Tim Geithner

All you need to read and more.

All you need to read and some more.

Geithner April 2011: Q: “Is there a risk that the United States could lose its AAA credit rating? Yes or no?” - Tim Geithner: “No risk of that.”

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Geithner April 2012: Q: “If we don't deal with these debt problems we are going to be Greece in two years” - Tim Geithner: “No risk of that.”

Let’s be clear: financial misdeeds ruin lives. If a Madoff takes your money and uses it to pay off other investors in a ponzi scheme, you won’t be able to get it back. If a Blankfein underling issues you with misleading advice, and then bets against you (creaming himself a nice profit), you won’t be able to get it back. If a Corzine steals your money and uses it to bet on the European sovereign debt market, you might not be able to get it back. You might end up in poverty or worse. You might lose your children’s college money, your retirement money, or capital you needed for your business. You might lose your home. So shouldn’t we take a tough line against financial misdeeds? Shouldn’t tricking and stealing from investors, tricking and stealing from the public, tricking and stealing from clients carry a heavy disincentive, like death? Would a corrupt banker not think twice about their misdeeds if they knew that apprehension would mean a noose around their neck and a kicked bucket? A lot of commentators — like for example, Max Keiser — seem to think so. And in China financial crimes are treated with a gravity far beyond a cushy minimum security cell, and home visits on the weekends. Financial criminals in China are often executed.

Unfortunately, nobody in the Treasury seems to want to deal with the mess at Ally Financial before Election Day.  But the question is whether Ally can wait until then.

The regulators have "fixed" a big problem. Actually they just created a much larger one.

Folks, QE 3 is not coming. Not without a Crisis first. End of story. The last time the Fed hit “print” with QE 2 put food prices at all time records and kicked off revolutions and riots around the globe. Today, gas is already at $4, food prices aren’t too far off their highs… do you REALLY think the Fed will kick off more QE in this environment… during an election year? At a time when the Fed is becoming a hot topic in the election?

How long will this last?

Earlier today, outgoing Treasury Secretary and tax challenged part-time pathological liar (see here) Tim Geithner said that any worries of the US debt ceiling are misplaced, and that at best such an event would occur "late in the year" (and to think the August 2011 extended $16.394 trillion debt ceiling was supposed to last well into 2013). Naturally, coming from Geithner, it meant this statement was a flat out lief the second it left his mouth, which is why we decided to do our own analysis of just when the latest and greatest debt ceiling would be breached. The answer is that at the current rate of debt issuance, which incidentally is going to accelerate sharply due to the recent extension of the payroll tax cuts which will require an incremental $100-150 billion total debt to be funded, and extrapolating future issuance solely on historical patterns, the US debt ceiling D-Day will be September 14, 2012. This means that there will be just over 6 weeks for the GOP to hijack each and every presidential debate before the November election with just this topic. Because there will hardly be anything more humiliating for Obama than to have to defend his platform even as the country is once again past the verge of insolvency, and forced to "commingle" retirement funds to keep Treasury operations running. Which incidentally is just as we predicted would happen when we explained why the GOP fast shelved the payroll tax debate so rapidly. It was nothing but a prelude to precisely this. Because once it is raised, and it will be raised of course, next up will be yet another ratings downgrade by S&P and this time, Moody's as well. All of which will most likely happen before November.

What is more amusing than the pathological liars that are Tim Geithner or Ben Bernanke testifying to congress? Both of them testifying at the same time. Such as now. From C-Span: Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke go before the House Oversight and Government Reform Committee Wednesday to discuss lessons learned from Europe’s sovereign debt crisis. In a hearing titled, “Europe’s Sovereign Debt Crisis: Causes, Consequences for the United States and Lessons Learned,” both financial chiefs will share their personal experiences.  Since the crisis, the Federal Reserve has assisted foreign counterparts by provide monetary support. In November, the Fed and it's worldwide counterparts announced a cut in the interest rate premium charged to over seas banks which borrow in dollars.  The monetary policy targeted struggling European banks. In a Senate hearing earlier this year, leading economists also testified on the European debt crisis and the outlook for the eurozone. They said that the U.S. should treat the crisis as a wake-up call and urged lawmakers to bring down debt and spending to sustainable levels.

With April 15 rapidly approaching, it is time to start thinking taxes once again. Yet do people actually stop to think about what the US tax system really is? And, as shown yesterday, does it even matter any more? After all as was just demonstrated based on cold, hard numbers, the US government has in fiscal 2012 funded deficit spending with 15% more debt (which will sooner or later be monetized by the Fed, as China just sold $100 billion TSYs in December in a harbinger of things to come) than with net tax revenues: should it not just drop the pretense of taxes altogether and fund the entire deficit with debt? After all it is not like it will slow down debt issuance any time in the next 4 years (when it will have $24.1 trillion in debt). For a 90 minute review of all that we take for granted as we sit down with our tax accountants, or with that copy of TurboTax (and in the case of Tim Geithner, push F1 repeatedly), various economists, politicians and industrialists weigh in on the U.S. income tax system in this hour and a half documentary showing how the tax code has grown and changed in response to military conflicts, economic changes and an ever-evolving political climate.

The cash settlement world of OTC derivatives is not investing, but gaming.  And the House sets the rules. 

And now for a word from Fireman Tim...

The real world revolves around cash flow. Families across the land understand this basic concept. Cash flows in from wages, investments and these days from the government. Cash flows out for food, gasoline, utilities, cable, cell phones, real estate taxes, income taxes, payroll taxes, clothing, mortgage payments, car payments, insurance payments, medical bills, auto repairs, home repairs, appliances, electronic gadgets, education, alcohol (necessary in this economy) and a countless other everyday expenses. If the outflow exceeds the inflow a family may be able to fund the deficit with credit cards for awhile, but ultimately running a cash flow deficit will result in debt default and loss of your home and assets. Ask the millions of Americans that have experienced this exact outcome since 2008 if you believe this is only a theoretical exercise. The Federal government, Federal Reserve, Wall Street banks, regulatory agencies and commercial real estate debtors have colluded since 2008 to pretend cash flow doesn’t matter. Their plan has been to “extend and pretend”, praying for an economic recovery that would save them from their greedy and foolish risk taking during the 2003 – 2007 Caligula-like debauchery.

Debt default means huge losses for the Wall Street criminal banks. Of course the banksters will just demand another taxpayer bailout from the puppet politicians. This repeat scenario gives new meaning to the term shop until you drop. Extending and pretending can work for awhile as accounting obfuscation, rolling over bad debts, and praying for a revival of the glory days can put off the day of reckoning for a couple years. Ultimately it comes down to cash flow, whether you’re a household, retailer, developer, bank or government. America is running on empty and extending and pretending is coming to an end.

No mas....