Green Shoots and White Lies

by Lila Rajiva / September 12th, 2009

Hark! Hear the buzz?
It’s the sap of the economy stirring.
Animal spirits are back on the prowl.
Just this week, a Schwab analyst argued that the recovery would be much stronger than expected.
Down in the federal maternity ward you can hear the squall of new life as Team Obama slaps cold flesh and breathes life into clammy infant lips.
Recovery is abornin’

How Green Are Our Shoots!

Thus say both Chairman Ben Bernanke and Treasury Secretary Tim Geithner. And the public believes them. How come?

It all began in March. In the first televised interview by any sitting Fed chairman in 20 years,¹ Bernanke used the term, “green shoots” for the first time. He pointed out that the Dow Jones index had recovered from 12 year lows in 2008 and the banking system had stabilized. No more big banks would fail, he predicted.²

Two months later, His Timness echoed Big Ben. Geithner cited reduced spreads on corporate and muni bonds, the reduction in costs in credit protection at the big banks, and smaller risk premiums in the interbank market. He too said the economy was recovering.³

In June, World Bank President Robert Zoellick joined the ’shooters.’

Zoellick is a former US trade representative notorious for forcing US government subsidies and trade policies inimical to small farmers onto emerging markets. Zoellick noted “signs of global recovery,” but cautioned that they might be killed off if protectionism were adopted.⁴

Translation: foreigners had better not object to US government-managed trade policies…or the global recovery will fold.

Put out… or look out.

Zoellick added his own revealing metaphor to the shooter lexicon: “Right now there is a low-grade fever; it isn’t full influenza, but we need to keep a close watch…” [my emphasis]

Oddly, Zoellick’s own employees at the World Bank contradicted their boss’s assessment in a report only a couple of weeks later. (See “World Bank Global Economic Outlook” below.)

By then billionaire hedge-fund manager George Soros was also seeing green. And in July, chief wonk of the Obama economic team Lawrence Summers detected greenery in remarks to the Peterson Insitute for International Economics.

Green shoots were now being sighted by everyone:

In July the International Monetary Fund published its World economic outlook update. The Fund revised expected global growth in 2010 upward to 2.5%. The main source of the improvement, it claimed, was a brightening outlook for Asia.


Simon Johnson, IMF economist–turned-Peterson-Institute-spokesman-turned green-shooting-star even went on PBS to announce, “we are turning some sort of corner.” (August 20, 2009)
Surveys of economists and business leaders in the summer showed that, in contrast to only a few months earlier, slightly more than half thought that the economy had bottomed.

Question: How can a depression heralded as equal to or worse than the Great Depression, a depression described as a ‘reckoning’ for over a quarter of a century of economic misdeeds, correct itself in less than a year?

Answer: It can’t.

Yet, by mid-year, that’s exactly what pundits were telling the public. And that’s exactly what the public was beginning to believe. Not surprisingly, by mid-year, stock markets the world over had rebounded sharply.

White Hats and White Lies

But the economy hadn’t really turned any corners. What was unfolding was a giant sleight-of-hand. The “good guys” of the liberal corporate-state were pulling a fast one, doing two contradictory things at the same time.

On one hand, Team Obama had to admit the enormity of the crisis, in order to justify the size of its own rescue efforts. Thus Tim Geithner in his statement to the banking committee in May took care to note the following:

1. The economy had lost 2.1 million jobs from December to February ‘09, the largest three-month decline since 1945. (the second-largest three-month decline in 1975 was only half as big).

2. GDP fell at an average annual rate of 5.9 percent in Quarter 4 ‘08 and Quarter 1 ‘09 — the fastest six-month rate of decline since 1958.

3. Even before policy changes, the Congressional Budget Office was projecting a budget deficit for 2009 well in excess of a trillion dollars because of the weak economy.

4. The US faced economic problems of such a “unique character” that Congress had had to adopt the largest fiscal stimulus package in the nation’s history, at 5% of GDP.

On the other hand, Team O also had to pretend that the rescue had improved things dramatically or people would ask what the point of it was.

The Obamites managed to pull this off with a slew of white lies.

Some of the biggest ones:

Fudge One: Goldman Sachs had a great quarter, making a profit of $3.5 billion and the government made $1.4 billion on its investment in Goldman Sachs. The government also got a 15% return on its investment in the eight biggest banks.

Truth: Goldman had a great quarter only because it moved its reporting calendar to cut out December 2008, when it had a loss. And the goverment only made a profit on the TARP money it gave to Goldman because

It funnelled more money via the bail-out of insurance giant AIG to AIGs counterparties, including Goldman (which took in $13 billion of the AIG money).
Warren Buffett made a pre-TARP financial investment in Goldman.
Goldman got the benefit of exceptionally low interest rates from the government at the expense of savers and to the benefit of borrowers.
Goldman was issued FDIC-guaranteed bonds.

Without that extra welfare thrown at it, Goldman would actually be broke, not showing a profit. Ditto for the other banks.

Fudge Two: The labor market is getting better because jobs are growing. The unemployment rate fell from 9.5% in June to 9.4% in July.

Truth: That number only shows a slowing in the growth of unemployment. And even that small improvement has been offset by other aspects of the labor market that are worsening quite sharply:

The duration of uemployment is increasing.
Temporary jobs are declining.
The percentage of the eligible population receiving unemployment insurance has increased (0.1 percentage point to 4.7%. by September).
The four-week moving average of initial claims has moved to its highest level in a month⁵

Even when jobs have been added, they’ve been created by government spending and they’ve been in areas like education, health, and government. In the purely private economy, in manufacturing, construction and retail, job losses have been huge.”⁶

Note: Recent improvement in the ISM (Institute of Supply Management) Index that signals expansion of production (and thus hiring) also needs to be discounted against the huge price inflation an increasingly pressured dollar will entail. That’s beside the effects of a hike in the Federal Funds rate that’s bound to follow a dollar crashing scenario.

Note also: The ISM is a leading indicator of executive expectations for future productions, orders, inventories hiring, and deliveries.

