Mish's Global Economic Trend Analysis

Ron Paul Claims Chairmanship of Monetary Policy Subcommittee, Prepared to Subpoena Fed
Jerry Brown Says California Budget Deficit May Hit $28 Billion
Caught in a Massive Lie: Daily Show Comments on Bernanke's Lies Regarding "Printing Money"
Food Stamp Usage up 16.2% Nationally, over 20% in 13 States; Tables by State, Charts Nationally Since 1970 as % of Population
Wisconsin Governor-Elect Proposes Abolishing State Employee Unions
Is the Political Class Economically Incompetent or are they Simply Bought and Paid For?

Ron Paul Claims Chairmanship of Monetary Policy Subcommittee, Prepared to Subpoena Fed

Posted: 08 Dec 2010 10:25 PM PST

Proving that on occasion the little guy can indeed win, Ron Paul announced to tonight that he will be named Chairman of the Monetary Policy Subcommittee.

When asked if he would take over chairmanship of the subcommittee, Paul replied "The chairman of the financial services subcommittee, Spencer Bachus, has told me today verbally that I will be the chairman of that subcommittee. He was the one who appointed me as the ranking member and he is sticking to his guns and that I will have responsibility of that committee."

When asked about subpoenas and "audit the Fed", Paul went on to say that he can issue subpoenas but would need agreement from the chairman as well as speaker.

It's a good clip, also containing a discussion of proposed legislation to redefine the word "journalist" and redefine the word "publisher", both scary thoughts.

Paul would oppose such legislation as being contrary to the first amendment and likened measures to the book "1984".

"I have a much broader definition" said Paul. "We all should have those first amendment rights as if we are all journalists".

Congratulations to Ron Paul and thanks to all who emailed their support.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Jerry Brown Says California Budget Deficit May Hit $28 Billion

Posted: 08 Dec 2010 08:39 PM PST

Wasn't it just a few short months ago California balanced its budget, plugging a $19 billion hole? Indeed it was. Nonetheless, Jerry Brown now warns of a $28 billion hole for the next fiscal year and the state controller warns of more IOUs.

Please consider California Deficit May Reach $28 Billion as IOUs Loom

California's budget gap may widen to $28.1 billion over 18 months, according to Governor-elect Jerry Brown, who takes charge of the most-populous U.S. state next month. A cash shortage may force the use of IOUs by July, Controller John Chiang said.

The deficit estimate takes into account a $2.7 billion drop in projected estate-tax receipts, and compares with the most recent forecast of a $25 billion gap for the period, Brown said today at a public meeting of state officials. The cash accounts may be short by $2.3 billion within eight months, Chiang said at the meeting in Sacramento.

"I don't want to say it, but this could mean IOUs and more tax-refund deferrals," Chiang said.

Brown, a Democrat who takes office Jan. 3, faces a widening gap after negotiators closed a $19 billion deficit for the current fiscal year, which ends in June.

"California is facing a very serious budget crisis," Brown said. "This latest increase comes from actions that are taking place in the Congress that will have an effect on California."

The extra yield investors demand above top-rated debt for 30-year general obligations from California issuers reached 105 basis points yesterday, the most since the budget was enacted in October, Bloomberg Fair Market Value data show.

California allegedly "closed" a budget gap of $19 billion this fiscal year and now faces a $28 billion gap next year.

However, and as before, Democrats do not want to cut services and Republicans do not want to increase taxes. I have the perfect solution: Let's throw a party and give everyone cookies like president Obama just did, with Republicans tooting their party horns in agreement.

Oh wait. I forgot California, unlike the US has to have a balanced budget. In that case, let's rely on the ol' Arnold Schwarzenegger Play, this time on steroids, and "balance" the budget for the next three years by floating $3 trillion in bonds all at once.

Hedge funds and pension plans should love the idea seeing that they chased 3-year Walmart bonds a few weeks ago yielding a mere .7%.

