The newly announced 50% haircut to Greek debt holders is a colossal development. The stock markets have reacted exactly the opposite of the way they should have. It is unfathomable for markets to rise steeply due to this. It is an unmitigated disaster with disastrous ramifications.
It must be realized that billions upon billions of Greek debt is held by Greek Pension Funds. This means that 50% of the asset value of the Greek bond portion of the pension funds has just been wiped out.
Here's an example of what this really means to Greek pensioners and future retirees. I'll use my own situation as a proxy for a Greek citizen.
I worked for state government for 25 years and am now retired. Each and every time I got my paycheck I contributed to my state retirement pension fund (as did the system in my behalf). The fund then invested all the contributions in various assets such as bonds, Treasury's and stocks. The retirement fund directors pursued returns on assets to meet its payout obligations.
OK - just to provide a simplified example. What if my retirement fund held a mixture of investments that included 35% US government debt? What if, as just occurred in Greece, my pension fund and other state pension funds were forced to take a 50% haircut on the value of the US government debt portion? It would immediately destroy the integrity of my retirement program. Each and every retirement system for each and every state would go to crisis mode. They would all become insolvent overnight!
This exceedingly dangerous "solution" to Greece's sovereign debt crisis is catastrophic. Citizens in Italy, Spain and other sovereign debt stressed countries had better follow this very, very carefully. If things unfold resulting in other countries having to apply similar "solutions" - the world financial system will collapse. Completely fall apart.
No one will be safe. It will change the world as we know it. The legacy of worldwide governments will be that their central banks, planners, political bodies and all leaders blew up the world by allowing fraudulent unfree "free markets" and the elite users of weapons of financial destruction to ruin everything. That the fate of the world was handed over to a group who could not have been more wrongly selected. Could not have been more untrustworthy. The group who governments worldwide turned to for answers and guidance - when all they had to offer was destruction while they lived the high life. I predict when all is said and done, history will record the early 21st century as a period where the world could never adjust to the change from manufacturing-driven economies to financial-driven economies, much of whose resultant products brought no value to society. A time when the very definition of the term "bank" was perverted beyond recognition. When civilization caved in and crumbled as a result of continual bowing to the needs and desires of the very, very, very few.
Thursday, October 27, 2011
Tuesday, October 25, 2011
The 12/31/11 end of Unemployment Compensation extensions Legislation
As many know, the federal unemployment extensions legislation is set to expire effective 12/31/11 unless Congress acts. This will immediately cut off millions of UI recipients in the beginning of 2012, followed by many more millions between the start of the new year and June 9, 2012.
One would think that politicians - as of 10/25/11 - would have announced or at least formulated their positions on this matter. This reasonable assumption is incorrect. I contacted the Washington, D.C. offices of my two US Senators and two US Congressmen about this one issue simply to ask their stance on this singular concept. I was unable to get a direct response to this very simplistically basic question.
Before calling these offices I had a discussion with a representative of the Bureau of Employment and Training responsible for the weekly reporting of initial unemployment claims. He was very forthcoming and enthusiastic about his job. Well spoken and thoughtful about a variety of issues. He essentially stated that not 100%, but closer to 130% of UI benefits are re-injected into the economy by the multiplier effect.
For example, before speaking to him I had not realized that budget constrained states had agreed to
relax restrictive "insured unemployment" standards to allow the payment of so-called State-Federal Extended Benefits as long as it was 100% federally funded (instead of 50-50). This EB category generally exists before the federal tier 1 to tier 4 extensions kick in.
My premise before speaking with him was a lingering question about what happens to people who receive a lengthy period of UI benefits and then are fortunate enough to get a new job. Only to be followed by a layoff or closing by the new employer. Would they then not be eligible for a new claim due to failure to accumulate enough earnings in their new eligibility period? ( Normally the first 4 of the last 5 completed calendar quarters).
He confirmed that this could be the case, but that states had created an alternative eligibility period to address this. Unfortunately, this would often result in a substantially lower weekly benefit amount - perhaps as low as $50 per week from a previous benefit amount around $300 per week. Hardly enough to live on.
But back to the premise for this piece. It is beyond my ability to comprehend that about nine weeks prior to the cut-off of extended benefits legislation, politicians are unwilling or unable to articulate their positions on this issue. This is basic stuff! I told the congressional staff that I spoke with that this is an issue on which my vote is decided since they are subject to two year terms - unlike my Senators who can relax until 2014 and 2016.
In summary - we now have congressmen/and or senators presumably nationwide who have either not yet established or are unwilling to provide their stance on the unemployment extension matter. A situation which will rear its monstrous head effective 12/31/11. One which will have a profound impact on our 70% consumer driven economy.