Fudge Three: Increases in real personal income in April and May will increase consumer spending.

Truth: The increases were caused by tax-rebates and unemployment benefits kicking in, and most of it was saved, not spent (80 cents on the dollars). There was a temporary lift in consumer spending, but it petered out quickly. And as unemployment rises, benefits decline, and credit tightens in the future, consumption will decline even further

Fudge Four: The bank stress tests came out better than expected.

The bank stress tests led Ben Bernanke to conclude that nearly all of the banks had enough capital to absorb higher losses should the economy worsen, and that the Treasury stood ready to provide more.⁷

Truth: The bank stress tests used an unemployment figure of 10.3% (the most adverse case). But unemployment is likely to be 11% and above by next year. If you take into account discouraged and partially employed workers, some economists suggest the figure is more likely to be 16%.

Another point. The stress tests overlooked all the other ways in which the government was paying for the banks, through FDIC guarantees and cheaper loans, for instance.

Fudge Five: The housing market is improving.

In July, the Pending Home Sales Index was up 3.2%.

Another improvement was in the value of U.S. homes. In the second quarter that number fell year-on-year (the 10th consecutive quarterly decline), but it fell by a smaller amount than in the previous quarter, for the first time since 2007.

Truth: The improvement in home sales has been mostly in the lower end of the market and it largely reflects foreclosure sales and government credit, not real improvement in the market.

The slow-down in price decline has been offset by negatives in other areas:

23% of all homeowners owe more on their mortgages than their houses are worth.
22% of all home sales nationwide in June were foreclosure resales.
29.2 percent of all homes sold in June were sold for less than the owners originally paid.⁸

Loan problems aren’t confined to subprime. Prime mortgages are going underwater too.

Meanwhile, the market also has to deal with the decline in commercial real estate, which is undergoing one of the greatest contractions in retail in decades. Rents, even in the best urban shopping districts, have been declining.⁹

Beyond commercial real estate, there are also all the other plagues about to visit us, when personal loans, auto loans, and student loans tighten over the coming years.

Bottom line? There is no real basis for sustained optimism about the economy yet. 

Simon Johnson’s relatively upbeat assessment reflects only temporary inputs:

the government’s reflation effort (that created cheaper credit)
business write-downs (that created better balance-sheets)
the business cycle (that leads to restocking and inventories rising)

Johnson cites low inflation as another positive factor. However, with all the money pumped into the economy (including the latest cash-for-clunkers scheme), that’s also unlikely to be anything more than temporary.

This harsh reality is reflected in the World Bank Global Outlook Report of June 22, 2009. It notes the following for 2009:

Global growth is set to fall by 2.9%
World trade is likely to shrink by nearly 10%
Industrial production in rich countries will drop by 15% from August 2008
Developed economies will contract by 4.5% in 2009 and grow only in 2010 and 2011
The US economy will decline by 3%
Private capital flows to developing countries are likely to be halved, from $US 707 billion (2008) to $US363 billion (2009)
Industrial production in developing countries, excluding China, is set to fall by 10%
GDP growth in developing countries will fall from 5.9% (2008) to 1.2%.

A Verbal Pandemic Infects the Economy

Given this underlying reality, the media’s success in manipulating market sentiment has been nothing short of astounding.

And all it seems to have taken was the viral proliferation of a single meme. Call it a verbal pandemic.

Go back to March, when there was a second rescue of AIG and Citi in the offing, the Madoff investigation was expanding, and the US had a face-off with China.¹⁰ Fear was widespread and consumer and business confidence were at multidecade lows.

To take one indicator, Google searches for “economic depression” were four times what they were before the crisis broke in 2008.

Then Bernanke came out with the phrase, “green shoots.” After he introduced it, it showed up 3,123 times in news articles that month. Compare that to 436 in February (according to Nomura Holdings Inc. research).

Bulls and bears both used it. It was applied to the Israeli-Palestinian conflict and to the Iranian demonstrations.

In four months, ‘green shoots’ had grown seven-fold. 

Today, a Google search for the meme fetches 3.31 million hits.

As the phrase spread across the media, Bloomberg noted that business and consumer confidence spread with it. Sentiment changed. People stopped panicking and started talking about buying opportunities. It was that change in mood that let administration economists build their flimsy case for economic recovery.

Take a look at Summers’ list of improving indicators in his speech at the Peterson Institute on July 17. You’ll see the proof. At least five of the metrics Summers cites relate to sentiment. I’ve highlighted the relevant words.

Most businesses are now expecting better times, not worse, as they’d expected 6 mths earlier.
Consumer sentiment is improving.
Options are showing a less than one percent chance of the Dow falling below 5000 in 2009 (they were once showing a better than 15% chance).
Private forecasters are expecting positive growth at the end of 2009.
Google searches for economic depression are back to normal. (Yes, that’s on Summers’ list).

Let me repeat this.

It took two simple syllables, neither beyond the reading ability of a pre-schooler, for people to discount the hard evidence of the numbers and the harder evidence on the streets in favor of a sales pitch by the government.

We might even go a bit further. The stimulus by itself can have done no more than buy time for the banks and take the pressure of the interbank market. It’s taken sustained propaganda for banks and businesses to regain enough confidence to operate.

And they’ve regained confidence not in the economy, but in thegovernment.

In brief, a story-line two words long shows up rational man of for a fiction and a fraud. Economic man, the maximiser of his self-interest, turns out not to exist.

Of course, outside economic text books, he had never existed. Man, as we find him in the world, adds up numbers as an afterthought to his feelings. When he feels good, he massages his numbers upward. When he feels bad, the numbers are downcast with him.

Economists who have caught on to this know that what they practice is no science of enlightenment. It is a black art. The knowledge keeps them humble.They stick to describing things the way things actually work. They look just ahead of their noses and count themselves lucky if they can balance their check books at the end of the day.

