Usually Right: Barker's Newsbites: Friday, December 7, 2012

Friday, December 7, 2012

Barker's Newsbites: Friday, December 7, 2012

This one is dedicated to all those who fought - and won - the Second World War... following the attack on Pearl Harbor on the morning of December 7, 1941.

God bless...

21 comments:

William R. Barker said...: http://video.cnbc.com/gallery/?play=1&video=3000134005

* WATCH... THE... VIDEO...

(*SHRUG*); December 7, 2012 at 11:52 AM
William R. Barker said...: * TWO-PARTER... (Part 1 of 2)

http://www.nytimes.com/2012/12/08/business/economy/us-creates-146000-new-jobs-as-unemployment-rate-falls-to-7-7.html?hp

* AND FOLKS... THIS IS THE "POSITIVE" SPIN FROM THE NYT...

(*GUFFAW*)

Shaking off the effects of Hurricane Sandy and the looming fiscal impasse in Washington, the economy created 146,000 jobs in November, well above the level economists had been expecting.

* FOLKS... (*ROLLING MY EYES*)... KEEP READING...

The report released Friday by the Labor Department also showed the unemployment rate fell to 7.7%, the lowest level in four years.

* KEEP READING...

But the drop came largely from a decline in the number of people seeking work and counted as officially unemployed.

(*SMIRK*)

* FOLKS... IN ALL SERIOUSNESS... HOW MANY TIMES DO WE HAVE TO GO OVER THIS...???

* FOLKS... HERE... RIGHT NOW I'M GONNA "REPACKAGE" THE TIMES' SPIN... I'M GONNA GO STRAIGHT DOWN THE PAGE TO THE LAST FIVE PARAGRAPHS OF THIS 19 PARAGRAPH STORY... (WHAT THE TIMES' ROUTINELY DOES IN SAVING THE "BAD NEWS" FOR LAST IS CALLED "BURYING THE LEAD.") HERE WE GO:

“It’s not something to get too excited about,” said Nigel Gault, chief United States economist for IHS Global Insight. “The number is 146,000 and the average so far this year is 151,000. We’re pretty much in line with what we’ve been doing.”

Mr. Gault said Hurricane Sandy’s impact may have been seen in construction, where the number of jobs fell by 20,000, as well as in manufacturing.

The labor participation rate, which represents the proportion of the adult population that is either employed or actively looking for work, remains very low by historical standards.

At 63.6% in November, Mr. Gault said, it was just 0.1% above the low point for the current economic cycle, which was reached in August 2012.

“We’re not at the point in which the jobs market is strong enough to pull discouraged workers back into the labor market," he said.

* FOLKS... (*SHRUGGING*)... NOTE THE LABOR PARTICIPATION STAT...

* FOLKS... NOTE THAT TODAY'S "POSITIVE NUMBER" OF "JOBS CREATED" IS ACTUALLY 5,000 LESS THAN WHAT WE'VE BEEN AVERAGING ALL YEAR - AND THIS IS DECEMBER, WHEN PART-TIME "TEMP" WORKER NUMBERS ARE AT THEIR HIGHEST!

* FOLKS... YOU'RE NOT STUPID... THE NYT APPARENTLY THINKS YOU ARE, THOUGH... MAYBE THEY THINK YOU'LL JUST READ THE HEADLINE OR AT MOST THE FIRST COUPLE PARAGRAPHS...

(*SMIRK*)

* CONTINUING...

Among specific industries, the retail sector was especially healthy, adding 53,000 jobs as the holiday shopping season approached. In the last three months, retail employment has increased by 140,000.

* HOW MANY OF THESE JOBS ARE TEMP JOBS...??? HOW MANY OF THESE JOBS ARE PART-TIME HOURLY POSITIONS...???

* FOLKS... COM'ON... LET'S BE FUCKING REAL WITH ONE ANOTHER!

One notable point of weakness was the manufacturing sector, which lost 7,000 jobs in the month.

(*BANGING MY HEAD AGAINST THE WALL*)

* TO BE CONTINUED...; December 7, 2012 at 12:35 PM
William R. Barker said...: * CONCLUDING... (Part 2 of 2)

* OH...! AND GET THIS! (READ ON!)

The Labor Department revised job growth in previous months downward somewhat.

* DOWNWARD SOMEWHAT...???

October growth fell to 138,000 from an initial estimate 171,000...

* Er... THAT'S 33,000 "JOBS" THAT THEY SAID EXISTED THAT... er... NOW THEY'RE SAYING NEVER ACTUALLY DID! (HOW'S 33,000 FOR "SOMEWHAT," FOLKS...?!?!)

...and September’s declined to 132,000 from 148,000.

* ADD TO THE ABOVE 33,000 ("DOWNWARD SOMEWHAT") ANOTHER 16,000.

* FOLKS... YA CAN'T MAKE THIS SHIT UP!

Average hourly earnings in November rose 0.2%, the report showed.

(*CLAP...CLAP...CLAP*)

* AND WHEN "ADJUSTED" TO TAKE ACCOUNT OF INFLATION...???

(*SMIRK*)

By the widest measure of joblessness, unemployment also eased slightly: after factoring in people looking for work as well as those forced to take part-time positions because full-time work wasn’t available, the total unemployed fell to 14.4% in November from 14.6% in October.

* AGAIN, FOLKS... THE NUMBER TO PAY ATTENTION TO IS THE LABOR PARTICIPATION RATE. THEN... ONE NEEDS TO LOOK AT WHAT JOBS WE'RE ACTUALLY TALKING ABOUT ARE - FULL-TIME vs. PART-TIME... PERMANENT vs. TEMP... STUFF LIKE THAT.

The report for November was relatively strong, economists said...

* SOME DID. SOME DIDN'T. NOTE THAT THE NYT LEADS WITH THOSE WHO BUTTRESS THEIR CONCLUSION.

(*RUEFUL SMILE*)

Ethan Harris, co-head of global economics at Bank of America of Merrill Lynch, said, “It’s a pretty solid report. It’s consistent with a slow recovery in the job market.”