We are governed by a" last-minute-itis" group of clowns. Which just goes to show why the Occupy Wall Street/99% demonstrators are the only group who properly perceive our present state. And further exemplifies why trying to pigeon-hole them into one issue convenience is a mistake promoted by the powers-that-be.
I believe that the OWS group should keep their stance as is. Because there are far too many issues to compartmentalize in the manner that the corporate-controlled main street media and elite would prefer.
One would think that politicians - as of 10/25/11 - would have announced or at least formulated their positions on this matter. This reasonable assumption is incorrect. I contacted the Washington, D.C. offices of my two US Senators and two US Congressmen about this one issue simply to ask their stance on this singular concept. I was unable to get a direct response to this very simplistically basic question.
Before calling these offices I had a discussion with a representative of the Bureau of Employment and Training responsible for the weekly reporting of initial unemployment claims. He was very forthcoming and enthusiastic about his job. Well spoken and thoughtful about a variety of issues. He essentially stated that not 100%, but closer to 130% of UI benefits are re-injected into the economy by the multiplier effect.
For example, before speaking to him I had not realized that budget constrained states had agreed to
relax restrictive "insured unemployment" standards to allow the payment of so-called State-Federal Extended Benefits as long as it was 100% federally funded (instead of 50-50). This EB category generally exists before the federal tier 1 to tier 4 extensions kick in.
My premise before speaking with him was a lingering question about what happens to people who receive a lengthy period of UI benefits and then are fortunate enough to get a new job. Only to be followed by a layoff or closing by the new employer. Would they then not be eligible for a new claim due to failure to accumulate enough earnings in their new eligibility period? ( Normally the first 4 of the last 5 completed calendar quarters).
He confirmed that this could be the case, but that states had created an alternative eligibility period to address this. Unfortunately, this would often result in a substantially lower weekly benefit amount - perhaps as low as $50 per week from a previous benefit amount around $300 per week. Hardly enough to live on.
But back to the premise for this piece. It is beyond my ability to comprehend that about nine weeks prior to the cut-off of extended benefits legislation, politicians are unwilling or unable to articulate their positions on this issue. This is basic stuff! I told the congressional staff that I spoke with that this is an issue on which my vote is decided since they are subject to two year terms - unlike my Senators who can relax until 2014 and 2016.
In summary - we now have congressmen/and or senators presumably nationwide who have either not yet established or are unwilling to provide their stance on the unemployment extension matter. A situation which will rear its monstrous head effective 12/31/11. One which will have a profound impact on our 70% consumer driven economy.
We are governed by a" last-minute-itis" group of clowns. Which just goes to show why the Occupy Wall Street/99% demonstrators are the only group who properly perceive our present state. And further exemplifies why trying to pigeon-hole them into one issue convenience is a mistake promoted by the powers-that-be.
I believe that the OWS group should keep their stance as is. Because there are far too many issues to compartmentalize in the manner that the corporate-controlled main street media and elite would prefer.
Saturday, October 22, 2011
Who Owns The Fed? - Wrong Question
Many people have been frustrated when trying to determine who actually owns the private entity known as the Federal Reserve. That's because the Fed itself has historically taken pathologically profound steps to ensure against it becoming known.
But if you think about it, perhaps ownership - who the shareholders are - might not be as important as who directs its activities. In other words, in whose behalf the Fed actually functions. We hear a lot about the Fed existing to preserve the country's basic banking system and serve the nation by accomplishing its dual mandates.
Consider the relationship between the Fed and the primary dealers. These bodies basically want the public to believe that primary dealers facilitate the Fed's objectives by acting as trading counterparties of the NY Fed. That they ensure the Fed's objectives are implemented to achieve desired results.
But what if this is actually ass-backwards? What if the evolution of the financial industry is such that the Fed now exists to carry out the desires of the banking elite? The most recent development of the Fed supporting Bank Of America transferring toxic assets from its Merrill Lynch division to the bank holding company supported by customer accounts (despite deserved disagreement from the FDIC) appears to support this thesis. The FDIC believes the taxpayer should not again act as a backstop for Merrill's gambling habit while the Fed apparently does. Add this to the $700 billion TARP program, Fed discount window policies and the basic free money with no conditions attached philosophy and it becomes pretty apparent who's running the show. Also the insane decision to allow such entities as Goldman Sachs to become bank holding companies in the first place. Not to even mention exchanging liquid treasuries for "value unknown" pieces of paper (derivatives) or "100 cents on the dollar" decisions. A never ending arrangement of exchanging solid assets for trash.
A quick review of the NY Fed primary dealers list reveals it is filled to brimming over with TBTF banks. While Bank Of America proper is not on it, Merrill is. And the list does not consist only of American institutions. Actually BAC could be said to be on it by some kind of convoluted situation involving Merrill and Banc of America.
