Economics Update

Well, it's official now for the British, they are in recession too.

Not surprisingly, the Pound has tanked and the dollar is generally up on this news.

The Ruble further weakened too.

We also now have ING warning that France’s AAA sovereign debt rating is at risk.

Meanwhile, on this side of the pond, the New York Stock Exchange has lowered its market capitalization requirement for companies on the exchange.

They delisted a record 53 companies last year, and my guess is that they are worried about breaking 100 this year, so they changed the requirement to account for a tanking market.

A more general indicator of economic activity, the rail freight traffic, has fallen sharply.

Generally, the high energy prices of 2008 favored the industry, but when total economic activity falls, so does rail traffic, even as it grows relative to trucking. (H/T Calculated Risk: Rail Freight Traffic Off Sharply in 2009)

In the intersection of banking and real estate, it appears that the regulators of Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLB) are seriously tightening up regulations because they are still engaging in risky activity.

I just want to note that I suggested that this might be an issue in March of last year.

Also, it appears that the inventory and foreclosure numbers are worse than you think.

Banks are not wanting to flood the market, so they are holding back on placing some of their foreclosures on the MLS and delaying foreclosures on properties in default, so there is a "ghost inventory" out there that is not showing up in the numbers.

In energy, oil was up today.

Jeebus, Chuck Todd is Stupid

Talking Points Memo noted the following bon mot at today's white house briefing:

And Chuck Todd just asked whether Obama would veto a stimulus bill that came to his desk that hadn't gotten Republican support.

I never noticed this on Olbermann, but Chuck Todd does not think on his feet well....No doubt because he is standing on his tongue.

Early Elections in Iceland

Because the citizens of that nation are experiencing the wonders of Milton Friedman's theories, and so they want to throw the folks out who created this clusterf^%$, with the attendant demonstrations and confrontations with police.

These folks are Viking stock, and I think that soon to be former Prime Minister Geir Haarde, who is not standing for reelection, realized that his head would be on a pike if he did not call for new elections.

We Need to Take Care of the Overpaid Part of "Overpaid and Incompetent" Too

Floyd Norris notes that the recent collapse of Wall Street may lead to a reduction in pay for bankers of all stripes.

I would further add that this is a very good thing.

He cites a National Bureau of Economic Research working paper, Wages and Human Capital in the U.S. Financial Industry, 1909-2006, which notes that wages in the financial industry are at an all time high.

One of the authors the recent runup in wages to, "A new era of financial innovation," and so the "The financial sector became once again a high-skill, high-wage industry."

Talk about not getting the point. The stock brokers and bankers in 1929 were not highly skilled or intelligent, they had just figured out a scam that allowed them to get paid for putting the rest of the poor house, and the same applies to the investment bankers in 2007.

Banking and investment exploded as a portion of the economy in the late 1920s and 2001-2005 because it became an easy way to take people's money. There was no real innovation, there was a simply pursuit of personal gain at the expense of the real economy.

Simply put, if you made robbing banks legal, the activity formerly known as robbing banks would explode.

Certainly, there was some additional talent attracted by this money, but the real attraction was that this was easy money for stupid people to make.

And anyone with half a brain, as Andrew Lahde so eloquently stated in his resignation letter could take them to the cleaners:

..... I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America. .....

But the important thing to remember here is that the, "low hanging fruit," continued to make excellent wages, and obscene bonuses anyway.

Too many people have been failing upward for years because who their daddy and mommy were, and a disproportionate number of them seem to be Harvard MBAs, like this guy.

People on wing pic courtesy of The Big Picture.

Elections Have Consequences

Barack Obama ends global gag rule.

Clinton Senate Replacement

New York Governor David Paterson has picked Kirsten Gillibrand to replace Hillary Clinton in the Senate.

She's a member of the Blue Dog caucus in the house (**blarf**), probably because she is in a Republican leaning district, but we have already seen some evidence of moderation, as she recently came out^* for marriage equality and the repeal of DOMA and DADT, so she is making nice with the gay community.

It appears that she has thrown a few elbows, and because of this she is not particularly popular with other members of her delegation.

Additionally, even if she moderates some of her views, I think that the fact that she has a 100% rating from the NRA, and that will antagonize many of the New York state Democrats, particularly Carolyn McCarthy, who is already threatening an aggressive primary challenge.

This is not surprising. Rep. McCarthy takes gun control very personally, as her husband was murdered, and her son gravely injured by the Long Island Rail Road killing spree of Colin Ferguson.

In any case, let's see how she does over the next year.

^*Pun not intended.

Never Start a Negotiation With a Compromise Offer

Because, of course the Republicans are demanding less stimulus and more tax cut.

Seriously, peel off one Senator, and tell the rest of the Republicans to go Cheney themselves.

Not only do they have a political win if the plan fails, they have a philosophical win too, because Keynesian stimulus refutes everything that they believe in.