* NO... IT'S NOT "PRETTY SOLID" AND NO... THERE'S BEEN NO "RECOVERY."

* FOLKS... IN NOVEMBER OF LAST YEAR THE LABOR PARTICIPATION RATE WAS 64% - IN NOVEMBER OF THIS YEAR... 63.6%.

* FOLKS... IN DECEMBER OF 2006... THE LAST MONTH WHERE AMERICA HAD BOTH A REPUBLICAN PRESIDENT (ABET A RINO) AND A REPUBLICAN CONGRESS (ABET A RINO CONGRESS) THE LABOR PARTICIPATION RATE WAS 66.4%!

“It’s encouraging that with the fiscal cliff looming, the corporate sector seems willing to hire even with the worries about what’s going in Washington,” Mr. Harris said.

* FOLKS... MR. HARRIS IS FULL OF SHIT. (*GRIN*) NOTICE HOW I BACK UP MY CONTENTIONS WITH THE ACTUAL STATS...? FUNNY... THE NYT NEVER INTERVIEWS ME!

(*CHUCKLING*); December 7, 2012 at 12:35 PM
William R. Barker said...: http://cnsnews.com/news/article/73-new-jobs-created-last-5-months-are-government

Seventy-three percent (73%) of the new civilian jobs created in the United States over the last five months are in government, according to official data published by the Bureau of Labor Statistics.

(*CLAP...CLAP...CLAP*)

In June, a total of 142,415,000 people were employed in the U.S., according to the BLS, including 19,938,000 who were employed by federal, state and local governments.

By November, according to data BLS released today, the total number of people employed had climbed to 143,262,000, an overall increase of 847,000 in the six months since June.

In the same five-month period since June, the number of people employed by government increased by 621,000 to 20,559,000. These 621,000 new government jobs created in the last five months equal 73.3% of the 847,000 new jobs created overall.

* YEP... THE OBAMA RECOVERY CONTINUES APACE...; December 7, 2012 at 1:21 PM
William R. Barker said...: https://www.washingtontimes.com/news/2012/dec/7/government-borrows-46-cents-every-dollar-it-spends/

The federal government borrowed 46 cents of every dollar it has spent so far in fiscal year 2013, which began Oct. 1, according to the latest data the Congressional Budget Office released Friday.

* UP FROM A "MERE" 43-CENTS...

(*CLAP...CLAP...CLAP*)

* YEP... THE BOEHNER REPUBLICANS HAVE DONE SOME JOB SINCE THEY'VE CONTROLLED THE HOUSE...

(*JUST SHAKING MY HEAD*)

* I... WANT... BOEHNER... DEAD!

The government notched a $172 billion deficit in November, and is already nearly $300 billion in the hole through the first two months of fiscal year 2013...

* CHANT IT WITH ME, FOLKS... BOEH-NER DEAD! BOEH-NER DEAD! BOEH-NER DEAD!

Fiscal year 2013 began on Oct. 1 and so far the government has spent $638 billion and taken in just $346 billion in revenue.

* BOEH-NER DEAD! BOEH-NER DEAD! BOEH-NER DEAD! BOEH-NER DEAD!

* AND FOLKS... (*DRUM ROLL*)... UNDERSTAND THIS.... (READ ON!)

That [even though] tax revenue is up by $30 billion compared with last year, or about 10%!

* KEEP... ON... READING...

But spending is up even more - a staggering $87 billion, or 14%! (The CBO said much of that higher spending total is due to timing of payments month-to-month. Without those shifts, spending would be up $22 billion, or 4%.)

(*JUST THROWING MY HANDS UP AT THE PURE ABSURDITY OF IT*)

The government is poised to post another $1 trillion deficit in fiscal year 2013, which would mark the fifth straight year. Before that, the record was $438 billion, which came in 2008, President George W. Bush’s last full year in office.

* AND IF THAT DOESN'T TELL YOU SOMETHING THEN GET THIS... IN THE YEAR OF REPUBLICAN CONTROL OF BOTH THE HOUSE AND SENATE (2006) THE DEFICIT WAS A (RELATIVELY) MERE $248 BILLION.; December 7, 2012 at 1:38 PM
William R. Barker said...: http://www.foxnews.com/politics/2012/12/07/secret-service-under-investigation-over-loss-sensitive-files-on-metro/#ixzz2ENcFH8Wa

The Secret Service is the target of an investigation into an "immense breach" involving the loss of two backup computer tapes left on a Washington, D.C., Metro train that contained sensitive personal information about all agency employees, contacts and overseas informants, according to multiple law enforcement and congressional sources.

(*CLAP...CLAP...CLAP*)

The Secret Service acknowledged the incident surrounding the lost tapes...

(*JUST SHAKING MY HEAD*)

...but downplayed the security risk.

* OF COURSE THEY DID!

Sources said the "personally identifiable information" - or "PII," in government-speak - on the tapes includes combinations of the following: Social Security Numbers; home addresses; information about family members; phone numbers; dates of birth; medical information; bank account numbers; employment information; driver's license numbers; passport numbers; and any biometric information on file with the Secret Service.

* OH... IS THAT ALL?!

(*SNORT*)

* FOLKS... IT GETS "BETTER," THOUGH! REMEMBER MY PREVIOUS COMMENTS REGARDING HOW THE MEDIA OFTEN "BURIES THE LEAD" WHEN REPORTING STORIES WHICH DON'T JIBE WITH THE EDITORIAL LOYALTIES OF THE PUBLICATION? WELL... NOTE WHAT WE FIND OUT ONLY IN PARAGRAPH 4 OF FOX's REPORTING:

Sources said the tapes were lost on the Red Line of the Metro in 2008...

* 2008...?!?!

...by a young, low-level associate of a private contracting company that had been hired to transport them from Secret Service's Investigative Resources Management division at the agency's headquarters in the Penn Quarter section of Washington, D.C., to a secure vault in Olney, Md., where government agencies store contingency plans, documents and other backup material. The employee had volunteered to deliver the tapes because he lived near the location of the vault, but got off at the Glenmont, Md., Metro stop without the tapes, according to sources.

