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Posts Tagged ‘stimulus’

What Obama said in 2008 (to get elected):

As a presidential candidate in 2008, Obama promised to end the Bush tax cuts for the top earners, arguing that it’s necessary to cut the federal deficit and has a minimal stimulative effect on the economy. (Source)

What Obama did December, 2010:

December 06, 2010: President Obama has agreed to extend tax cuts for the rich in a deal with a total cost estimated by the NY Times at $900 billion over the next two years. (Source1, Source2)

What Obama says now:

I will fight to end tax cuts for rich in 2012. (Source)

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Well, do they?

Arguing with the forces that appear to be, legitimizes them. They are illegitimate and have no real basis for existence as they are. They are parasitical entities. They are ticks. (Source)

PhD economist Michael Hudson says that the financial “parasites” are “sucking as much money out” as they can before “jumping ship”. . . The problem with parasites is not merely that they siphon off the food and nourishment of their host, crippling its reproductive power, but that they take over the host’s brain as well. The parasite tricks the host into thinking that it is feeding itself. (Source)

Sacculina Carcini parasite

Saculina Carcini is an extraordinary creature, a barnacle that degenerates practically into a plant. It starts life as a free-swimming larva that invades a crab then changes into a microscopic slug, which plunges into the crab’s underside and sprouts “roots” that draw in nutrients from the crab’s blood.

The crab’s immune system cannot fight off Sacculina. but continues living with the parasite filling its entire body and begins to change into a new sort of creature. One that exists to serve the parasite. Externally it appears the same, but internally it is merely a puppet controlled by the intruder. (Source)

See any parallels?

But one cannot defend the actions of Team Obama on taking office. Law, policy and politics all pointed in one direction: turn the systemically dangerous banks over to the Federal Deposit Insurance Corporation. Insure the depositors, replace the management, fire the lobbyists, audit the books, prosecute the frauds, and restructure and downsize the institutions. The financial system would have been cleaned up. And the big bankers would have been beaten as a political force.

Team Obama did none of these things. Instead they announced “stress tests,” plainly designed so as to obscure the banks’ true condition. They pressured the Federal Accounting Standards Board to permit the banks to ignore the market value of their toxic assets. Management stayed in place. They prosecuted no one. The Fed cut the cost of funds to zero. The President justified all this by repeating, many times, that the goal of policy was “to get credit flowing again.”

The banks threw a party. Reported profits soared, as did bonuses. With free funds, the banks could make money with no risk, by lending back to the Treasury. (Source)

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Hey, you, middle class people. Get back to sleep.

In the first 19 months of the Obama administration, the federal debt “held by the public” increased by $2.5260 trillion. (Source)

This works out to $22,158 of new federal debt added for each and every US household. How is that calculated?  Lets do the math:

  • $2,526,000,000,000 / 114,000,000 US households = $22,158 per US household

When President Barack Obama took the oath of office on Jan. 20, 2009, the total federal debt held by the public stood at 6.3073 trillion, according to the Bureau of the Public Debt, a division of the U.S. Treasury Department. As of Aug. 20, 2010, after the first nineteen months of President Obama’s term, the total federal debt held by the public had grown to a total of $8.8333 trillion, an increase of $2.5260 trillion.

“Debt held by the public,” includes U.S. government securities owned by individuals, corporations, state or local governments, foreign governments and other entities outside the federal government itself.

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Christina Romer, chairman of President Obama’s Council of Economic Advisers, has resigned her position. (Source)

"I quit" . . . Christina Romer, Chair, Obama's Council of Economic Advisers

Why did she quit? Maybe she feels like a failure?

Romer had predicted that Obama’s stimulus package (which she advocated strongly) would keep the unemployment rate below 8 percent or less; it is now 9.5 percent.

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Here’s what she shared at her final speech:

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At a lunch at the National Press Club on Wednesday Romer gave a farewell speech with four points, each more unnerving than the last:

  • She had no idea how bad the economic collapse would be.
  • She still doesn’t understand exactly why it was so bad.
  • The response to the collapse was inadequate.
  • And she doesn’t have much of an idea about how to fix things.

