RRSP Season No One Buying

Average Canadian family debt hits $100000

The report, released by the Vanier Institute of the Family on Thursday, suggests the debt-to-income ratio is a record 150 per cent.

Leads to this:

Banks are finding us RRSP-fatigued

Deja Vu

Stephen Harper, Jim Flaherty and Mark Carney assured us that the economic fundamentals in Canada are sound, despite the current meltdown of international finance capitalism. Wearing Bush/McCain like rose coloured blinders they refuse to admit that Canada faces a pending recession and the government will likely incur a deficit. Something Harper and Flaherty denied during the election campaign. Instead they say steady as she goes.

Of all the leaders, Harper was most determined to stay the course.
"What leaders have to do is have a plan and not panic," he said. Revising the plan
based on new data was considered to be a sign of panic, not prudence.Harper, in
the dying days of the campaign, proclaimed that he would not run a deficit,
raise taxes or cut spending. That may be a difficult circle to square, and those
words may come back to haunt him.

Wait I have heard this before...why in 1929 when then PM William Lyon Mackenzie King said he would stay the course.....

October 24, 1929 went down in history as "Black Thursday". On that day, stock prices plummeted on the New York Stock Exchange, creating a domino effect on world stock markets. It signaled the beginning of the Great Depression.

Canada was one of the hardest hit by the economic crisis. The country relied heavily on its exports. Pulp and paper, wood and wheat represented two-thirds of Canadian exports and accounted for much of the country's prosperity.

Governments in Canada were slow to respond to the desperate economic and social conditions. Until the Great Depression, government intervened as little as possible, letting the free market take care of the economy. Social welfare was left to churches and charities.

When the Depression began William Lyon Mackenzie King was Prime Minister in 1930. He believed that the crisis would pass, refused to provide federal aid to the provinces, and only introduced moderate relief efforts.


Although unemployment was a national problem, federal administrations led by the Conservative R.B. BENNETT (1930-35) and the Liberal W.L. Mackenzie KING (from 1935 onwards) refused, for the most part, to provide work for the jobless and insisted that their care was primarily a local and provincial responsibility. The result was fiscal collapse for the 4 western provinces and hundreds of municipalities and haphazard, degrading standards of care for the jobless.


The Depression altered established perceptions of the economy and the role of the state. The faith shared by both the Bennett and King governments and most economists that a balanced budget, a sound dollar and changes in the tariff would allow the private marketplace to bring about recovery was misplaced.



Library and Archives Canada / C-000623
Bennett Buggy in the Great Depression in Canada


October 1929 – Stock Market Crash: Markets Suffer the Worst Losses in Canadian History
In the late 1920s, Canada’s economy and stock exchanges were booming. From 1921 to the autumn of 1929, the level of stock prices increased more than three times. But these heady days came to a swift end with the stock market crash on Black Tuesday, October 29, 1929, in New York, Toronto, Montréal and other financial centres in the world. Shareholders panicked and sold their stock for whatever they could get.
Overnight, individuals and companies were ruined. It was estimated that Canadian stocks lost a total value of $5 billion on paper in 1929. By mid-1930, the value of stocks for the 50 leading Canadian companies had fallen by over 50% from their peaks in 1929.
The stock market collapse affected all investors—individuals who had been persuaded to buy shares as well as speculators looking to make a fast dollar. Despite the market crash, 1929 was a good year for banks, mines, manufacturing and construction in Canada. All reported record profits at year-end.
Although the crash was sudden and deep, there were signs that it was coming. Earlier in 1929, stock prices had been volatile. Economic slowdowns in May and June hinted that the booming economy was heading for a recession. Export earnings were declining and the price of wheat plummeted.
Economists and historians are still debating what caused the crash. At the time of the crash, Canada had no monetary policy or central bank, so there was little government intervention in the market. (See 1934—Bank of Canada.) Canadian firms had healthy profits and did not expect the boom to end. Corporate profit expectations were inflated. Canadian corporations took advantage of the bull market to issue new stock, which overheated the supply. Banks gave out easy and cheap credit, and let people buy stocks on margin: buyers paid only a fraction of the share price and borrowed the rest. Speculation was rampant: bidding drove up the value of stocks as much as 40 times the companies’ annual earnings. Investors seemed to pay less attention to corporate earnings than to how much their shares would appreciate in value.
The economy could not sustain its rapid growth and the bubble burst. Investors lost confidence in the market. In the United States, the government was blamed for not controlling the speculative frenzy. Because Canada’s economy was so closely tied to that of the United States, the New York crash brought down Canadian markets, too.
It is widely felt that the stock market collapse started a chain of events that plunged Canada and the Western world into the decade-long Great Depression, which ended only with the outbreak of the Second World War.

