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Thursday, June 25, 2009

The Iranian Crisis Discussed By Karim Sadjadpour on Fresh Air

This is a must listen to program!!! Mr. Karim Sadjadpour, a political analyst discusses the current political crisis in Iran with Ms. Terri Gross, host of the NPR radio program called Fresh Air. This discussion is excellent!!! He discusses the challenge President Obama will faced with if President Mahmoud Ahmadinejad is declared the official winner of their current election.

Tuesday, June 23, 2009

The Coming Economic Cold War Will Be President Obama’s Challenge

For anyone to believe the United States will soon return to a state of economic stability, I am afraid you have not been reading your herbal tea leaves correctly. Not only is there a new American paradigm emerging, but there is a new world paradigm on the horizon. For many Americans it is unlikely that they will ever return to a state of economic stability. And, for others, they may get closer to where they were before the big collapse, but not close enough.

The powerful economic forces in the world are all fighting for recognition as dominant players, while strategizing to become master players through their political maneuvers in order to position themselves in such a way so their currencies will evolve as the major trading reserve currencies above all others. It has become more visible and apparent that the United States has not been fully included in the current Eurasia summit conferences. As a matter-of-fact, we are being excluded, at this time. It not only has to do with the instability of the United States dollar and economy, but equally as much as it involves U.S. dollar hegemony, it is also about how other world powers are now realizing they can finally subdue its domination, without firing a shot, as well as reducing the sphere of influence by the world’s largest debtor nation—the U.S.

This overwhelming paradigm shift will be jettisoned by Russia and China supplanting the U.S. dollar as the world’s major reserve currency with, instead, other sovereign currencies. This dramatic change will be initiated as foreign central banks pull back their purchases of U.S. treasurys, especially those that are considered longer term investments—anything beyond a 10 year maturation.

The days of China and Russia subsidizing U.S. military expansion (approximately half of the U.S. budget) through the purchase of U.S Treasurys is coming to an end. Another way that the U.S redirects it currency back into the budget is by circulating it through the host nation’s central bank via the 737 military bases and installations established around the world. This, too, may be coming to an end. The U.S. may be finding Russia, China, Brazil, Pakistan, India, Iran, and Malaysia removing its pawns, knights and bishops from the world’s chessboard. The nations with budgetary surpluses now have greater control over the one country, which was so willing to destroy its real economy, and replace it with a phony financial-monopoly based economy full of fake securitized debt instruments, which were given fake high AAA ratings, and insured against their failures through Ponzi-style credit default swaps; and, as a result of such foolhardy willingness shown by Reagan, Bush, Clinton, Bush, and now, Obama, the U.S. will more than likely find itself in a continuous decline as it throws more of its economic resources into the burn-barrel of financial institutions.

For President Obama to even think of giving Federal Reserve Chairman, Ben Bernanke any oversight powers, is to give a pyromaniac oversight control of the burn-barrel. And, to allow his voice to structure new regulatory rules over the financial sector would be like letting a bank’s personnel director hire professional bank robbers as night janitors!

Bernanke is culpable in this economic collapse. He has been deeply embedded in the plot by the top 20 banks to take over the Treasury, and the Federal Reserve’s resources.

We have now learned that 10 financial banks want to pay back $68 billion of the $700 billion allocated TARP funds. Now Kevin Hall of McClatchy News has spun propaganda by stating that “the TARP bailout turns out to have been good business for the U.S” in his article of the same name. He says that out of the $68 billion, the U.S government received $1.8 billion in dividends. “That translates to an annualized rate of return of about 4.64 percent on the $68 billion.”

Out of the $700 billion allocated for TARP, there still remains $134 billion still remaining in the program’s account. Subtract the $68 billion, and there still remains $498 billion still outstanding by the remaining 9 financial banks. $566 billion was actually lent out. Only around 15% is now planning to be paid back.

The question is what kind of impact did this $1.8 billion have on the GDP? Or, on the productivity of the country, for that matter? The answer is zero! Did it improve the plight of the suffering working American? NO! I am sorry Kevin, but I don’t see how the bank bailout was good business for the U.S.

