Archive for the ‘CHECKBOOK ECONOMICS’ category


May 23, 2010

I’m old and slow and have to simplify things down to there lowest common denominator till I can understand exactly what went on. The mortgage crisis that none of the big wigs saw coming , was as easy to spot as lipstick on the wrong end of a pig. You only had to look at a few simple everyday facts most of which were yelled and screamed and touted ofter in the MSM. House prices never in history have gone up 15 to 20% a year. A quick look at a chart on the average price of a house clearly showed a deviation from the normal 3% average increase per year. The frosting on the cake was that nobody can afford a house that cost more than 3 times your average wage. So exactly how did they pull this off.

Keep in mind , this bubble was created to hide the effects of the Dot Com Crash. The Fed used their most popular took, they lowered interest rates to zero. Even though this is often touted as the cause it’s not. If everybody had stayed hones a lot of folks could have bought and kept a house because of the low rates but that’s not what happened.

1.The Mortgage brokers because of deregulation and the knowledge that the government wouldn’t interfere started making all kinds of loans most of which they knew would fail in the first few years. They didn’t care how long they lasted as long as it was longer than the 30 milliseconds they took to unload them to banks. Meantime they collected handsome fees.

2. The banks gladly took the loans off the brokers hands knowing they were bad, but didn’t care as they were going to package them and hawk them to the Investment Houses.

3. The Investment Houses sent the packages to the ratings agencies to be rated as to investment grade (AAA the preferred rating)

4.The Rating Houses would rate 80% of the packages AAA making them of the quality that Pension Funds and Retirement Accounts were looking for. It is known now they didn’t really look very hard at the quality of loans in the package they just gave them the required rating. They normally sent 20% back as low quality , which were repackaged with other dogs, with a few good ones thrown in for luck and 80% of this junk package was rated AAA. This process was repeated over and over till there contents could be properly labeled JUNK OF JUNK.

5.The Investment Houses then sold these packages world wide and essentially turned the mortgage packages (about 7 Trillion bucks worth) and there derivative packages into a 600 Trillion dollar bomb. That you now see blowing up.

6.But wait that’s not all . Eventually the banks and investment houses knew these were pieces of crap and were buying bets they would fail while selling them as AAA investment grade instruments. In the beginning of the bubble they were betting long and did this for several years and during this time almost nobody was betting that housing prices would ever go down so they were buying derivatives packages betting the market would continue up.

7.One loan guy sitting in a darkened office running a small fund and known for his ability to pick good stock buys by carefully reading the quarterly reports . Suddenly he realized that these mortgage packages were based on the incorrect idea that housing prices would never fall. He called some of the biggest banks to see if he could buy a bet they would fall. Almost nobody was interested but a couple took the bait and sold him his shorts. This is all detailed in his book “THE BIG SHORT” a fast reading tell all tale of what started the crash. No it wasn’t his fault that it crashed as no more than 20 people knew and took advantage of this vehicle. When it became apparent because of the high number of these mortgages inside a package were failing (it took about 8% failure rate) to make a package fall like a rock from a tower. Ok , for all you Newton fans (an apple from a tree).

The above is a simple version of what took the mortgage market to hell. Don’t be fooled, we are only about half way through the residential mortgage mess with 2010 and 2011 forecasted to be as bad as we have already seen.

Another big factor in the downsizing of America is the tactics of Hedge Funds and the lack of government interest in controlling them or for that matter enforcing the laws already on the books. Naked short selling by these funds have driven a lot of companies stock to prices that allow the funds to buy the company for pennies on the dollar. (Naked short selling is illegal because it allows companies to bet stock they don’t own or rent, which sometimes throws more stock on the market than actually exists.) After they own the company one of first acts is to downsize the work force (they don’t like to say fire) , then it’s bust the contracts that control wages and benefits (aided by the courts) which often takes away health care and pensions from not only current employees but retirees too.

In the every day market these huge funds because of their piles and piles of money can drive commodity prices anywhere they want. Take a look at a oil price chart, or money, or corn, or just about any damn thing and notice the prices swing widely. Most know now they are artificially swinging the prices so they can make huge profits up or down and exercise huge control of our economy itself by deciding where we would have to spend our money. Will it be on gas, or food, or health care, you got the picture by now I’m sure. The song and dance they do to explain all the price moves are wearing thin now days and most just scream bullshit , put have to pay the piper anyway.

