June 3, 2011 archive

Our regular featured content-

• 6 in The Morning by mishima
• On This Day In History June 3 by TheMomCat
• Punting the Pundits by TheMomCat
• Evening Edition by ek hornbeck

These featured articles-

• More Ryan Lies About Medicare and Recycling His Failed Budget by TheMomCat
• Hilda Solis- Shill by ek hornbeck
• Moody by ek hornbeck

The Stars Hollow Gazette

This is an Open Thread

Crossposted from The Stars Hollow Gazette

The Shame of the Ratings Agencies: How Moody’s Blows It Again

By Zachary Karabell, Time Magazine

June 3, 2011

Moody’s, Standard & Poor’s, and Fitch are three of the most powerful actors in the global financial system. Their inability to discern the flimsiness of those “investment grade” mortgage-backed securities between 2006 and 2008 was one reason for the implosion of that system in 2008 when it became apparent that those trillions of dollars of securities and their derivatives were worth a lot less than it seemed. Yet for all the reforms since then, the ratings agencies remain largely untouched.

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Add to this yet another issue: the United States debt market of Treasury bonds and bills is one of the anchors of the global economy. The dollar remains the preferred – though not much loved – currency of international commerce. The purchase and sale of U.S. Treasuries is not something the world can halt if Moody’s or S&P or Fitch decide one day that there are credit questions. Until the Chinese yuan or the Brazilian real or the euro or some new synthetic currency replaces the dollar, and until there is a market liquid enough to absorb the trillions now invested in U.S. Treasuries, countries and institutions can’t just shift gears and divest of their U.S. holdings simply because one day ratings agencies decide that they should.

So it is patently ridiculous that these agencies are even in a position to hold court on U.S. creditworthiness. It’s not that their analysis of the challenges and pitfalls is useless: far from it. But it is the degree to which that analysis is supposed to be connected to action, and there is a world of difference between saying that company X is no longer investment grade and saying the same of the United States. At best, such a decision will roil markets and sow confusion; at worst, they will trigger a wave of selling and a race to the bottom that could make the mistakes of the ratings agencies during the financial crisis look small in comparison.

U.S. Treasuries are the world’s reserve currency.  They’re currently trading at less than 3% (as Colbert would say- the judgment of the market).  To think that any other currency could or would want to absorb the $600 TRILLION notional value of derivatives (1000% of the WORLD GDP) is as foolish as wishing the Sumerians had never invented cuneiform–

Some ten millennia ago the Sumerians began using clay tokens to count their agricultural and manufactured goods. Later they began placing the tokens in large, hollow, clay containers which were sealed; the quantity of tokens in each container came to be expressed by impressing, on the container’s surface, one picture for each instance of the token inside. They next dispensed with the actual tokens, relying solely on symbols for the tokens, drawn on clay surfaces. To avoid making a picture for each instance of the same object (for example: 100 pictures of a hat to represent 100 hats), they ‘counted’ the objects by using various small marks. In this way the Sumerians added “a system for enumerating objects to their incipient system of symbols.” Thus writing began, during the Uruk period c. 3300 BC.

Crossposted from The Stars Hollow Gazette

“I’m optimistic!”

That was the message from Hilda Solis, Secretary of Labor, in response to a jobs report that can only be described as appalling.

The Obama administration is in a complete disconnect from the Main Street economy and Ms. Solis looked pathetic and frantic as she denied reality on behalf of her employer.  It’s really not a good sign when you let a CNBC reporter PWN you like this.

Unless Obama can change these numbers (or at least the stink of failure that permeates his record) he is doomed no matter what nut job the Thugs put up.

The Mistake of 2010

By PAUL KRUGMAN, The New York Times

Published: June 2, 2011

In fact, in important ways we have already repeated the mistake of 1937. Call it the mistake of 2010: a “pivot” away from jobs to other concerns, whose wrongheadedness has been highlighted by recent economic data.