(*MIGRAINE HEADACHE*)

* CONTRACT EMPLOYEE VOLUNTEER...?!?!

* FOLKS... APPARENTLY THE SECRET SERVICE WAS "BROKEN" LONG BEFORE OBAMA!

Congressional and law enforcement sources told FoxNews.com that the Secret Service failed to comply with strict DHS-wide procedure for reporting and responding to privacy incidents where personally identifying information is lost, released or otherwise compromised. "They just covered it up so they wouldn't get in trouble, so they wouldn't be scrutinized for such a huge breach of security," one official said.

(*BANGING MY HEAD ON THE DESK*)

* FOLKS... (*SIGH*)... READ THE REST FOR YOURSELVES...; December 7, 2012 at 2:17 PM
William R. Barker said...: http://www.telegraph.co.uk/culture/books/booknews/9729383/Catcher-in-the-Rye-dropped-from-US-school-curriculum.html

American literature classics are to be replaced by insulation manuals and plant inventories in U.S. classrooms by 2014.

A new school curriculum which will affect 46 out of 50 states will make it compulsory for at least 70% of books studied to be non-fiction, in an effort to ready pupils for the workplace.

Books such as J.D. Salinger's "Catcher in the Rye" and Harper Lee's "To Kill a Mockingbird" will be replaced by "informational texts" approved by the Common Core State Standards.

Suggested non-fiction texts include "Recommended Levels of Insulation" by the U.S. Environmental Protection Agency and "Invasive Plant Inventory" by California's Invasive Plant Council.

The new educational standards have the backing of the influential National Governors' Association and the Council of Chief State School Officers, and are being part-funded by a grant from the Bill & Melinda Gates Foundation.

Supporters of the directive argue that it will help pupils to develop the ability to write concisely and factually, which will be more useful in the workplace than a knowledge of Shakespeare.

* FOLKS... NO DOUBT SCHOOL CHILDREN NEED MORE EXPOSURE TO "REAL WORLD" SKILLS...

(*PAUSE*)

* FOLKS... I MYSELF BELIEVE THERE'S TOO MUCH EMPHASIS ON SHAKESPEARE...

(*PAUSE*)

* BUT, FOLKS... MY GUESS... THESE DUMMIES ARE GONNA SCREW THINGS UP EVEN WORSE WITH THESE "NEW STANDARDS" THAN THEY ARE NOW!; December 7, 2012 at 2:35 PM
William R. Barker said...: * TWO-PARTER... (Part 1 of 2)

http://online.wsj.com/article/SB10001424127887324705104578151601554982808.html?mod=WSJ_Opinion_LEADTop

Democratic Party leaders, President Obama in particular, are forever telling the country that wealthy Americans are taxed at too low a rate and pay too little in taxes.

In 1958, the top 3% of taxpayers earned 14.7% of all adjusted gross income and paid 29.2% of all federal income taxes. In 2010, the top 3% earned 27.2% of adjusted gross income and their share of all federal taxes rose proportionally, to 51%.

So if the top marginal tax rate has fallen to 35% from 91%, how in the world has the tax burden on the wealthy remained roughly the same?

Two factors are responsible: 1) Lower- and middle-income workers now bear a significantly lighter burden than in the past; 2) The confiscatory top marginal rates of the 1950s were essentially symbolic — very few actually paid them.

(*PAUSE*)

(*DRUM ROLL*)

In reality the vast majority of top earners faced lower effective rates than they do today.

(*CYBAL CRASH*)

* TO BE CONTINUED...; December 7, 2012 at 4:24 PM
William R. Barker said...: * CONCLUDING... (Part 2 of 2)

In 1958, an 81% marginal tax rate applied to incomes above $1.08 million, and the 91% rate kicked in at $3.08 million. These figures are in unadjusted 1958 dollars and correspond today to nominal income levels that are at least 10 times higher. That year, according to Internal Revenue Service records, just 236 of the nation's 45.6 million tax filers had ANY income that was taxed at 81% or higher. (The published IRS data do not reveal how many of these were subject to the 91% rate.)

In 1958, approximately 28,600 filers (0.06% of all taxpayers) earned the $93,168 or more needed to face marginal rates as high as 30%. These Americans — genuinely wealthy by the standards of the day — paid 5.9% of all income taxes.

And now?

In 2010, 3.9 million taxpayers (2.75% of all taxpayers) were subjected to rates that were 33% or higher. These Americans reported an adjusted gross income of $209,000 or higher and they paid 49.7% of all income taxes.

In contrast, the share of taxes paid by the bottom two-thirds of taxpayers has fallen dramatically over the same period.

In 1958, these Americans accounted for 41.3% of adjusted gross income and paid 29% of all federal taxes.

By 2010, their share of adjusted gross income had fallen to 22.5%. But their share of taxes paid fell far more dramatically — to 6.7%.

(The 77% decline represents the single biggest difference in the way the tax burden is shared in this country since the late 1950s.)

The changes came about not so much by movements in rates but by the addition of tax credits for "the poor" and the elimination of exemptions for the wealthy.

In 1958, even the lowest-tier filers, which included everyone making up to $5,000 annually, were subjected to an effective 20% rate. Today, almost half of all tax filers have no income-tax liability whatsoever - and many "taxpayers" actually get a net refund from the government.

(Those nostalgic for 1950s-era "tax fairness" should bear this in mind.)

The tax code of the 1950s allowed upper-income Americans to take exemptions and deductions that are unheard of today. Tax shelters were widespread, and not just for the superrich. The working wealthy — including doctors, lawyers, business owners and executives — were versed in the art of creating losses to lower their tax exposure.

(For instance, a doctor who earned $50,000 through his medical practice could reduce his taxable income to zero with $50,000 in paper losses or depreciation from property he owned through a real-estate investment partnership. Huge numbers of professionals signed up for all kinds of money-losing schemes. Today, a corresponding doctor earning $500,000 can deduct a maximum of $3,000 from his taxable income, no matter how large the loss.)

Those 1950s gambits lowered tax liabilities but dissuaded individuals from engaging in the more beneficial activities of increasing their incomes and expanding their businesses. As a result, they were a net drag on the economy. When Ronald Reagan finally lowered rates in the 1980s, he did so in exchange for scrapping uneconomical deductions. When business owners stopped trying to figure out how to lose money, the economy boomed.

