Buried Headlines: July 21, 2012

Former FDIC Chair Sheila Bair told CNBC Friday that she "didn't understand" why crony capitalist and tax cheat Timmah Geithner's NY Fed didn't thoroughly investigate banks that allegedly participated in the Libor scandal, given that it was notified of potential wrongdoing. Gee, I can't imagine why...

FDIC Chair On Libor Scandal: Geithner-Led Fed Knew, Did Not Investigate

In other news:

Failing To Break Up The Big Banks Is Destroying America

Now It's the Big Banks That Are Getting Foreclosed On 

Respect My Authoritah: Justice Department Sues Telecom For Challenging National Security Letter

Laugh It Up, Liberals: Rupert Murdoch Steps Down From Newspaper Boards

Who Is Funding The Presidential Race? A List Of The Uber-Wealthy Behind The PACs

The Rise Of Skynet: FAA Has Authorized 106 Government Entities To Fly Domestic Drones

The Abysmal Earnings Season Explained In Two Charts

Presenting The 10 Most Spectacular Financial Speculations Of The Past 300 Years

VIDEO: Castrating The Fed Is The Only Way Out Of The Economic Depression

Lew Rockwell recently posted a Casey Research interview of former United States Comptroller General David Stockman in which the former head government accountant discusses why the economy is stuck in a multi-year depression. According to Mr. Stockman, Fed-enabled debt--sovereign and consumer--prevents recovery (as I've been saying), and the only way the economy can recover is through a painful period of austerity. According to the former CG:

 I don't think we are at the beginning of the recovery. I think we are at the end of a disastrous debt supercycle that has gone on for the last thirty or forty years, really. It started when Nixon defaulted on our obligations under Bretton Woods and closed the gold window. Incrementally, year after year since then, we have been going in a direction of extremely unsound money, of massive borrowing in both the private and the public sector. We now have an economy that is saturated with debt: $54 trillion or $53 trillion – 3.5 times the GDP – way off the charts from where it was for a hundred years prior to the beginning of this. The idea that somehow all of that debt is irrelevant, as the Keynesians would tell us, is fundamentally wrong – and the reason why the economy can't get up off the mat.

We're doing all the wrong things. We're adding to the problem, not subtracting. We are not allowing the debt to be worked down and liquidated. We're not asking people to save more and consume less, which is what we really need to do. And so therefore I think policy is just making it worse, and any day now we will have another recurrence of the kind of economic crisis we had a few years ago.

Mr. Stockman made a salient point that should be made common knowledge: Since its creation in 1913, Fed money printing has caused periods of economic malaise in this country:

The greatest period of growth in American history was 1870-1914 – the Fed didn't exist. Right after 1870, when we recovered from the Civil War we went back on the gold standard. It worked pretty well. World War I was a catastrophe for the financial system. The Fed financed it, but I don't give them any credit for that, okay? We shouldn't have been in that war. It was a stupid thing to get involved in. But once we got involved in it, the Fed printed money like crazy, it facilitated borrowing, set the groundwork for the boom of the 1920s and the collapse of the 1930s.

The former Comptroller General hammered home the point that the Fed has been propping up the stock market:

...then the crisis came in September, 2008. They panicked and pulled out the stops everywhere. As I said, tripled the balance sheet in thirteen weeks, [compared to what] they had done in 93 years. They are now at a point where they don't dare begin to reduce the balance sheet, begin to contract, or they'll cause Wall Street to go into a hissy fit. They are afraid to death of Wall Street going into a hissy fit, so essentially, the robots and the boys and girls and the fast-money traders on Wall Street run the Fed indirectly.

Clearly, Stockman isn't fond of the Fed's board of directors:

 So no wonder we are in totally uncharted waters, and it's being run by people who are clueless as to how to get out of the corner they've painted this country into. They really ought to be run out of town on a rail.

Watch the video. It's well worth your time:

Buried Headlines: July 19, 2012

The second leg down has begun. Jobless claims are up, factory orders are down, home sales have plummeted, and, thanks to massive Fed Dollar printing, we're experiencing high inflation while the economy is contracting. Stagflation? No, much worse. This is "depflation".

Weekly Claims Post Rebound; Jobs Market Still In Doldrums

Did The Philly Fed Just Signal The End Of Obama's Jobs "Recovery"?

