Alas, this is just what the powers-that-be want. Not zonked out so much that you can’t work, but zonked out just enough that you really don’t (want to) care.
At stake is 1/4 trillion. The lawyers and lobbyists will get $100 million of that.
As noted by Richard Heinberg on June 22nd, 2011, the media has lacked the ability to connect the economic situations in the Middle East and their uprisings to what is happening in Europe. I would avoid the word “Revolution” in the case of the Middle Eastern uprisings, seeing as no dramatic systemic changes have taken place, only the ousting of dictators. Same as I would avoid the words of social upheaval in the case of European protests, which have been quite calm and only demanding to maintain the social safety nets produced through years of labor struggle. Rather, the odd occurrence is the ostensibly quiet population of the United States who are in many cases having the same economic problems and austerity based government solutions. This is a place where the media does want to ask the public the question, “Why aren’t you protesting?”
With increasing chatter that no matter what Congress agrees on, if anything, vis-a-vis the debt ceiling, the preemptive spin has begun, with the first salvo coming out of UBS' George Bory who has released a note "The difference between downgrade and default" which paints a very placid picture of the consequences of the US losing it AAA rating. Coming from a credit strategist, Bory naturally looks at the tightly confined consequences of such an event within the rates space exclusively without any mention of other cross-linked securities. In UBS' view, we would expect i) 10-yr yields rise 20-25bps, ii) a steeper yield curve, especially long end, iii) Treasuries underperform bunds and other highly rated sovereign debt iv) Vol term structure inverts further, v) Corporate spreads tighten, especially at long end, vi) Bank credit quality re-rated lower. Altogether not too bad. The problem is that there are a few trillion in money market related rating triggers which would grind to a halt the repurchase of paper of a sovereign that no longer has the AAA mark, resulting in our opinion in a dramatic crunch in short-term liquidity, and set the stage for a Lehman-like monetary system paralysis. But that is a topic for another day. Since today reality is to be ignored (see "transitory default"), here is why according to UBS America can simply call Moody's and S&P's bluff.
Alabama's Jefferson Country, which has been teetering on the verge of bankruptcy for years courtesy of $3.2 billion in bonds related to its sewer system (a deal which has not made JP Morgan many friends south of the Mason Dixon line over the years), may soon decide to unleash the spring-loaded municipal bankruptcy dominoes. Reuters reports that "bankruptcy is still a "very strong possibility" for Alabama's Jefferson County, Governor Robert Bentley said on Saturday -- a move that could make for the largest municipal bankruptcy in U.S. history. "It is still on the table, and it's a very strong possibility," Bentley told Reuters during the National Governors Association meeting in Utah's Salt Lake City. The county is observing a "standstill period" to allow settlement talks with creditors, and this week it finalized a plan aimed at settling the debt to present to creditors." And while the municipal insolvency tsunami is merely a matter of time (it would be amusing to watch the army of Whitney bashers retract), the greatest irony would be if the Federal government were to file first, a move which as Moody's already noted would immediately send 7000 munis down the Chapter 9 rabbit hole as well, effectively bankrupting the entire $2.9 trillion municipal bond market overnight.
Given the choice between recognizing that we are subtly, but effectively, conditioned and controlled or believing we are free and independent, which way do you think we will lean, particularly if our consumer culture reinforces the ‘free’ belief? Promoted and enabled self deception is always the most effective mind control because we willingly accept the programming and then customize it to suit our own particular belief system, thus assuring its effectiveness.
As of August 2011, it will be three years since the global financial meltdown. In three years, the Savior State has borrowed and blown $6 trillion maintaining the Status Quo, and the Federal Reserve has printed almost $3 trillion and shoveled that vast sum into "risk assets" to keep housing on life support and the stock market rising. The Fed has also devalued and debased the dollar, stealing wealth from the citizenry and holders of U.S.-denominated debt in the process, to serve two goals: 1) spark inflation and thus avoid deflationary deleveraging of the nation's fast-growing mountain of debt, and 2) to enable servicing that debt with cheaper dollars. None of these grandiose manipulations has healed the economy or fixed the structural problems which made the meltdown inevitable.
Continuing our exploration of why small business isn't expanding and hiring: here are four more deeply pernicious structural dynamics crushing small business. Yesterday I addressed this issue in Here's Why Small Business Isn't Hiring, and Won't be Hiring; Part II covers three other three systemic issues: 1. The real estate bubble completely mispriced/overvalued commercial real estate; 2. Financing is cheap to global Corporate America and costly to nonexistent to startups and expanding small businesses; 3. Crony capitalism doesn't like competition; it seeks monopoly or a shadow cartel, imposed and maintained by the regulatory agencies of the Central State;
4. Overlapping regulation designed to suppress competition, benign neglect/hostility from government bureaucracies obsessed with self-preservation and lack of financing make it impossible to scale up a success business in the real world.