It's hard to determine how much otherwise taxable income disappeared through tax shelters in the 1950s. As a result, direct comparisons between the 1950s and now are difficult. However, it is worth noting that from 1958 to 2010, the taxes paid by the top 3% of earners, as a percentage of total personal income (which can't be reduced by shelters), increased to 3.96% from 2.72%, while the percentage paid by the bottom two-thirds of filers fell to 0.51% in 2010 from 2.7%. This starker division of relative tax burdens can be explained by the inability of upper-income groups to shelter income.

It is a testament to the shallow nature of the national economic conversation that higher tax rates can be justified by reference to a fantasy — a 91% marginal rate that hardly any top earners paid.; December 7, 2012 at 4:25 PM
William R. Barker said...: * FIVE-PARTER... (Part 1 of 5)

http://www.realclearmarkets.com/articles/2012/12/07/unstable_money_usurps_our_rights_wrecks_our_economy_100030.html

On July 20, 2012, the European Central Bank (ECB) suspended collateral acceptance for sovereign Greek debt within its own liquidity programs.

On the surface, it seemed like it would amount to a death blow to the struggling financial system in the Greek Republic, but it was really nothing more than a risk management tool for the ECB itself. Getting thrown out of the ECB general programs simply meant that Greek banks, those relying heavily on Greek government obligations to make up the bulk of their collateral liquidity regimes, were switched to a central bank backdoor. Instead of direct assistance, these Greek institutions took their tainted collateral to the Bank of Greece (the country's national central bank) and obtained liquidity through the Emergency Liquidity Assistance program (ELA).

Relatedly, we are treated to the unsurprising "news" that Deutsch Bank intentionally misvalued (allegedly) derivative securities in its credit portfolio.

It should be odd that this German behemoth found itself ensnared in the liquidity crisis raging in U.S. dollar denominations of U.S.-synthesized credit instruments on U.S. real estate, but unfortunately that is the modern system as it has evolved over time as the U.S. Federal Reserve found itself bailing out banks all over the globe in 2008 and 2009 as U.S. dollar liquidity imbalances nearly destroyed the modern global system.

To my mind there were three great monetary evolutions. The first was the wide acceptance of paper money as a near or equal substitute to real money or specie. The second evolution took place after the "lost decade" of the Gilded Age, the 1890's. In my missive last week I highlighted the underappreciated decade of the 1900's and its role in the development of money from publicly owned to central bank-determined elasticity, the political removal of the public check on currency inflation. The last great monetary evolution has been total removal of any real check on currency inflation through the wholesale change of money to virtual reality beginning in the 1960's.

The dramatic consumer inflation of the 1970's was but one symptom of monetary imbalance that occurred in the wake of the technological, philosophical and regulatory changes that began in the decade before. But rather than just impact the immediate years after that change, it was a paradigm shift in the function of financial intermediation that realized the worst nightmares of the Founders of the American political system: the close alignment of financial concerns with fiscal authority.

* TO BE CONTINUED...; December 7, 2012 at 5:34 PM
William R. Barker said...: * CONTINUING... (Part 2 of 5)

In 1965, President Lyndon Johnson began to ask for a voluntary reduction of credit flowing overseas. He said, "Let me make clear that the Government does not wish to impede the financing of exports, or the day to day operation of American investment abroad. But loans and investments that are not essential must be severely curtailed. Specifically, I ask the bankers and businessmen of America to exercise voluntary restraint in lending money or making investments abroad in developed countries."

This impulse to restrain American credit flowing to overseas destinations was born out of the growing use of the U.S. dollar as a global reserve currency in the Bretton Woods system. In the context of the early and mid-1960's, the U.S. had begun to run a balance of payments deficit. Despite a large merchandise and trade surplus, capital and money was flowing overseas in great quantity. The European continent, in particular but not exclusively, had returned to a measure of stability after rebuilding where investment returns were much higher compared to the low return, regulation bounded environment in the United States. This situation led to what is now known as the Triffin dilemma where a reserve currency finds itself at odds with national monetary needs.

As the volume of dollars flowed overseas to meet the demands of global finance as the reserve currency, faith in the dollar necessarily declined as dollar holders eventually came to realize that there were far too many dollars to convert to gold (the Bretton Woods system pegged the U.S. dollar to gold).

To restore that faith meant that U.S. monetary policy would have to be overly restrictive, but that would cause a money-driven collapse in finance globally.

The dilemma, then, was that if the U.S. wanted the dollar to be the reserve currency it must necessarily run a payments deficit knowing full well that doing so would risk the dollar's stability and therefore its place as reserve currency (this is sometimes called Triffin's paradox for that contradictory reasoning).

The result was, of course, a series of runs on the dollar and gold reserves in the U.S., the first in November 1960.

That led to what was informally known as the London Gold Pool where eight major Western nations pooled their gold in an attempt to manage dollar convertibility. At the same time, the U.S. government began what were essentially capital controls.

* TO BE CONTINUED...; December 7, 2012 at 5:35 PM
William R. Barker said...: * CONTINUING... (Part 3 of 5)

In 1963, the Kennedy Administration implemented the Interest Equalization Tax (IET) that discouraged foreign bond obligors from attempting to float bond sales in U.S. dollar denominations in New York City. The result was that money simply shifted from New York investment houses to commercial banks. The commercial banks then circumvented the IET by lending to those foreign obligors directly in largely syndicate credit format. It was the actions of commercial banks that caught the attention of the Johnson administration.

In late 1964 the Voluntary Foreign Credit Restraint program (VFCR) was devised and "asked" that, under guidelines issued in March 1965, commercial banks limit their lending to foreign obligors to 105% of levels reached in December 1964. Within the VFCR, as President Johnson noted, it was made clear that credit intended to finance U.S. exports would be exempt. In addition to the VFCR, there was another voluntary restraint called for in the area of direct investment overseas. Again in 1965, the Johnson administration implemented the Foreign Direct Investment Program (FDIP) asking that banks and businesses limit the dollar flow outside the U.S. to help close the balance of payment deficit.

