As Zero Hedge readers predicted by a margin of more than nearly three to one, Tim Geithner's next employer of choice, per bnet's Constantine von Hoffman, is none other than the universal viceroy-cum-vampire squid presiding at 200 West according to a just "leaked" letter. And while we all know the key resume highlights (issuing $1.5 trillion in debt a year for the duration of his tenure, mopped up on both sides by Quantitative Easing, bringing America to the verge of insolvency and living on an "auction to auction" basis), here is the summary of Geithner's key qualifications that make him a shoo in for the job.
We have not recovered from the Great Recession and thus our current economic stagnation is less a new event than a continuation of the original collapse. The basis for the so-called “recovery” was a rise in GDP, that measure of what we have spent in the economy. It’s a fairly useless bit of data.
The Federal Reserve is playing a game of Pretend: Let's pretend that if interest rates are near-zero, we'll always be able to borrow more. Hey, what's a trillion dollars at zero interest? You and I could make the interest-only payments each month, because they're zero. But shoving "free money" into banks and Wall Street doesn't filter down to John Q. Citizen: it simply incentivizes massive speculation in stocks, commodities, seaside resorts, empty cities in China, you name it. This is the basis of the current stock, bond and commodities booms in the global economy: push trillions of dollars in "free money" to financial players, and guess what, that hot money flows out seeking a fat return. The Keynesians and other economists have no ideas for confronting the reality of a post-consumerist debt economy and society. Like frenzied rats in a cage, they only have one lever to push to release the cocaine-laced pellets, and so they've been pushing it for 40 years. Now they're hitting the bar with frantic energy, hoping the crazed and addled rats around them can dredge up some "demand" for more pellets to "consume." But the consumer-rats are bloated and lethargic; they've consumed so much debt-drug that they're near death. Like a star which has expanded and now cannot maintain its grand state, the debt-based consumerist economy is now poised to experience a supernova implosion.
A few weeks ago we pointed out what may be the most troubling (and Marxist) observation in America's labor arena, namely that the labor's share of national income has dropped to the lowest in history as a record number of Americans now focus on wealth creation through assets (i.e. owners of capital) instead of labor. In his just released latest letter (below) Bill Gross piggybacks on this observation in what is one of the most scathing notes blasting the traditional of higher education, and in essence claiming that college, as means of perpetuating a broken employment status quo whcih redirect labor to a now-expiring Wall Street labor model, is now worthless: "The past
several decades have witnessed an erosion of our manufacturing base in
exchange for a reliance on wealth creation via financial assets. Now,
as that road approaches a dead-end cul-de-sac via interest rates that
can go no lower, we are left untrained, underinvested and overindebted
relative to our global competitors. The precipitating
cause of our structural employment break is both internal neglect and
external competition. Blame us. Blame them. There’s plenty of blame to
go around." And why college graduates have only a 6 digit loan to look forward to: "American citizens and its universities have experienced an ivy-laden ivory tower for the past half century. Students, however, can no longer assume that a four year degree will be the golden ticket to a good job in a global economy that cares little for their social networking skills and more about what their labor is worth on the global marketplace." And some very bad news for the communists in the White House and the chimpanzees in the San Francisco Fed who continue to believe that unemployment is anything but structural: "The “golden” days are over, and it’s time our school and jobs “daze” comes to an end to be replaced by programs that do more than mimic failed establishment policies favoring Wall as opposed to Main Street."
Just under a year ago, we got the tax fraud, and the only remaining member of Obama's economic Titanic, praising the US recovery. His timing top ticked the economy, preceded the Hindenburg Omen by 10 days, and ushered in QE2. Now, we get his sidekick, long since departed after totally failing (we use the more polite F-form of the word) up at his job, writing the follow up, from the cushy confines of academia, warning America that unless there is a major fiscal stimulus (because presumably the monetary stimulus which everyone praised in the form of QE2 has now been proven to only be a boost to the stock market and a bailout of European banks), this once great country which once exhibited the world's reserve currency is on its way to another "lost decade." We wish Summers well: perhaps 3 of those who read the following drivel will take him seriously. Two of them are Krugman and Koo. We are taking bets as to who the third one will be...
- Germany Digs In On Greek Debt Restructuring (Bloomberg)
- Libya emerges as Opec's big winner (FT)
- Athens approves four-year austerity package (FT)
- Germany sticks to demand for Greek bond swap (Reuters)
- Fed said to consider expansion of capital reviews (Bloomberg)
- Ally Financial delaying IPO (Reuters)
- Tokyo Riot Squad to Safeguard Tepco Meeting (Bloomberg)
- Christine Lagarde's victory a "done deal" says IMF rival (Telegraph)
- Jamie Dimon's faulty capital requirement math (Simon Johnson)
So our Federal Reserve Chairman, with a supposedly Mensa level IQ, declares that prices have risen due to demand from emerging markets. He also declares that US economic growth will pick up in the 2nd half of this year. He then declares that inflation will only prove transitory as energy and food prices will stop rising. I know I’m not a Princeton economics professor, but if US demand increases due to a recovering economy, along with continued high demand in emerging markets, wouldn’t the demand curve for oil and commodities move to the right, resulting in even higher prices? Ben Bernanke wants it both ways. He is trapped in a web of his own making and he will lie, obfuscate, hold press conferences, write editorials, seek interviews on 60 Minutes, and sacrifice the US dollar in order to prove that his economic theories are sound. They are not sound. They are reckless, crazy, and will eventually destroy the US economic system. You cannot solve a crisis caused by excessive debt by creating twice as much debt. The man must be judged by his words, actions and results.