70% of the market today is controlled by what they call “FAST TRACK TRADING” , just a fancy high priced bunch of computers and software that control the market. Did you like the 1000 point swing the other day, all started by a bet of 7.5 million that the DOW would fall, to buy a bet somebody has to be on the long side, they were , and realized they better cover their asses with a fall bet too, somebody had to be on the other side and on and on it went . When the first execute button was pushed (no fat finger mistake) a deliberate bet , the shit hit the fan. They jumped on the panic button and sent the market the other way…Somebody made a shitpot full of money and of course somebody lost. One thing for sure we didn’t have time to do a damn thing but watch and take an extra dose of heart medicine .

The bottom line is this, how can us commoners plan for investment vehicles to provide for college for our kids , or retirement funds for ourselves with this kind of bullshit taking place. Don’t think for a minute that the Financial Reform package will do anything for us, we ain’t got the bucks to buy that kind of deal. Did you notice the shit storm caused by Angela Merkel banning naked short selling in Germany caused, ever some of my favorite economic writers criticized her for it. It’s those kinds of sudden moves that can bust these hedge funds and this automatic trading nonsense overnight. Sounds like a hell of an idea to me. Don’t hold your breath for those kinds of changes happening here, it won’t.



February 9, 2010

This Rasmussen Poll (yeah I know you don’t trust polls) however the spread on this one is so wide even if it’s not very accurate is scary at worst and a death rattle if accurate.

According to this poll only 11% of Americans believe that the government should spend and increase the deficit during tough economic times.

Question #1:     Which would be better for the economy cutting deficits, or increasing deficit spending?

70% say cutting the deficit

11% say increase spending,

19% wouldn’t know if it hit em in the head.

You can see all three questions in the poll by clicking here

Anybody with more than a wart on their shoulders knows that the only way out of this mess is to create jobs.  Without government leadership and money this will not happen. Paul Craig Roberts (after conversion) lays it out for you here and it is plain the government and corporations acting in tandem have destroyed the American Labor Force , with their , treaties, tax breaks,  and corporate greed sending our jobs overseas.  They sold this crap to us with a MSM solidly in their pockets and full of outright lies.  Pie chart is breakdown of 2009 budget.

Now I’m betting that 90% of those that say cutting the deficits is the favorable way to boost the economy can’t site you the %’s or the numbers from this budget or chart.  They prove that in poll after poll by showing how very little they know about what’s going on.  Since we have so little to say about how any of this is done it may be best for your mental health to just say “TO HELL WITH IT” Before we give up let’s apply a little Checkbook economics to the problem.  If your household was in trouble and you have set down with your Quicken program and printed out your expenditures for the year , what numbers would you look at first.  Of course you go the biggest outlay first (and fixed costs like mortgage’s are not changeable) so you go to the largest item that you can make changes in life style to lower.  Simple ole houshold common sense.

Gee do you think you could find a few cuts in the 1.4 trillion dollar military budget which is  (54%) of the total budget.  Only 34% of the budget can be cut  as the veterans part is already strapped for funds in most departments.  But from the President down the military budget, social security , Medicare and Medicaid and the military will not be cut.  So what’s left chicken feed that if we cut it all would have no effect on the current crisis.  Yet 70% of the citizens think budget cutting is the big ticket item.  In this case the politicians will most likely hear the people, they will cut whatever they can reach.  You can bet Social Security , Medicare, Medicaid and education will be under fire.  Forming panels on things like Social Security whose recommendations  will get  a straight up or down vote are a danger to every citizens counting on SS for part of their retirement.

Damn people, you gotta go a little deeper then the evening news.


February 4, 2010

I’ve said it before , but it needs saying again, quit blaming the collapse of the housing bubble on the the citizens who bought the houses.   Put the blame (there’s enough to go around) where it belongs .  Mike Whitney lays it out in detail here.  Sheila Bair in testimony The Fed knew exactly what it was doing when it lowered interest rates to near zero , at the same time signaled to the banks that they were not going to police the mortgages they gave under the laws that existed at the time.  The Banksters knew a good thing when they saw it and since they had no intention of holding the mortgages they decided there were no rules on lending (old economics doesn’t apply) .  You apply , YOU GOT THE LOAN, no job (no problem) no income (no problem) no credit (no problem) , living on cat food (no problem).  Is you body temperature above 83 degrees , sign here.