Value is for sissies, at least until the bond market revolts (as it is now), with 3-year treasury yields at .94% and rising. This makes saps out of buyers of those Walmart bonds.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Caught in a Massive Lie: Daily Show Comments on Bernanke's Lies Regarding "Printing Money"

Posted: 08 Dec 2010 12:38 PM PST

Leave it to the Daily Show to express in a humorous way the blatant lies of Fed Chairman Ben Bernanke about "Printing Money". The amazing thing is Bernanke exposed himself, in his own words.

The clip notes an interesting discrepancy with what Ben Bernanke told 60 Minutes in his first infomercial on 60 Minutes in March of 2009 and what he said Sunday December 5, 2010.

Flashback March 15, 2009: Ben Bernanke on 60 Minutes- Complete Transcript

PELLEY Is that tax money that the Fed is spending?

BERNANKE It's not tax money. the banks have-- accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. so it's much more akin to printing money than it is to borrowing.

PELLEY You've been printing money?

BERNANKE Well, effectively. And we need to do that, because our economy is very weak and inflation is very low. when the economy begins to recover, that will be the time that we need to unwind those programs, raise interest rates, reduce the money supply, and make sure that we have a recovery that does not involve inflation.

Flash Forward December 2010: Lies, Half-Truths, and 100% Hubris on 60 Minutes; Deficit-Chicken Republicans; Middle-Class Crucifixion; Ron Paul Needs Your Support

Bernanke: "One myth that's out there is that what we're doing is printing money. We're not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way. What we're doing is lowing interest rates by buying Treasury securities. And by lowering interest rates, we hope to stimulate the economy to grow faster. So, the trick is to find the appropriate moment when to begin to unwind this policy. And that's what we're gonna do."

This is exactly why we need Ron Paul as chairman of the Monetary Policy subcommittee. Here is the Email I sent John Boehner who will replace Nancy Pelosi as the next Speaker of the House.

Dear Mr. Speaker

As Speaker of the House, you have a duty to watch out for all citizens of the United States, not just your own Ohio constituency or the bank lobby.

As such I kindly ask you honor the will of the people and appoint Ron Paul as chairman of the Monetary Policy subcommittee.

Thank you.

Mike "Mish" Shedlock

Note: Ron Paul got that Subcommitte - See Addendum 3

Please email House Speaker Boehner Regarding Ron Paul to let him know how you feel. That link will put in a subject line of Ron Paul for Monetary Policy Chairmanship.

Please email House Speaker Boehner Regarding the Budget. The second link will put in a subject line of $900 Billion Budget Compromise.

Just click on the links and type away to your heart's content. If your browser does not interface with email, then simply email Boehner at AsktheLeader@mail.house.gov

Addendum:

Reader "JD" writes ...

I watched the most recent Bernanke interview on 60 Minutes and was startled by one of Bernanke's responses to the interviewer. When asked how certain he was that QE2 would work, Bernanke replied: "100%!"

That reminded me of the preface to Nobel Prize-winning author Czeslaw Milosz's The Captive Mind:

"When someone is honestly 55% right, that's very good and there's no use wrangling. And if someone is 60% right, it's wonderful, it's great luck, and let him thank God. But what's to be said about 75% right? Wise people say this is suspicious. Well, and what about 100% right? Whoever say he's 100% right is a fanatic, a thug, and the worst kind of rascal."

I talked about the concept of being 100% certain previously as well. Here is the snip from Lies, Half-Truths, and 100% Hubris on 60 Minutes; Deficit-Chicken Republicans; Middle-Class Crucifixion; Ron Paul Needs Your Support

100 Percent Hubris

What if this does not spur hiring but instead spurs gasoline prices and food prices? Oh not to worry ....

Pelley: You have what degree of confidence in your ability to control this?

Bernanke: One hundred percent.

Bernanke is a man with 100% confidence who did not see the housing bubble, who did not see a recession, whose worst case scenario for unemployment was 8.5% when it was already over 8%. Bernanke cannot find his ass with both hands and a roadmap, yet he is one hundred percent certain about his ability to control things.