Lilly Ledbetter Fair Pay Act Passes House

Therw were some minor changes, so the law allowing a greater statute of limitations on ongoing pay discrimination has to go back through the house, but it appears headed to Obama's desk in a matter of days.

As Kevin Drum notes, "All 56 voting Democrats supported the bill, and five Republicans joined in. Which ones? Arlen Specter plus all four of the women in the GOP caucus. Imagine that."

Lovely

We now have word that mass transit got the shart in the bailout package because they need to cut a few hundred billion out to accommodate the dumb-ass tax cuts.

This pursuit of 80 votes by Obama is not a smart move. Remember, Social Security was passed with out a single Republican vote in either house of Congress.

The pursuit of bipartisan support will make the bill worse not better.

I Hope That He is Not Serious

In his confirmation hearings, Timothy "Eddie Haskell" Geithner aggressively supported a strong dollar policy.

I understand that this is the conventional wisdom, because much of the money made in Wall Street comes from borrowing cheaply and lending expensively, because the strong dollar policy makes it an attractive reserve currency, but in the long run it's unsustainable.

He probably had to say it. I just hope that he's not another Bob "Under Investigation for Insider Trading" Rubin about this.

BTW, the Senate Finance Committee voted in favor of his appointment by 18-5 and sent him to the Senate floor.

On The List of Middle East Commentators Who I Thought I Would Never Link to ....

Muammar Qaddafi, yes, the Libyan colonel, writing in the IHT.

He suggest a unitary state encompassing Israel and the territories, which he dubs "Isratine".

I disagree with him, I think that this became impossible some time in the 1990s, and that today it is as nonsensical as suggesting a reconstruction of the USSR or Yugoslavia, actually more so than suggesting the reassembly of the USSR, as that separation was mostly non-violent.

There has been too much blood spilled in the last 1½ for it to work, and the trend world wide is toward the division of countries over roughly the same period.

That being said essay is well written and reasonable, so he, and/or whoever wrote/translated it with him, did a good job.

He is remarkably genteel and diplomatic.

There is an interesting nugget here, and it says something about the Arab view of the Palestinians, he is talking about the complete return of Palestinians to the region:

Further, a Palestinian state in the West Bank and the Gaza Strip would do little to resolve the problem of refugees. Any situation that keeps the majority of Palestinians in refugee camps and does not offer a solution within the historical borders of Israel/Palestine is not a solution at all.

This reflects, in an off hand manner the fact that the Arab nations with significant Palestinian populations expect most of them to simply leave if the opportunity arises.

It's been 60 years, and the idea that most of these people will want to leave what has been their home for all , or the overwhelming portion, of their life is unrealistic.

Even if Qaddafi's vision were realized, you would not see quite the mass migration expected, unless we saw the institution of something rather more extreme than the "genteel ethnic cleansing" that happens to non-Francophones in Quebec and Russian speakers in the Baltic Republics.

The truth is that, with the exception of Jordan, these sorts of policies are largely in place with things like prohibitions on owning land (Lebanon) and a denial of citizenship to Palestinians by virtue of being born in country (Saudi Arabia, Lebanon, and IIRC Syria, at least).

One interesting thing here is how, unrelated to his commentary, is the provision of aid and support has distorted the conflict, much as it has in Eastern Congo, where they have provided a base of operation for the remnants of the genocidal militias from Rwanda. (It's a pet peeve of mine)

Without the UNRWA providing free ghettos, many of the Palestinians would be full citizens of these countries, because it would simply have untenable to maintain refugee camps as such for so long, and they would be leading better lives today.

Economics Update

The weekly new claims for unemployment jumped last week by 62,000 last week, to 589,000, the highest level since 1982, and more than predictions.

The 4 week average was flat, and continuing claims were worse than predictions too, at 4.607 million.

If that weren't enough housing starts fell by 15.5% to 550,000, which, according to Calculated Risk,is, "by far the lowest level since the Census Bureau began tracking housing starts in 1959."

Mortgage applications fell by 9.8% last week, because interest rates bumped by 0.37%, and most of the action right now is ReFi.

Over in Asia, the Bank of Japan is buying corporate bonds, because the credits markets have frozen there, and China's economic growth fell to a 7 year low for the 4th quarter.

Meanwhile, it looks like the humongous loss phenomenon is moving from the banking giants to the regional banks, which may have a larger effect on business output, since they do a lot less of the high finance and a lot more lending to mom and pop businesses.

In commodities, steel production fell 1.2% in 2008, the first annual drop in a decade, while oil was up a few pennies today.

In currencies the dollar was down vs. the Euro and Yen, but up against the Pound...but then again, everything is up against the pound.

Good News from the White House

New executive orders from President Barack Obama, directing that the Guantánamo Bay dentition facility and the CIA's Gulag Archipelago of secret prisons be closed within a year.

He also ordered, "ll federal agencies and departments on Tuesday to stop any pending regulations until they can be reviewed by incoming staff."