But government economists labor under the delusion of omnipotence. To a man, they believe they can make bull frogs sing in tune and bats bathe in the sunshine. It isn’t enough that their theories blew up the market. For that alone, lesser men would have cut open their veins or thrown themselves under a passing tram.

Now the delusion is they can fix it. And that is where the meme of ‘green shoots’ figures. It’s task was not so much to boost confidence in the markets as it was to boost confidence in the ability of government experts to fix markets.

For that, visible success.. or even marginal competence.. is no longer needed. The old rain-men had to make rain or they were fed to the lions. The rain-men of today can produce drought… or famine, or even plague and theybecome lions.

The more they fail, the more they are believed. When they have been completely refuted, they become Nobel laureates. They may not know what ails the market, but they know for certain it takes a village of economists to fix it.

Or, as economist Robert Samuelson put it in a sharp criticism of Summers’ speech at the Peterson Institute: “If the president and his allies claim often enough that their policies have succeeded, most Americans may believe them.”¹¹

CBS, 60 Minutes [↩]

AFP, March 15, 2009. [↩]

Tim Geithner, Statement before the Senate Banking Committee, May 20, 2009. [↩]

Reuters, June 8, 2009. [↩]

Thomson Reuters, September 3, 2009. [↩]

Brown manure not green shoots,” Nouriel Roubini, Forbes, July 9, 2009. [↩]

AFP, “Hope is alive for ‘green shoots’ as stress tests trigger optimism,” May 11, 2009. [↩]

Portfolio.com August 11, 2009. [↩]

Colliers International Spring 2009 Retail Report, May 14 2009. [↩]

”Nightmare on Wall Street,” Lew Rockwell, April 1, 2009. [↩]

”Summer’s Spin: We Did It,” Newsweek, July 17, 2009. [↩]

Lila Rajiva is a freelance journalist and the author of The Language of Empire: Abu Ghraib and the US Media (Monthly Review Press, 2005) and Mobs, Messiahs and Markets (with Bill Bonner-Wiley, September 2007). She has also contributed chapters to One of the Guys (Ed., Tara McKelvey and Barbara Ehrenreich, Seal Press, 2007), an anthology of writing on women as torturers, and to The Third World: Opposing Viewpoints (Ed., David Haugen, Greenhaven, 2006). She can be reached at lrajiva@hotmail.com. Read other articles by Lila, or visit Lila's website.

http://dissidentvoice.org/2009/09/green-shoots-and-white-lies/

Nonsensical Economy & Champion Greenbacks

 http://animacenter.org/   

I never gave much thought to money in my life, and usually vilified it in my mind when I did.  To this day, we live entirely on sporadic donations and a very few article sales, have no savings and prefer barter.  That said, money has never seemed plentiful enough to waste.  Yet looking at how our economy functions and what incentives our government offers, you’d think money was to burn.

Frankly, there’s something wrong with an economic system that depends on a constant increase in production, spending and debt just to avoid complete collapse.  Here’s how it works, just is case you didn’t fully understand: The economy suffers even if we spend and produce the same, exactly the same amount as the year before.  It requires not only that we buy ever more stuff, needed or not, but it also needs us to go into debt, the economy’s health depending increasingly on our purchasing things we cannot yet afford.  It’s sounds like something out of a bad science fiction movie, the ponderous creature that must constantly grow or die, needing to kill and eat ever more in order to remain on its feet.  All the frightened townsfolk need to do is figure out a way to slow it down and it will get sick and begin to die… but in the case of the ever expanding economy, if it sickens, we all suffer.  This is frankly nonsensical, and not a very promising model for doing business in a world that is of measurably limited size, created and then gifted to us with a finite amount of water for drinking, a specific number of acres suitable for farming, a still undetermined amount of minerals for industry, and at best only just so many salmon for sushi not matter how you shake your rod.

President George Bush said that spending was patriotic, and his mantra was to “buy, buy, buy.”  Current President Obama is mortgaging future generations by his monstrous swelling of the national debt, spending a mint in the emergency room trying to save the life a sick patient that had never done anything to contribute to its own long term health.  Such approaches stand in stark contrast to the sentiments and strategies of our national past, with frugality and savings being an aspect of the American spirit since the founding of the country and the sensible proclamations of cofounder Benjamin Franklin.  President Theodore Roosevelt came from a wealthy family and was militarily an unapologetic expansionist, but he was also a conservationist who wanted to see wildlife, coal and oil reserves conserved, and a conservative who believed in Americans saving their hard earned money so we would be well prepared in case of future hardships.  Even later President Franklin Roosevelt, who’s “New Deal” initiated the first Big-Brother management of social services in an attempt to crawl out of the economic depression of the 1930’s, still preached the importance of conserving and recycling precious materials like steel, and instead of being encouraged to dump their few dollars at the nearest strip mall, they were told that the most sensible and indeed American thing they could do was to grow a “Victory” garden and learn to generally make rich lives with less.

If there are any advantages to our system the way it works, it’s that it can fuel innovation and contribute to diversification.  And it’s great the way buying gives us a degree of individual and collective power.  We wouldn’t have to sign up for organized boycotts to start working in unison to influence the world we are in.  You don’t like a certain political leader?  Then refuse to give your business to any businesses associated with conglomerates that fund them.  Might take a little education on our parts, mercy sakes, but then we could start making every expenditure an informed decision.  Tired of work being contracted overseas?  Simple, pay a little more and buy American made.  Better yet, buy locally whenever possible, and be part of the solution for your own local economy.  If we want products that are made well and last long, instead of engineered to need regular replacement, then we need to research and buy the best made items we can afford.  Want to see less produced, then buy more used items, they’re often more cool anyway.  Can’t bear to see forests clearcut for pulp?  Pay for recycled or tree-free agri-waste paper instead.  We need to know what we truly need and most want, and then search out the best as well as the best priced, instead of going for the cheapest possible at WallyWorld, or making impulse purchases of crap that we’ll soon pitch in the closet or garage and never look at again.