Had the banks been allowed to fail, and all the funds that were handed over to the zombie financial banks, including the measly $566 billion out of the $11 trillion total amount of money made available to the zombie financial banks, the U.S. government might have been able to gather a return by investing nothing, but instead, taking control of the bank’s assets, and once taken over through receivership, then the toxic mortgage debt could have been auctioned off for around 22 cents on the dollar. Bank receivership would have been better business for the U.S. in the long run. And, better for working people. In spite of all the party favors given to the financial banks, credit is still frozen because the banks are hoarding the money for their own protection.

Now, had the government made available the $11 trillion to those companies in the real economy, as loans, to, once again, build up a Green and vibrant manufacturing sector, workers would have been hired, who would be paying income taxes, and stimulating the economy through spending. Foreclosures would have slowed months ago. The peripheral economy that surrounds the manufacturing economy, such as services, would hire workers and the nation’s productivity would grow, as well. And, the businesses would be paying back the government in taxes. Such a plan would have been a real stimulus improving the GDP far better than lending money to the hoarding financial banks that were responsible for the economic collapse in the first place!

Another weak aspect of President Obama’s regulatory plan would allow credit default swaps to go unregulated only if they were considered to be “custom” by the insurer—our government protected financial crime syndicate. And, of course, “custom” swaps would be the majority issued. Credit default swaps continue to amount to $30 trillion, and were a major player in the collapse of our economy because they went unregulated. So, for the most part, President Obama wants to continue walking the path toward the Gates of Hell!

The path President Obama has chosen will very likely embolden the neo-fascist Right wing hate-talk media voices doing what they can to bring about a sea change of civil unrest the likes of which many of us have never seen. He will deliver it to them because his decisions allowed for it to evolve. For a person as smart as he seems, he lacks the ability to see the cause and affect, 3 or 4 moves ahead, of his decisions. Some believe the opposite, that he sees moves forward, but I must differ with that observation.

The foreign countries mentioned above are sick and tired of being forced to buy Treasurys through the cycling of dollars they receive from U.S. corporate business sectors buying up their cheap goods and services, and foreign corporations, as well as having dollars circulated into their banks as a result of U.S. military installations situated in their countries, which is then used to further support these same U.S. military bases and facilities they would like to see closed up and moved out.

Foreign central banks don’t have very much they can buy with dollars except Treasurys and American corporations, only when the U.S government permits it.

This change will likely happen. China and Russia have seriously created a plan during their BRIC (Brazil, Russia, India, and China) summit in Katerinburg, Russia. The U.S. was told “No” you are not invited, even as a passive observer.

President Obama’s actions have advanced the Economic Cold War. [Read Dr. Michael Hudson’s enlightening article, “Appointment in Yekaterinburg: The Ending of America’s Financial-Military Empire”,, 6-20-09.]

The result of the U.S.’s possible loss of the dollar as the world’s central reserve currency will be hyper-inflation because the Federal Reserve will print much more money. It is likely that there will be more job losses, significant rollbacks with state and local budgets and a shake-up in the way President Obama has been doing business, as well a Republican uprising inside Congress.

In the June 17, 2009 Wall Street Journal, there was an article about how hedge funds are foreseeing inflation with regard to commodity prices in the nation’s future and investors are betting on it happening. Such news materializing would be bad for the average working person. I have my doubts that commodity prices could inflate much more without higher wages being realized. Consumers would just cut back on spending forcing commodity prices to fall. It is a hedge fund gamble.

China, Russia and the other foreign nations realize they cannot kill their consumer export market in the U.S., but will be able to bring it to its knees as they begin to dictate new rules. They will capitulate and continue to buy U.S. Treasurys, but it will be on their terms, as they “negotiate” a reduction in U.S. military expenditures reducing our dominant influence in Eurasia.

Without the U.S government’s ability to borrow from the world’s budget surplus nations, it will not be able to spend and expand its own budget deficits. Government spending reductions will squeeze the economy, and shrink government programs, services, and entitlements, along with contributions to the states. But rest assured, the Bush-Obama bail-out/rescue plan delivered to the financial banking sector occurred as a result of demands they made to be protected from the coming squeezes, such as with luxurious wages, once the economy begins to further fold in on itself. These oligarchs have demanded they be insulated from any of the financial suffering the rest of the population will experience.

Thanks for reading, jerry

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Wednesday, June 17, 2009

America-Take A Lesson From The Iranian People!

