FedUpUSA

Archive for February, 2010

Paul Solman sits down with former bank regulator and author Bill Black as part of his continuing series of reports examining bank eform and the future of Wall Street.

CPI Number Reported INTENTIONALLY INCORRECT?

Posted by Karl Denninger

Remember the market’s “cheering” of the “-0.1%” CPI-U reading (core) yesterday?

There’s a problem – it was wrong.

Look at the highlighted numbers.  Let’s multiply them up.

(5.966 x 0) + (.769 x -2.1) + (25.206 x -0.1) + (.347 x 0.4) / 32.288 = -0.12%, or -0.1%.

But it was reported as -0.5% in the line directly above (inverted tone.)

Oops.

I didn’t re-run the weightings for the entire series but a quick “eyeball” of the table shows that this should result in a CORE reading of 0.1% (positive), not the negative number reported.

Will the BLS admit to this error?  Who the hell knows, but if you have a calculator, you can verify that yet another game to “boost” the market was run, with desire effect – a roughly 1/2% spike in the S&P 500 futures right on the BOGUS data release.

Since this table is undoubtedly computed (indeed, if I was to dump the raw data into EXCEL I could have a spreadsheet do this literally in a fraction of a second) it calls into question whether this was an accident or an intentional distortion of the data at the BLS.

It also leads to a few other questions, none of which are very comfortable to consider, but all of which, unfortunately and in light of this report, we must.

For example, is the BLS simply publishing whatever the government wants it to, and then making up the numbers inside the report to hit that target?  Even a simple high-school cheat knows that you must “fix” the constituent numbers that go into a cheated result in order to not get (easily) caught; in a world where people don’t add things with calculators but instead have computers sum up columns and do the math it is essentially impossible that this sort of ”mistake” is an error. 

Rather, it is virtually certain that this “reported” value was in fact intentionally false, and the persons doing so were too clumsy to “fix” the evidence behind it so that it would “add up.”

We now officially live in a world where intentionally-incorrect data is published by our government for the specific intention of misleading the markets.

PS: This will, of course, be used to screw Social Security recipients out of their lawfully-mandated cost-of-living increases.  Count on that.  Oh, and don’t ask about the money you already got screwed out of from other similar “errors” that neither I or anyone else caught because they weren’t so clumsy as to fail to cover it up.

….the nation’s future now rests with Gen X (citizens in their 30s/early 40s) and Gen Y.

By Charles Hugh Smith

Gen Y, your time has come. Spend the next few years of devolution preparing yourselves to lead by example as one of The Remnant.

I received an important request from a 26-year old reader, Charlie O. I try not to give unsolicited advice more than four times a week, but since Charlie was kind enough to ask me to sketch a “wider context for the experience of a twenty-something in a rapidly changing America,” here goes.

This is one of the most critical tasks we face as a nation. The Boomers and their parents have crowded round the status quo’s Kool-Aid bowl for decades, and as a result the nation’s future now rests with Gen X (citizens in their 30s/early 40s) and Gen Y.Even at this late date, the Boomer-controlled government and mainstream media are pushing the status quo propaganda that all you need to do is get out there and take on more debt and spend, spend, spend, and pay more taxes, of course, and everything will be just fine.Here are Charlie’s comments:

I would like to ask if you could address some issues facing younger Americans in some of your future articles. I am 26, I have a degree, and I was going to become a History teacher, but after working in the school systems for two years and witnessing its dysfunction I decided not to waste my working years in its service. Since then I have left my graduate program, internship, catering job, my apartment and my car to become a traveling farm apprentice. I started in upstate New York, then went to South Florida and now I am on my way to Illinois for the next year (and quite possibly to settle down for a while).I simply want to convey my feeling that twenty-somethings are in a strange place. A lot of the articles about financial issues for us recent graduates that I come across seem to have a tone of admonishment as if we are “dragging our feet” or “can’t get it together,” when I know that many of us are savvy and doing our best. So — they’re useless, but it would be nice to have a wider context for the experience of a twenty-something in a rapidly changing America. 

Thank you, Charlie, for stating the critical task so well. It is truly essential to establish the wider context. Without an integrated understanding, then all actions will be mere flailing about, misguided and largely wasted.I know it seems like I’m always pitching my own work, but the fact remains that this “wider context” is precisely why I slaved away for a year to write the 140,000-word Survival+ and why I prepared a shorter version, Survival+ The Primer, for those who prefer a 140-page book to a 400-page book.Just off the top off my head, here is a rough sketch of the wider context:1. The status quo is doomed to implosion. Clinging to the propaganda that the American State/Empire is sustainable is self-destructive. Harbor no illusions.The status quo cannot be “reformed,” as I explain in the chapter “Insurmountable Barriers to Structural Reform.” The upper-caste Elites who thrive in protected fiefdoms are mounting a full spectrum defense of the status quo. Minor tweaks in parameters (“we’re raising the Medicare payment by $5 a month,” “city employees agree to a 3% pay reduction,” etc.) will not “save” structurally unsustainable systems.