The primary dealers constantly meet and interact with the Fed. Interact to the extent that they know before anyone else about forthcoming Fed actions. Getting this information early allows them to front run every QE implementation and Twist policy. To allow them to set up their positions and profit from everything others learn about later. But it gets worse - of late the Fed has even been requesting advice from the TBTFs about moves it is considering.
No, the Federal Reserve does not act to preserve the banking system as a whole - it exists to serve the desires of the primary dealers. The question of who owns the Fed is not the proper one. The appropriate question is who controls the Fed and ensures that it acts in their best interests. The answer to this question is the primary dealers. And the primary dealers list is synonymous with the list of TBTF banks.
The TBTF banks have actually taken over a private entity which profoundly effects the lives of every American. This country is very far from a free capitalism democracy with equal opportunity for all. It has been hijacked by the most greedy, wanton, unpatriotic species known to man. The .01% that the Occupy Wall Street/99% demonstrators target - but Congress, Presidents, Treasury Secretaries and the Federal Reserve serve.
UPDATE : The recent audit of the Fed revealing $16 trillion in secret near-zero interest loans to certain banks and biggest corporations does VERY little to dispel the above and much to support it.
But if you think about it, perhaps ownership - who the shareholders are - might not be as important as who directs its activities. In other words, in whose behalf the Fed actually functions. We hear a lot about the Fed existing to preserve the country's basic banking system and serve the nation by accomplishing its dual mandates.
Consider the relationship between the Fed and the primary dealers. These bodies basically want the public to believe that primary dealers facilitate the Fed's objectives by acting as trading counterparties of the NY Fed. That they ensure the Fed's objectives are implemented to achieve desired results.
But what if this is actually ass-backwards? What if the evolution of the financial industry is such that the Fed now exists to carry out the desires of the banking elite? The most recent development of the Fed supporting Bank Of America transferring toxic assets from its Merrill Lynch division to the bank holding company supported by customer accounts (despite deserved disagreement from the FDIC) appears to support this thesis. The FDIC believes the taxpayer should not again act as a backstop for Merrill's gambling habit while the Fed apparently does. Add this to the $700 billion TARP program, Fed discount window policies and the basic free money with no conditions attached philosophy and it becomes pretty apparent who's running the show. Also the insane decision to allow such entities as Goldman Sachs to become bank holding companies in the first place. Not to even mention exchanging liquid treasuries for "value unknown" pieces of paper (derivatives) or "100 cents on the dollar" decisions. A never ending arrangement of exchanging solid assets for trash.
A quick review of the NY Fed primary dealers list reveals it is filled to brimming over with TBTF banks. While Bank Of America proper is not on it, Merrill is. And the list does not consist only of American institutions. Actually BAC could be said to be on it by some kind of convoluted situation involving Merrill and Banc of America.
The primary dealers constantly meet and interact with the Fed. Interact to the extent that they know before anyone else about forthcoming Fed actions. Getting this information early allows them to front run every QE implementation and Twist policy. To allow them to set up their positions and profit from everything others learn about later. But it gets worse - of late the Fed has even been requesting advice from the TBTFs about moves it is considering.
No, the Federal Reserve does not act to preserve the banking system as a whole - it exists to serve the desires of the primary dealers. The question of who owns the Fed is not the proper one. The appropriate question is who controls the Fed and ensures that it acts in their best interests. The answer to this question is the primary dealers. And the primary dealers list is synonymous with the list of TBTF banks.
The TBTF banks have actually taken over a private entity which profoundly effects the lives of every American. This country is very far from a free capitalism democracy with equal opportunity for all. It has been hijacked by the most greedy, wanton, unpatriotic species known to man. The .01% that the Occupy Wall Street/99% demonstrators target - but Congress, Presidents, Treasury Secretaries and the Federal Reserve serve.
UPDATE : The recent audit of the Fed revealing $16 trillion in secret near-zero interest loans to certain banks and biggest corporations does VERY little to dispel the above and much to support it.
Thursday, September 22, 2011
Thursday 9/22/11 Economics update
Some quick bullet points amidst the crumbling world :
1. Our system of governance has not yet adjusted to the global change from manufacturing driven economies to financial system driven economies.
2. As a result of the above, and other factors, financial institutions direct economic activity worldwide.
3. The far-less-than-honorable group of Primary Dealers totally control how much "free money" ends up in the various economies rather than the bonus pools of these same banks.
4. They have repeatedly shown that their instinct is, in fact, to retain these free monies for their bonus pools.
5. The Fed, the Treasury and other parties have repeatedly trusted Primary Dealers to act as anticipated by injecting free money made available to them into the economy. And they maintain this mistaken trust that they will. This despite the fact that the TARP money "with no strings attached" should have proven to a learning disabled individual that they wouldn't.