Why is President Obama capitulating to the political right after so many liberal-progressive voters chose him as their candidate and choice for president? By taking such moves, which are not even “center-based”, he has alienated a great many of his supporters. As Bill Maher has stated, “I didn’t vote for this!”

Progressives, liberals, or for that matter, many former-Reagan Democrats have flared up their ire, which is worse than whacking your big toe against a fixed object, when Obama began reversing his support for Democrats who protested against the White House when it decided to rally behind the telecom industry’s subversive Stalinesque use of their technologies to gather intelligence, without warrants, against everyday Americans. Didn’t Little Boy Bush do that?

We call these acts spying! Stalin, Khrushchev, Mao, Castro, Pinochet, Bush, and, of course, Hitler all spied on their own people, and now, Obama has walked that supportive tightrope. Such actions are part of the neo-con battle cry, and Obama has raised a few masts in that direction.

Another sail flapping on the Demo-con's phantom ship has emboldened across its sailcloth is his support for government funded faith-based initiatives. Just because he believes in religious action for people in need, it does not mean that it has to be financially supported through the government’s budget. Why is it that the government cannot directly fund such initiatives without having to go through religious organizations? I always thought there was a separation between church and state, but that belief continues to get whittled away.

The same questions come up over and over again in regards to the Federal Reserve Bank. Why is it that the government borrows money from the Federal Reserve, a private banking organization, in order to operate? The Federal Reserve buys government issued Treasuries, sells them, and then loans the government money. The US government, then in return, pays the Federal Reserve interest on the money it borrows.

Does this make any sense? Why cannot the US government establish its own bank, through the Treasury, and operate it without having to pay interest to itself? Why is the Federal Reserve still operating? It is because the international bankers, who sit on the Federal Reserve board, have incredible power over the government. The Federal Reserve Bank is just one of other international central banks affiliated with the International Bank of Settlements, which is the chief central bank for all these world banks.

Dr. Ellen Brown, of, wrote about the innovative Bank of North Dakota (BND), which is North Dakota’s state owned bank, established in 1919. It just so happens that North Dakota has a budget surplus because of the way they use this bank. “By law, the state must deposit all its funds in the bank, which pays a competitive interest rate to the state treasurer. The state rather than the FDIC guarantees the bank’s deposits, which are plowed back into the state in the form of loans. The bank’s return on equity is about 25% and it pays a hefty dividend to the state, which is expected to exceed $60 million this year. In the last decade, the BND has turned back a third of a billion dollars to the state’s general fund, offsetting taxes. The BND avoids rivalry with private banks by partnering with them. Most lending is originated by a local bank.”

If this is just fine for North Dakota, then why is it not good enough for the federal government? Why must we have a Federal Reserve, when we can have the USA Bank? And, why is not every state legislature establishing their own state-owned banks to build equity for their state treasuries? It appears that every state can become solvent, and fund their own projects through their own state-owned banks paying itself interest and dividends?

Dr. Brown writes, “North Dakota has also managed to avoid the credit freeze, through the simple expedient of creating its own credit. It has led the nation in establishing state economic sovereignty.” “Only three of fifty states are now solvent, meaning they have the revenues to meet their state budgets; and one of them is North Dakota.”

She discusses that if we had our own national bank, then we could lend operating capital to our newly acquired car company-GM. She says “One advantage of a government-owned bank is that it could fund public projects interest-free or nearly interest-free, cutting production costs dramatically. Interest comprises as much as 77% of the cost of goods and services, such as public housing, that require large amounts of capital.”

Imagine our own government-owned bank creating jobs through the people’s GM company building electric cars leased by the US government, intra-city commuter rail cars, innovative and energy efficient buses, and alternative energy products, such as battery technology. The return on such an investment would generate jobs and real Green Shoots throughout the nation.

There are major concerns burdening working class Americans and government supported domestic spying, or faith-based initiatives are just some of several policies that need to be surgically removed from the cancerous growth spreading throughout the White House. President Obama has seamlessly connected some of the Bush dots into his own matrix.

A declining dollar, rising un-underemployment, stagnant wages, an escalating war in the Middle East, rising consumer prices, and energy costs, unaffordable health care, a mounting debt crisis causing destruction to the economy, and more are the most acute problems facing this nation. Yet, Obama wants to make great speeches addressing issues that are not life threatening, at this time, like the ones just mentioned.

