US economy slip into another crisis, economic contraction would be inevitable. Corporate bankruptcies would spread, and jobless rate would surge.

A presidential election is still slightly more than one year away, and Obama’s reelection prospects are solid. But his popularity rating is highly dependent on the unemployment rate. That is why the Republicans think the only way for them to erode Obama’s popularity now is by pushing the US economy into crisis.

As the stakes are high, the two political parties should temporarily set aside their ideologies and adopt a pragmatic stance for the interests of saving the world economy from another catastrophe.

President Obama demonstrated his willingness to compromise his political ideology during the global financial crisis of 2008-2009. Being a Democrat, Obama’s political inclination is generally anti-big business.

Obama realized that it was reckless lending by some big banks on Wall Street that triggered the financial crisis. But he also realized that saving these banks from bankruptcy was key to saving the world economy from further disaster.

His decision to pour $800 billion of taxpayer’s money to bail out these banks was hard to swallow by his fellow party members, but it worked. Now it is expected that the Republicans will be willing to do likewise.

The writer is an economist.