In July 1966, British Prime Minister Harold Wilson found that country in the midst of a Sterling crisis. He observed that: "Action taken by the United States' authorities has led to an acute shortage of dollars and Euro-dollars in world trade and this has led to a progressive rise in interest rates and to the selling of sterling to replenish dollar balances."

In the words of the Prime Minister, the U.S. was attempting to settle the payment imbalance by using the dollar status of reserve currency to enforce adjustments on trade and finance partners rather than the domestic economy.

At the same time these capital controls were being voluntarily called, the U.S. government began to borrow massive sums in the twin financing of escalation in Vietnam and the rollout of the Great Society welfare/redistribution system.

* OUR UNDOING...

* TO BE CONTINUED...; December 7, 2012 at 5:37 PM
William R. Barker said...: * CONTINUING... (Part 4 of 5)

Financing of these programs was increasingly tied to dollar debasement in the form of bank reserve creation through the Federal Reserve's "even keel" policy.

* IN ENGLISH: THE POLITICIANS KNEW FULL WELL THEY WERE FUCKING THE AMERICAN PEOPLE.

At first, banks in the U.S. were seemingly onboard. But as the flow imbalance grew in proportion to imbalances abroad, money opportunities were presented in these overseas flows. In particular, what is now called the eurodollar market.

(Deposit rates were far higher than what domestic banks could offer due to a Great Depression leftover called Regulation Q. It prohibited payment of interest on sight deposits and enforced a low ceiling on demand deposits. In London, by contrast, banks that served non-British counterparties were almost completely exempt from regulation. That meant they were not restricted by Regulation Q, but it also meant that these London-based bank branches were not in any way encumbered by capital reserves.)

This more efficient arrangement allowed banks to operate on a smaller net interest margin, and thus it became a preferred destination for both depositors and intermediaries. Since the U.S. dollar was the reserve currency, most of this "money" was denominated in the U.S. dollar. As funding tightened domestically in the U.S., U.S. banks began to raise funds increasingly through this London-based eurodollar system for transfer back to the United States.

[T]he eurodollar market was also unique in that it relied heavily on interbank transfers for liquidity flow. As an interbank market, each individual participant would be free from the encumbrance of maintaining a large stock of liquid currency because the liability counterparties operating here were also banks that disfavored currency. Unlike banking regimes that were traditionally funded on deposits of real persons, this interbank market had little need for currency since each of the interbank counterparties were better served with just changes to accounts. That ultimately meant that transfers inside the eurodollar market were nothing more than bookkeeper entries on balance sheet ledgers rather than the actual transference of physical currency (let alone gold). It also meant that these "dollars" were themselves intangible bookkeeping entries far removed from anything resembling legal tender.

* FOLKS... I KNOW THIS IS COMPLICATED. (CARL... YOU HAVE A FRIGGIN' MBA... WERE YOU EVER TAUGHT THIS HISTORY...???)

This kind of leap in innovation made eurodollar functioning the most efficient (in terms of profitability) means of banking in the world. Not only was it largely devoid of the limitations of maintaining currency stocks, the traditional intermediary function was changed toward collateral arrangements. In the traditional bank system, credit flowed most often to a bank's own customers, who were likely already in a depository relationship with the bank. This familiarity formed the basis of intermediation between deposits and ultimate credit creation, but that was impossible in eurodollars. Instead, eurodollar participants turned first to syndicate-type lending and then to collateralize lending arrangements in the absence of obligor familiarity. Collateral arrangements had been a part of banking systems since the beginning, but here they began to develop in shorter and more liquid terms that offered banks a significantly reduced funding cost - making them even more interest efficient.

* BUT ALL THE WHILE THIS "EFFICIENCY" WAS BEING CREATED AT THE COST OF CREATING AN ARTIFICIAL - AND THUS EASILY MANIPULATED AND THUS UNSTABLE - WORLDWIDE "CURRENCY" REGIME.

* TO BE CONTINUED...; December 7, 2012 at 5:39 PM
William R. Barker said...: * OOPS... IT'S GONNA TAKE SIX POSTS! (Part 5 of 6)

Again, as a result of this profit efficiency, U.S. commercial banks began to open overseas branches, particularly in London.

Despite the voluntary capital controls of the Johnson administration, indeed largely because of them, the balance of payments deficit grew over the decade from $1 billion to nearly $11 billion by 1970. As you might expect in all things with government, those voluntary controls became compulsory on January 1, 1967, by Executive Order 11387 which authorized the Commerce Department to impose penalties on "excessive" direct investment abroad (ironically, since the Johnson administration was trying to curb monetary flows to ostensibly our allies, the authority for the executive order rested on Section 5(b) of the 1917 Trading With The Enemy Act).

By June 1969, the Federal Reserve finally moved in to curb the practice of raising "dollar" funds in London to "repatriate" back to commercial bank headquarters in the United States.

(First, the Fed imposed a marginal reserve requirement of 10% on eurodollar transfers above levels reached in May 1969. That was pushed up to 20% in November 1970.)

[B]y 1971 the entire system fell as the Nixon administration abandoned dollar convertibility altogether.

This is the moment that conventional wisdom has assigned as the beginning of the age of fiat, but that sentiment ignores the primary importance of this third evolutionary phase in the 1960's.

The rise of eurodollars as an engine of global liquidity and transference was at first resisted by both fiscal and monetary authorities under the gold convertibility standard as incompatible with traditional global finance. Once gold convertibility was removed the eurodollar market became the embraced and de facto global clearinghouse of liquidity.

* IN OTHER WORDS... NIXON WAS SIMPLY PLAYING THE HAND HIS PREDECESSOR - JOHNSON - HAD DEALT AT THE "GLOBAL TABLE" WHILE HE WAS PRESIDENT.

In early 1973 the Federal Reserve re-interpreted Regulations K & M to include foreign activities.

By May 1975, the Fed again reconstituted Regulation M and added changes to Regulation D to reduce the reserve requirement on eurodollar borrowings to 4%, which was completely eliminated in 1978.

