Bernanke’s Balance Sheet

August 31, 2009 by Leave a Comment
By the Editors, National Review
The Obama administration has two approaches to former Bush administration officials: Threaten them with prosecution (CIA interrogators, Justice Department lawyers) or reappoint them to office (the secretary of defense). Ben Bernanke, once known as “Helicopter Ben” but destined to go down in history as “Bailout Ben,” has been reappointed as chairman of the Federal Reserve, though there are critics, left and right, who might have dreamed in secret of the other approach.
Bernanke’s reappointment invites a fresh assessment of his management of the recent financial crises, including the much-criticized bank bailouts, and the chairman comes off surprisingly well. The unprecedented federal intervention into the financial industry organized by Mr. Bernanke was bitter but necessary medicine. Distasteful as these measures were, our choice was not between the bailouts and an ideal free-market approach, but between a problematic federal intervention and an even worse federal intervention, one more shaped by congressional Democrats than by the Fed; not Ben Bernanke vs. Milton Friedman, but Ben Bernanke vs. Nancy Pelosi. And the results, as they stand today, suggest that the approach adopted by Mr. Bernanke and Pres. George W. Bush represented the better choice.
Read the Full Story: By the Editors, National Review
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Asia Debt Holders Squirm

August 31, 2009 by Leave a Comment
HONG KONG – In June, Sami Caracand received a notice from Asia Aluminum Holdings Ltd., a Chinese company in which he had purchased $250,000 of debt. It asked him to support a deal to wind up the firm and sell its assets. In return, Mr. Caracand might receive 20 cents for each dollar of debt he held.
He had rejected an earlier offer from the company to pay him 27.5 cents for each dollar of debt because he felt the Hong Kong-registered aluminum maker didn’t adequately explain its financial troubles. “There was an issue of transparency,” says Mr. Caracand, an investor based in Dubai. “Not much information was given.” This time, convinced there were no more alternatives, he said yes.
Faced with a recalcitrant emerging-market borrower that owed them more than $1.2 billion, foreign creditors of Asia Aluminum had fought for their rights — and lost.

HONG KONG – In June, Sami Caracand received a notice from Asia Aluminum Holdings Ltd., a Chinese company in which he had purchased $250,000 of debt. It asked him to support a deal to wind up the firm and sell its assets. In return, Mr. Caracand might receive 20 cents for each dollar of debt he held.

He had rejected an earlier offer from the company to pay him 27.5 cents for each dollar of debt because he felt the Hong Kong-registered aluminum maker didn’t adequately explain its financial troubles. “There was an issue of transparency,” says Mr. Caracand, an investor based in Dubai. “Not much information was given.” This time, convinced there were no more alternatives, he said yes.

Faced with a recalcitrant emerging-market borrower that owed them more than $1.2 billion, foreign creditors of Asia Aluminum had fought for their rights — and lost.

Read the Full Story: BY PETER STEIN AND LAURA SANTINI, Wall Street Journal

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Politicians Duck Hard Choices on Deficit

August 31, 2009 by Leave a Comment
By Robert Samuelson, Real Clear Politics
WASHINGTON — The problem of the burgeoning government debt is mainly political, but the adverse consequences may be economic. The trouble is that we don’t know what those consequences may be, when they may occur, or even whether they will occur. Without some impending calamity, politicians of both parties recoil from doing anything unpopular that might bring the budget into balance over, say, the next six or seven years. The idea of anticipating and pre-empting future problems is not on their agenda.
Although the recent surge of budget deficits — the annual gaps between outlays and revenues, resulting in more federal debt — reflects the savage recession, the true cause is political. Deficits allow liberals and conservatives to maintain self-serving public positions. Liberals claim we can have more government (more health care, more education, more transportation) without taxing anyone but “the rich.” Conservatives promise that taxes can be cut without depriving anyone (retirees, veterans, cities and states) of existing government benefits.
Read More: By Robert Samuelson, Real Clear Politics
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AFL-CIO, Dems push new Wall Street tax

August 31, 2009 by Leave a Comment

   

The nation’s largest labor union and some allied Democrats are pushing a new tax that would hit big investment firms such as Goldman Sachs reaping billions of dollars in profits while the rest of the economy sputters.