The speech included scary descriptions and warnings:

  • “Terrible recession. . . .
  • Incredibly searing. . . .
  • Dramatically below trend. . . .
  • Suffering terribly. . . .
  • Risk of making high unemployment permanent. . . .
  • Economic nightmare.”

(Source)

Lots of luck guys . . .

According to Romer, “What we would all love to find – the inexpensive magic bullet to our economic troubles – the truth is it almost surely doesn’t exist.”

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US politicians caught in multiple acts of  blatantly illegal voting fraud:

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These are elected politicians . . .  and not one has been prosecuted. Why?

Today, give me liberty or give me death no longer rings true, the typical American is content to put up with any outrage because he’s so ideologically stripped as to no longer have any idea he should be outraged. Harboring a completely materialistic view of politics that equates material comfort with freedom, he’ll bear any assault on liberty with timid submission so long as the hi-def cable stays on. (Source)

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Woooooo Hoooooo!

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Les Leopold, Posted: January 27, 2010 09:06 AM

http://www.huffingtonpost.com/les-leopold/why-are-we-donating-2000_b_438301.html?source=patrick.net

Wall Street is awarding itself $150 billion in bonus money…..and it comes from us!

That’s $500 for every man, women and child in the country — $2,000 for a family of four. (Maybe we should try deducting it from our income taxes as a charitable donation.)

Had we not bailed out the financial sector, there would be no bonus pool this year. Zip, zero, ziltch.

Wall Street, and no one else, crashed the economy through its fantasy finance extravaganza. Wall Street went begging for subprime debt in order to create and market their new financial securities, the most profitable activity in their history. As a result of their securitization casino, which leveraged bet upon bet, the housing market turned into a bubble and finally burst. Wall Street had miscalculated, big time.

We gave the Wall Street banks gigantic loans and enormous guarantees on their toxic assets. We gave them TARP. It all totaled to more than $12 trillion, with most of it still in play, even after the TARP repayments. (See Nomi Prins’s excellent accounting..)

Yep, that's it

Wall Street was saved from bankruptcy, including Goldman Sachs which now cavalierly insists that it didn’t really need the bailout money (yet it took $12.9 billion of taxpayer support via AIG, and tossed it into its bonus pool.) Wall Streeters actually think they’ve earned the $150 billion in bonuses through their own cleverness. Think again. It’s nothing more than taxpayer welfare.

Les Leopold is the author of The Looting of America: How Wall Street’s Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009.

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Because I Said So: Henry Paulson justifies the Wall Street bailouts by explaining that letting Goldman Sachs AIG fail would have caused “complete collapse of our financial system, and unemployment easily could have risen to the 25% level.” Instead of just 17.3% and rising.  His proof – he thought so.  He believed.  Has anybody ever challenged these hysterical fears, or do the peasantry just gather up $2,000 per family, send it to the Banksters and say thanks? (Source)

lightningbolt: We aren’t donating anything. The American people were overwhelmingly against the bailout. The money is being STOLEN!!! Our government is aiding these criminals in this theft! Both Bush and Obama are complicit and guilty in this crime.

So Much for the Sovereignty of Our Nation: Sorry, but Joe Taxpayer is not responsible for the inability of AIG to write insurance that it could not cover losses on. Fact is, the United States of America had no one in power to stop the Fed. The Fed did what it wanted to do. No one was a there to protect the taxpayer. America abdicated sovereignty. The country was actually too weak to fight the banks.

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People are calling Congressional Legislation introduced by Barney Frank, which will pre-approve $4 Trillion for the next free cash give away, “the US Economic Suicide Bomb“:

Barney Frank, "Trust me, my friends need a few trillion dollars a lot more than you do."