2. Differentiate between simulacra of optimism and true optimism. The American “ethos” is supposedly “can-do,” but that has devolved to a charade, a mockery and a sham of optimism. What is served up as “optimism” (everything will be fine if you shut up, keep your head down, pay your taxes and follow orders) is in fact denial on a scale so massive and pervasive that it qualifies as a cultural psychosis.Accepting reality is optimism; denial is a sure path to self-destruction.

3. The American economy/Empire/State has a financial and cultural sickness unto death. Chimeras, illusions, delusions, denial, simulacra and facsimiles abound; artifice and propaganda rule the corporate airwaves and the State machinery. One way to start clearing your mind of propaganda is to stop watching MSM (mainstream media) TV and listening to MSM radio. Read more, watch less. Ask cui bono of all statements: to whose benefit?

4. As I noted in Why I am Optimistic, this devolution is a cause of optimism; it is truly deranged to fear the implosion of Empire, debt-serfdom, the drug-war/gulag complex, the State ruled by Protected Fiefdoms which strip-mine the middle class and the impoverishment imposed by a Financial-Rentier Power Elite.

5. Understand that the Financial-Rentier Power Elite controls the productive wealth of the nation. That is the key context to keep in mind when viewing the propaganda which attempts to present the Demopublicans as “your only choice.” Both are owned lock, stock and barrel (“captured” is the current word for this) by the financial Elites.

Frequent contributor U. Doran submitted an excellent portrayal of this reality: The Economic Elite Have Engineered an Extraordinary Coup, Threatening the Very Existence of the Middle Class.Here is researcher G. William Domhoff’s summary:

In terms of types of financial wealth, the top one percent of households have 38.3% of all privately held stock, 60.6% of financial securities, and 62.4% of business equity. The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America.

For reasons too complex to go into here, it is the top 1% which have the political power; the other 9% are wealthy but not politically dominant except at a local level (i.e. the real estate development interests who typically control local politics).

6. If you follow this through, it is easy to see what “the rest of us,” especially young people should do: most importantly, do not take on any more debt for any reason. The Financial Plutocracy feeds off debt. It is the lifeblood of their wealth and of your impoverishment.

7. Do not count on the Savior State to pay your bills and arrange your life. As difficult as it may be, make other arrangements to care for yourself and those you care about. The Savior State has two options: destroy the currency via inflation so your Social Security check will buy a loaf of bread, or it will default on its debts and entitlements. There is not enough real money in the Universe to pay all the promises the State has made.

8. Base your self-worth on integrity, not on what you own or wear. Create an independently constructed sense of self (Survival+ 101) which exists independently of the mass media/marketing complex (“you are nothing unless you own what we’re selling”), the State (“you exist to pay taxes and take orders”) and the Plutocracy (“you exist to consume and make us profit and to toil as a debt-serf”).

9. Invest in yourself, not with student loans tossed into the maw of academia, but in your own experiential skillsets, social network/social wealth and well-being. Focus your energies on radical self-reliance which is founded on reciprocity (“to take care of Number One, start taking care of Numbers 2 through 9″–Survival+ 101).

10. Study, join, participate and lead voluntary, transparent, non-privileged parallel structures which exist independently of the status quo Corporatocracy and Savior State.The mainstream media has marginalized the late 1960s/early 1970s Counterculture, but as a participant I can assure you it was a truly radical idea and structure, being entirely voluntary, transparent, non-privileged, networked, reciprocal and independent of the State and predatory/crony corporate interests.I learned to fear the State. So-called “Progressives” who naively see the State as their benefactor and Savior never crossed the State’s machinery of suppression. If they had, they wouldn’t be so naive. The Counterculture solution was to opt out as much as possible, and that remains the best, most productive alternative to debt-serfdom, resentment and a soul-draining passivity.As Rome crumbled, opting out was the only solution. Reform was impossible due to the entrenched interests who held sway. Taxes went up to feed the protected Elites, crushing the dwindling productive class. Government edicts were ignored, the currency was debased, etc. etc.–all the symptoms of terminal decline we see in abundance today.

11. Opt out means: pursue self-sufficiency, build social capital (Survival+ 101 again) and skillset capital, slowly assemble and own your own means of production. Seek resilient communities and entrepreneural networks. Seek to fill a niche of need; as a default setting, focus on the FEW resources: food, energy, water. Minimize debt, income and thus taxes. Render unto Caesar what is Caesar’s, but have as little to do with Caesar as possible, with one exception:

12. Vote. Always vote, no matter how futile the gesture may seem. Vote against the incumbents, and for any voice of reason, innovation and courage (meaning anyone who says the status quo is unsustainable and borrowing trillions more to prop up Protected Fiefdoms is only hastening the implosion). Ignore party affiliations as just more mist generated by the propaganda machines. Vote for Third-Party candidates and independents.