I believe I’d really have enjoyed being alive at an earlier date when both words and money were spent carefully, when meaningful conversation was of more importance than accumulation, when free time for having fun was seen as more valuable than owning more toys, when a good friend was considered worth more than a thousand investors, love more precious than gold and one’s word more bankable than a lawyer-penned contract.  That said, if cash is to be “king” like the classified ads often claim, then we might ought to consider making every purchase a personal decree.

Whether we make conscious spending decisions or not, we verily decide the culture we are a part of, not only who will lead it but what it will look like.  We could be equipped by vehicles that run for years without repair, long lasting tools powered by wind generators or who knows what, stores stocked with hard goods from somewhere besides Chinese sweat shops, our homes furnished with real wood and lovely if sometimes pre-owned material, if we only we insisted upon it and spent our unreasonably powerful dollars accordingly.  The fact that our political leaders range from puppets to paternalists, that 2/3 of what’s on the variety store shelves could be considered disposable, that multinational corporations are expanding while small town businesses close, that new cars only last a few years and come with tacky plastic body parts, is all determined by the spending choices we together and separately make.

If I feel guilty and out of sorts going into that monolithic, many-tendriled discount store, saddened at the sight of the resigned blue-vested workers, shuddering under its flickering fluorescent lights and all-seeing cameras, it is not just because of the low wages paid its laborers, the jobs lost to the Orient when it orders its merchandise almost entirely from there, or the laid-off stateside workers now struggling to pay even the discount store prices for the food their family needs.  If I feel sickened, it is also because I know this particular monster – the same as our national economy – has to endlessly eat and expand its repulsive bulk if it is to survive… and I, in my haste to get a bargain on imported raspberries and an air cleaner for the Jeep, have helped to feed it.

As I learn more, I increasingly intend that my scarce but powerful dollars speak loudly in support of individual liberties and my own personal values, that they impact the world I am a part of, if not always to an evident degree.  I no longer see the few computer encoded greenbacks in my wallet in the same entirely unpleasant light I used to.  They are my weapons of justice, agents of love and good taste.  They are my champions, few but now purposeful, dedicated and directed for an intended good.

My response...

Jesse, I agree with much of what you say, BUT…

One must also take into consideration that U.S. dollars are not money, but debt instruments…fiat currency backed by nothing but debt, and as long as we consent to their use, we are part of the problem.

In 1913, through careful calculation and political manipulation, the international central bankers got their Federal Reserve Act passed late in the evening on December 23rd after most of Congress was dismissed for Christmas vacation and their puppet, Woodrow Wilson then signed it into law, changing our nation forever.

Later, Woodrow Wilson would go on to say…”I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.” http://www.apfn.org/apfn/reserve.htm

The only way to truly save our nation and our freedom is to get the Federal Reserve banks shut down, and remove the international central bankers behind them from having such power over our government and economy.

There are alternative sources of real money that can be used instead of using debt backed Federal Reserve notes, and the more people who use them, the better we will all be. http://www.libertydollar.org/

Other alternatives are bartering, as you mentioned, and setting up small community banks with your own money. 

We as a people MUST think beyond the paradigms set for us by criminal bankers and their fractional reserve Ponzi scheme banking systems that are unsustainable and destructive.

http://animacenter.org/blog/?p=773#comment-5815

Ron Paul: My Conversation With Ben Bernanke, February 15, 2006

by Ron Paul

Monetary Policy and The State of the Economy hearing before the Committee on Financial Services, U.S. House of Representatives, February 15, 2006

Chairman OXLEY. The gentlelady yields back. The gentleman from Texas, Mr. Paul.

Dr. PAUL. Thank you, Mr. Chairman. Thank you, and welcome, Chairman. Mr. Chairman, I was very pleased with what you said about your support for transparency, and I want to ask a question dealing with that. Also, at the bottom of page 8, you said something that I thought was very important, where you said that the Federal Reserve, together with all other central bankers, has found that successful policy depends on painstaking examination of a broad range of economic and financial data, and I also think that’s very important. There is a famous quote by an economist, which I’m sure you’re familiar with, that inflation is always and everywhere a monetary phenomenon. And likewise, another famous economist from the 20th Century, and I’ll paraphrase this, said that monetary authorities deliberately confuse the issue of inflation by talking only about price increases. Yet it’s the price increases which are merely the inevitable consequence of inflation. This is done on purpose to distract from the real cause, which is the increase in the quantity of money and credit. And I notice in your report to the Congress, you do report M2, and it went up last year at four percent. And M3 was not mentioned, other than the fact that it won’t be reported any more. M3, interestingly enough, went up twice as fast, and M3 is going up probably more than two times as fast as the GDP. And this is information that I consider important and I know a lot of other economists consider important. And I find it rather interesting and ironic that one of the reasons that the Federal Reserve has given – of course, this was before you were the chairman – for this change is the fact that it costs money; it costs too much money. Now that is really something in this day and age, especially since the Federal Reserve creates their own money and their own budget and they have essentially no oversight, and all of a sudden it costs too much money to give us a little bit of information. So that to me is a bit ironic that this information will not be available to us. And my question to you is, would you ever reconsider this policy of denying this information to the Congress just so that we have another tool to analyze what’s going on with monetary policy? It seems like with your support for transparency, this should be something that you would heartily support.

Mr. BERNANKE. Congressman, first, you’re absolutely right. We do look at a wide variety of indicators, and money aggregates are among those indicators. In particular, M2 has proven to have some forecasting value in the past, and I think the slowdown this year is consistent with the removal of accommodation that’s been going on. In regard to your references to M3, a still broader measure of money, we have done, and I’m now speaking about the Federal Reserve before my arrival, but we have done periodic analyses of the various data series that we collect to see how useful they are. And our research department’s conclusion was that M3 was not being used by the academic community, nor were we finding it very useful ourselves in our internal deliberations. Now it’s not just a question of our own cost; although, of course, we do want to be fiscally responsible on our own budget, but it’s also I think important for us to recognize the burden that’s placed on banks that have to report this information. And so when we can reduce that burden, we would like to do so. And that was one of the considerations in the decision that was made about M3. Would we reconsider it? If there were evidence that this was an informative series and that it was useful to the public and to the Federal Reserve in forecasting the economy, naturally we would look at it again. There’s nothing dogmatic going on here.