- Read the Bloomberg news article here: Bankers Get $4 Trillion Gift From Barney Frank

- Read the 1279 pages of the legislation here: HR 4173

- Read a preliminary analysis here: Congressional Legislation Introduced By Barney Frank Pre-Approves $4 Trillion For Next Crisis

Here is a sampling of online comments about it:

- $4 Trillion works out to about $40,000 from every US household. This US dollar economic suicide bomb is so far beyond all-things-rational… and makes me double-check my supply of tinfoil.

- Current efforts to stave off the financial crisis are doomed to fail and are preparing for the next rescue. A very bad collapse is coming…..it’s just a matter of when. I suspect Frankie is preparing for a bank run.

- There can only be one reason for a sum of money this large, as the Fed only liquidates paper for banks and to some extent for the government. Frank is preparing for a run on the banks. The FDIC is broke. The Fed will buy as many good assets as they can buy and let the rest collapse.

- $4 trillion in liquidity in a year will add 8000 points to the Dow. I guess when you are headed over a cliff you might as well floor it and see what happens.  (Jump the Grand Canyon Dukes of Hazard style.)

- “The bill is 1,279 pages long.” I have a hard time believing Barney wrote that legislation. I bet it was handed to him already typed up, spell checked, and placed in a nice glossy 3 ring binder by a friend of a friend.

- When I was a kid corruption like this was described as only happening in places like Mexico. We are Argentina on steriods.

- Our country isn’t doomed just the way of life we have lived before.

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Of course Obama may do the opposite but Obama says:

We Can’t Continue to Waste Tax Dollars Like ‘Monopoly Money’

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One TRILLION dollars… (Source)

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What does that look like? I mean, these various numbers are tossed around like so many doggie treats, so I thought I’d take Google Sketchup out for a test drive and try to get a sense of what exactly a trillion dollars looks like.
We’ll start with a $100 dollar bill. Currently the largest U.S. denomination in general circulation. Most everyone has seen them, slighty fewer have owned them. Guaranteed to make friends wherever they go.

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A packet of one hundred $100 bills is less than 1/2″ thick and contains $10,000. Fits in your pocket easily and is more than enough for week or two of shamefully decadent fun.
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Believe it or not, this next little pile is $1 million dollars (100 packets of $10,000). You could stuff that into a grocery bag and walk around with it.
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While a measly $1 million looked a little unimpressive, $100 million is a little more respectable. It fits neatly on a standard pallet…
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And $1 BILLION dollars… now we’re really getting somewhere…
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Next we’ll look at ONE TRILLION dollars. This is that number we’ve been hearing about so much. What is a trillion dollars? Well, it’s a million million. It’s a thousand billion. It’s a one followed by 12 zeros.
You ready for this?
It’s pretty surprising.
Go ahead…
Scroll down…
Ladies and gentlemen… I give you $1 trillion dollars
image0066(And notice those pallets are double stacked.) Hey, that’s me standing at the lower left hand corner, thinking this must be my stimulus package…
So the next time you hear someone toss around the phrase “trillion dollars”… that’s what they’re talking about.

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Obama slams ‘fat cat bankers’ — but does nothing (Source 1, Source 2)

WASHINGTON — US President Barack Obama has hit out at Wall Street “fat cats”, expressing anger that banks bailed out by the government plan huge bonuses while millions of Americans battle poverty and unemployment. With a recession triggered in part by the excesses of financial institutions, Obama voiced frustration that “some people on Wall Street still don’t get it.”

“I did not run for office to be helping out a bunch of fat cat bankers on Wall Street,” Obama said Friday in excerpts of an interview with CBS television to be aired on Sunday.

You tell ‘em Obama! Talk is cheap.

. . . go here for a simple explanation of how big banks rip off our government.

The huge bonuses are outrageous fraud that is well understood, but is being condoned. Why? Why does the Obama Administration allow this fraud to continue? Unless, as one blogger asks, “When Obama criticizes bailed-out banks like BoA for their huge bonuses, but fails to take action to stop them, isn’t he just admitting who really runs the country?”