Over The Past 4 Years News Corp Generated $10.4 Billion In Profits And Received $4.8 Billion In "Taxes" From The IRSSubmitted by Tyler Durden on 07/12/2011 11:25 -0500
Call it the gift that keeps on giving (if one is a corporation that is): the US Tax system, so effective at extracting income tax from America's working class, is just as "effective" at redistributing said income tax at the corporate level. Case in point: News Corp, which after generating $10.4 billion in profits over the past 4 years, and which would have been expected to pay the IRS $3.6 billion at the statutory corporate tax rate, instead received $4.6 billion back from Uncle Sam. Bottom line: Murdoch's corporation had a cash paid tax rate of -46% between 2007 and 2010. The culrpit: two little somethings called Deferred Tax Assets and Net Operating Loss Carry-forwards.
The low job growth in the U.S. isn't a "soft patch," it's a sea of quicksand. In a nutshell, here's the situation: 2/3 or more of all job growth comes from small businesses starting up and expanding; only a third or less of new jobs come from Corporate America or government expansion. As recent reports have shown, Corporate America has been on a hiring spree--overseas. From the point of view of globalized Corporate America, why hire anyone in a slow-growth market like the U.S.? It makes sense to hire new employees in fast-growing markets where the corporation is reaping its growth and most of its profits. As for government hiring: the game of expansion based on explosively rising debt or Federal stimulus spending is over. To live within their means, local goverment and related agencies will have to shed jobs, as labor accounts for 80% of government expenses. That leaves any future expansion of jobs up to small business. But small business isn't hiring, and won't be hiring, for these structural reasons...
I have to tell you some terrible things.
According to my research, last week's stock market rally was the sharpest such surge since 1644, just before the Ming Dynasty collapsed and Europe was decimated by an epidemic of plague. Perhaps that is coincidence, perhaps not. The Status Quo always tries to brighten the outlook just before things fall apart, and nothing cheers flagging spirits more than a sudden rise in wealth. The rally in barley in Babylon during the last week of December 1748 BCE was almost as robust, a peculiar coincidence given the next sharpest rally on record was the rebound in Dutch tulip bulb contracts which also occurred in the month of December, 1636. Shares in the South Seas Company recovered much of their initial losses in a similar rebound in London, September, 1720, a welcome respite for all the investors who were about to be wiped out by the 80% decline in share value when that bubble popped. More recently, condos in Florida saw a sharp uptick of sales and prices fetched in August, 2007, just before that market collapsed in a great heap. You see the pattern: the sharper the rally, the closer the market is to the bubble's end-game.
Yesterday I laid out why the Status Quo is financially unsustainable in The Promises That Cannot Be Kept. The unavoidable consequence of that is the the nation will experience a Great Reset in which the promises of the Savior State are relinquished, either voluntarily or involuntarily. As I discussed in July 4, 2011: The Cycle of Dependency and the Atrophy of Self-Reliance, our reliance on the Savior State has sapped our will and confidence, and hollowed out communities that have become dependent on the Savior State and its quasi-private partners, the corporate cartels of banking, defense, healthcare and so on. The Great Reset will thus be a great shock to everyone who has grown dependent on Big Government and global Corporate America. An unprecedented array of interconnected trends are converging that will force a Reset not just in the economy but in the American society and culture.
Paul Farrell's 7 Reasons Why America Needs A "Good Depression" Now...Or Face A Great Depression LaterSubmitted by Tyler Durden on 07/05/2011 12:27 -0500
Another must read from one of the "less cheerful" people on MarketWatch. His 7 reasons why "kicking the can" should no longer be the official policy of the ponzi banker syndicate: 1: Capitalism’s now a lethal soul sickness, needs a reawakening; 2. We’re already in the early stages of a Great Depression; 3. Good Depression exposes our self-destruct bubble-thinking; 4. Good Depression will stir outrage, force real reforms; 5. Good Depression forces Wall Street to think outside the box; 6. Good Depression will deflate America’s warring soul; 7. Good Depression now … avoids a far bigger depression later
The Fourth Turnings that centered upon an external threat ended with a glorious High. The Civil War Fourth Turning resolution felt more like defeat, with the country exhausted, bitter and angry. All indications are this Fourth Turning will be mainly an internal struggle between the ruling class of bankers, business elites, and politicians and the downtrodden middle class. The lying, cheating, fraud, theft and other wrongs committed by those in power will need to be atoned for. The generational dynamics in place will drive the reactions of the country moving forward. We have been badly led. A vast swath of the populace has lived beyond their means. The existing system is unsustainable. The Boomer generation does not want to yield on their perceived entitlements. The Millenial generation will be saddled with un-payable debts. Generation X is caught in the middle of this generational struggle. The huge imbalances in our society have built up over decades like flood waters behind a weakening levee. When the levee breaks the existing order will be swept away in the raging torrent that will follow.