President Obama embeds former president and CEO Edward Whitacre of A.T.&T to the helm of the new government controlled, but with no control, G.M. As we recall during the Bush administration, this telecom company and others were involved in offering up data information about Americans without their consent and had allowed the government to just directly hook up to their phone conversations, emails, and cell phone conversations without warrants. Now, this guy has been dropped into the driver’s seat of the new G.M company.

Wow! Does this not sound like what has been going on with the nation’s corrupt financial banking institutions over the decades? Their former employees have been embedded inside the Obama administration to fix the very firestorm they created as employee/representatives of these banks. And, the Federal Reserve has embedded its own homeboy-Timmy Geithner to make sure that the Treasury continues to do the bidding of the Federal Reserve Bank and its international banking organization.

I have to keep going back to President Obama’s campaign slogan of “Yes We Can”, and “Change We Can Believe In.” As a voter and supporter, if Obama had spoken about embedding Wall-Street bankster Trojan Horses in his economic recovery plan for the country, and said he would hire on former CEOs of corporations that acted against the Constitution, the interests of the nation, and the will of the people, I would have told him, ‘No You Can’t!’ and I cannot vote for that!

We are now seeing the Iranian citizens protesting by the tens of thousands against what they believe is voter fraud. They are willing to get out in the streets and raise their voices in protest, but here in America, the nation’s biggest economy theft and hijack of our economy by a bunch of banker criminals gets no protest. No protest over handing over $14 trillion to replenish the bankster’s losses while Americans go into foreclosure by the millions, with little help, and who have seen trillions of dollars in home value wealth evaporate, as well as their retirement nest-eggs. No protest. Not a peep in the street.

Back on April 3, 2009, the Obama Justice Department filed a motion to dismiss one of the Electronic Frontier Foundation’s (EFF) landmark lawsuits against illegal spying by the National Security Agency (NSA). “The lawsuit was aimed at ending the NSA’s dragnet surveillance of millions of ordinary Americans and holding accountable the government officials who illegally authorized it” as was reported by Tom Burghardt, in his April 13, 2009 article “Obama Administration Endorses Continued Spying on Americans.”

What we are seeing is that this president is not making it simple, nor building the same grassroots momentum behind him that elevated him into the presidency. If there were, then he would have the force to press the Congress and the nation’s elite to accept new policies that would benefit hardworking, middle class Americans without destructive and diluted comprises. He would have the momentum to take the country back from those who stole it away over the last 30 years from the very people that make it function—the middle class.

From all we are seeing and hearing from him is that there is little change we can believe in. The American people are to blame for this. We must harness the same courage to protest as we are now seeing from the Iranian people.

Thursday, June 11, 2009

A Special Thanks to 101.7 CHLY Radio and Rae Kornberger!

We, who make up Eye-On-Washington blogspot, want to thank Ms. Rae Kornberger, the host of "A Sense of Justice" broadcasted over 101.7 CHLY Vancouver Island University radio for allowing us to share with her and her audience our view of politics, and political events and topics that occur in the United States. She has interview us twice, thus far, and will bring us back to her show on a monthly basis to discuss what we do on this blog for an hour of talk.

A special thanks to you Rae!!!

Your friends in Pittsburgh, Carl and Jerry

Monday, June 8, 2009

President Obama Gives Good Speeches!

President Obama has become a huge disappointment when it comes to saving the country from itself. We had hopes that he would live up to his promise of Change We Can Believe In. It has morphed into more of the same stuff that Little Boy Bush left behind.

The new book series he is writing has been titled, “I Left It Behind”. Harry Truman entered the Oval Office scared out of his mind. He had a nation to attend to. He rolled up his sleeves and placed a sign on his desk, which read, “The Buck Stops Here!”

After attending the inauguration ceremony in the bitter cold, on January 20, 2009, we all had hope for real honest to goodness change. That day, millions of us felt we did the right thing by voted for this guy. We defended his inexperience, his message, and his call for change, but now I, and many other progressives, am heavily disappointed. I have become so disillusioned that I have coined a new name for President Obama. I am now calling him President Peacock because he has begun to strut his colorful plumy feathers in full display for all to admire and applaud. I could forgive a president who struts his stuff about town, such as when he flew into New York City---Manhattan, where he and his misses attended a show, dinner and the splendor of the city that never sleeps. Good On Ya Barack, but Harry Truman would not have done that until he felt the nation’s suffering citizens were willing to say, ‘You deserve it now, Mr. President. You really busted your butt for all of us!”