After everything blows sky high we just may hear a statement like this.

Addendum #2:

Caroline Baum has some interesting comments regarding 100% certainty in Bernanke's 21-Month Conversion Takes 60 Minutes

He probably wishes he hadn't said it, the part about the Federal Reserve not printing money and his 100 percent confidence in his ability to raise interest rates at the appropriate time to prevent an acceleration of inflation.

But he did. The Fed does (print money). And nothing is 100 percent certain in this world, except death and taxes.

So what on earth was Ben Bernanke thinking when he talked to Scott Pelley on CBS's "60 Minutes" Sunday night?

Compare and Contrast

Let's compare the Bernanke of March 2009, working on little sleep and lots of adrenalin to keep the markets functioning and economy afloat, to the Bernanke of December 2010.

Back then, Bernanke conceded that "It's hard to forecast where we're going." It is hard -- in both good times and bad. The uncertainty principle applies to both phases of the business cycle, not just a contracting economy.

Now, asked by Pelley what degree of confidence he had in his ability to act at the appropriate time to prevent inflation from accelerating, Bernanke said, "A hundred percent."

What's so troubling about the Sunday interview is that it wasn't Bernanke, the media-shy economist, talking. It was a politician attempting to bolster confidence in his constituents and support for his policies. That's not an ideal character trait for a central banker at a time when official interest rates, already close to zero, can only go up.

In the March 2009 interview, Bernanke said that the biggest risk was that the U.S. wouldn't have the "political will" to fight the crisis and would withdraw support for the economy too early.

After Sunday's interview, we no longer have to worry about the Fed's commitment to doing whatever it takes to promote a self-sustaining recovery. The real concern is policy makers won't know when they've done enough. If history is any guide, we can be almost 100 percent certain that they won't.

Addendum 3:

Proving that on occasion the little guy can occasionally win, Ron Paul announced to tonight that he will be named Chairman of the Monetary Policy Subcommittee.

For details, please see Ron Paul Claims Chairmanship of Monetary Policy Subcommittee, Prepared to Subpoena Fed

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Food Stamp Usage up 16.2% Nationally, over 20% in 13 States; Tables by State, Charts Nationally Since 1970 as % of Population

Posted: 08 Dec 2010 11:35 AM PST

The Wall Street Journal reports Food Stamp Rolls Continue to Rise

42.9 million people collected food stamps last month, up 1.2% from the prior month and 16.2% higher than the same time a year ago, according to the U.S. Department of Agriculture.

Nationwide 14% of the population relied on food stamps as of September but in some states the percentage was much higher. In Washington, D.C., Mississippi and Tennessee – the states with the largest share of citizens receiving benefits – more than a fifth of the population in each was collecting food stamps.

Click on the above link to see a table of all 50 states.

Sample Details

16.2% Year-Over-Year Change Nationally
39.1% Year-Over-Year Change in Idaho
28.7% Year-Over-Year Change in Nevada
27.2% Year-Over-Year Change in New Jersey
26.0% Year-Over-Year Change in Rhode Island
25.9% Year-Over-Year Change in Utah
25.8% Year-Over-Year Change in Florida
21.5% of population in D.C. on Food Stamps
20.4% of population in Mississippi on Food Stamps
20.1% of population in Tennessee on Food Stamps

13 states had greater than 20% gains in food stamp usage. Not all of them were housing bubble states. Idaho led the way with a 39.1% year-over-year change.

Six states had a 25% change or greater. Texas just missed at 24.6%

The food stamp program is now called SNAP. It stands for Supplemental Nutrition Assistance Program.

Reader Tim Wallace has a couple of national charts I wish to share. Click on either chart for a sharper image.

Snap Participants by Year Since 1970

SNAP as a Percentage of the US Population

Tim Wallace writes ...

SNAP numbers for September just came on line, 42,911,042 - up from 42,389,614 in August, an increase of 521,428 in one month.