Dr. PAUL. If the Congress expressed an interest in receiving this information, would you take that into consideration?

Mr. BERNANKE. If there was broad interest in the Congress in receiving this information, we would look at it. But, again, Congressman, remember, it’s a burden on the reporting banks to provide the information, and we are trying to reduce that burden as much as we can.

Dr. PAUL. But, of course, this has been available to the financial community for a lot of years, and for some people it’s very important to measure what you’re doing. If the money supply is important, which a lot of people believe it is, and it causes the inflation, this to me seems like we’re taking information about the money supply and literally hiding it from the people. And I yield back.

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Dr. Ron Paul is a Republican member of Congress from Texas.

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This Is Your Economy on Credit Crack - and Heading for a Crack-Up

15 April 2009

Here is a clear and simple explanation of why we may have already passed the point at which the Fed and Treasury will have no choice but to substantially devalue the bonds and reissue a 'new US dollar' as part of a managed default on our sovereign debt.


Ben's Un-shrinkable Balance Sheet
Delta Global Advisors
April 14, 2009

As he stated again clearly today, the Chairman of the Federal Reserve has deluded himself into thinking that when the time comes, he will be able to shrink the size of the Fed's balance sheet and reduce the monetary base with both ease and impunity. He also has deluded himself into thinking inflation will be easily contained.

It is very important that he does not fool you as well.

The Fed believes low interest rates should not be the result of a high savings rate, but instead can exist by decree, a conviction which has directly led consumers to believe their spending can outstrip disposable income.

The result of such thinking has been a rise in household debt from 47% of GDP in 1980 to 97% of total output in Q4 2008. As a result of this ever increasing burden, the Fed has been forced into a series of lower lows and lower highs on its benchmark lending rate. Keeping rates low is an attempt to make debt service levels manageable and keep the consumer afloat. Problem is, this endless pursuit of unnaturally low rates has so altered the Fed's balance sheet that Mr. Bernanke will be hard-pressed to substantially raise rates to combat inflation once consumer and wholesale prices begin to significantly increase.

Banana Ben Bernanke has grown the monetary base from just $842 billion in August 2008 to a record high of $1,723 billion as of April 2009. But it's not only the size of the balance sheet that is so daunting; it's the makeup that's becoming truly scary.

Historically speaking, the composition of the Fed's balance sheet has been mostly Treasuries. And the Federal Open Market Committee would typically raise rates by selling Treasuries from its balance sheet into the market to soak up excess liquidity. However, because of the Fed's decision to purchase up to $1 trillion in Mortgage Backed Securities (and other unorthodox holdings), it will not be selling highly-liquid US debt to drain reserves from banks. Rather, it will be unwinding highly distressed MBS and packaged loans to AIG. Not to mention the fact the Fed would have to break its promise of being a "hold-to-maturity investor" of such assets.

Moreover, not only are the new assets on the Fed's balance sheet less liquid but the durations of the loans are being extended. According to Bloomberg, the Fed is contemplating extending TALF loans to buy mortgaged backed securities to five years from three after pressure it received from lobbyists and a failed second monthly round of auctions. That means when it finally decides it's time to fight inflation, the Fed will find it much more difficult to reverse course.

But because of the extraordinary and unprecedented (some would say illegal) measures Mr. Bernanke has implemented, only $505 billion of the $2 trillion balance sheet is composed of U.S. Treasury debt. Today, most Fed assets are derived from the alphabet soup of lending programs including $250 billion in commercial paper, $312 billion of Central Bank liquidity swaps and $236 billion in mortgage-backed securities.

Thus, our economy has become more addicted than ever to low interest rates. But because bank assets will now be collecting income at record low rates, when and if the Fed tries to raise rates it will only be able to do so on the margin. If Bernanke raises rates substantially to fight inflation, banks will be paying out more on deposits than they collect on their income streams. Couple that with their already distressed balances sheets and look out!

Additionally, not only do the consumers need low rates to keep their Financial Obligation Ratio low, but the Federal government also needs low rates to ensure interest rates on the skyrocketing national debt can be serviced. Our projected $1.8 trillion annual deficit stems from the belief that the government must expand its balance sheet as the consumer begins to deleverage. In fact, both the consumer and government need to deleverage for total debt relief to occur, else we're just shuffling debts around and avoiding a healthy deleveraging entirely.

In order to have viable and sustainable growth total debt levels must decrease, savings must increase and interest rates must rise. But that would require an extended period of negative GDP growth-a completely untenable position for politicians of all stripes. Ben Bernanke would like you to believe inflation will be quiescent and he can vanquish it if it ever becomes a problem. Just make sure you don't invest as though you believe him.

http://jessescrossroadscafe.blogspot.com/2009/04/this-is-your-economy-on-credit-crack.html

A Scary Corporate Coup Is Under Way -- We've Got to Stop It

I don't necessarily agree with all of this authors point of view, becuase I believe the Fed should be shut down along with its many arms of power, including the IRS, Social Security, etc., that we need to restore our Constitutional Republic and not a "Democracy" that was put in place after the U.S. went bankrupt, suspending the Constitution and our nation being tyrannically ruled under war powers that have been in place ever since.

I will put it out there none the less, because I see the value of allowing all points of view to be heard.

A Scary Corporate Coup Is Under Way -- We've Got to Stop It

By William Greider, TheNation.com. Posted March 31, 2009

If Wall Street gets its way, Washington will pass new "reforms" that consolidate power and ratify a corporate state.

Editor's Note: Click here to join the protest!

The Rip Off Must Be Stopped!

Big bankers ruined our economy and now they are gaming the political system so they can profit even more off the crisis they caused. They must be stopped.