Lavish pay and bonuses on Wall Street have been blamed for encouraging the excessive risk-taking that with the subprime mortgage housing crisis fueled the global maelstrom and brought the US financial sector to the brink of collapse a year ago.

But who’s counting . . . ?

Priorities: 1 in 4 mortgages is now under water, 1 in 3 Americans have either lost their job or live with someone who has, 1 in 4 children is on food stamps and one in 8 families are. We spent over a trillion dollars bailing out Wall Street and friends. It will cost about a million dollars a year to keep each soldier in Karzai’s opium patch and after the ‘surge’ there will be over 70,000 of them. (Source)

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How To Make The World’s Easiest $1 Billion

Henry Blodget, Dec. 10, 2009

Source: http://www.businessinsider.com/henry-blodget-how-to-make-the-worlds-easiest-10-billion-2009-12

With all the banks paying back the TARP money, some folks are assuming that the great Wall Street bailout is finally coming to an end. But of course it isn’t!

Taxpayers are still guaranteeing all big bank bonds (Too Big To Fail) and subsidizing huge bank earnings and bonuses with absurdly low interest rates. But instead of bellyaching about it, you might as well just smile and cash in.  After all, that’s what Wall Street’s doing.

So here’s how to make the world’s easiest $1 billion:

STEP 1: Form a bank.

STEP 2: Round up a bunch of unemployed friends to be “bankers.”

STEP 3: Raise $1 billion of equity.  (This is the only tricky step. And it’s not that tricky.  See below.*)

STEP 4: Borrow $9 billion from the Fed at an annual cost of 0.25%.

STEP 5: Buy $10 billion of 30-year Treasuries paying 4.45%

STEP 6: Sit back and watch the cash flow in.

At this spread, you should be earning at least 4% per year on your $10 billion of capital, or $400 million.  Sure, there’s some risk that the Fed will grow a backbone and raise short rates, but there’s not much risk.  (They have an economy to fix and banks to secretly recapitalize).  And in any event, if the Fed raises short rates, making your $1 billion will just take a bit longer.  (And if they REALLY raise rates, causing you to actually lose money, it will be someone else’s problem.)

You’ll have made $400 million in a single year!  So pay yourself a fat salary for all your hard work.  And pay your “bankers” fat salaries for all their hard work (But don’t worry–your bankers won’t actually have to do anything.  You’ll just need one of them to borrow the money from the Fed and buy the Treasuries, which he will be able to do part-time.)   At the end of the year, celebrate.  It’s bonus time!

Don’t be greedy.  Pay yourself and your bankers the industry-standard compensation ratio of 50% of revenue.  Your revenue was $400 million, so that creates a $200 million bonus pool.  Pay each of your unemployed friends bankers, say, $1 million.  And give yourself the rest for being such a smart entrepreneur and creating all the jobs and value.

Now, you’ve already made at least $150 million, so it doesn’t really matter what happens next.  But you’re in this for the world’s easiest $1 billion, right?

So proceed to Step 7.

STEP 7: Go public. After bonuses, your bank will be earning about $200 million a year, your capital ratio will be super-strong (10% equity-to-debt!), and your balance sheet will be clean as a whistle (all risk-free Treasuries!).  So you ought to be able to persuade investors to pay you at least 20-times earnings, or a valuation of $4 billion.  Sell 25% of the company for $1 billion.

STEP 8: Use your $1 billion of new equity to borrow another $9 billion at 0.25% from the Fed.  Buy another $9 billion of Treasuries.  Collect another $400 million a year.  Pay yourself and your team bonuses that are twice as large as last year’s.  You deserve it!  And you’re now about $500 million to the good.

STEP 9: Wait for your stock to double or triple, which won’t take long given your amazing growth trajectory and clean balance sheet.  When your market cap hits $10 billion, sell another 10% of the company for $1 billion.  Now you’re really ready to grow.