Furthermore, SNAP participation is now up 5,992,094 from September of '09 and up 11,528,481 from September of '08 - just before the election based on "Change You Can Believe In".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Wisconsin Governor-Elect Proposes Abolishing State Employee Unions

Posted: 08 Dec 2010 10:24 AM PST

In the midst of fiscal insanity by Congress and the Obama Administration comes common sense proposals in Wisconsin as the governor-elect may try to gut public union bargaining power. Please consider Walker looks at showdown with state employee unions

Governor-elect Scott Walker raised the possibility of essentially abolishing state employee unions on Tuesday as one option to control rising employee benefits costs and eliminate the state's budget deficit.

Walker, a Republican, said he's looking at a range of options that would weaken unions, including eliminating their ability to negotiate with the state.

"Anything from the decertify all the way through modifications of the current laws in place," Walker said at a luncheon sponsored by the Milwaukee Press Club at the Newsroom Pub.

"The bottom line is that we are going to look at every legal means we have to try to put that balance more on the side of taxpayers and the people who care about services."

Walker's comments were an escalation of an aggressive posture he's taken with state unions as he prepares to take office on Jan. 3.

Walker said the state's red ink and his pledge to focus on economic recovery require cuts in workers' health and pension benefits.

"You are not going to hear me degrade state and local employees in the public sector," Walker said. "But we can no longer live in a society where the public employees are the haves and taxpayers who foot the bills are the have-nots."

As a short-term measure, Walker wants to require workers to make a 5% contribution to their pensions. State union workers have traditionally not contributed to their plans. He also wants to increase employees' share of health costs to 12% - up from 4% to 6%, depending on the bargaining unit. Those changes would save $154 million from January to June 30 alone.

Walker is following the path of other fiscally conservative governors, such as Indiana Republican Mitch Daniels, who used an executive order to rescind collective bargaining and union settlements for state employees on his first day in office in 2005.

Democratic Gov. Jim Doyle and outgoing Democratic leaders in the Legislature are working to pass 2009-'11 worker contracts in a lame-duck session, which Walker says would block him from achieving savings through cuts to union benefits, at least until the contracts expire in June.

The key question Walker faces is whether or not what he proposes is in violation of federal laws.

If outright abolishing unions would break federal laws, then gutting the effectiveness of those laws will have to suffice. However, some of those federal collective bargaining laws may change (hopefully) in the next US Congress.

It is disgusting that current Governor Jim Doyle wants to pass lame-duck measures the state cannot afford. In a sense, it is political-pandering insanity as it cannot do Doyle any good and it does go to show just how beholden politicos are to those who donate to their campaigns.

For further discussion, please see Is the Political Class Economically Incompetent or are they Simply Bought and Paid For?

After watching a $900 billion fiscally insane proposal gather momentum in Congress (see Cookies for Susie and Obama's "Temporary" Tax Compromise; Total Cost $900 Billion), the proposals of Walker are a breath of much needed fresh air.

Walker makes me want to stand up and salute just as does governor Chris Christie in New Jersey.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Is the Political Class Economically Incompetent or are they Simply Bought and Paid For?

Posted: 07 Dec 2010 11:31 PM PST

Inquiring minds are reading an interesting article in Forbes by writer Charles Kadlec regarding the Economic Incompetence of the Political Class.

The sovereign debt crisis now threatening Europe, as well as major American states and cities, discloses the sheer incompetence of a political class that has over-promised, under-delivered and squandered vast amounts of their citizens' wealth.

Greece, Ireland, Spain, Portugal, California, Illinois, Los Angeles and Chicago are simply the poster children for what happens when elected officials engage in reckless and irresponsible management of their economies, their banking system or their respective government's public finances.

California's budget deficit has soared to $25 billion, or more than 25% of total spending. And, according to a recent study, the City of Chicago's unfunded pension liabilities total $45 billion, or more than $40,000 per household.

Politicians may not be solely responsible for this fiscal mess. But they are responsible for using borrowed money to pay for current expenses until they had borrowed more than they now seem able to pay back.