We had Little Boy Bush riding the jet plane to Crawford, Texas in order to play in his brush pile, wear his cowboy hat, and his fancy boots driving around the dry, acrid and arid shrub plain where he could talk “Texan” and not look so stupid. A war had emblazoned around him, and the economy had seriously begun to show signs of crumbling, yet he took more time off than any president in his first term. So, really what is there to complain about when Mr. and Mrs. Obama decided to fly, not halfway across the country, but just over the state line? Little Boy Bush logged more Air Force One frequent flyer miles than anyone in history.

So lately, President Peacock has been out-sourcing himself in the Middle East giving great speeches about reconciliation, communication, respect for religious beliefs, tolerance, the strength of the U.S. economy and the resiliency of the American people, as well as the goodness of good people, while doing the work to achieve peace along with extinguishing the threats of terrorism and fanatical extremism. Who can argue with those talking points? Yet, Mr. Peacock, what is the best way to achieve those lofty goals of yours, but for the United States to be an example of those goals, and for the president to correct the greatest economic disaster since the Great Depression, along with dismantling the evils of the Cheney-Bush legacy. Unfortunately, China is laughing at Treasury Secretary Tim Geithner for claiming the U.S. believes in a strong dollar, as President Obama considers Fed Chairman Ben Bernanke as his chief economic regulator. So, President Peacock hires the Wall-Street pyromaniacs to replant the burned out forest, but then, asks the senior fire starter, Ben Bernanke, to guard the matches. These actions by President Peacock show Americans, and the world that he is not Harry Truman, nor Franklin D. Roosevelt during the nation’s most critical, and dangerous times.

Since last year, and on into this current administration the focus has been on rescuing the greedy bankers who stole the economy from everyone else, and various bankruptcies that ensued the nation while sucking out of the treasury $14 trillion, as the real economy was engulfed by an economic firestorm. Beginning in 1999, as the Clinton administration waned furthering the Royal Scam upon the country with the construction of the Future Commodities Modernization Act of 1999, making it illegal to regulate the private investment scam artists and the shadow banking industry located within every major crime syndicate financial bank, which was signed into law by the administration of Little Boy Bush, which allowed for a massive financial heist of America’s middle class wealth concentrating it within the confines of our corrupt Wall Street institutions and then, grabbed by the top executives running those companies. And, of course, there was the shelving of the Glass-Steagall Act, as well, no longer placing a firewall between savings banks and the financial casino-like institutions, such as Merrill Lynch, and Lehman Brothers.

As the Wall Street pyromaniacs began to experience the rapid fire storm sweeping subprime mortgages, 401Ks, foreclosures, unemployment statistics, then on into the prime mortgage market, pension funds, personal portfolios, and more, these banksta gangstas sitting in the executive suites of the biggest financial institutions were still buying their second and third homes, luxury cars, yachts, airplanes, condominiums, collectible art, country club memberships, and stashing their liquid wealth into accounts opened in places like the Cayman Islands, and other tax haven hideaways.

As Pam Martens tells us Sandy Weill, for example, the former CEO and chairman of Citigroup, walked away from his job with $1 billion in ill-gotten gain. What did he actually create at Citi? Did he create a company with sustainability, job security, or tangible products, like shampoo, or dog food? No! He walked away from a burned out company that he set on fire through “creative” gambling securities scams, through the hocus pocus of imaginative and make-believe AAA rating agencies, credit default swaps, and other bogus scams.

And now, because of the erosion of the Glass-Steagall Act, defining the boundaries between banks and financial institutions, the data released from the Federal Deposit
Insurance Corporation (FDIC), on March 31, 2009 revealed “there are 8,246 FDIC insured institutions with total assets of $13.5 Trillion and domestic deposits of $7.5 Trillion. Four institutions, Bank of America Corporation, JPMorgan Chase and Co., Wells Fargo and Co. and Citgroup Inc., four institutions out of 8,246, control 35% of all the insured domestic deposits and 46% of the assets according to the March 31, 2009 figures from the FDIC.”