STEP 10: If you want to get fancy and get nice profiles written about you in business magazines, start buying branch networks from defunct banks (the FDIC will pay you to take them) and start making actual loans.  Also, start hiring trading desks to gamble on things more exotic than Treasuries.  Yes, all this sounds risky, but just remember–the risk isn’t yours, and you’re already $500 million to the good.

STEP 11: Sell $500 million of your stock to a “strategic investor” and let the rest ride.  Don’t worry, if your traders and loan officers turn out to be idiots or the Fed suddenly raises rates, the taxpayers will handle it.  And you’ve already made your $1 billion.

So, congratulations, you’re now a billionaire!  Now all there is left to do is celebrate!


* If you’ve been paying attention, you will note that the only potentially tricky step in this process is the “raise $1 billion of equity.”  Where, exactly, are you going to get $1 billion of equity?  Well, you will have to do some selling there.

Basically, you’ll have to tell a few investors about your awesome new business plan (see above) that will earn them returns of at least 20% on their equity from Day 1.  A 20% return on equity is a lot, especially when the return is largely risk free. So you should have no problem raising that $1 billion of equity.

Given the government’s desperate desire to get banks to start lending again, you might also want to try to hit up the government for some funds.  The pitch will be simple: Old banks aren’t lending because they’re hiding embedded losses and need to protect their balance sheets.  You don’t have that problem.  You’ll use the equity to LEND.  (And you will use it to lend!  You don’t have to say that you’re going to lend it to the US government.  None of the other banks are saying that.)

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Catabolic Collapse: Bridges at both end of the country – the San Francisco-Oakland bridge and the Lake Champlain bridge (NY/VT) both have been closed for urgent repairs.

Too bad there wasn’t any stimulus money left over from feeding Wall Street to put some people to work fixing up this countries rotting infrastructure.  (Source)

U.S. Leadership Federal Government

If you go down anyway, why do it telling blatant lies till the bitter end and cheating every grandma you can put your sweaty palms on, including your own, out of every penny they own? Have these folks no pride? In Washington, they certainly don’t.

So tell me, how ridiculous does it have to get? Why not put Goldman directly in charge and do away with the tiresome pretense? The direction is obvious: more and more centralized rule. Eat your heart out, Benito.

They’re selling you out every chance they get when you’re not looking. They’ve voted to burden you with $23.7 trillion in debt, and yes, you will have to pay that back, and that’s just in the past year and a half. Before that, they established the too big to fail banks, a bunch of “wars” that kill scores of your kids, and land, water and air that will do in many of those the wars do not.

They’ve made sure tens of millions among you live in homes you’re either already not able to afford or won’t be in the near future. They’ve watched over the demise of the manufacturing base your own parents and grandparents fought hard to establish, they’ve made health care unaffordable for a fast growing number among you, and did the same with the education system your children’s futures should have been built on.

Look at yourself, and then look at them, look at what they’re doing to you. Don’t listen to them, look at them.

(Source)

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Sale!

Govt Subsidized Loan Rates

How much longer can global central banks depress the true cost of money?

Surrender: Eventually the true cost of money will surface, for if the world is a riskier place, the cost of borrowing should rise. If governments are competing with each other to borrow large amounts of money, its price should rise. Sooner or later interest rates will rise, and the violence of the upheaval will be proportionate to the suppression.

Welcome to a world of inverted economics courtesy of quantitative easing and public debt issuance. (Source.)

Update: Interest on ten-year Treasuries jumped 10% last week to yield 3.45%. By September the Treasury has to sell $900 billion in new bonds. Despite Mr. Bernanke’s belief in his ability to hold borrowing rates down, there’s a lot of suspicion that the free lunch isn’t going to be free. “There isn’t enough capital in the world to buy the new sovereign issuance required to finance the giant fiscal deficits that countries are so intent on running.”

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In case no one is keeping track, Bernanke has now fired every bullet from his 2002 “helicopter drop” speech Deflation: Making Sure “It” Doesn’t Happen Here.