The AFL-CIO, one of the Democratic Party’s most powerful allies, would like to assess a small tax — about a tenth of a percent — on every stock transaction.
Small and medium-sized investors would hardly notice such a tax, but major trading firms, such as Goldman, which reported $3.44 billion in profits during the second quarter of 2009, may see this as a significant threat to their profits.

Read More: By Alexander Bolton, The Hill   

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When the Rich Get Poorer, Look Out Below

August 24, 2009 by Leave a Comment
by  Mark Skousen, Human Events
“Any major shift in the financial status of the rich could have big implications…..Over the last century, the worst years for the rich were the early 1930s, the heart of the Great Depression.” — New York Times, August 21, 2009
On Friday, the New York Times had a cover story, “After 30-Year Run, Rise of the Super-Rich Hit a Sobering Wall.”
The financial crisis has hit the rich hard — the net worth of rich Americans has fallen an average 24% in the past year, according to a new Merrill Lynch Wealth Management report. The number of people with investable assets over $1 million has fallen from 3 million to 2.5 million. They have lost big money in real estate and stocks, their two biggest holdings. Even the price of Mei Moses Art Index has fallen 32% in the past six months.
The real question is: What is the impact of less wealth on the average American? The answer is: serious.
The wealthy, including business entrepreneurs such Bill Gates and independent investors such as Warren Buffett, have led the global economy to astonishing new heights over the past generation.
by  Mark Skousen, Human Events
“Any major shift in the financial status of the rich could have big implications…..Over the last century, the worst years for the rich were the early 1930s, the heart of the Great Depression.” — New York Times, August 21, 2009
On Friday, the New York Times had a cover story, “After 30-Year Run, Rise of the Super-Rich Hit a Sobering Wall.”
The financial crisis has hit the rich hard — the net worth of rich Americans has fallen an average 24% in the past year, according to a new Merrill Lynch Wealth Management report. The number of people with investable assets over $1 million has fallen from 3 million to 2.5 million. They have lost big money in real estate and stocks, their two biggest holdings. Even the price of Mei Moses Art Index has fallen 32% in the past six months.
The real question is: What is the impact of less wealth on the average American? The answer is: serious.
The wealthy, including business entrepreneurs such Bill Gates and independent investors such as Warren Buffett, have led the global economy to astonishing new heights over the past generation.
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7 Reasons to Worry About Next Week

August 24, 2009 by Leave a Comment
by Rick Aristotle Munarriz, Townhall.com
For the most part, the market has been rocking since March. The economy hasn’t exactly bounced back, but investors still feel confident bidding up the shares of most public companies.
Doing so could be a huge mistake.
Not every company is worthy of its upticks. If you don’t believe me, check out some of the earnings reports that are likely to go the wrong way over the next few days.
Let’s go over a few of the blue chips and seemingly recession-proof companies for which analysts see the arrows pointing down on the bottom line next week. Some of the names may surprise you.
by Rick Aristotle Munarriz, Townhall.com
For the most part, the market has been rocking since March. The economy hasn’t exactly bounced back, but investors still feel confident bidding up the shares of most public companies.
Doing so could be a huge mistake.
Not every company is worthy of its upticks. If you don’t believe me, check out some of the earnings reports that are likely to go the wrong way over the next few days.
Let’s go over a few of the blue chips and seemingly recession-proof companies for which analysts see the arrows pointing down on the bottom line next week. Some of the names may surprise you.
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Do This Before the Green-Shoot Bubble Pops