Ms. Martens went on to report that Chairman Ben Bernanke of the Federal Reserve has not done anything to reduce this massive concentration of wealth into the hands of a very small portion of the population, and the collusion to corral more government funds to stuff in safety deposit boxes and fatten up balance sheets, since the crisis began, but has encouraged this concentration allowing these monopoly banks to absorb their financially wounded competitors at Blue Light Special prices. Such actions create even bigger “too-big-to-fail” behemoths that when found dying in their insolvency holes drowning in stale champagne, will ask Congress twice over for trillions more treasury minted dollars calling out once more that the sky will turn black, and the country will face mortal danger if they are not rescued again.

The Wall-Street taxpayer bail-out amounting to $14 trillion far exceeds the mere $500 billion offered up to Main Street’s real economy. The Wall-Street bail-out is 25 times bigger than the Main Street offering. Now, had this been reversed, we would be seeing a resurgence of new manufacturing jobs sweeping the work force, no doubt, contributing to a Green economy that would be exportable reducing the trade deficit, stimulating consumer spending, stabilizing the housing market, and replenishing the lost retirement dollars. But, President Peacock, and his flock of financial fundies have not moved toward such sensible solutions.

Part of the national bail-out is the U.S. government’s 60% investment in General Motors, which according to Robert Reich, the nation’s 22nd Secretary of Labor and professor at the University of California-Berkley, GM will eventually be no more. The only reason for the $60 billion rescue package is “designed to give the economy time to reduce the social costs of the blow” when its assets eventually get sold off and the company no longer exists. Dr. Reich went on to say that the $60 billion would have been better spent had it been allocated to retrain auto workers, as well as to give them extended unemployment insurance as they become retrained for other jobs.

As we recall, GM was able to retool during the build up to World War II in order to manufacture tanks and other war machines, therefore, why cannot GM retool to manufacture high-speed rail cars for the development of intra-city transportation corridors? Or, electric cars, such as the Aptera. But, President Peacock has stated that we, the investors who now own controlling interest in GM will say nothing about the products this dying automaker will manufacture. It appears that the GM brand name will eventually be sold to China, as has gone the Hummer.

Dr. Reich wrote that GM was once the nation’s number one private employer with strong middle class jobs paying $60 per hour to workers not requiring a college education. Today, Wal-Mart has replaced GM with their $10 per hour jobs. This is part of the new American paradigm shift the nation has been willing to accept over the last 30 years. Sit down, hold on, and shut up seems to be the mantra of Wall-Street to Main Street.

The real economy jobs are disappearing. Credit is not flowing. Borrowing has narrowed. The economy has contracted more than 6% average annual rate in the fourth quarter of 2008, and first quarter of 2009. From December 2007 through April 2009, the economy has burned up 6 million jobs. Dr. Morici has estimated that the economy will likely have lost more than 8 million jobs as the recession wanes.

The editor note on the website has calculated that “we would need 48 straight months (4 years) of 350,000 jobs added a month to reach January 2008 employment levels [which had been 4.9% and considered full employment]. Keep in mind that to get there, we need every last one of these rosy projections to happen [create 7 million jobs to get back to 4.9%, adding 137,000 new jobs to keep up with the pace of working-age population growth], plus a sustained job growth rate unseen in our lifetime, plus no worsening or new financial crises, no additional sector collapses, no double dip recession, and no black swans.” Wow! Now that is a tall order for President Peacock!

According to Tyler Durden of, it seems that credit default swaps, those bets that specific stocks will drop in value, continue to be purchased in the billions of dollars every month in nearly every sector. He wrote that the “net notional value change [with JPMorgan] was an almost record $2.1 billion in the name alone (on $52.1 billion in gross) on a ridiculous amount of contracts.” The gambling continues. The real economy suffers. And, Ben Bernanke, Timmy Geithner, President Peacock and Congress sit on the sidelines doing nothing to control such stuff.

Bernanke had spoken about keeping mortgage interest rates down in order to encourage home buying, but he has been buying up mortgage backed securities, and treasury issues that he has been printing up, which has driven up mortgage interest rates, and not dropped them. It just seems Bernanke has been saying one thing to the homebuilders but doing another to sabotage their survival.

There is good reason to be disappointed in President Obama. What he has done is just not good enough. It seems he was promising us more, but it appears we misunderstood those great speeches he gave us. The motto, “Change We Can Believe In” was just part of a darn good speech.