The idea all along was to role these loans (some good and some very bad) into a packet to be sold as investments, but first you have to have your package rated  (get your mind out of the dirt) the rating companies played along with the game and applied their AAA stamp to these pieces of junk, which made them hot sought after deals by the whole world.  But wait the hot shots are not done yet.   You can picture them sitting around the lunch table with their gold plates and goblets asking a simple question (notice how these simple questions end up most of the time as bombs) we know the packages we just sold are junk how can we profit from that knowledge.  I know, a bright young lad (coulda been a lass) jumped up and said let’s design and buy a derivative package betting these packages would fail. ( a sure bet) .  They didn’t stop there though and bought derivatives on derivatives knowing all along they had a sure thing.  All the rules went out the window, most of these rules had been in place since the Great Depression and had kept these Wolves at bay for 80 years (fits nicely into the cycle theory)  now they were on the loose unrestricted by those Stinking Rules.  Were on a Free Market roll get outta our way.  So there you have it the set up for failure.

Into this mess good ole John Q. Public strolls being told by all the Powers that be , that now he can afford all those things he has wanted for years but couldn’t qualify for.  What the banks knew all along was this simple fact detailed in this link by Budget 360 , Ole John Q couldn’t afford all this stuff but he doesn’t know it because the find print was so small he couldn’t read it (most of us don’t) and the game was on.  Not only were the houses he bought not affordable to him when the magic rules were applied later (1, 2, 5 years later) but the house inflated by 10, 15 or 20% per year and he was encouraged to get an equity loan and spend the equity into a new SUV a new boat, or a nice cruise to Europe.  He did exactly that (some say he should have know better) but face up to it , he could afford his monthly payments so what’s the big deal.  It was a” Hot Time in the Old Town Tonight” for a few years.  THEN THE SHIT HIT THE FAN!

The set up for what happening  now has been going on for 30 years, since dear ole Ronnie Regan rode the Free Market Pony into town , and with his Con man talent planted that incorrect theory deep in out brains.  So we didn’t scream very loud when they started shipping our jobs overseas (they told us how great it would be) we would be able to go to work in a white shirt and tie at higher wages.  They were half right, the wages didn’t happen , we got a white shirt and tie, but they didn’t say it would say Kentucky Fried of the front. The average family during the last 30 years has lost ground wage wise , both husband and wife are working , and together make a little more than 60% of what a  husband use to make.  The destruction of manufacturing jobs was not enough for the big boys, they set out on a pogrom of building Walmart stores in every town America running the Mom and Pops out of business.  Sold to us by “Man it’s cheap, quit bitching”.   Then they were on to outsourcing our high tech jobs, (after they suckered us into a Zillion dollars worth of student loans) to train for these jobs which they now shipped overseas.  But wait, they are not done yet, now they are shipping back room jobs out of the country too.  So we are left with damn few good paying jobs, nurses, teachers, government employees and a very few more.  We are left with low paying no future jobs clerking, burger flipping, cashiers, laborers .  When truck drivers and customer service reps are classified as high paying jobs then you should get the scope of the problem.

It was no secret to those who cared to look, that NAFTA, GATT, WTO were passed it put American on a  Race to the Bottom economically.  Sure enough , look around you, the direction we are going is not up.


This story claims there are 5 reasons for the passivity of Americans in response to this crisis.


You’ll have to read this piece to see if you agree with the points above.  I have and and I don’t buy #1 or #5.

The major crisis in morality and ethics that I see has mostly occurred at the highest levels of government and corporate figures.  We all know what these breaches of trust are so I won’t name them again here.  Down in the trenches I don’t buy that we are less moral or less ethical than in past history.  The failing listed are not what I would site as moral or ethical failures at our level.  The failings as I see are bigger than any mentioned, high on my list of moral failures is the lack of  outrage on finding out the lies that took us to war, the justification of torture, the violation of numerous treaties, complete disregard of the Geneva Convention , the huge financial crimes committed by the FED the Banks, and the Treasury . There are many, many more crimes too numerous to mention.   The use of religion by the right wing to create huge divisions in the country on supposedly moral and ethical grounds has prevented us from moving forward on many fronts.  While the same ole topics rule the conversation God ,Gays, Abortion, Guns (know as GAGG).