Bernanke’s Scorecard

Here is Bernanke’s roadmap, and a “point-by-point” list from that speech.

1. Reduce nominal interest rate to zero. Check. That didn’t work…
2. Increase the number of dollars in circulation, or credibly threaten to do so. Check. That didn’t work…
3. Expand the scale of asset purchases or, possibly, expand the menu of assets it buys. Check & check. That didn’t work…
4. Make low-interest-rate loans to banks. Check. That didn’t work…
5. Cooperate with fiscal authorities to inject more money. Check. That didn’t work…
6. Lower rates further out along the Treasury term structure. Check. That didn’t work…
7. Commit to holding the overnight rate at zero for some specified period. Check. That didn’t work…
8. Begin announcing explicit ceilings for yields on longer-maturity Treasury debt (bonds maturing within the next two years); enforce interest-rate ceilings by committing to make unlimited purchases of securities at prices consistent with the targeted yields. Check, and check. That didn’t work…
9. If that proves insufficient, cap yields of Treasury securities at still longer maturities, say three to six years. Check (they’re buying out to 7 years right now.) That didn’t work…
10. Use its existing authority to operate in the markets for agency debt. Check (in fact, they “own” the agency debt market!) That didn’t work…
11. Influence yields on privately issued securities. (Note: the Fed used to be restricted in doing that, but not anymore.) Check. That didn’t work…
12. Offer fixed-term loans to banks at low or zero interest, with a wide range of private assets deemed eligible as collateral (…Well, I’m still waiting for them to accept bellybutton lint & Beanie Babies, but I’m sure my patience will be rewarded. Besides their “mark-to-maturity” offers will be more than enticing!) Anyway… Check. That didn’t work…
13. Buy foreign government debt (and although Ben didn’t specifically mention it, let’s not forget those dollar swaps with foreign nations.) Check. That didn’t work…  (Source: Mish.)

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Obama's friends

Obama's friends

Imagine you bet $500,000 on a stock and it dropped to $20,000. If you owned Treasury Secretary Tim Geithner, he’d get on TV and explain that if the government didn’t buy your shares for $500,000, the economy would suffer because you couldn’t invest anymore. He’d say the “free market” isn’t pricing the stock “right,” and we have to “help” the market with taxpayer money to make sure you get the “right” price.

The administration and the banks keep talking about a credit crisis, but there isn’t one. Banks are lending. If you want a mortgage and can afford to pay it back, you can borrow at low rates today.

To fix this fake crisis, there are fake discussions about what the government must do. The endlessly recycled plan to buy “troubled” assets isn’t to get banks lending again, because they haven’t stopped lending. The plan seeks for taxpayers to buy worthless assets at high prices to absorb rich investors’ losses. That’s it. It keeps coming back as a different plan, but with that same goal. There is no goal beyond that one goal: keep rich people from taking losses. (Source.)

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The fed’s planned balance sheet expansion results in a 15-fold increase in the domestic US base money supply. (Source.)

262 Billion = US monetary base as of Sept. 2008 (minus $ held abroad)
3,818 Billion = projected US monetary base in Sept. 2009 (minus $ held abroad)

3,818 Billion / 262 Billion = 15-Fold Increase in US monetary base

This is a staggering devaluation of the US currency!

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By Mark Pittman and Bob Ivry

March 31 (Bloomberg)  The U.S. government and the Federal Reserve have spent, lent or guaranteed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s. New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.

[Prof77 here. Did you know that this $12.8 Trillion works out to taking $128,000 from every household in the US? This financial "rescue" scam keeps growing. It's up by an additional $3,500,000,000,000 in just the last 7 weeks. No end is in sight!]

Feb. 9 (Bloomberg) — The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages. Recipients’ names have not been disclosed.

“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose.”

Bloomberg requested details of Fed lending under the Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral. Arguments in the suit may be heard as soon as this month, according to the court docket. Bloomberg asked the Treasury in an FOIA request Jan. 28 for a detailed list of the securities it planned to guarantee for Citigroup and Bank of America. Bloomberg hasn’t received a response to the request.