It's nice to have people in the White House who aren't, you know, irredeemably evil.

But I still want war crimes prosecutions.

Toyota Beats GM in Car Sales in 2008

Inevitable, I guess, but the end of a 77 year run.

Wall Street Journal White Powder Mailing "Not Hazardous"

link

Not Enough Bullets: MerrilllLynch

Executives at Merrill-Lynch rushed their bonuses so as to beat the official takeover by Bank of America, December 29 instead of January or February.

The BoA deal closed January 1, and Merrill hurridly allocated, "about $3bn to $4bn," for bonuses, despite a $21.5 billion loss in 2008.

I guess that this is because their base salaries, probably more than $¼ million/year on the low end, were just not enough to incentivize them, because there are just so many investment banks aggressively hiring, and they would poach their valued employees.

Delightful.

Video: NSA Whistleblower Interview

Visit msnbc.com for Breaking News, World News, and News about the Economy

Another Bush Lie

Suit Jackets Required At All Times in the Oval Office



H/T Americablog

Oh Crap: Israeli Polling Numbers

Well, with the election in about 19 days now, the effect of the Gaza war is being felt, and the numbers are not good.

They are generally as I expected, with Kadima falling further behind Likud, down 4 seats, and with Labor picking up some ground because Barak's position as defense minister, and I see that Yisrael Beiteinu is up to 16 seats.

Whiskey Tango Foxtrot? That group of bigots might be the 3rd largest party in the 130 seat Knesset?

I think that Natanyahu would be a disaster, but this is just gone into the Twilight Zone.

About the only bright side are reports of a possible prisoner swap for Gilad Shalid, which might move the election out of the, "Just fracking crazy," category, and possibly even lead to a unity government.

Another Wingnut New Deal Myth Busted

I am not talking here about the delusional ramblings of people like wingnut welfare recipient^* Amity Shlaes, who suggests that capitalists put their money in their mattresses in Atlas Shrugged style in 1937 because of the "uncertainties" that FDR produced.

After all, that one has been debunked by a legion of economist including right wing darling Milton Friedman, with the only dispute being to what degree the cause was fiscal tightening in 1937 by FDR (Keynesian) or monetary tightening by the Fed (Chicago School).

Instead, I am talking about the suggestions by the Chicago School boys that the New Deal did little or nothing to fix unemployment.

As economist James Galbraith so ably notes, the people who want to show this do so by not counting employed people.

Actually, it's more than that, it's by counting the employed as unemployed.

He starts out with the figures must usually used by neoliberal economists, in which Stanley Lebergott seems to show that the 1937 recession returned unemployment to nearly its prior level.

It seems to be a damning indictment of the new deal, except, as Michael R. Darby noted in 1976, 3½ million employed individuals are not being counted in this graph.

As Lebergott notes in his own footnotes, the people on "Emergency Employment," things like the WPA and NRA (not the gun lobby) projects are simply not counted, because that is how the BLS counted employment in the 1930s.

What's more, not only are they not counted, they are counted as unemployed, which paints a very different picture, with the dashed line showing the unemployment numbers.

The critics of FDR are figuring unemployment numbers by using employment data ex-employment data.

While there may be a case, though I would disagree, that these people should be dropped from the employment rolls for counting purpose, as active duty military were until 1982, when they were added to artificially keep the unemployment rate below 10% by Ronald Reagan's BLS.

It turns out that if you take their argument, which is that government employment isn't real, and that private sector is what matters, you get a picture which an even more drastic drop in unemployment during the New Deal, in part because private sector unemployment did not peak at 25%, but because it peaked at 30%. (!)

So, now that we have dealt with that shibboleth, I actually found another interesting bit of information, from a handy chart of GDP and federal spending from 1930 to 1984, which allows me to do this GDP chart in both absolute and real (inflation adjusted) terms using CPI data available online.

It shows a fairly blistering decent growth rate in 1934, with blistering double digit growth in 1935 and 1936, and in 1937, the economy, in real terms, finally passes the 1930 economy, as opposed to 1941 in absolute terms.

This gives us an insight as to why Roosevelt listened to his Treasury Secretary, and cut spending: he thought, or at least his gut was telling him, that the economy had grown beyond the level of 1930.

^*She graduated with a degree in English from Yale's Jonathan Edwards College^†, never, as near as I can determine, has published anything on economics in a peer reviewed setting, and yet she is a senior fellow in economic history at the Council on Foreign Relations.^‡
†Ivy League Welfare too, I guess.
^‡The fact that her rise to prominence followed her 1988 marriage to right wing luminary "journalist" Seth Lipsky, former editor-in-chief and president of the faux "newspaper" the New York Sun seems to indicate that nepotism is involved, but compared to Bill Kristol, who would be flipping burgers but for who his father was, it's a minor example.^§
§Why doesn't the left support its ideological foot soldiers in the same way?