On April 11th, 2009, the public will come out in cities across the country to express their frustration and disapproval with how our elected officials have handled the economic crisis. No one has been left unscathed; this protest is yours.

Sign AlterNet's pledge that you aren't going to let this rip-off happen and join New Way Forward's national protest on April 11.

***

A reassuring new story line is emanating from our leaders. I heard Rep. Barney Frank, D-Mass., chairman of the House Banking Committee, explain it. Then I read the same line in a Washington Post news story. That tells me people in high places are selling it.

Dynamic capitalism, they explain, invents ways to create greater wealth, but sometimes it goes a little too far. Then government has to step in to correct things. This need typically occurs every generation or so, all in a day's work.

The Obama administration is proposing "sweeping" new regulatory laws so capitalism can continue its good works.

The story makes disturbing current events sound practically normal. But what are the storytellers leaving out?

They aren't saying that this financial catastrophe was not merely an inevitable development of history but a manmade disaster. Greedheads on Wall Street did their part, but so did Washington. The reason we need new rules is that a generation of Democrats and Republicans systematically repealed or gutted the old ones -- the regulatory controls enacted 80 years ago to remedy the last breakdown of capitalism (better known as the Great Depression).

The White House executed a nifty two-step this week to re-educate the public and deflect anger. On Tuesday, Treasury Secretary Timothy Geithner relaunched the massive bailout of banking and finance. Knowing how unpopular this is with the people at large, Geithner followed on Thursday with his "sweeping" plans to re-regulate the bankers and financiers.

Whenever official plans are called "sweeping," it indicates that they really, really mean it this time.

Most Americans are not financial experts. It's very difficult, nearly impossible, for normal mortals to sort through the dense policy talk and conflicting opinions to figure out if the rhetoric of reform is real.

Confusion is widespread in the land. Most Americans want to believe this president is leading us out of the swamp, but how can they know? I say, trust your gut feelings. They are as reliable as the learned experts.’

Many Americans want to believe because they think that returning to "normal" means their decimated 401(k) retirement accounts might somehow recover the 30-40 percent that disappeared during the past year. If it takes monster bank bailouts to restore stock-market prices, let's have bailouts.

Good luck with that.

The Dow has regained 21 percent in two weeks of rallies, but I remind friends that steep, short bursts in the stock market do not foretell the future of the economy. Banks may be relieved of their losses without changing the general economic outlook. After the crash of 1929, there were occasional stock rallies, followed by fierce bears. It took 25 years (until 1954) for the Dow to regain its old peak.

Another way to assess the Obama plan for reform is ask: Who likes it? The verdict was swift and sure after Geithner's twin announcements. Wall Street likes it.

The blueprint for regulatory reforms was applauded by the Securities Industry and Financial Markets Association; the American Insurance Association; and the Private Equity Council, the trade group for the major private funds that will get public money and backup insurance to buy the banking system's rotten assets.

This could be born-again patriotism. Or it could be the animal appetites of financiers smelling gorgeous opportunity for returns.

This may be one of those moments where people can find some guidance from their moral convictions. They do not need to know all the details to ask simple questions.

Does the outline of what's happening to rescue major financial institutions seem morally wrong? Or is it justified by the larger necessities of the national predicament? Is the government insufficiently tough in demanding reciprocal commitments from the beneficiaries? Should Washington pursue larger structural changes in the banking system?

Trying to imagine alternatives to the bankers-first bailouts is a good place to start. What follows are suggestions I produced at the request of young people organizing demonstrations around the country for April 11. They call themselves A New Way Forward. I hope they light lots of bonfires.

This rough outline leaves out lots of particular regulatory issues, but the core goal of reform is to create a banking and financial system that serves the society and the economy, not the other way around.

Everything being done to rescue and restore the old order gets in the way of creating something truly new and valuable for the future. Those of us throwing logs in the path of the bailouts are dismissed as naysayers or worse, but the financial titans are trying to foreclose just solutions by stampeding Congress and the president to adopt ill-considered ideas.

If Wall Street gets its way, the "reforms" may further consolidate power and ratify a corporate state -- a grotesque hybrid that combines the worst aspects of socialism and capitalism.

The reform ideas announced by Geithner would plant the seeds by creating a "systemic risk" regulator, presumably the Federal Reserve, to oversee the largest, most politically adept banks and financial firms that qualify as "too big to fail." Capitalism, with its inherent tendency toward monopoly, would have the means to monopolize democracy (see my recent Washington Post article.)

My new book, Come Home, America, asks people to enunciate their versions of "patriotic realism."

That is the essence of an alternative vision: de-concentrate power, liberate people and smaller enterprises, workers and middle managers and investors, to help shape the country's future from many different perspectives. This is how democracy was supposed to work. It can again.

Some points I recommend people consider:

1. Euthanasia for insolvent banks. Transferring their losses to the public will not restore the trillions in capital the bankers helped destroy. It would merely relieve the banks, their creditors and shareholders of the pain.

Government must take control of the system to supervise a just unwinding of the mess -- whether we call it nationalization or something else. Handing out money and leaving bankers in control of how it's spent is nutty and morally wrong. People everywhere understand this. Only Washington seems oblivious to the irrationality of what it is attempting.

2. The Federal Reserve must be democratized and effectively stripped of its peculiar, anti-democratic status as an unaccountable island of power within the government. A new federal agency -- accountable to Congress and the president -- can be refashioned from the working parts of the Fed. Call it a central bank or something else, but its governing power must not rest with heavyweight bankers on the board of directors at the 12 regional banks. (To understand why, consider that the New York Federal Reserve Bank was headed until recently by Geithner.)

3. The reformed Fed would be stripped of its regulatory functions and confined to conducting monetary policy. A different section of the Treasury or a new free-standing regulatory agency can assume responsibility for regulation and be armed with strong antitrust laws and other rules to ensure that "too big to fail" institutions are redefined as "too big to save."

4. The federal law against usury can be restored to halt predatory lending. Persistent violators would not be fined with trivial penalties, as they are now, but stripped of their government protections and subsidies -- that is, doomed.