The adventures begin...
Obama Fed Board Nominee Peter Diamond Discovers His Nobel Prize In Economics Is Worthless, Pulls Nomination In DisgustSubmitted by Tyler Durden on 06/06/2011 07:07 -0500
In a move that is sure to send the infamous Fed "economist" (Ph.D., never forget) Kartik Athreya over the edge, Obama's nominee for the Fed Board, after unsuccessfully trying to enter the one circle that is just less exclusive than the Goldman partnership ranks for over a year, has decided to pen an Op-Ed in the NYT titled "When a Nobel Prize Isn't Enough", and disgusted with the fact that his utterly worthless Nobel prize in something or another can't even buy him one seat with those who decide the price of money, has pulled his nomination in utter disgust. "Last October, I won the Nobel Prize in economics for my work on unemployment and the labor market. But I am unqualified to serve on the board of the Federal Reserve — at least according to the Republican senators who have blocked my nomination. How can this be? " How indeed: could it be that, gasp, Nobel awards are merely a honorary award in groupthink, presented to anyone who perpetuates the status quo with little regard for actual merit-based contribution (one needs only recall Obama's Peace prize just as the President is contemplating opening up a 4th, or is that 5th, war front?). Most importantly: nobody tell Krugman his one validation of his life's work, has just been downgraded to junk.
Housing Prices Have Already Fallen More than During the Great Depression ... How Much Lower Will They Go?Submitted by George Washington on 06/05/2011 11:09 -0500
Allow me a rant on a nice Saturday morning.
Watch the teleprompter advise the president on the correct choice of words at his address to workers at a Fiat, pardon Chrysler Group, Toledo supplier park, during which he will have to explain why both fiscal and monetary policy (read Keynesianism) is now a confirmed failure. But far from Austrian economics finally get the respect it so much deserves, this will merely retrench the current idiotic policies - just read any column by Krugman demand doubling down on stimulus post haste: that's what happens with junkies - it never ends, and in fact the "last" does must always be more and more and more...
- Still no go on the white smoke, a few more weeks: Hilsenrath - Dallas Fed's Fisher Says More Easing by Fed Not Needed (WSJ)
- Chinese Economic Slowdown May Lead to 75% Plunge in Commodities, S&P Says (Bloomberg)
- EU should control member states' budgets, says bank boss (Guardian)
- Syrian Violence Tests U.S. (WSJ)
- SAC Again? Probe Deepens of Alleged Inside Trades at FDA (WSJ)
- Pushing for a return to the gold standard (LATimes)
- Wheat Futures Climb for Second Day on Weather Concerns in U.S., EU, Canada (Bloomberg)
- Europe E. Coli Outbreak is Deadliest on Record (Bloomberg)
- EU, IMF Wind Up Greek Economy Review (Bloomberg)
- China Ministry: 1H Industry Output To Slow to 13.5% (Market News)
As the great Yogi says: "It ain't over 'till it's over" but May is now officially over and it was, in fact, a down month, despite the TREMENDOUS effort that was made in the past week to keep it from being a 5% loss.
Richard Koo Calls For, Surprise, More Reconstruction Stimulus To Prevent Japan's Natural Disaster From Becoming A Man-Made CalamitySubmitted by Tyler Durden on 06/01/2011 12:52 -0500
Richard Koo is back with his latest piece titled, not surprisingly, that "Fiscal Consolidation is Not the Answer" - alas, a decimated by (previously secret) debt European continent, and even America, is rapidly starting to disagree with this assessment, which stems from the faulty assumption that the economic "balance" achieved after 30 years of endless balance sheet expansion courtesy of ever declining interest rates is sustainable. Hint: it isn't. And until the world realizes that it is precisely this Fiscal Consolidation that is the answer, we will continue seeing bankers sell bits and pieces of Greece to each other, transfer payments in the US from the government ending up straight in Wall Street pockets, and broadly the Big getting Ever Bigger to Fail. Yet for those who still believe (Krugman) that one last hit is all it takes and after that it will be better, here is Koo's summary, on why Japan, which we continue to believe is the key macroeconomic variable over the near term, may be in very deep trouble unless it commences yet another (what number is that, #20, #50, is anyone even keeping score?) round of fiscal or monetary stimulus: "Fortunately for the Kan administration, Japanese institutional investors have been dealing with this surplus of private savings on a daily basis for more than 15 years and understand its macroeconomic implications. It is only because of their calm and calculated response to these conditions that the yield on 10-year JGBs remains at 1.2%. To prevent this natural disaster from becoming a man-made calamity (ie a recession), the government needs to push ahead with reconstruction efforts. With private savings surging, the necessary funds can be borrowed for now. Later, once businesses and households start looking to the future, funding can and should be shifted to tax hikes and budget reshuffles." That is the conventional wisdom. For all those who wish to read what will happen if and when Japan continues on this unsustainable path of converting private savings into public funding without regard for demographics, please read Dylan Grice (here, here and here).