13. A New American State is possible and indeed, inevitable. Right now the corrupted, venal, rapacious American State is dominated and controlled by parallel shadow structures of privilege which operate behind the facade of legitimate governance. The apparently powerless voluntary, transparent, non-privileged parallel structures which are slowly self-assembling will be the template for the New American State.Yes, there is a role for government, if it is truly transparent, limited in scope and under the control of an engaged citizenry. Such a New State becomes possible when the current State implodes into insolvency.

14. Be productive. Even if you’re not being paid, be productive. I pick up the trash on the curb and in the street around my neighborhood; that small work is unpaid but productive. Beauty (flowers, art, live music, etc.) is a form of social capital; ugliness, trash and passivity are core elements of the cultural sickness unto death.

15. Seek a life of hybrid work: some paid, some unpaid, some grunt work, some creative, some community/family/networked, some individual. The structural instabilities which are devolving the status quo are large-scale, but the opportunities for well-being and full-spectrum prosperity are small, local, regional, networked and individual.You are what you do every day. When 20% of the populace have opted out then the Pareto principle suggests their influence will grow dramatically. Become one of that 20%.There are no “disabled” people except the severely mentally ill and people who have lost all motor control. People now dismissed as “disabled” can perform useful tasks: maintaining “eyes on the street” is a useful task. Taking care of pets is useful and life-affirming. Much work can be performed online.

16. Invest in your own health by eating well, cooking well, sharing good food, and by stretching, being fit and working productively.

17. Turn off the TV, iPod, iPhone, PDA, radio, gaming device and computer for several days a week. The digital fire hose destroys reflection, contemplation, and appreciation; it fosters distraction, disorientation, anxiety, distorted thinking, depression, and passivity, which is the mortal enemy of truth, creativity, innovation, growth and beauty.

18. Prepare for leadership by leading by example. The Remnant leads by example, not talk-radio exhortations.

19. Grow some food, even if it a single tomato plant in a pot on the patio of an apartment. What you gain from this experience cannot be easily summarized.

20. Trust in failure, rejection and mistakes. They are the teachings we remember. Seek them out. Embrace the courage of learning from your mistakes and failures. Try something else; keep learning, keep building your own means of production and social capital (resilient, self-organizing, voluntary, entrepreneural, sustainable networks); seek social networks of reciprocity, avoid the Savior State mentality of entitlement/resentment.

21. Be accountable, first to yourself and then to others. Stop making excuses. The only operant phrase with any meaning is “I made a mistake, I’ll do better next time.”

22. Put another way: Nurture the Divine within.

23. The future will be more humane, more liveable and more fun than the tottering, rapacious status quo Empire of “eternal growth, rising consumption and never-ending debt-serfdom.” Focus on learning and innovation, exploration and trying things.

24. Learn from those elders who have not drunk the status quo Kool-Aid; you will find them mostly willing teachers. Even though Baby Boomers have failed on a generational level, as individuals many have achieved incredible mastery through unceasing work and dedication. Seek them out before they pass on.

25. Innovate with new social and economic models. We have been brainwashed to see consumer electronics as “innovations” (iPhone, iPad, etc. etc.) when the truly revolutionary innovations are social and economic structures which bypass the predatory crony capitalism which has the State by the throat and the insolvent State itself.The technology already exists to end our dependence on fossil fuels. What is lacking is the political will and the non-global-corporate/financial-rentier Elites structures to fund and build it. Don’t wait around for Big Oil to own the solar power plants; raise capital via new or hybridized non-Wall Street structures on a small scale and construct a distributed, parallel, resilient, locally owned network of providers of the FEW resources. (Food, energy, water)I have already rambled on for 140,000 words in Survival+. This is a taste of the integrated understanding I attempt to present in the book.Emerson’s dictim–”Do the thing and you will have the power”–came to mind as I read Charlie’s followup email:

As an organic farming apprentice I am getting strong, healthy, solid skills and friendships with some of the most honorable and interesting people I’ve ever known.

Congratulations, Charlie–you are now part of the Remnant.

 Of Two Minds

Real, Uglier American Unemployment

Citigroup Warns Customers It May Refuse To Allow Withdrawals

John Carney

The image of banks locking their doors to keep customers from making withdrawals during a bank run is what immediately came to mind when we heard that Citigroup was telling customers it has the right to prevent any withdrawals from checking accounts for seven days.

“Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change,” Citigroup said on statements received by customers all over the country.