5. A new banking system -- smaller and more diverse and responsible to the public interest -- can fill the hole left by the demise of major banks like Citigroup. Vast public resources should be devoted to creating this system, not to saving the mastodons. Public banks (like the North Dakota State Bank) and nonprofit savings-and-lending cooperatives can also serve as an important cross-check on private commercial banking -- a competitive model that offers credit on nonusurious terms and keeps the big boys honest.

6. Once the Federal Reserve is domesticated in a democratic fashion, then it can be reformed to assume broad supervision of the nonbank financial firms in the "shadow banking system" -- hedge funds, private equity firms, pension funds, mutual funds, insurance companies. (For more on this, see my recent Nation article, "Fixing the Fed.")

7. Our first political challenge is to disturb business as usual in Washington and prevent Congress from taking hasty action to adopt Wall Street's "reform" agenda. Congress is rattled by the exploding popular anger and listening nervously. The people need to speak louder -- loud enough for the president to hear.

William Greider is the author of, most recently, The Soul of Capitalism (Simon & Schuster).

http://www.alternet.org/democracy/134217/a_scary_corporate_coup_is_under_way_--_we%27ve_got_to_stop_it/

ROME IS BURNING, NERO IS FIDDLING

By Lynn Stuter

March 17, 2009
NewsWithViews.com

Did you know that the White House is being bombarded by “minutiae?” That the president’s personal aid is a “hunk”? That his speech writer has a “buzz cut?”

While America slides precipitously toward an all-out economic depression, while Also Known As (AKA) Obama continues to break every promise he made on the campaign trail, this is what the New York Times thinks is important for people to know!

Wow, aren’t you just really impressed?

And the lamestream media wonders why people are turning off their television sets, terminating their newspaper subscriptions, and using their computers to access alternative media sources and joining news loops to learn what is really going on in this nation.

This past week the Senate passed HR 1105, the Omnibus Appropriations Act of 2009, complete with close to 9,000 earmarks, $410 billion in spending, the largest spending bill ever passed, appropriating money that the United States does not have. This on top of the $787 billion in pork (H.R. 1) passed by Congress and signed by AKA on February 17, 2009, appropriating money out of thin air to spend on favored projects like building a new overpass across Highway 520 in Redmond, Washington to ease congestion caused by Microsoft.

Payback to Bill Gates for his generous donations to the Obama campaign and inauguration party? Isn’t that the definition of pay-to-play — “You give me a donation and I’ll make sure you are compensated out of the coffers of the taxpayers?”

Every economist worth his salt and the American people told Congress not to pass either of these bills; they did it anyway. At a time when government needs to be seriously downsized and taxes need to be seriously cut, AKA’s answer to the economic situation is to grow government and increase taxes.

Hey, who cares if the government spends money it doesn’t have in the bank. If you or I did that, we would be headed for prison. But what’s good for the people obviously isn’t good for the government; a double standard that violates equal access and equal justice under rule of law.

And we haven’t even begun to talk about AKA’s $3.6 TRILLION proposed budget for 2010 while AKA proclaims,

“These kinds of irresponsible budgets — and inexcusable practices — are now in the past. For the first time in many years, my administration has produced a budget that represents an honest reckoning of where we are and where we need to go.”

Not to mention Peter Orszag, director of the Office of Management and Budget, who assisted the Russian Government from September 1992 through August 1993, who asserts the “[d]eficit [will be] $2 trillion higher this year and next because of [the] crisis we inherited.”

The way AKA is spending money, we have to ask, “What crisis? We don’t see no stinkin’ crisis!” If there were truly a crisis, wouldn’t they be spending less instead of more; wouldn’t they be downsizing government instead of growing government? AKA didn’t “inherit” a crisis, he helped create the crisis, while a Senator, by voting for bailout after bailout, and since becoming the usurper-in-chief, signing bill after bill spending money this country doesn’t have to spend!

And while promising the tax increases will be on “the rich”; don’t bet on it. AKA doesn’t dare bite the hand that feeds him; the rich have the means to do him in so he isn’t going after them; he’s going to go after the middle class, just as has always happened when more money was needed. The cap and trade agenda, based on global warming junk science, is but one way that will happen. Watch for skyrocketing energy prices as carbon taxes and offsets come into play.

Not long in the White House, it is reported that AKA and company are holding extravagant parties on a weekly basis. Wagyu beef steaks costing $100 a pound (is there beef worth that kind of money?) are just the tip of the iceberg, it seems. Not long on the job, it seems AKA and company are “lonely,” absent the night life afforded them by the Chicago underworld.

“My fellow Americans, [pause for effect] while we wine and dine at your expense [pause for effect] while you are losing your jobs, homes, cars [pause for effect] truly [pause for effect] read my lips [pause for effect] we feel your pain [pause for effect] you have to believe that! [pause for effect] That’s what hope and change are all about.” [pause for applause]

With apparently a lot of time on their hands, maybe a course in how not to insult visiting heads of state would be a worthwhile investment of time! “Prime Minister Brown: We, the American people, wish to apologize for the impudence displayed by the White House …”

But then, maybe insulting the leaders of other nations is AKA’s idea of the “new era of responsibility,” fitting right in with the lewd, crude, coarse Alinsky style of community organizing? Look out, Congress, if you don’t bow to AKA’s agenda, those pledging their support on AKA's brown-shirt website may well conduct a sit-in in your bathrooms in support of their “messiah” and his Marxist mentor, Saul Alinsky!

While the lamestream media yawned, AKA appointed “American Taliban” member John Walker Lindh’s defense attorney, Tony West, as assistant attorney general in charge of the U.S. Justice Department's Civil Division. Of course, the fact that Mr West raised $65 million for AKA had nothing to do with his appointment, you understand!

This is in keeping with the stream of corrupt, tax dodging, conflict of interest nominees, including those forbidden lobbyists, that just keep cropping up like bad pennies in the AKA administration that was going to have none of that sort of thing going on. But hey, the Marxist pool of talent is so limited, don’t you know?