1929 - 1939 —The Great Depression.
The Roaring Twenties saw boom times in Canada. Unemployment was low; earnings for individuals and companies were high. But prosperity came to a halt with the stock market collapse in New York, Toronto, Montréal and around the world in October 1929. The crash set off a chain of events that plunged Canada and the world into a decade-long depression. It was the beginning of the Dirty Thirties.
The Great Depression caused Canadian workers and companies great hardship. Prices deflated rapidly and deeply. Business activity fell sharply. There was massive unemployment—27% at the height of the Depression in 1933. Many businesses were wiped out: in Canada, corporate profits of $396 million in 1929 became corporate losses of $98 million in 1933. Between 1929 and that year, the gross national product dropped 43%. Families saw most or all of their assets disappear. Governments around the world, including Canada’s, put up high tariffs to protect their domestic manufacturers and businesses, but that only created weaker demand and made the Depression worse. Canadian exports shrank by 50% from 1929 to 1933.

THE CAUSE OF THE DEPRESSION
Many Canadians of the thirties felt that the depression wasn't brought about by the Wall Street Stock Market Crash, but by the enormous 1928 wheat crop crash. Due to this, many people were out of work and money and food began to run low. It was said by the Federal Department of Labor that a family needed between $1200 and $1500 a year to maintain the "minimum standard of decency." At that time, 60% of men and 82% of women made less than $1000 a year. The gross national product fell from $6.1 billion in 1929 to $3.5 billion in 1933 and the value of industrial production halved.
Unfortunately for the well being of Canada's economy prices continued to plummet and they even fell faster then wages until 1933, at that time, there was another wage cut, this time of 15%. For all the unemployed there was a relief program for families and all unemployed single men were sent packing by relief officers by boxcar to British Columbia. There were also work camps established for single men by Bennett's Government.
The Great Depression, also known as The Dirty Thirties, wasn't like an ordinary depression where savings vanished and city families went to the farm until it blew over. This depression effected everyone in some way and there was basically no way to escape it. J.S. Woodsworth told Parliament "If they went out today, they would meet another army of unemployed coming back from the country to the city." As the depression carried on 1 in 5 Canadians became dependent on government relief. 30% of the Labour Force was unemployed, where as the unemployment rate had previously never dropped below 12%.

It was estimated back in the thirties that 33% of Canada's Gross National Income came from exports; so the country was also greatly affected by the collapse of world trade. The four western prairie provinces were almost completely dependent on the export of wheat. The little money that they brought in for their wheat did not cover production costs, let alone farm taxes, depreciation and interest on the debts that farmers were building up. The net farm income fell from $417 million in 1929 to $109 million in 1933.


Canada suffered a major depression from 1929 to 1939. In terms of output it was
similar to the Great Depression in the United States. However, total factor productivity
(TFP) in Canada did not recover relative to trend, while in the United States TFP had
recovered by 1937. We find that the neoclassical growth model, with TFP treated as
exogenous, can account for over half of the decline in output relative to trend in Canada.
In contrast, we find that conventional explanations for the Great Depression - monetary
shocks, terms of trade shocks and labor market and competition policies – do not work
for Canada.

Our conclusion is that the reason that Canadian output per adult was still 30 percent below
trend in 1938 was that productivity failed to return to trend.