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Back when the original 2009 Obama stimulus was enacted, some of us warned that it was both too small and too short-lived. In particular, the effects of the stimulus would start fading out in 2010 – and given the fact that financial crises are usually followed by prolonged slumps, it was unlikely that the economy would have a vigorous self-sustaining recovery under way by then.

By the beginning of 2010, it was already obvious that these concerns had been justified. Yet somehow an overwhelming consensus emerged among policy makers and pundits that nothing more should be done to create jobs, that, on the contrary, there should be a turn toward fiscal austerity.

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(T)he news has, indeed, been bad. As the stimulus has faded out, so have hopes of strong economic recovery. Yes, there has been some job creation – but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. And the latest numbers suggest that even this modest, inadequate job growth is sputtering out.

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(T)he mistake of 2010 may yet be followed by an even bigger mistake. Even if that doesn’t happen, however, the fact is that the policy response to the crisis was and remains vastly inadequate.

Somewhat corrected transcript below.

Crossposted from The Stars Hollow Gazette

More job seekers give up, reducing unemployment

By PAUL WISEMAN, AP Economics Writer

19 mins ago

The percentage of adults in the labor force is a figure that economists call the participation rate. It is 64.2 percent, the smallest since 1984. And that’s become a mystery to economists. Normally after a recession, an improving economy lures job seekers back into the labor market. This time, many are staying on the sidelines.

Their decision not to seek work means the drop in unemployment from 9.8 percent in November to 9 percent in April isn’t as good as it looks.

If the 529,000 missing workers had been out scavenging for a job without success, the unemployment rate would have been 9.3 percent in April, not the reported rate of 9 percent. And if the participation rate were as high as it was when the recession began, 66 percent, in December 2007, the unemployment rate could have been as high as 11.5 percent.

Electoral Victory my ass!

Employment Data May Be the Key to the President’s Job

By BINYAMIN APPELBAUM, The New York Times

Published: June 1, 2011

WASHINGTON – No American president since Franklin Delano Roosevelt has won a second term in office when the unemployment rate on Election Day topped 7.2 percent.

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More than 13.7 million Americans were unable to find work in April; most had been seeking jobs for months. Millions more have stopped trying. Their inability to earn money is a personal catastrophe; studies show that the chance of finding new work slips away with time. It is also a strain on their families, charities and public support programs.

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Ten presidents have stood for re-election since Mr. Roosevelt. In four instances the unemployment rate stood above 6 percent on Election Day. Three presidents lost: Gerald Ford, Jimmy Carter and George H. W. Bush. But Ronald Reagan won, despite 7.2 percent unemployment in November 1984, because the rate was falling and voters decided he was fixing the problem.

How to Get Washington’s Attention

by Robert Reich

Wednesday, June 1, 2011

The stock market is dropping because corporate earnings are slowing. Corporate earnings are slowing because consumers are pulling back. Consumers are pulling back because they don’t have enough jobs or adequate wages.

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The economy needs 125,000 new jobs a month just to tread water, given that at least 125,000 people join the potential labor force every month. Simply put, if new hires are in the range of five digits, American consumers will not have enough purchasing power to buy what the private sector can produce.

The leaders of the Street and big business may now have to wake up to a reality they’ve tried to avoid – that the central economic problem of our time isn’t the long-term budget deficit but the immediate deficit in aggregate demand.

Chaos in Yemen Drives Economy to Edge of Ruin



By ROBERT F. WORTH and LAURA KASINOF  

 Even as Yemen’s political crisis deepens, the country is on the brink of an economic collapse so dire it could take years to recover, and hobble efforts to rebuild its fragmented society.

After four months of mass protests and political deadlock, Yemen – already the poorest Arab country, a place where many people have become accustomed to mere subsistence – has had its domestic oil supplies and electricity network largely cut off by hostile tribes. Gas lines now extend for miles in the capital, Sana, provoking fights and new protests; electricity is available for only a few hours a day.