* 1975... FORD; 1978... CARTER.

The reserve requirement and subsequent regulations have changed since, but the Federal Reserve system clearly began to accept eurodollars as a normal course of U.S. bank finance in the 1970's, a sharp divergence from policy in the 1960's. The figments of bank balance sheets became "real money" by default.

* TO BE CONTINUED...; December 7, 2012 at 5:41 PM
William R. Barker said...: * OOPS... MAKE THAT SEVEN PARTS! (Part 6 of 7)

Because capital controls in the 1960's were focused on, in President Johnson's words, "not essential" investments and loans, the eurodollar market itself was, particularly in its growth phase, unattached to global trade. It was simply a means for unrestricted bank funding for any and all purposes. That meant that credit inside the interbank system would not self-extinguish and would simply rollover in perpetuity.

* JEEZUS... (*JUST SHAKING MY HEAD*)

Second, and more importantly, this global currency market devoid of actual currency became the liquidity buffer against economic adjustments. In the age of floating currencies, countries with payments deficits could and did simply raise funds in the global marketplace through dollar-denominated bonds (and later euro-denominated bonds as European governments sought to capture their own share of all this liquidity in their own currency).

Trade imbalances no longer directed currency flows and imbalances themselves were no longer tied to economies.

Under the old gold standard, a balance of payment deficit had to be settled by an outflow of gold, what the U.S. was attempting to avoid in the 1960's, meaning the inevitable and painful money-driven economic downturn. But at least in that temporary despair the imbalance would self-extinguish.

In this new liquidity clearinghouse of floating currency arrangement of eurodollars, trade imbalances posed no monetary threat to national economic systems. Deficits could be absorbed through liquidity, i.e., sovereign debt issuance. Imbalances could now grow without much if any restraint, and certainly without official restraint, under the cover of moneyless money.

* FOLKS... I'VE GOTTA BE HONEST... I MYSELF AM TRYING - BUT FAILING - TO TOTALLY GRASP ALL I'M READING AND CONNECT ALL THE DOTS. FROM WHAT I DO "GET"... THESE BASTARDS FUCKED US!

The growth of this liquidity clearinghouse would develop along the lines of collateral availability and, more importantly, definition. The placement of sovereign OECD debt at the head of the "risk-free" spectrum simply aligned the banking interests of elasticity and currency inflation with the desire of various governments and political impulses to spend and be fiscally profligate without any monetary restraint.

* YEP... THIS PART I UNDERSTAND COMPLETELY!

* TO BE CONTINUED...; December 7, 2012 at 5:43 PM
William R. Barker said...: * CONCLUDING (FINALLY!) (Part 7 of 7)

Because there was only a quasi-official acceptance of these "dollars", political authorities, including the Federal Reserve, were at least one step removed, making this seem as though the free market were operating and underwriting all this government expansion. The misunderstanding of the nature of eurodollars, particularly the common misperception that they were and are tied to U.S. trade, seems to place all of this inside the realm of normal capitalist operation.

* BUT... IT... WASN'T...!!! IT WAS CRONY CAPITALISM! IT WAS INTERNATIONAL OLIGARCHY!

[T]hese markets are not anything remotely related to the concept of capitalism. They are the fullest, unrestrained representation of the desire of bankers to always and everywhere expand and inflate as much as humanly and technologically possible.

* YES...!!!

The advent of money without money removed any true power the citizens of each respective democratic nation had over the banking system.

(*NOD FOLLOWED BY A HEAVY SIGH*)

Indeed, in the decades since the 1960's, the domestic banking system in the U.S. and Europe now mirrors almost exactly the eurodollar system rather than anything remotely like the traditional depository system that still captures popular thought.

* AND, FOLKS... UNDERSTAND... IT'S NO "COINCIDENCE," NO "ACCIDENT," THAT MOST OF YOU WERE NEVER TAUGHT ANY OF THIS IN SCHOOL - INCLUDING THOSE OF YOU WHO TOOK COLLEGE LEVEL ECONOMICS COURSES!

The banks won the battle of the 1960's by showing the political powers that be a means to have it both ways (or so they thought until 2007) - profligacy and inflationary currency without the need for painful adjustment.

In 1990's parlance, Greenspan defeated the business cycle.

In a system that depended on actual currency or actual money, these imbalances would have never gotten so far or so dangerous to the point of existential turmoil because physical currency and physical money are, in the end, the public restraint on banking. (But that is incompatible with the stated goal of elasticity, and the age-old desire of bankers to dominate and scalp unlimited and leveraged rent from the real economy.)

The pathway of banking and financial evolution was not technological advancement, per se, it was the final removal of all obstacles to inflationary currency in the inexorable realization of phantasm monetary units.

In those phantasm units, the powerful interests of government and bankers re-aligned in a seemingly permanent co-dependency.

Not even the economic destruction of an entire continent seems to be able to dislodge it, as we hear time and again that the real economy cannot survive without the moneyless banking regime and all the increasingly ridiculous and lawless means by which it is intended to be preserved.

Only a determined political desire can wrestle control over the affairs of both the political and economical from elite, vested and entrenched interests that no longer service the greater societal good of human economic, social, and, ultimately, political freedom.

The usurpation and growing domain of government has been prepaid by the evolution of money and banking. The malaise in the economy is concurrent and causally related to the erosion of individual rights by way of financial or fiscal elasticity, the path of monetary progress laid down more than a century ago.; December 7, 2012 at 5:44 PM
William R. Barker said...: * THREE-PARTER... (Part 1 of 3)

http://online.wsj.com/article/SB10001424127887324001104578163491822943984.html?mod=WSJ_Opinion_AboveLEFTTop

America's shale gas boom is so promising that it has some people discombobulated — including, naturally, our politicians.

The same folks who complain about America's trade deficit now want the U.S. government to ban the export of liquefied natural gas (LNG).

This is one way to ruin what has been a very rare piece of good U.S. economic news.

* MAYBE... BUT MAYBE NOT... LET ME CONTINUE READING...