August 24, 2009 by Leave a Comment
by John Rosevear, Townhall.com
I know nobody wants to think about it, but I believe the market (and the economy) are still a long way from being out of the woods.
It seems like plenty of people don’t want to see them, but I’m seeing storm clouds gathering on the market’s horizon. I just spent a few minutes scanning headlines and this is what I saw:
one in eight U.S. households with mortgages was in foreclosure or behind on payments in the second quarter, The Wall Street Journal reported. That’s not “one in eight subprime mortgages” — we’re talking about one-eighth of all residential mortgages.
I could go on — there’s plenty of significant not-so-good economic news out there to choose from. But why does that translate to storm clouds on the market’s horizon?
Here’s why: Because we’ve had this big rally, which — to the extent it was driven by anything at all other than stimulus and bailout cash being shoved into the markets — was driven by the idea that a recovery would be underway by the end of the year.
by John Rosevear, Townhall.com
I know nobody wants to think about it, but I believe the market (and the economy) are still a long way from being out of the woods.
It seems like plenty of people don’t want to see them, but I’m seeing storm clouds gathering on the market’s horizon. I just spent a few minutes scanning headlines and this is what I saw:
one in eight U.S. households with mortgages was in foreclosure or behind on payments in the second quarter, The Wall Street Journal reported. That’s not “one in eight subprime mortgages” — we’re talking about one-eighth of all residential mortgages.
I could go on — there’s plenty of significant not-so-good economic news out there to choose from. But why does that translate to storm clouds on the market’s horizon?
Here’s why: Because we’ve had this big rally, which — to the extent it was driven by anything at all other than stimulus and bailout cash being shoved into the markets — was driven by the idea that a recovery would be underway by the end of the year.
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White House Deficit Explodes To $9 Trillion

August 24, 2009 by Leave a Comment
The Administration quickly and fairly quietly raised its budget deficit forecast  for the next ten years to $9 trillion from $7.1 trillion, an astonishing 27% increase.
The new estimate is much closer to the number that the Congressional Budget Office posted earlier this year.
One of the reasons for the change is that tax receipts are running below estimates due to the recession. The Administration believed unemployment would peak at 8%.
The shortfall in government revenue could continue for another year or more. The White House budget forecast robust GDP recovery in 2010 and 2011. Many economists expect the improvement will be closer to 2%. Unemployment will almost certainly remain above 9% next year and perhaps even into early 2011.
Tax receipts from businesses are also below forecast. A number of factors, especially weak consumer spending, have hurt many American companies worse than expected.
The alternatives for fixing the deficit problem are all bad. One is to raise taxes. A much higher burden on individuals would almost certainly wound a recovery in consumer spending. Higher taxes on enterprises will make it more likely they will cut more workers. It becomes a vicious cycle which ultimately adds to unemployment.
By 247wallst.com
The Administration quickly and fairly quietly raised its budget deficit forecast  for the next ten years to $9 trillion from $7.1 trillion, an astonishing 27% increase.
The new estimate is much closer to the number that the Congressional Budget Office posted earlier this year.
One of the reasons for the change is that tax receipts are running below estimates due to the recession. The Administration believed unemployment would peak at 8%.
The shortfall in government revenue could continue for another year or more. The White House budget forecast robust GDP recovery in 2010 and 2011. Many economists expect the improvement will be closer to 2%. Unemployment will almost certainly remain above 9% next year and perhaps even into early 2011.
Tax receipts from businesses are also below forecast. A number of factors, especially weak consumer spending, have hurt many American companies worse than expected.
The alternatives for fixing the deficit problem are all bad. One is to raise taxes. A much higher burden on individuals would almost certainly wound a recovery in consumer spending. Higher taxes on enterprises will make it more likely they will cut more workers. It becomes a vicious cycle which ultimately adds to unemployment.
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The Sound Money Institute is and educational organization dedicated to the stability and soundness of the United States Dollar. Faced with unprecedented pressure to spend beyond its means the United States Government has pressured the Federal Reserve Bank to monetize the debt or in other words they are printing currency to fund deficit spending by the US Treasury.

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