6. When such legislation as Dodd-Frank or the Volker Rule was passed, the actual promulgation of attached rules goes out for input . THIS is when financial lobbyists come into play. THIS is when legislators and regulators turn to "financial industry experts" for guidance and advice. THIS is when the financial industry extracts the teeth out of the intent of the original legislation. They will promote and agree to only the aspects that will have the minimum impact on the industry they represent.
7. The combination of #1 and #6 above is in the process of destroying our country.
...........................................................................................................
We as citizens are governed by politicians who have not yet adjusted to the realities of the 21st century world and who are therefore under the thumbs of the ruling financial industry.
1. Our system of governance has not yet adjusted to the global change from manufacturing driven economies to financial system driven economies.
2. As a result of the above, and other factors, financial institutions direct economic activity worldwide.
3. The far-less-than-honorable group of Primary Dealers totally control how much "free money" ends up in the various economies rather than the bonus pools of these same banks.
4. They have repeatedly shown that their instinct is, in fact, to retain these free monies for their bonus pools.
5. The Fed, the Treasury and other parties have repeatedly trusted Primary Dealers to act as anticipated by injecting free money made available to them into the economy. And they maintain this mistaken trust that they will. This despite the fact that the TARP money "with no strings attached" should have proven to a learning disabled individual that they wouldn't.
6. When such legislation as Dodd-Frank or the Volker Rule was passed, the actual promulgation of attached rules goes out for input . THIS is when financial lobbyists come into play. THIS is when legislators and regulators turn to "financial industry experts" for guidance and advice. THIS is when the financial industry extracts the teeth out of the intent of the original legislation. They will promote and agree to only the aspects that will have the minimum impact on the industry they represent.
7. The combination of #1 and #6 above is in the process of destroying our country.
...........................................................................................................
We as citizens are governed by politicians who have not yet adjusted to the realities of the 21st century world and who are therefore under the thumbs of the ruling financial industry.
Wednesday, July 13, 2011
Maxine Waters vs. Ben Bernanke
I actually thought Mr. Bernanke performed OK this time around.
But....................Representative Maxine Waters (D-CA) wounded him at the end with two questions:
1) Asking him why Mrs. John Mack of JP Morgan fame was able to, along with her connected girlfriend, put up $20 Million to obtain a $220 million non-recourse loan through TALF when qualified minorities cannot get a dime. A very symbolic question about why a lot of this stuff supposedly to improve the economy is actually still back door shoveling of money to banker types.
Bernanke claimed not to have read the Rolling Stone article, although he termed it wrong. When Waters pressed him further about details as to who did or did not have access to the funding, he essentially said that couldn't really be done. So he couldn't address her question about minority participation.
2). She asked him whether the Fed had a conflict of interest regarding the BAC settlement negotiations as BAC is partly owned by the Fed. Bernanke said that is incorrect as it is partly owned not by the Fed, but by the Richmond Reserve.
Well - " The Richmond Reserve is one of 12 reserve banks that, together with the Board of Governors, MAKE UP the Federal Reserve System ". Mr Bernanke was far less than accurate.
.............................................................................................
Finally (for now), none of the congressional questioners asked the OBVIOUS QUESTION.
- Given that all but 4 states must enact balanced budgets by July 1, someone should have asked the chairman about the impact of this on jobs/the economy GOING FORWARD. Many of them mentioned cuts having already occurred. But the vast majority of teacher, state and local layoffs haven't shown up yet. They are not presently accounted for in new claims statistics. These only now go through the week ending 7/2/11. But they will be shortly - resulting in my oft-stated opinion that the four week moving average of new claims will exceed 500k by Labor Day.
But....................Representative Maxine Waters (D-CA) wounded him at the end with two questions:
1) Asking him why Mrs. John Mack of JP Morgan fame was able to, along with her connected girlfriend, put up $20 Million to obtain a $220 million non-recourse loan through TALF when qualified minorities cannot get a dime. A very symbolic question about why a lot of this stuff supposedly to improve the economy is actually still back door shoveling of money to banker types.
Bernanke claimed not to have read the Rolling Stone article, although he termed it wrong. When Waters pressed him further about details as to who did or did not have access to the funding, he essentially said that couldn't really be done. So he couldn't address her question about minority participation.
2). She asked him whether the Fed had a conflict of interest regarding the BAC settlement negotiations as BAC is partly owned by the Fed. Bernanke said that is incorrect as it is partly owned not by the Fed, but by the Richmond Reserve.
Well - " The Richmond Reserve is one of 12 reserve banks that, together with the Board of Governors, MAKE UP the Federal Reserve System ". Mr Bernanke was far less than accurate.
.............................................................................................
Finally (for now), none of the congressional questioners asked the OBVIOUS QUESTION.