To contact the reporters on this story: Mark Pittman in New York at mpittman@bloomberg.net ; Bob Ivry in New York at bivry@bloomberg.net

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Here is an excerpt from Dan W’s “Ashes Ashes” well-reasoned update and forecast for the US economy: http://ashizashiz.blogspot.com/2009/03/no-matter-what-else-happens.html

U.S. GDP over the past several years has not only been driven by outrageous levels of consumer spending, but the majority of that spending has been pure debt, leverage, no capital foundation. Also:

  1. The gap between real wages and the cost of consumer goods continues to widen. In other words, it is becoming increasingly difficult for a family of four to make ends meet—just the basics!— on the wages of two median-income wage earners.
  2. The Import-Export economy has collapsed. Not only can people not afford to purchase the luxury items that just recently comprised much of their spending, but such items are becoming increasingly scarce as overseas production grinds to a near halt.
  3. An extraordinarily FEW individuals are still willing to seek financing for such things as new cars, new homes, etc. AND, what we’re beginning to see is that many who are able to secure such financing are defaulting on their loans without making so much as one payment in service of their loan.

We have simply run-up, as a society, far too much debt. We have run-up so much debt in fact, that even under the best circumstances and with the best policies in place we would need to experience a deep recession in order to bring spending and production and debt back into line. But the circumstances are grim, and the monetary and fiscal policies of our government are insane, and as such we are lurching our way toward the deepest and quite possibly the longest economic DEPRESSION in the brief history of our troubled nation. Such an end has become entirely unavoidable:

  1. The FED’s efforts to stimulate growth and ease possible deflation through the strategy of Quantitative Easing will only serve to (1) artificially prop up certain sectors of the economy for a finite amount of time, and to (2) bring us closer to conflict with the rest of the world over our policy of currency devaluation and our status as a nation whose debt-service cannot be counted upon.
  2. Consumer spending is going to continue to collapse. Despite federal reports to the contrary, as more and more people lose their jobs and as more and more people try desperately to pay down their debt, consumer spending on the types of goods & services that once spurred “growth” will plummet. As such, GDP will continue to contract at an extraordinary rate.
  3. There is a feeling out there in the world of the ordinary person that debt has become a very dirty word. I hear it all of the time. People are saying, “never again”. Never again will I run-up my credit card debt or buy something on financing. People are coming to see the system of ‘money-as-debt’ as fraudulent and unctuous, and the Obama obsession with getting credit flowing again is falling upon deaf ears and unwilling minds.
  4. The velocity of money—real money—is going to slow to a virtual standstill over the next few years. ANY money that people can hold, they will. ANY money that people are able to scrounge and save will NOT circulate. Just wait until this spring and summer—and the next—when the barter economy robs the federal government of tens of billions of dollars in tax revenues and when banks see a precipitous drop in deposits and reserves.
  5. There remains TRILLIONS upon TRILLIONS of dollars of debt in the system that need to be cleared. And not only consumer debt, but corporate and sovereign debt as well. And until that debt is destroyed, any manner of GDP growth will remain impossible.
  6. Any new regulation of trading in derivatives, etc., should it succeed, would suppress the market and as such would lead to further retrenchment and contraction. Don’t get me wrong here: I support the idea of honest regulation. I am simply recognizing that mandatory reserve limits and elimination of “naked” trading would further contract GDP because less “profits” would mean less spending of said profits (and converting the supposed capital into investments). And thus the collateralization of said debt through spending is reflected in GDP. And yes I am cognizant of the fact that much of the profligacy in the derivatives market is nothing more than leverage, but this DEBT spending, regardless of its future harm to the overall economy, is still calculated as part of the overall picture of GDP because the debt is used to purchase goods and services.

The days of 4%, 3%, even 2% GDP growth are over. We’re looking at several years of falling GDP, several years of negative growth.

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