The European strategy of enabling more borrowing while imposing austerity plans, including higher tax rates, on overly leveraged countries may prove counterproductive. Increasing tax rates slows growth, reducing GDP, employment and the tax base necessary to service the debt.

At some point, there is a risk that one or more European countries may be unable to avoid a de facto, if not de jure default on their debt, requiring a complete restructuring. And that creates the risk that the European Central Bank will be forced to bail out the political class by buying that country's sovereign debt and devaluing the euro--hence the current weakness of the European currency.

The sovereign debt crisis now encircling Europe may well prove to be a preview of what lies ahead for the political class in the U.S. Like their European counterparts, they may be participants in an end-game in which capital markets force a reassessment of debt-financed government spending, especially on transfer payments, government pensions and wealth-destroying investments in bridges to nowhere, green energy and other government boondoggles with negative rates of return.

There is much more in the article so you may wish to give it a closer look. It's very rare for me to completely agree with anyone but I find no faults in what Kadlec wrote.

Here's the pertinent question: "Why is Political Class Economically Incompetent ?"

The answer is actually very easy. Nearly every politician is beholden to someone throwing money into their campaign.

For example: public unions feed vast amounts of money into literally every election. Corrupt politicians go along.

In most major cities the politicos are in bed with the unions. In San Diego Mayor Jerry Sanders' "Radical Idea" to Cut Costs, I asked if Sanders was a hero or a liar?

What I did not know when I wrote that article was that Sanders was the former San Diego Chief of Police. Does that explain why his "radical" for rescuing San Diego exempts police and firefighters from the pain? Does that explain why Sanders, a Republican mayor, wanted to increase sales taxes to "save the city"?

Why yes it does, and that is called buying votes. And nearly every city in the country is in trouble for it.

Plunder!

Steve Greenhut's excellent book Plunder! describes the process. Here is my book review: Five Thumbs Up for Steve Greenhut's Plunder!

I do not have five thumbs, but if I did, it would be all thumbs up for Plunder! How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation by Steven Greenhut.

Plunder! takes a look at the perverse incentives that bring together corrupt politicians and public unions to rape taxpayers.

From the ever-growing $100,000 pension club, to the realities of unbelievable pay and benefits, to dispelling myths propagated by the unions, to public union scare tactics, overtime abuse, and pensions far beyond the taxpayer's ability to pay, Steven Greenhut covers it all, in painful detail.

I say, "painful" because Plunder! is meticulously researched, extremely well documented, and after reading the book you will see how public unions are robbing ordinary taxpayers, including you, unless of course you are part of the union mob.

Warmongers

The problem of course does not stop with public unions. Anyone opposed to warmongering is labeled "soft on defense" by the warmongering industries who donate billions of dollars to candidates who want "strong defense".

Bankers

The financial industry does not want reform and they will donate billions to any candidate willing to look the other way.

Former Treasury Secretary Hank Paulson and current Treasury Secretary Tim Geithner are both beholden to Wall Street in general, and Goldman Sachs in particular. Geithner did not even pay his taxes and the politicos in power did not care.

Running List of Unpunished Fraud, Coercion, Tax Evasion

I have a huge ongoing list of fraud and coercion at the very top, including Geithner, Bernanke, and Paulson but nothing will ever happen.

Please see FDIC Authorizes $1 Billion Lawsuits Against Failed-Bank Executives; Token Search for Low-Profile Scapegoats for details.

The Big Compromise

When all the political hacks (the worst politicians money can buy) get together to vote on a "compromise", no one ever gives up anything. Somehow in these compromises, more things we cannot afford get tossed onto the plate.

I am thoroughly disgusted with the most recent "compromise" that will add $900 billion to the deficit over two years. Everyone in Congress should know the bill is fiscal insanity. Yet the democrats and deficit-hawk hypocrites will vote for it anyway.