And lest pornography be left out of the equation, the senate last week confirmed David Ogden to the second-ranking position of deputy-attorney general; Ogden best known for his defending those accused of pornography. Maybe he can do something about those pornographic pictures that appear to be Stanley Ann Dunham circulating on the internet!

And to round out the debauchery, it seems that AKA now has his sights set on veterans. He thinks it would be a grand idea if, after they get shot up, blown up, and injured while fighting illegal “police actions” in far off places, that their health care needs be taken care of by private insurance. What a swell guy! Veterans should feel privileged that AKA shows such appreciation for their service to this country!! You just gotta believe he truly feels your pain!

And lest we forget, AKA has set about to reward unions for supporting his candidacy. On February 6, 2009, AKA signed executive order 13502 “encouraging” government contracts over $25 million include costly project labor agreements (PLA’s). PLA’s require that contractors and subcontractors agree to recognize that the union represents their employees. As 84% of all construction workers do not belong to a labor union, such actually represents a windfall to the unions at taxpayer expense, increasing the cost of construction projects substantially. But hey, what’s a few million here and a few million there. No problem, the taxpayers can afford it!

AKA also believes in the First Amendment guaranteeing free speech so long as it is he speaking freely and everyone else listens. When people speak out against his Marxist ideology, that isn’t free speech, that’s destructive to progress and those people must be held accountable. AKA, you understand, doesn’t believe in discrimination! And I have a bridge to nowhere I’ll sell real cheap!

And just so no one is left out, AKA is working diligently to socialize healthcare so you only get the care the government decides you need, forbids alternative medicine, vitamins, minerals and supplements that would undoubtedly be far more beneficial. Having your healthcare completely under government control means you will conform to the Marxist line or be denied life-saving healthcare.

The same applies to food. AKA is moving to destroy small farms, organic farms and your right to have your own garden (HR 875 and S 425), all under the guise of “food safety.” The goal is not food safety, which is truly a problem with commercial concerns, but controlling your ability to eat. If you want to eat, you will conform to the Marxist philosophy.

If, by this point in the AKA debauchery, people have not figured out that this man is a liar who couldn’t tell the truth if it would serve him better; an empty suit dangling from puppeteers strings; a snake oil salesman; a smooth talking con man; then there is no hope for change!

Americans are watching as AKA, with the help of the Democrat-controlled Congress and the Progressive Caucus, spends money like it was water running from a tap at a time when Americans are losing their jobs, homes and ability to feed themselves; throws extravagant parties while the American people suffer; and works feverishly to implement laws in the name of helping people that do nothing but further oppress the people.

It is becoming increasingly clear to all but the most ardent obamanoids that AKA is a narcissistic Marxist who lusts after power and cares not one iota for the plight of the people of this country. In short, he is dangerous to the continued freedom, liberty and justice afforded the American people by our Constitution and Bill of Rights. While playing to the poor, the downtrodden, the minorities, they are being used by AKA to get what he wants. And if he gets what he wants, which is absolute power, he will laugh at their gullibility in believing he would help them just as Hitler laughed at the downtrodden, poor and minorities who helped him gain absolute power.

Some, looking at AKA’s obvious excesses since moving into the White House — the spendthrift bills that will push this country into a full-blown depression, his extravagant partying at the expense of the people, his insulting of foreign heads of state, wonder if this is just a man out of his element or if this is deliberate.

Make no mistake, while AKA is obviously a man out of his element, his actions with regard to running this country into the ground are deliberate.

Any individual who has worked for a living knows that you cannot spend more than you make and get ahead of the game; that writing checks with no money in the bank to cover them is a one-way street to bankruptcy; that living beyond your means is a fools game.

Yet that is exactly what AKA is doing. And he is being aided in that by Representative Nancy Pelosi and Senator Harry Reid and the Democrat-controlled Congress.

AKA was, and may still be, a member of the Democrat Socialists of America (DSA) New Party; a membership that both he and the New Party have attempted to deny.

AKA hates everything this nation stands for. He is a Marxist, through and through, right down to those he associates with, including William Ayres and Bernadine Dohrn. People are known by the company they keep, even when they try to deny that relationship after twenty years of attending a church where anti-American hate is spewed from the pulpit and the victimology of Black Liberation Theology is the course served up exclusively.

And while AKA told the people that he was about “hope” and “change”, he has filled his administration with the same old anti-American, pro-globalist crowd from the Council on Foreign Relations, Trilateral Commission and Bilderberg group. The more things change, the more they stay the same!

The people have requested AKA prove his eligibility to the office he holds. While claiming his administration would be “transparent” and “open”, he has refused, spending hundreds of thousands if not millions on attorneys to keep that information from being made public. In this endeavor, the courts have been complicit, right down the line, offering various excuses — from standing, to the cases being “moot” after the fact, to being frivolous, to the eligibility issue being the duty of Congress. Congresses says the courts must decide the issue; the courts say it’s the duty of Congress. The same old blame game we’ve seen so many times before.

The evidence that AKA is not natural born, is not even an American citizen, is over-whelming to all but ardent obamanoid worshippers who run on the mantra “don’t confuse me with the facts.”

AKA is what he is and if the American people plan on saving this nation, they better come to the realization of what he is and give him the boot; sooner rather than later.

The emperor truly has no clothes!

© 2009 Lynn M. Stuter - All Rights Reserved

Activist and researcher, Stuter has spent the last fifteen years researching systems theory and systems philosophy with a particular emphasis on education as it pertains to achieving the sustainable global environment. She home schooled two daughters. She has worked with legislators, both state and federal, on issues pertaining to systems governance, the sustainable global environment and education reform. She networks nationwide with other researchers and a growing body of citizens concerned with the transformation of our nation from a Constitutional Republic to a participatory democracy. She has traveled the United States and lived overseas.

Web site: www.learn-usa.com

E-Mail: lmstuter@learn-usa.com 

http://www.newswithviews.com/Stuter/stuter147.htm