- Given that all but 4 states must enact balanced budgets by July 1, someone should have asked the chairman about the impact of this on jobs/the economy GOING FORWARD. Many of them mentioned cuts having already occurred. But the vast majority of teacher, state and local layoffs haven't shown up yet. They are not presently accounted for in new claims statistics. These only now go through the week ending 7/2/11. But they will be shortly - resulting in my oft-stated opinion that the four week moving average of new claims will exceed 500k by Labor Day.
Friday, July 8, 2011
Unemployment as a Lagging Indicator - A Mistake
The continuing (mis)perception of unemployment rates as a lagging indicator persists among economists. By treating it as such, they continue to pervert the already "dismal science".
In a 70 percent consumer driven economy it is ludicrous not to assign unemployment as a forward looking indicator. DOES IT NOT OCCUR TO ECONOMISTS THAT SPENDING PRACTICES AND BEHAVIOR GOING FORWARD WILL BE IMPACTED BY NEW OR CONTINUING UNEMPLOYMENT. Let me repeat that, families or individuals without jobs just cannot continue their former spending habits. For the economist asleep in the back row - the rate of unemployment and new claims filed will to a great extent determine the direction of a 70 percent consumer driven economy IN THE FUTURE.
With new claims remaining well above 400k a week (and in my estimation soon to increase with local, state and federal budget cutting layoffs yet to hit) and those already unemployed facing minimal new job creation as confirmed by the June pathetic 18k addition to payrolls - the forthcoming direction of the economy should be quite clear.
Consumer spending will dive and small retail businesses will in turn be shuttered. Restaurants will close, foreclosures will rise, the typical homeowner will continue to see their main asset deteriorate in value. Large businesses will continue to hoard cash and layoff workers to address decreasing demand.
Our government has completely failed us by shoveling trillions to the financial industry through TARP, emergency loans, the discount window, QE2, bailouts of AIG-type monstrosities, foreign banks and the financial arms of multi-national corporations. NONE of this has filtered down to the normal citizenry. NONE of this spending has helped the average American citizen. Trickle down economics has been exposed as a dangerous hoax - a thoroughly discredited fallacy.
Instead, the President's commission on jobs features Jeffrey Inmelt - the prototypical shredder of jobs. This person - surrounded by similar thinking types, defective economists and financial "stalwarts" - will not formulate anything of true value. Just read their preliminary report and see if you can detect any inspirational feature whatsoever. It is a rehash of nothingness - a travesty of wasted dollars of wining and dining.
When one properly focuses on unemployment trends as a FUTURE INDICATOR, it becomes clear that our future will be in a downtrend as our government chose to indiscriminantly fund those who will not contribute to a true recovery, while defunding those who could (government support agencies). This to occur at the same time as more of our citizens will turn to the defunded parties to help them survive a crisis to which they did not contribute. The "oh so important" FUTURE INDICATOR is signalling very lean times coming up. But we discount it at our peril by failing to properly account for it - instead consigning it to the utterly wrong status of lagging indicator.
In a 70 percent consumer driven economy it is ludicrous not to assign unemployment as a forward looking indicator. DOES IT NOT OCCUR TO ECONOMISTS THAT SPENDING PRACTICES AND BEHAVIOR GOING FORWARD WILL BE IMPACTED BY NEW OR CONTINUING UNEMPLOYMENT. Let me repeat that, families or individuals without jobs just cannot continue their former spending habits. For the economist asleep in the back row - the rate of unemployment and new claims filed will to a great extent determine the direction of a 70 percent consumer driven economy IN THE FUTURE.
With new claims remaining well above 400k a week (and in my estimation soon to increase with local, state and federal budget cutting layoffs yet to hit) and those already unemployed facing minimal new job creation as confirmed by the June pathetic 18k addition to payrolls - the forthcoming direction of the economy should be quite clear.
Consumer spending will dive and small retail businesses will in turn be shuttered. Restaurants will close, foreclosures will rise, the typical homeowner will continue to see their main asset deteriorate in value. Large businesses will continue to hoard cash and layoff workers to address decreasing demand.
Our government has completely failed us by shoveling trillions to the financial industry through TARP, emergency loans, the discount window, QE2, bailouts of AIG-type monstrosities, foreign banks and the financial arms of multi-national corporations. NONE of this has filtered down to the normal citizenry. NONE of this spending has helped the average American citizen. Trickle down economics has been exposed as a dangerous hoax - a thoroughly discredited fallacy.
Instead, the President's commission on jobs features Jeffrey Inmelt - the prototypical shredder of jobs. This person - surrounded by similar thinking types, defective economists and financial "stalwarts" - will not formulate anything of true value. Just read their preliminary report and see if you can detect any inspirational feature whatsoever. It is a rehash of nothingness - a travesty of wasted dollars of wining and dining.