What’s going on? It seems that this is something of an error. The seven day notice policy only applies to customers in Texas, Ira Stoll reports at The Future of Capitalism. It was accidentally included on customer statements nationwide.

“Whatever the explanation, it doesn’t exactly inspire confidence in Citi,” Stoll writes.  “But it’s hard to believe a bank would be sending out a notice like that on its statements.”

PDF

* Thank you to reader, J.R. for sending this in.

By Bill Bonner

02/19/10 Paris, France – It’s Goldman this. And Goldman that. And Goldman rhymes with greed. But it’s “Thank you, Mr. Blankfein,” when it’s money that you need.

Last week, Greek Finance Minister George Papaconstantinou slipped. He said not what he should have said, nor what he wanted to say. Unwittingly, he said something that was true: his country’s budget was “out of control.” He begged for more time to straighten it out. “We’re trying to change the course of the Titanic,” he said. The EU ministers gave him a month.

Mr. Papaconstantinou was speaking of Greece. But he described much of Europe, Britain, Japan and the US. And, in his fortunate metaphor, he prophesied. The big ships can’t be turned around. They’re going to sink.

Greece has been taking on water for many years. But this was the first time a finance minister of any country signaled to lenders that they should head for the lifeboats. Then, looking around, the press noticed that one of the lifeboats had already been launched. In it were no crying widows and no shivering orphans. Just one very satisfied Lloyd Blankfein, chief executive of Goldman Sachs. He had sold the Greeks their debt, said the papers; now he has sold it short.

Der Spiegel was first to break the story. Then, it came out in The New York Times. And then Bloomberg was on Goldman’s case. It wasn’t the mess that the Greeks had gotten themselves into that attracted the press attention, it was who had helped them get into it. Greece has been in default to its creditors in one out of two years since it got independence in the early 19th century. It is almost the definition of a poor credit risk. By what crook and what hook did the slippery Hellenes manage to get themselves into the Euro Club?

Creativity in art makes for masterpieces. Innovation in industry may lead to success. But when the financial industry schemes and canoodles, it invariably leads to disaster. Goldman Sachs, the most cunning of Wall Street’s financiers, is fundamentally a debt monger. Like a liquor store or a drug dealer, it earns money to the extent it is able to move its merchandise. The more the customer wants, the more Goldman earns. Whether the purchase is good for the customer or not is not Goldman’s concern. But just look at where the moneylenders have been most creative and you will surely find something you should not own.

In the present example, Goldman earned a total of $300 million. Immediately, the pundits kvetched that its work was both criminal and noxious. As to the noxious charge, Goldman needs no defense. Greece has always been a notorious drunk. Goldman is merely a bartender. The money monger seeks neither the ruin of his customer, nor his reformation

As to the criminal charge, Goldman says it was perfectly legal to structure the deal with Greece the way it did. Moreover, the authorities in Brussels have been aware of it for years…and even seemed to approve of it. Member states were allowed to “use derivatives to adjust deficit ratios,” The Financial Times revealed last Wednesday. Goldman arranged for Athens to swap cash for a stream of income coming from an airport and a lottery. Was it debt or equity? Had Goldman lent Greece money…or had it bought part of the national patrimony? It really makes no difference; whatever you call it, the Greeks had impaired their balance sheet. Goldman had merely made a buck helping them do it.

Goldman need not worry about persecution; it has friends in high places. Such as Mario Draghi. Mr. Draghi has a long and impressive résumé. Not only has he been a managing director of Goldman Sachs, in charge of business development in Europe, he’s also served as director general of the Italian Treasury and lately, Italy’s central bank governor. And now he’s up for the post of head of the ECB, to replace Jean-Claude Trichet, who is scheduled to step down next year. He is Goldman incarnate – banker, servant of the people, one of the financial world’s high priests from whose hands come unction, salvation…and cash.

In the US, Goldman is so tight with the feds it is known as “Government Sachs.” But what’s new? Governments always turn to rich, well-connected moneymen for finance. The Rothschilds largely financed Britain’s continental allies in its war against Napoleon in the early 19th century. Then, in the early 20th century, JP Morgan financed the British in WWI. In both cases, the lenders found innovative and often complex ways to keep the money flowing. Now, we are in the early 21st century and Goldman is providing the money.

But this time it is different. Borrowers are not at war. Instead, they borrow to blow themselves up. There is no foreseeable end to their borrowing. The Greek affair is peanuts. America’s ink is so red it looks as though it has cut an artery; this year’s deficit alone is $1.6 trillion. Japan, the world’s second largest economy, now borrows more than it raises in tax revenues. And while the Greeks run a deficit of 13% of GDP, in the UK the deficit is even higher at 14%.

Goldman is right; this is a good time to sell government debt. Better to get into the lifeboats too early than too late.

Regards,

Bill Bonner
for The Daily Reckoning