Foreclosure Crisis Hits Older Americans Hard

Mid-Atlantic Factory Activity Contracts Again In July

Home Sales Drop 5.4%, Fewest Sold Since October

Rising Corn Prices Increase Food Costs

ECOMINOES FLASHBACK: Fed Dollar Printing Responsible For Global Food Crisis

In other news:

USDA Partnering With Mexico To Boost Food Stamp Participation

House Minority Whip: Food Stamps, Unemployment Insurance Two "Most Stimulative" Things for Economy

Lawmakers Push Web Retailers To Collect Sales Tax

"Drones Will Dominate The Skies" In 2.5 Years

Post Office Might Miss Retirees' Payment

GSA Spent $270K On Event

Keynes Would Be Proud: Union Bosses Okay Digging Up, Then Filling Back In, Ditches On Taxpayers' Dime

Buried Headlines: July 18, 2012

As part of yesterday's Buried Headlines, I posted a commentary from ZeroHedge in which "Tyler" argued that the economic and political conditions that made it possible for the U.S. to prosper after WWII do not exist today. Recently, Joel Kotkin wrote for Newsweek that young adults haven't had such dim economic futures since the Great Depression. In his piece, Kotkin focused on the burden Baby Boomers are becoming to younger generations, which is decent angle to take. After all, irrationally-exuberant credit expansion was a primary cause of the 2008 Financial Crisis. But debt aside, younger Americans' economic futures are dim because:

1) The Fed has increased the scale and scope of career-killing long-term unemployment by prolonging the country's economic malaise by pumping massive amounts of liquidity instead of allowing the economy to delverage and clear itself of malinvestment after the financial crisis. Long-term unemployment early in a person's career is especially damaging to his lifetime earnings.
2) With the exception of its corporate cronies, Washington has become hostile to the private sector, which is responsible for the overwhelming majority of the nation's payrolls.
3) The federal government has become increasingly authoritarian. No society in the history of man has prospered economically in the absence of liberty. Liberty is under assault in this country.

At any rate, here is Kotkin's piece:

Are Millennials The Economically-Screwed Generation?

ECOMINOES FLASHBACK: We Are The Lost Economic Generation

In Obama news:

Oops! Obama’s Top Bundler Was In Charge Of Bain During Massive Layoffs

"Mission Accomplished": President Obama's Jobs Panel Missing In Action

In other news:

New Study Shows Potential Impact Of Tax Hikes On Small Businesses

ECOMINOES FLASHBACK:  Washington On The Back Of Small Business

FLASHBACK: Government Regulation Hurts Small Business, Helps Big Business

So Much For "Housing Has Bottomed": Shadow Housing Inventory Resumes Upward Climb

Spain Goes From Bad To Worse

Bank of America Being Questioned On Libor

Surprise! Democrats Propose Plan To Sidestep Anti-Tax Pledge

U.S. Building Missile Defense Station...In Qatar

Duh! Chávez Accused Of Eroding Rights

ECOMINOES FLASHBACK:  Sad Images Of Hugo Chavez's Trolleybus

From The Land Of Mad Max: Plan to Raze Detroit's Empty Homes In Final Stages

Buried Headlines: July 17, 2012

This economic depression is interminable. It wouldn't have lasted this long had 1) the Fed not flooded the patient with Morphine in the form of artificially-low interest rates and liquidity pumping (Dollar printing), and 2) the federal government had not attempted to defibrillate the patient with massive Keynesian spending. Why can't the Fed and Washington heed the lessons learned from The Forgotten Depression of 1920? That depression was every bit as bad as the Great Depression, but the economy recovered without protracted malaise. The difference? The Fed and the federal government allowed the economy to deleverage and clear itself of malinvestment. In other words, they allowed the patient to heal.

One more thought before the headlines: By preventing the economy from naturally deleveraging and clearing itself of malinvestment, the Fed and Washington have prolonged the suffering of the unemployed. What should make every unemployed, underemployed, and marginally attached worker angry--as it has made me angry-- is that the Fed propped up the stock market and Uncle Sam rewarded his cronies in exchange for the protracted economic malaise we've been experiencing, and its accompanying chronic unemployment.

Unemployment Running Out: More Americans Joining Disability Than Finding Jobs

Bernanke Predicts Slow Progress On Unemployment

Businesses Pessimistic About Economy, Hiring

Bernanke Gloomy On Economic Outlook

Sen. Schumer Tells Bernanke To Print Dollars Before November

CNBC: How Close Are We To New Great Depression?

ECOMINOES FLASHBACK: More On The Ongoing Depression And The Coming Austerity

In other news:

Do Obama's Executive Orders Reveal A Pattern?

ECOMINOES FLASHBACK: Obama's Communication Takeover Order Created To Protect Government?

Under Present Conditions, The Post-World War II American Economic Renaissance Cannot Be Repeated

Chevy Volt Makes NO Money, Costs Taxpayers Hundreds of Thousands of Dollars Per Car

One Problem With Low Interest Rates: Pension Under-Funding For S&P 500 Companies Hits Record

Sad Images Of Hugo Chavez's Trolleybus

Curious to see what the Venezuelan town I studied in looks like in its second decade of Chavez rule, I pulled up some recent photos from Google maps. Among other surprises, I was surprised to see that the government had built a trolleybus system in the neighborhood I stayed in. Clearly the work of socialists, the system is ostentatious and contrasts greatly with its impoverished surroundings. But pretentious design aside, what struck me was that the neighborhood looked much poorer than it did when I was there. I don't have a scanner, so I can't upload photos of the area from 1998, but I can attest that the privately-owned buildings in the background didn't look nearly as bad before the socialist government took over.