Thanks for reading, Jerry

Tuesday, June 2, 2009

President Obama’s Economic Recovery Will Continue To Sputter

President Obama’s auto task force has reported that if GM goes into bankruptcy, then the bondholders would need to take a 10% stake in the restructured company in exchange for their $27B they hold in GM corporate bonds. The re-emerged downsized GM could acquire another $40 billion in loans, which would be in addition to the already nearly $20 billion they have already received. It appears that the bondholders have been squawking over their deal. I say, too bad. Suck it up or loose it! Where is their “shared sacrifice?” as President Obama has demanded from the workers, and all those peripherally connected to the auto industry? Didn’t anyone tell the bondholders that investment is a risk and not a guarantee; and, that this is a bankruptcy unraveling? The UAW health care group will receive 17.5% ownership stake in exchange for the $20B owed them by GM. The U.S government will take a 60% stake in the company, while Canada will own a 12% piece of the pie.

And then there is the bankruptcy of Visteon Corporation, and Metaldyne Corporation both of which supply parts and chassis respectively for Ford Motor Company.

Automaker sales have plunged 37% this year through April, according to Bloomberg News.

The auto task force wants to see the newly-government owned GM company manufacture future cars in China. This sounds like more of the same strategy of outsourcing American jobs. Ship good paying manufacturing jobs overseas where they can be made cheaply, adding to our trade deficit, unemployment problems, further erosion of wages, and a diminished domestic tax base. This is more of the failed Reaganomics-style policies that failed the nation in the past. Haven’t Democrats woken up yet? Oh, I forgot, many are a part of this problem. Aren’t they?

Robert Reich pointed out in “What Industrial Policy Should Be”, 5-19-09, “So tucked into the latest version of climate legislation unveiled this week by the House Energy and Commerce Committee is a provision that doubles to $50 billion loans to help auto makers comply [to fuel economy targets].” Will such research and development, as well as design and manufacturing be done domestically? Or, will that be outsourced, too?

Ralph Nader and Robert Weissman wrote a letter addressed to both Senators Dodd, and Frank strongly suggesting that the Congress exercise their oversight powers regarding Obama’s consideration of bankruptcy for Chrysler and GM, “or other irreversible moves until after the task force plan has been subjected to close and careful review via thorough Congressional hearings.” It does not appear that such considerations will be honored. Just get rid of middle class jobs altogether appears to be the mantra of the nation’s elite. The richest 400 Americans, who have a net worth of $1.7 trillion, based on 2008 figures, which is around 10% of our GDP, want the welfare state kept in place just for themselves. Remember, they got this rich based on shoddy regulation of the financial industry, and the government’s allowance of over-leveraged mortgage-backed securities, as well as the credit default swap scam that kept the high roller financial bankstas, who had been betting against gains, even richer.

According to Les Leopold, in his piece “Fear and Looting in America…” in 1982, the top 400 of America’s richest, their net worth was $604 million; but, by 2008, this net worth had grown to $1.56 trillion!

It seems that the White House has grown so far removed from the collapse of the economy that there won’t be a recovery strong enough to buy even cheap foreign-made GM cars. What we have heard from the media bobbleheads is how the economy has picked up in May. “Hurray! Has a recovery begun? Will consumers continue to spend money they cannot afford to part with? Let us sure hope so! They better stop saving 4% of their incomes and go back to a zero savings rate. Maybe they will start borrowing again, too.” wrote that “Personal savings as a percentage of personal income was 5.7% in April, compared with 4.5% in March.” Americans are now getting it. They better save more and spend less.

The bobbleheaded media pundits cannot see the forest through the trees. What happened in May? Well, there were graduations: college and high school. People bought gifts for the graduates. They traveled to college communities to attend these events. They ate in restaurants and bars. High schoolers bought prom dresses, and accessories. College graduates went to department stores and purchased, probably on credit, a few outfits for their interviews. There may even have been a few house parties. OH NO. WE CANNOT HAVE THAT NOW!

I believe such spending can boost the economy a few percentage points. The AP news service reported that the Consumer Confidence Index rose from 40.8 to 54.9. Macy’s Inc., Apple, and Best Buy Co. saw an increase in sales. Such data makes temporary sense. Families may actually spend money they don’t have on short, and local vacations in the coming weeks. Watch credit card debt increase over the next few months. Has anyone noticed creeping gas prices?