Unlike oil, which is a global commodity sold at a global price, the world natural gas market is fragmented by limits on supply. Gas has to be liquefied before it can be loaded on ships and transported. But with the natural gas price in the U.S. ($3.70 per million BTUs) so much lower than it is abroad ($17 in Japan, for example), suddenly LNG exports from the U.S. look like a potentially good investment.

* YES... FOR THOSE CONTROLLING THE NATURAL GAS...

And it's no surprise that is precisely what a report commissioned by the Department of Energy and released this week concludes. The experts at NERA economic consulting suggest that LNG exports would produce net economic benefits for the U.S. across a range of possible natural gas price changes. In all cases benefits increased as LNG exports increased.

* BENEFITS TO WHOM...???

* WHAT I'M GETTING AT HERE FOLKS IS SIMPLY THIS: THIS IS WHAT WE WERE TOLD ABOUT "FREE TRADE," ABOUT "DEINDUSTRIALIZATION." HOW'S THAT WORKED OUT FOR US...?

* TO BE CONTINUED...; December 7, 2012 at 7:26 PM
William R. Barker said...: * CONTINUING... (Part 2 of 3)

"Benefits that come from export expansion more than outweigh the losses from reduced capital and wage income to U.S. consumers, and hence LNG exports have net economic benefits in spite of higher domestic natural gas prices," says the report. "This is exactly the outcome that economic theory describes when barriers to trade are removed."

* AGAIN... "ECONOMIC THEORY" SEEMS TO HAVE LED TO A SITUATION WHERE PRETTY MUCH EVERY ITEM NOT GROWN (MEANING NON-FOOD ITEMS) AMERICANS BUY IS MADE OVERSEAS INSTEAD OF BEING MADE HERE.

This sounds like a case of the government discovering the law of supply and demand, but we should still be grateful. The Obama Administration has said the report will weigh heavily on its decision to allow LNG exports, and it will use any excuse if it wants to kill something.

Not that the report will mute the critics, who include Massachusetts Congressman Ed Markey and Oregon Senator Ron Wyden. Mr. Markey worries that exports will allow a "massive wealth transfer from working Americans to oil and gas companies."

* WELL... FRANKLY... I SHARE HIS WORRY. PERHAPS IT'S UNFOUNDED... BUT AGAIN... WOULDN'T IT BE BETTER TO HAVE BOTH THE LNG BUSINESS HERE AND THE BENEFITS OF LOWER DOMESTIC PRICING RATHER THAN TO HAVE THE BUSINESS HERE BUT THE LOW PRICE RESULTS OF THE BUSINESS EXISTING NOT TRANSLATING TO LOW DOMESTIC FUEL PRICES FOR AMERICANS...?

* YEAH... IN OTHER WORDS I DO WANT TO HAVE MY CAKE AND EAT IT TOO!

His economic logic seems to be that broadening the market for natural gas will raise prices for American consumers, never mind the other economic gains.

BUT... BUT... BUT... UNTIL OUR DOMESTIC MARKET IS TOTALLY SATURATED HOW DOES KEEPING OUR NATURAL GAS HERE HURT DOMESTIC EXPLORATION, DRILLING, REFINING?

By such logic, the U.S. should never export anything because foreign buyers might bid up the price.

* NO...

* BUT THERE'S A DIFFERENCE IN EXPORTING SCARCE COMMODIES vs. MASS-PRODUCED GOODS THAT AMERICANS ALREADY HAVE AND CAN BUY MORE OF CHEAPLY!

Thus Iowa farmers should limit their corn sales to the 50 states because Chinese demand has raised corn prices.

* YEAH... SOUNDS GOOD...

(*SMILE*)

* IN POKER TERMS... DON'T LET CHINA "BUY THE POT" AND SCREW THE AMERICAN "PLAYERS." (MEANING CONSUMERS.)

* TO BE CONTINUED...; December 7, 2012 at 7:27 PM
William R. Barker said...: * CONCLUDING... (Part 3 of 3)

In the real world, growing demand for a product leads to rising prices and then an increase in supply.

* AH... BUT WHEN SUPPLY IS FINITE... (*SHRUG*)

If world demand rises for LNG, natural gas prices will rise and U.S. producers will look for more gas.

* AGAIN... LET'S WAIT UNTIL WE'RE ACTUALLY SELF-SUFFICIENT AND AMERICANS ARE BUYING CHEAP AMERICAN PRODUCED ENERGY BEFORE WE MOVE ON TO MORE... er... THEORETICAL DISCUSSIONS.

Many U.S. drilling rigs have moved to extract more oil rather than gas in the last couple of years precisely because of a glut of gas in the U.S. market that saw prices fall to as low as $2 per million BTUs.

* WE NEED TO CONVERT FROM OIL USAGE TO LNG USAGE AS MUCH AS POSSIBLE AS FAST AS POSSIBLE...

* LET'S CREATE MORE DOMESTIC CUSTOMERS! (WOULDN'T THAT DO EXACTLY WHAT THE AUTHOR SEEMS TO BE CALLING FOR... A DEMAND CARROT TO SPUR PRODUCTION...?)

As exports rise, so will income for U.S. producers and workers.

* BUT AS LONG AS THERE'RE UPTAPPED DOMESTIC MARKETS...

(*SCRATCHING MY HEAD*)

[Some U.S.] companies that have made big bets on a future of relatively low natural gas prices in the U.S. Dow Chemical CEO Andrew Liveris is investing billions in new chemical manufacturing in America in the wake of the shale gas boom, which is to his credit. The Journal quotes him as saying this week that the U.S. should be "careful" to protect this comparative price advantage.

* SOUNDS REASONABLE...

But a ban on exports is the worst way to do that.

* PERHAPS IT IS... BUT THE AUTHOR CERTAINLY ISN'T CONVINCING ME.

(*SHRUG*)

By reducing demand, it would encourage less domestic drilling and gas supply.

* AGAIN... I TOO AM CALLING FOR SPURRING DEMAND - BUT SPURRING U.S. DEMAND WHILE KEEPING PRICES REASONABLE FOR AMERICANS!

Meanwhile, plenty of other domestic uses for shale gas could develop, such as light trucks that run on natural gas rather than gasoline.