The "compromise" is so convoluted that I am wondering if Ben Bernanke himself persuaded the president to go for it.

Bernanke certainly has been pushing for stimulus. He defended his actions in a creampuff interview on 60 Minutes that was really nothing more than an infomercial begging for more stimulus.

Well Bernanke got what he wanted, and if it blows up he will get to blame Obama and Congress for it.

Please see Lies, Half-Truths, and 100% Hubris on 60 Minutes; Deficit-Chicken Republicans; Middle-Class Crucifixion; Ron Paul Needs Your Support for details on the infomercial.

After everything blows sky high we just may hear a statement like this.

Dr. Mr. Speaker

In Dr. Mr. Speaker I asked people to email incoming House Speaker John Boehner about the fiscal insanity of that $900 Billion compromise. Here is a portion of what I sent the speaker.

Dear Mr. Speaker

Polls show 75% of the citizens of this country place a priority on reducing the budget deficit.

Yet, somehow we see a compromise proposal from President Obama that goes back against his promises to tame the deficit.

We cannot afford this proposal. You know, I know it, and the public knows it. In fact, the only group supportive of this alleged "compromise" proposed by President Obama is Congress.

Congress Thinks It's Time to Party

To congress, the word "compromise" does not mean giving up anything you want. Instead, it means giving the other guy something you do not want him to have.

The process is much like asking a group of kids at a birthday party if they want cherry pie, chocolate cake, or fudge for desert and if there is no consensus winner, everyone gets a full slice of each, with chocolate chip cookies thrown in for good measure because that's what Cousin Susie likes. It's irrelevant whether or not Cousin Susie is even at the party.

I am thoroughly disgusted with Congressional "compromises" that look like a birthday party for 8-year olds. Yet that is exactly what we saw in this "compromise".

Chocolate Chip Cookies for Susie

Susie was not at the party. Nonetheless, like a bolt out of the blue, president Obama proposed that kiddies get two additional cookies not previously on the menu.

1. A two percent payroll tax reduction
2. A full, upfront deduction for equipment purchases, in lieu of depreciation

The deficit-busting problem is the huge out-of-the-blue payroll tax reduction coupled with the "temporary" extension of income tax reductions for everyone.

I am all in favor of cookies, especially tax-cut cookies. However, I want to know how the deficit-hawk hypocrites on both sides of the aisle intend to pay for them. The answer is they don't intend to, which of course is what makes them deficit-hawk hypocrites in the first place.

Overcoming Inertia

Inertia is difficult to overcome because those who want free handouts are the ones who donate money and pack every school board and town hall meeting in the country. They can and will get out the vote. Corrupt politicians willing to pander to unions and special interest groups go along.

The warmongers, homebuilders, banks and every special interest group in the country bribes candidates via campaign contributions.

The compromise vote goes something like this: "You toss a sweetener to the homebuilders and I will toss a sweetener to your defense contractor." With deals like that, the campaign contributions keep pouring in.

Perhaps we should elect lobbyists instead of Congressional representatives. At least we would know where people stood and why.

Certainly we cannot expect any Congressmen to read the bills, not even the speaker. In regards to healthcare legislation, Nancy Pelosi actually said "We have to pass the bill so you can find out what is in it"

Click on that link to see a nice video of that proud moment.

Sadly, the only people who know what's in these bills are the lobbyists. They know because they are the ones who actually write the key provisions.

Three Classes of People

When it comes to making changes, there are three classes of people.

1. Those who try to make needed changes
2. Those who don't
3. Those who recognize a need for change but sit back and mock others for trying

Sadly there are too many people in groups two and three. Yet fight on we must.

No Constituency for Honesty

Unfortunately, it's a very uphill battle because there is no constituency for honesty. Someone who wants to cut military spending and take on the unions gets no money from anyone.

Simply put, we have campaign contribution system that rewards graft, fraud, incompetence, political pandering, greed, and absurd compromises. Economically speaking, we get the worst politicians that money can buy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Mish's Global Economic Trend Analysis

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