When one properly focuses on unemployment trends as a FUTURE INDICATOR, it becomes clear that our future will be in a downtrend as our government chose to indiscriminantly fund those who will not contribute to a true recovery, while defunding those who could (government support agencies). This to occur at the same time as more of our citizens will turn to the defunded parties to help them survive a crisis to which they did not contribute. The "oh so important" FUTURE INDICATOR is signalling very lean times coming up. But we discount it at our peril by failing to properly account for it - instead consigning it to the utterly wrong status of lagging indicator.
The Great Recession Never Ended
First off, economists - who have never yet been right about anything this decade - need to change the definition of recession to reflect an economy which is 70 percent consumer driven. And the revised definition must include unemployment, which should also no longer be perceived as a lagging indicator but as a forward indicator. This is basic stuff.
These economist clowns were just today again caught with yet another misread on the economy. After a bunch of them had just RAISED their jobs outlook - the June 2011 figures came in with a miniscule 18,000 new jobs created and a rise in the unemployment rate to 9.2%. Once again revealing that these great minds are completely clueless about the reality surrounding them.
I'll also take this opportunity to restate my prediction that the forthcoming massive layoffs of teachers and public employees due to severe budget cuts will bring the four week moving average of new claims to above 500k by Labor Day.
If nothing else, citizens should learn to trust their own thoughts and opinions about the state of things. Because common sense has once again been shown to be a heckuva lot more accurate than the utterances of a group of people practicing a science based on faulty assumptions, outdated definitions and incompetence.
These economist clowns were just today again caught with yet another misread on the economy. After a bunch of them had just RAISED their jobs outlook - the June 2011 figures came in with a miniscule 18,000 new jobs created and a rise in the unemployment rate to 9.2%. Once again revealing that these great minds are completely clueless about the reality surrounding them.
I'll also take this opportunity to restate my prediction that the forthcoming massive layoffs of teachers and public employees due to severe budget cuts will bring the four week moving average of new claims to above 500k by Labor Day.
If nothing else, citizens should learn to trust their own thoughts and opinions about the state of things. Because common sense has once again been shown to be a heckuva lot more accurate than the utterances of a group of people practicing a science based on faulty assumptions, outdated definitions and incompetence.
Wednesday, July 6, 2011
The Upcoming Crisis !!!!!
I have forwarded this information to numerous news organizations, financial sites, budget planners and everyone I can think of with no reaction or interest whatsoever. So any reader of this blog can reflect on this upcoming situation without having to wade through anyone else's take on the matter.
School districts, cities, towns and all municipalities are fast approaching the time for establishing their budgets going forward. It is well established that this will involve substantial cutbacks. The major result of which will be layoffs. Many have read articles about cities such as Philadelphia, Providence, R.I. and others being compelled to greatly reduce the level of teachers. Other headlines address all kinds of city and town employee cutbacks.
Employers of teachers and city & town workers do not pay an unemployment tax on their payroll as the typical employer does. Rather, they reimburse the state Unemployment Division dollar for dollar for benefits paid out to eligible individuals. This will result in direct charges to the employers for up to 26 weeks of benefits per laid off person This so-called "Reimbursing Employer" arrangement is beneficial during times of low, stable unemployment - but can really clobber budgets when layoffs are high.
So what does this really mean? Well, normal employers have seen their "contribution rate" increase since their accounts have generally paid out more in benefits than they have contributed in taxes to the unemployment fund during the Great Recession.. Actually, this has already caused some states to limit the longevity of benefits to make their states more "business friendly". Basically, to try to cut the burden of unemployment payroll taxes to make it appear that business costs are less compared to other states that have not done so.
But the hit on school districts, cities and towns has not really even occurred yet. This will come in July and August of 2011 when the layoffs occur and the claims are filed. A teacher without a contract for the upcoming school year will not have "reasonable assurance" of returning to their position and therefore will be eligible for unemployment benefits. A laid off city, town or municipal employee will also be immediately eligible.
Just contemplate the impact. If these thousands upon thousands of individuals collect unemployment - with the former employers being charged dollar for dollar for benefits paid - we are talking very, very large sums. Huge expenditures.
Just take an example of a laid off teacher receiving $300 a week for up to 26 weeks - all being billed to the school district. Multiply this by all the laid off school teachers nationwide. The total will be massive. And I'm just talking about the direct costs to the school districts. (Of course, a similar scenario exists for cities, towns and municipalities).
How does this impact payment of property taxes? Let's say a home-owning household is headed by two wage-earners, one of whom is a teacher or public employee. If one is laid off, how do they pay their property taxes? In a family with a single laid off teacher wage earner - how do they pay property taxes, mortgage or any other bills for that matter? With relentlessly increasing food and energy bills? Will they be in a position to contribute towards our 70% consumer spending driven economy? Or will they, by necessity, contribute unwillingly to our national debt?