The drugging of America is focused non recreational drugs but on drugs used to treat various forms of brain chemistry that are the causes of depression, bi polar and other chemistry problems the society has.  Are they used more often (than when ) I might ask.  They have not been around all that long and have done millions a lot of good.  The interesting thing is if you really didn’t need them and were just mis diagnosed no damage is done, so what’s the problem.  Recreational drug use , depending on what you want count is up, but a lot of what they are talking about is pot and it’s pretty well proven to be not much of a problem.  A lot of the rest of the world doesn’t list some of these drugs as a problem , they just legalize them, or administer them making them not a social problem.  The sighting of anti depressant as a drug problem  just clouds the picture.


THE DYING OF THE AMERICAN DREAM:  I would label as the Deliberate Destruction of the American Dream by a bunch of Free Market Radicals out for personal profit with complete disregard for the workers of America.  So far the 22% unemployed and god knows how many underemployed of downsized to mere existence have remained pretty passive, probably based on the hope that things will bounce back to the past.  When they realize that dream is dead ????

THE FAMILY CRISIS.   When both parents have to work to survive that leaves little time for the leisure time of the past (I can remember when the projected big problem was we would have too much leisure time) Well they sure took care of that.  The women who until the 70’s were homemakers, mothers, care givers now still try to do all that and work too.  Is it any wonder that intimacy between the spouses has fallen to very low levels. Where a headache  or I’m too tired was an excuse , now it’s a fact, and the man thinks thank God. I’m too tired too.  Then there’s the kids.  In days of old they would come home from school to a smiling mom, who would ask them how was their day while offering a glass of chocolate mild and fresh baked cookies, who made sure they did their homework, changed into play clothes and ate a good dinner.  Now they might not get home till after 6 or 7 , spend the in between hours at a baby sitter or day care or maybe some kind of lesson if their lucky.  Home by seven, four hours of homework, a delicious TV dinner and if their really lucky maybe an hour surfing on the net.  Then there’s the weekend , Mom and Dad now do the household chores, shop for groceries, take the kids to their organized leagues, or to music lessons or other form of completely organized events.  If this evaluation of a normal week is any where near close you can see there is hardly any time dedicated to individual enjoyment, it’s go , go , go. and then more go.

ISOLATION:  The car, where we live, TV and work make this a normal way of life.  When you leave home in the morning , drive to work, work, drive home, the only interaction with people you have is at work (hell that’s 8 hours a day)  the rest of the day is spent in the car going to and from work.  Gee now you lucky dog,  your home, you address the everyday chores of family living, cook dinner, wash clothes, supervise the kids homework, and now it’s fun time you flip on the TV ,,,, AND FIND OUT YOUR JOB HAS BEEN OUTSOURCED.




January 27, 2010

It’s always the funding be it politicians, corporations, governments, or individuals , funding is the name of the game.

Let’s do the political side of funding first.  As the current health reform debate has proven in spades , what the people want, or think they want, or what a whole bunch need has nothing to do with the end product if there even is one.  Just to name a few of the maneuvers we have seen in this process, first the President makes a back room deal with the drug companies to ban the negotiation of drug prices in Medicare D or in any of the new programs, you saw committees hold hearings where single payer advocates were thrown in jail for trying to participate in the hearings, you have seen individual congressman force deals for their states to get to 60 votes (which they don’t even need) , you have seen a single senator kill most of the progressive parts of the proposed legislation to get his vote, you have seen the executive branch cut deals with just about everyone but us to get support  for the watered down version of the bill, hell they even got unions to sign on.  So here we sit in the middle of the biggest citizen hold up since Jessie James and we have no real idea what’s in the bill.  In this case NOthing is better than something.

Finance Reform is more of the same , by the time deals are done being cut any changes will not stop the thievery on the Street.  Banksters have to buy pants with bigger pockets to hold the rolls of cash they are getting as bonuses.  The banks are using our money (graciously given by the FED) (to who they won’t tell us) and are playing the derivative market bigger than before.  Bank CEO’s testify before congress they are doing the work of God (told you he was a vindictive prick)  and come to find out if they are doing his work then he is a crook too.