* EXACTLY!

Mr. Liveris is asking the government to protect the price of his raw materials to protect his profit potential by limiting the investment opportunities for other businesses. Government's job is not to protect any company's business model or investment.

* GOVERNMENT'S JOB IS TO PROTECT THE INTERESTS OF AMERICA AND THE AMERICAN PEOPLE. I WANT EXPORTS... I WANT THE REST OF THE WORLD TO NEED U.S. PRODUCTS... BUT I'D PREFER THEY GET OUR SURPLUS... I'D PREFER WE PAY ONE PRICE (LOW) AND FOREIGNERS PAY ANOTHER PRICE (HIGH). AMERICA FIRST, BABY!

The real threat to Dow Chemical's natural gas supply is government limits on drilling.

* AND I'M AGAINST EXCESSIVE GOVERNMENT LIMITS ON DRILLING.

Governor Andrew Cuomo continues to imitate the French ban on hydraulic fracturing (fracking) with his moratorium in New York state...

* I'M AGAINST ANDREW CUOMO... I'M AGAINST THE BAN ON FRACKING...

...while the Environmental Protection Agency is angling to supplant the 50 states as the main shale drilling regulator.

* I'M AGAINST THIS AS WELL!

It makes no economic sense to complain that foreign markets are closed to American goods and then assert that U.S. interests are served by hoarding U.S. gas.

* YES IT DOES - OR AT LEAST YES IT CAN. IT DEPENDS WHAT COMMODITIES... WHAT PRODUCTS... WE'RE TALKING ABOUT.

American prosperity is best served by letting business exploit as many opportunities as possible for the U.S. market or for export.

* AMERICA FIRST MEANS THE U.S. MARKET FIRST! FIRST AND FOREMOST!; December 7, 2012 at 7:28 PM
William R. Barker said...: http://online.wsj.com/article/SB10001424127887324001104578165502877505148.html?mod=WSJ_Opinion_AboveLEFTTop

In Friday's Labor Department report for November, the U.S. unemployment rate fell to 7.7% from 7.9% in October...

* WAIT FOR IT... WAIT FOR IT...

...but mainly because another 350,000 workers disappeared during the month.

* I KNOW... I KNOW... WE'VE GONE OVER THIS TODAY ALREADY... WE'VE GONE OVER THIS SO MANY TIMES IN THE PAST THAT EVEN I'M SICK OF REPEATING THE FACT... BUT JUST IN CASE THROUGH REPETITION I CAN GET THROUGH TO ONE SINGLE PERSON...

(*SHRUG*)

[E]ven as payrolls are rising, albeit slowly, the overall labor participation rate has continued to fall. In November, the share of the available labor force that is working fell to 63.6%, which is down from 65.7% when the recession ended in June 2009.

* I KNOW... I KNOW... REPETITION...

* BY THE WAY... THE RECESSION NEVER TRULY ENDED. IT'S BEEN ONGOING! YES... I KNOW "TECHNICALLY" IT "ENDED" IN JUNE 2009... BUT WE ALL KNOW THAT THE "TECHNICALITIES" DON'T JIBE WITH REALITY ON THE GROUND... REALITY IN OUR EVERYDAY LIVES.

Three years into an economic expansion, the labor participation rate has fallen two full percentage points and three times this year (including November) it has reached the lowest level since 1981.

* THUS MY "RECESSION" POINT. THUS MY RUEFUL LAUGHTER AT THE PHRASE "THREE YEARS INTO AN ECONOMIC EXPANSION..."

(*JUST SHAKING MY HEAD*)

In the last year alone, the number of working age non-workers grew to 89.2 million from 86.8 million.

* YEP! ALONG WITH THE LABOR PARTICIPATION RATE YOU NEED TO FOCUS ON THE LABOR NON-PARTICIPATION RATE!

* FOLKS... PARTICULARLY "YOU WHOSE NAME MUST NOT BE MENTIONED"... I HOPE YOU'VE BEEN PAYING ATTENTION TO THESE NEWSBITES! THIS ISN'T THE KIND OF INFO HIGHLIGHTED BY THE NEW YORK TIMES, SLATE, AND HUFFPOST!

(*SNORT*) (*CHORTLE*)

So why are more Americans sitting on the labor market sidelines even as job opportunities expand?

* BECAUSE THE WELFARE STATE HAS BEEN EXPANDED OVER THE PAST FIVE YEARS. (AT LEAST THAT'S ONE REASON...)

Economist Casey Mulligan of the University of Chicago has documented that the huge increase in government benefits for not working — food stamps, disability payments and unemployment insurance — are increasing the incentive not to work.

(*SHRUG*)

Welfare payments that redistribute income from workers to mostly non-workers now exceed $1 trillion a year.

(*SHRUG*); December 7, 2012 at 7:49 PM
William R. Barker said...: http://hosted.ap.org/dynamic/stories/U/US_WASHINGTON_POST_DIVIDEND?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-12-07-16-53-14

* FILE UNDER: "FUCKING HIPOCRITES!"

The Washington Post Co. will pay its 2013 dividends before the end of this year to try to spare investors from anticipated tax increases.

* BUT... BUT... BUT... THEIR EDITORIAL STANCE IS FOR TAX INCREASES...!

Washington Post is the latest company to move up its quarterly payout or issue a special end-of-year payment to protect investors from potentially having to pay higher taxes on dividend income starting in January.

* "PROTECT...?!?!" BUT... BUT... BUT... I THOUGHT "THE RICH" HAD TO "PAY THEIR FAIR SHARE..."

(*SCRATCHING MY HEAD*)

The Washington Post's dividend payment also stands to benefit those with a significant stake in the company, such as Warren Buffett's firm Berkshire Hathaway. Berkshire is its largest shareholder with an estimated 1.7 million shares, which means it could get a roughly $17 million dividend payment.

* DO I HAVE TO SAY IT, FOLKS...?

(*SNORT*) (*JUST SHAKING MY HEAD*); December 7, 2012 at 11:56 PM

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Friday, December 7, 2012

Barker's Newsbites: Friday, December 7, 2012

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