Wages have remained stagnant for many. Foreclosures seem not to be taking a rest during this rise in consumer spending. The private economy continues to shrink shedding jobs at a pace of more than 600,000 a month over the last half-year. Where will all these new college graduates find jobs? Will they earn enough to pay down their student loan debts or will they declare bankruptcy? If some are lucky, they will find work in the public sector getting experience from jobs funded through the U.S. government stimulus package. The private sector surely will not be expanding anytime soon in order to bring on new employees. Households have seen their net worth fall down the well at a cost of $13 trillion.

Also found on Bomlat’s blog, “Real gross domestic product-the output of goods and services produced by labor and property located in the United States—decreased at an annual rate of 5.7% in the first quarter of 2009…estimates released by the Bureau of Economic Analysis.” We have seen GDP over the last 2 quarter fluctuate between 5.7— 6.3%. Other economists have stated that our real GDP is actually in negative to zero ranges.

Bomlat also reported that “intermodal volume of trailers or containers was off 19.1% from last year, with container volume down 14.2% and trailer traffic off 37.2%.” This data is not very reassuring that a recover is soon at hand. Can someone call Ben Bernanke and tell him so?

The stock market knows that it has no legs. That game is only for those who can jump in and jump out. It has its own rules separate from reality. It has no long term sustainability.

Fed Chairman Ben Bernanke will be finding $1.7 trillion worth of treasuries coming due. He is printing up $1.75 more treasuries to pay for additional deficit spending. Who is going to buy these bonds? It will be the Fed themselves, more than likely. Will there be a point when foreign central banks and currency buyers stop believing in the continued erosion of the US dollar through debt expansion? Will the price of these bonds be driven down, while interest rates move upward? Will this build a wall in the path of home mortgage lenders and new house builders? Both Bernanke and Geithner already know that business-fixed investment, and non-residential fixed investment, which makes up most of all business investment, is collapsing at an annual rate of 40%. Does this sound like the private sector will be growing? The Bernanke fantasy that our national recovery will realize a 3% growth rate next year, 4% in 2011, and 4.6% in 2012 is just gobbligook. Currently, our GDP is basically negative. He drinks too much Psycho Kool-Aid at lunch.

Economist Niall Ferguson has stated that our 2009 deficit will move above 12% of GDP. He also stated that the Fed will likely be buying $300 billion worth of treasuries this year, but they will probably find themselves having to open up their balance sheet to buy more than that. Economist Paul Krugman claims that the US is currently in debt about 60% of GDP. Will the rest of the world back away from financing our growing debt by purchasing virtually zero percent interest bonds? The U.S is basically producing nothing of tangible value to export in order to bring down the deficits.

China is very happy to see all of our manufacturing going over to their side, so we can keep buying their cheap stuff. But at some point, most Americans will not have any money to keep that going. And, if our debt exceeds our GDP, we no longer are a viable economy. Our currency could become worthless through hyperinflation. If we ship our auto industry overseas, then many jobs, which would be interconnect to it, would disappear, too.

The economist Peter Morici recently wrote that “unless the economists are wrong, this key forward looking indicator of economic health [Durable goods orders in March were down 0.8% and the consensus forecast calls for another 0.3% drop.] would likely indicate that the recession has some to time to run. Until consumers have the confidence to purchase big ticket items and businesses put cash into new technology, the economic recovery is not at hand.”

Michael Whitney stated it beautifully. “The current downturn is not really a recession at all; it’s more like a self-inflicted wound perpetrated by avaricious speculators who put a gun to the economy’s head and blew its brains out. The banks and Wall Street have created a capital hole so vast that the entire economy is being sucked into the abyss. And it all could have been avoided. Credit production is too important and too lethal to entrust it to profit-driven vipers whose only motivation is self-enrichment. The whole system needs rethinking and public input before Bernanke wastes trillions more trying to revive the same crisis-prone business model. If “credit is the economy’s life’s blood”, as Obama says, then it should be distributed through a government-controlled public utility. The real lesson of the financial crisis is that privatizing credit has been a disaster.” (The Real Lesson of the Financial Crisis,, 5-19-09).

Thanks for reading, Jerry