The economy is in recovery , of course they are only looking at the stock market as a lone indicator, while every other indicator is in the tank headed down , down, down.  Meantime the FED has dumped 10’s of trillions somewhere , and as myself and others have pointed out it has been going into the back entrance to the stock market through various ingenious schemes (in more honest circles , called crimes)  or some say the Plunge Protection Team has been playing the futures market big time.  Banks have been getting zero interest loans from the fed and if they just buy T-Bills they are making 3 or 4 % on money that costs them nothing, or they might be lending it to us on our credit cards at 18 to 30% .  When you look at the bank cash reserves you can plainly see a huge chunk of money that came from (where)?

They are already building another bubble and most have not figured it out yet, some believe that they are trying to rebuild the housing bubble, I don’t think so.   Cap and Trade is being set up to make the housing bubble look like a kindergarten scheme.

So here we sit, anxiously awaiting the President’s State of the Union Speech.  Will he have the balls to say “MY FELLOW AMERICANS , WE ARE FUCKED”  ?  Oh hell no he won’t , there will be all kinds of bells and whistles that say we are in recovery and that it is time to cut spending  , Oh Sweet Jesus, some saw this coming a long time ago.  God knows what the reasons he is going to go this route, I seriously doubt he’s doing it to get the lone republican vote he might get.  Some would have you believe that Scott’s victory in Mass. has caused the Dems to panic and turn hard to the middle,  I think it has been the game plan all along to bail out the banksters, and letting us swing in the wind.  It really doesn’t matter what he says or does tonight , the cards are already dealt and the little amounts they are talking about will have no effect on the economy.

Enough said about the Political side, now for our side of the problem.  Let’s keep it simple, we will not look around to point fingers at whose fault this mess really is , instead let’s just look at where Average Joe American Is today.  For 30 years the goal has been to destroy the MIddle Class of America thru various means.  From the beginning with the firing of the Air Traffic Controllers to the outsourcing of 7 million manufacturing jobs, to the outsourcing of back room jobs, to the complete relocation of entire industries, to the insourcing of jobs they supposedly coudn’t find qualified people to fill.  The bottom line in the job market at least 22% are unemployed using numbers figured the old way like Shadow Stats shows you every month.  At the same time the makeup of the remaining workforce has changed from being a single wage earner to a two wage earner family.  Now as some say this change in workforce is a good thing and perhaps it should have been but when you look at wages from 1970 till 2008 explain to me please why household income has gone from 40,000 to 51,000 bucks  almost 40 years.  You don’t get very far in trying to compare costs to wages during the same time, you only get to the cost of housing and the cost of debt servicing to eat up more than half your income.  When you add on just the cost of the necessities of life you quickly see why the Average Joe was forced to hit his credit card or his equity line just to keep from loosing ground.  All the while being encourage by Government to spend it ,it’s your money, and they did. Now most are sitting in houses whose mortgages are underwater, whose credit cards are maxed, whose job is gone or downsized and is fast approaching the point of action.

What action you Scream.  Why the only one left.  I have cringed at the saying ‘OLD ECONOMICS DOESN’T APPLY ANY MORE”  I always though the same rules apply today as they always did.  I think I may have been wrong.  The government and the corporations don’t honour their commitments, their contracts, their word, or their obligations.  When they get in trouble , they walk away from it all.  Owe a lot of money that you can’t pay, then don’t , default on it or go bankrupt.  Have a contract on a nice new shiny plane, let them come get it if they can find it.

The Supreme Court has just ruled that Corporations have the same rights as all other citizens.  What’s Sauce for The Gander is Juice for the Goose must apply here.  If Corporations and governments can just walk away from their obligations, then we must be able to do it too.   MAKE IT SO!


January 8, 2010

Mike Whitney gets it right once again.  Whatever chance we have of pulling out of this downturn is probably on the way to ruin as the politicians start whining about the deficits and start talking about cutting the budget.  Now you know they won’t cut defense and the only other place to cut significant amounts are the social programs.  The Presidents economic team (and the President too) are trying to pull off once again a game plan the conservatives have had in place since 1936.