This is the trolleybus stop closest to my host family's neighborhood. The structure is made of stainless steel and likely cost more than what the typical Venezuelan earns over a lifetime. I used to get haircuts and buy guitar strings in the shopping center in the background. The center was well-maintained back then.

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Here's a closer look at the shopping center. Notice the hand-painted sign and trash on the ground. This was actually a pretty nice place to shop 14 years ago.

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Here's a view from the other side of the station. Notice the Venezuelan flags everywhere. Also notice that Chavez changed the stoplight colors to match the colors of the Venezuelan flag. Only in a socialist country...

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This is a terminal station. The ostentatious design couldn't contrast more with the decrepit houses in the background. The decrepit houses are actually part of my good friend's neighborhood. The area didn't look so bad when I used to visit.

(Click to enlarge.)

Here's a closer look at the terminal. Straight out of a utopian socialist fantasy. Tragic considering the poverty that surrounds it.

(Click to enlarge.)

Buried Headlines: July 16, 2012

California is an absolute economic and fiscal basket case. The Golden State taxed and regulated itself out of prosperity and into insolvency, and it's still throwing money it doesn't have into epic boondoggles such as the $68 billion high speed rail. Government in California knows no boundaries, and now some of the state's municipalities are using eminent domain to assume properties with troubled mortgages.

You Knew This Day Would Come: CA Cities Eye Plan To Seize Mortgages

Note To The CA Legislature: High-Speed Rail Does Not Help Economy

ECOMINOES FLASHBACK: California: The GDP, Budgetary Woes, And Resistance To Austerity Of A PIIGS Nation

In other news:

IMF: Global Economic "Recovery" Showing Signs Of Trouble

IMF Says Japan And Spain Are Done, "Debt Ratio Will Never Stabilize"

Europe's Lessons For The U.S.

Obama Fails The Young

As A Result, Fewer Young People Plan To Vote This November

Epic Rick Santelli Rant On "Un-American" Federal Reserve, Treasury Incompetence

Facebook's Zuckerberg Gets Multimillion-Dollar Loan At Rate Lower Than Inflation

Microsoft, NBC Dissolve MSNBC.com Joint Venture

"Avengers" Director Goes On Anti-Capitalist Rant

Social Immobility: America Is Becoming A Third World Country

A while back Bernie Marcus, co-founder of Home Depot, told Fox Business's Neil Cavuto that the current regulatory environment and anti-business sentiment emanating from Washington would prevent him from replicating his American Dream story if he tried to start Home Depot today. Bernie's claim shed light on the adverse effects of overbearing regulation, but the Atlanta entrepreneur touched on a larger issue: Social mobility is in decline in this country.

Many mainstream pundits have noted the decline in social mobility, but the generally-accepted theory of the cause, insufficient government services, could not be more off-base. For example, Fareed Zakaria recently gave his take in the Washington Post in which he claimed that Europe has more social mobility than the U.S. (a dubious claim) because the supply of government services is more abundant there. What Zakaria and the like fail to understand is that the growth of government ultimately comes at the expense of the private sector, which is responsible for the majority of employment opportunities in this country.

Employment opportunities have become sparse, and chronic unemployment is derailing many Americans' careers. Studies have shown that long-term unemployment not only significantly reduces one's lifetime earnings, but it reduces inter-generational earnings as well (.pdf). So, those who were unlucky enough to find themselves out of the work force during this economic depression may be the first generation of a whole new underclass. And, with crushing national debt, encroaching regulation, and increasing central bank control of the economy, the probability that this new underclass will "pull itself up from the bootstraps" is slim.

Limited social mobility is one characteristic of a third-world country. In that regard, America is becoming a third world country.

Buried Headlines: July 15, 2012

The overwhelming majority of federal elected officials have zero experience in the private sector. As such, they have no idea what it takes to run a business, and they have no idea how toxic to small business the regulations they pass are, unless the regulations in question are passed at the behest of a corporate crony. The Community Organizer, like so many contemporary liberals, believes that success in business is a function of government services. On the campaign trail wooing government drones, Obama made the following outrageous statement:

There are a lot of wealthy, successful Americans who agree with me -- because they want to give something back.  They know they didn’t -- look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something -- there are a whole bunch of hardworking people out there.  (Applause.)   If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business -- you didn’t build that.  Somebody else made that happen.

Who is John Galt?

Obama: If You've Got A Business, Government Made That Happen

In other news:

Employers Use Temps To Circumvent Obamacare Requirements

In Vast Effort, FDA Spied On E-Mails of Its Own Scientists

Wealthy Homeowners Brace for "Mansion Cliff"

Austerity Reaches The Hollande Government In France

"Trade-Off": A Study In Global Systemic Collapse

The Politicians Have To Stop Doing What They Have Done Since WWII Or "The Markets Will Do It For Them"

Here's An Idea: Report The Numbers Accurately: SEC Wary on Global Accounting Standard

After Decades, Scientists See HIV Vaccine Within Reach