Our government is not even close to even recognizing - much less answering these types of questions. Our elected officials are myopically preoccupied with matters that mean little. It's not a matter of "failing to see the forest for the trees", but rather being totally blind to the obvious. A state of complete and utter non-preparedness. When the government and the media that should make an attempt to make it accountable cannot comprehend a coming crisis - then the citizenry is left to bear the brunt of the results. I guess we learned nothing from Katrina and the financial crisis. We might as well go by the name FEMA and congratulate our leaders by saying "good job, Brownie".
School districts, cities, towns and all municipalities are fast approaching the time for establishing their budgets going forward. It is well established that this will involve substantial cutbacks. The major result of which will be layoffs. Many have read articles about cities such as Philadelphia, Providence, R.I. and others being compelled to greatly reduce the level of teachers. Other headlines address all kinds of city and town employee cutbacks.
Employers of teachers and city & town workers do not pay an unemployment tax on their payroll as the typical employer does. Rather, they reimburse the state Unemployment Division dollar for dollar for benefits paid out to eligible individuals. This will result in direct charges to the employers for up to 26 weeks of benefits per laid off person This so-called "Reimbursing Employer" arrangement is beneficial during times of low, stable unemployment - but can really clobber budgets when layoffs are high.
So what does this really mean? Well, normal employers have seen their "contribution rate" increase since their accounts have generally paid out more in benefits than they have contributed in taxes to the unemployment fund during the Great Recession.. Actually, this has already caused some states to limit the longevity of benefits to make their states more "business friendly". Basically, to try to cut the burden of unemployment payroll taxes to make it appear that business costs are less compared to other states that have not done so.
But the hit on school districts, cities and towns has not really even occurred yet. This will come in July and August of 2011 when the layoffs occur and the claims are filed. A teacher without a contract for the upcoming school year will not have "reasonable assurance" of returning to their position and therefore will be eligible for unemployment benefits. A laid off city, town or municipal employee will also be immediately eligible.
Just contemplate the impact. If these thousands upon thousands of individuals collect unemployment - with the former employers being charged dollar for dollar for benefits paid - we are talking very, very large sums. Huge expenditures.
Just take an example of a laid off teacher receiving $300 a week for up to 26 weeks - all being billed to the school district. Multiply this by all the laid off school teachers nationwide. The total will be massive. And I'm just talking about the direct costs to the school districts. (Of course, a similar scenario exists for cities, towns and municipalities).
How does this impact payment of property taxes? Let's say a home-owning household is headed by two wage-earners, one of whom is a teacher or public employee. If one is laid off, how do they pay their property taxes? In a family with a single laid off teacher wage earner - how do they pay property taxes, mortgage or any other bills for that matter? With relentlessly increasing food and energy bills? Will they be in a position to contribute towards our 70% consumer spending driven economy? Or will they, by necessity, contribute unwillingly to our national debt?
Our government is not even close to even recognizing - much less answering these types of questions. Our elected officials are myopically preoccupied with matters that mean little. It's not a matter of "failing to see the forest for the trees", but rather being totally blind to the obvious. A state of complete and utter non-preparedness. When the government and the media that should make an attempt to make it accountable cannot comprehend a coming crisis - then the citizenry is left to bear the brunt of the results. I guess we learned nothing from Katrina and the financial crisis. We might as well go by the name FEMA and congratulate our leaders by saying "good job, Brownie".
Friday, July 1, 2011
Eyes Wide Shut
I just read that Bill Clinton believes that unexpectedly strong job growth will bring Mr. Obama re-election.
Oh my. It is amazing just how wrong a respected figure can be. After July 1st, anyone who files a new claim for unemployment insurance will be limited to 26 weeks with no extensions unless Congress does an improbable about face. Some states are even reducing the basic 26 to save money.
(Actually, some states do continue to offer an additional 13 weeks under the long-standing Federal/State Extended benefits program if their unemployment rate is high enough).
This nicely corresponds with the now being finalized state and local budgets. You remember - the budgets resulting in the layoffs of thousands upon thousands of teachers, municipal and state employees.
Very, very cruel timing. Just when benefits duration will be restricted due to the (end) of the Great Recession, the initial claims figure will be jumping above the 500,000 level. The four week moving average will be substantially above 500k by Labor Day.
Far from propelling Obama to another term, the unemployment mess coupled with the increasing fortunes of the super wealthy will cost him dearly if the republicans can field even a semi competent candidate. His outstanding speaking skills cannot overcome a dismal record and the perception of betrayal among former supporters.
Oh my. It is amazing just how wrong a respected figure can be. After July 1st, anyone who files a new claim for unemployment insurance will be limited to 26 weeks with no extensions unless Congress does an improbable about face. Some states are even reducing the basic 26 to save money.
(Actually, some states do continue to offer an additional 13 weeks under the long-standing Federal/State Extended benefits program if their unemployment rate is high enough).