They hate Social Security and Medicare , Medicaid and have been trying the death of a thousand cuts for years, now they think they have a chance to just rip the hearts out of these programs once and for all.

All politicians but especially Democrats are scared to death that this cut the deficit Tea Party crowd will throw them out of office.  I truly hope we don’t fall for the scheme and put the republicans back in power.   Truth of the matter is neither side are on our side.  The only answer is to find more polls like Sanders, Kucinich and put enough of them in to form a block big enough to control the vote.


January 1, 2010


Since 1980 we have been on ‘THE LONG SLIDE”, and we won’t get off the slide this year as I see it.  Here’s what I think the problem areas will be.

  • Retail Sales numbers for Christmas will be disappointing at best and probably more on the catastrophe level.
  • This will trigger the Commercial Real Estate failure that we have talked about for months.
  • The collapse of Commercial Real Estate will trigger National and local bank failures that the FDIC will have to go to Congress for more money to save the depositors funds.
  • Expect 4 million more homes to go into foreclosure , new home construction will fall more, meaning less jobs, less everything that new home sales generate.
  • There will be no rise in GDP (even if they say it does) we will not grow in 2010 in the normal sense of growth.
  • Unemployment will continue to rise.
  • Debt will be defaulted on by countries and by it’s citizens , this will include houses , credit card, car loans all will be just walked away from.  You can’t pay with money you don’t have.  Simple…
  • Inflation/Deflation= Would you believe both?  and that’s why we will be confused as to what is exactly going on.  Our houses will fall in value, while the items we use daily will rise , food, gas, oil, natural gas, medical care, dentists.  The government has been printing money as fast as they can but you have not seen a sign of the hyperinflation some are talking about, and you won’t till we shake out all the debt being destroyed by default.  When the bottom of debt is reached , then you will see hyperinflation.  (I’m not really sure about this because how can price pressure be put on things by people who have no money.
  • A NEW Currency- perhaps if we enter an hyperinflation period do to the dollars weakness or collapse a new currency (as Germany did) and withdraw to things we make here.
  • AN END OF FOREIGN WARS AND OCCUPATIONS- this will be forced on the government because we are broke and nobody will finance us any more.  This might be forced by a few more stupid attacks on additional countries . You pick your country of choice.  If this doesn’t destroy the world , it could bring about the end of at least our nonsense.
  • A WORLD FOOD CRISIS – Due to crop failures world wide, Soy beans in America, wheat in India and many , many more.  Which I think will force the farmers of the US back to growing real food instead of speciality crops.
  • WORLD ENERGY CRISIS- It’s still here  but is being muted somewhat by the world downturn.  There are lots of reasons it will return to be a huge problem.  Seems like the rest of the world is anticipating this by building new nukes, new solar, and other non oil energy sources, us , not so much..
  • BIG BANK FAILURES- The top ten will not be around much longer- when countries default of their derivative contracts the game is over.
  • IN CONCLUSION -2010 is not going to be fun.











December 28, 2009


In this piece “BOYCOTT LOCAL BUSINESS” this fool is saying big box stores are better for the community than a locally owned business because we all can share in the profits by OF COURSE BUYING THEIR STOCK while the locally owned store only profits the owner.

First off you will notice that the only thing on the writers mind is profit, who profits, who gives a great big shit. To me two things are much more important.  First when you walk in the door they greet you by name. Second they usually have a bigger variety than a lot of big box stores.. He uses a book store as his example, fine, I’ll use Ace Hardware, or my local pharmacy.  My biggest bitch about big box stores is you cannot have a favourite brand and expect it to be carried over time. (think motor oil)  Either one calls me by name and if they don’t have it they will offer to order it and will stock it in the future if you ask.  Show me a big box store that will do that.  He also uses Walmart as an example, ok, I hate Walmart that’s no secret.  To compare the ability of a local stores wages and benefits is totally fair don’t you think.  My local book store owner is absolutely in the top 100 richest people in the world, and his yearly take is in the billions., and of course the local store will close shop and leave town if one employee says the almighty dirty work UNION.

I ‘m  sure the stack of bullshit this dude has heaped will set the Guinness Book World Record for shit stacking, and incredible piece of work .  Wanna bet how much Walmart stock he owns.