This nicely corresponds with the now being finalized state and local budgets. You remember - the budgets resulting in the layoffs of thousands upon thousands of teachers, municipal and state employees.
Very, very cruel timing. Just when benefits duration will be restricted due to the (end) of the Great Recession, the initial claims figure will be jumping above the 500,000 level. The four week moving average will be substantially above 500k by Labor Day.
Far from propelling Obama to another term, the unemployment mess coupled with the increasing fortunes of the super wealthy will cost him dearly if the republicans can field even a semi competent candidate. His outstanding speaking skills cannot overcome a dismal record and the perception of betrayal among former supporters.
Thursday, June 23, 2011
"Student of the Depression" did not graduate
On 6/22/11 we heard Ben Bernanke say that unemployment was stubbornly high, but felt to be temporary. On 6/23/11 we learn that initial claims for unemployment unexpectedly rose to 429,00.
One of the Federal Reserve's mandates is to maximize employment. This has simply not been addressed by Fed policy - while at the same time the Fed has instead focused its attention on its self-created third mandate of propping up the stock market.
Mr. Bernanke is utterly clueless about what is to shortly occur in the labor market. I'll give you a hint:
Just today, Philadelphia newspapers confirmed that 1600 teachers were given layoff notices. That is just one city in one state. State, municipal and school district budgets are near finalization. These budget cutbacks will bring thousands upon thousands of layoffs. These layoffs will impact communities from top to bottom. Consumer spending, payment of property taxes, collection of state taxes falling due to lost jobs, added foreclosures and a multitude of other negative things. And this is what is coming up - today looks pretty good in comparison. I suspect that the four week average of initial claims will be trending on the 500,000 or above bar by September.
Going back to the Fed chairman's status as a "student of the Depression". I've long held that any person with an undergraduate degree can get a master's degree as long as they are willing to continue to pay an academic institution to get it. But to earn a doctorate degree, one has to take the requisite courses, pass a comprehensive exam and defend one's dissertation. Mr. Bernanke is in the process of failing to do this.
No authoritative body will award a Ph.D based on his body of work. His QE results do not support his assertions. His zero percent interest rate policy has rewarded a corrupt banking system and "pink slip mongering" group of multinational corporations at the expense of the (working) class and savers. Just today Discover Cards announced record profits. I would guess so - they get money at close to zero and lend it out from 7-22%.
And what body would award a doctorate degree after hearing him state yesterday that the Greece situation should have minimal impact on US banks when he has no idea of derivative exposure? No idea whatsoever.
Our monetary policy is being guided by an individual "student" who could not pass muster to earn his doctorate degree. Perhaps Congress could better utilize its time and resources researching how to recall (fire) such an individual. While they're at it - they should explore similar options with regard to Treasury Secretary Geithner. Both are in the process of destroying our country It is best to act before it happens.
One of the Federal Reserve's mandates is to maximize employment. This has simply not been addressed by Fed policy - while at the same time the Fed has instead focused its attention on its self-created third mandate of propping up the stock market.
Mr. Bernanke is utterly clueless about what is to shortly occur in the labor market. I'll give you a hint:
Just today, Philadelphia newspapers confirmed that 1600 teachers were given layoff notices. That is just one city in one state. State, municipal and school district budgets are near finalization. These budget cutbacks will bring thousands upon thousands of layoffs. These layoffs will impact communities from top to bottom. Consumer spending, payment of property taxes, collection of state taxes falling due to lost jobs, added foreclosures and a multitude of other negative things. And this is what is coming up - today looks pretty good in comparison. I suspect that the four week average of initial claims will be trending on the 500,000 or above bar by September.
Going back to the Fed chairman's status as a "student of the Depression". I've long held that any person with an undergraduate degree can get a master's degree as long as they are willing to continue to pay an academic institution to get it. But to earn a doctorate degree, one has to take the requisite courses, pass a comprehensive exam and defend one's dissertation. Mr. Bernanke is in the process of failing to do this.
No authoritative body will award a Ph.D based on his body of work. His QE results do not support his assertions. His zero percent interest rate policy has rewarded a corrupt banking system and "pink slip mongering" group of multinational corporations at the expense of the (working) class and savers. Just today Discover Cards announced record profits. I would guess so - they get money at close to zero and lend it out from 7-22%.
And what body would award a doctorate degree after hearing him state yesterday that the Greece situation should have minimal impact on US banks when he has no idea of derivative exposure? No idea whatsoever.
Our monetary policy is being guided by an individual "student" who could not pass muster to earn his doctorate degree. Perhaps Congress could better utilize its time and resources researching how to recall (fire) such an individual. While they're at it - they should explore similar options with regard to Treasury Secretary Geithner. Both are in the process of destroying our country It is best to act before it happens.
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