Relative to trend, consumption fell more in Canada, and remained below that of
the United States throughout the 1930s. Investment in Canada fell to 15 percent of its
trend value by 1933, and recovered very slowly in both countries (remaining roughly 50
percent below trend in 1939). Government purchases in the two countries followed a
similar pattern during the downturn, before diverging in the late 1930s when U.S.
government spending remained above trend, while in Canada it fluctuated about trend.

U.S. government output increased more relative to trend
than Canadian government output. A large part of the difference in government
expenditure can be attributed to different government policies towards providing
unemployment relief. In the United States, the government relied much more heavily
upon make-work projects (government relief projects) than in Canada. The fraction of the
workforce employed by the government doubled in the United States, while increasing by
less than 50 percent in Canada. The increase in U.S. government employment was mainly
due to public works, as nearly 7 percent of U.S. employment in the late 1930s was in
relief projects. Relief workers were never more than 1.5 percent of the total number of
employed people in Canada.

Canada was the first country to leave the gold standard, suspending gold
shipments in January 1929 (Bordo and Redish (1990)). Despite the suspension of
convertibility, the Canadian government took steps to prevent depreciation of the dollar,
motivated in part by a wish to maintain access to American capital markets to refinance
Dominion debt (Shearer and Clark (1984)). As a result, the government maintained the
advance rate at its 1928 level throughout 1930, despite the fall in world rates. This policy
was ultimately abandoned in 1931. Despite this, the Canadian dollar did depreciate
relative to the U.S. dollar by approximately 15 percent between 1929 and 1931, before
recovering to its 1929 level in 1935.

The “debt-deflation” view of the Great Depression asserts that deflation and high
private debt levels contributed to the Great Depression by reducing borrower wealth and
constraining lending. Haubrich (1990) argues that the debt crisis was much less severe in
Canada than in the United States. He argues that there is little evidence to suggest that the
debt crisis caused the Great Depression in Canada.

A common view is that banking crisis played a significant role in transforming the
1929 downturn into the Great Depression. For example, Bernanke (1983) states that “the
financial crisis of 1930-33 affected the macroeconomy by reducing the quantity of
financial services, primarily credit intermediation” (p. 262). As has been pointed out by
numerous authors, however, Canada did not experience any bank failures.

Can the usual explanations of the Great Depression account for the Great
Depression in Canada? Our answer to this question is no. As we show, money shocks,
policy shocks and terms of trade shocks cannot account for the 10-year depression.
Explanations based on these shocks fail because their effects are quantitatively too small
to explain the Great Depression.

Our findings in this paper tell us where to go next. Future research into the Great
Depression in Canada should focus on models in which changes in the level of trade
affect the level of productivity. Such models are consistent with the fact that Canada’s
TFP and trade both declined from 1929 to 33. Beginning in 1934, trade began to slowly
recover, and so did TFP. This also matches the fact that the only large shock that hit
Canada but not the United States was trade, while the main difference in macro
performance is the behavior of productivity.

Journal of Economic Literature Classification Numbers: E30, N12, N42.
Key Words: Great Depression, Canada, productivity, terms of trade, deflation

Community Voices
GWINNETT COUNTY: Depression days brought to mind
By Rick Badie
The Atlanta Journal-Constitution
Saturday, October 25, 2008
Elwood Hart lived in Canada during the Great Depression. He considers himself lucky. A Salvation Army was next to the family’s home in Hamilton, Ontario.
“Maybe it was a bowl of soup or a bologna sandwich, but I got something to eat,” said Hart, now a Lawrenceville resident. “If it weren’t for that, I don’t think we could have ever made it. We weren’t living in the United States, but the situation was the same all over.”
Comparisons and contrasts are being drawn between the current economic crisis and the Great Depression. Conventional wisdom says this is the worst financial crisis since the Great Depression. Generally, experts say the odds of a full-blown depression are nonexistent. Let’s hope they are right.
Not many of us were around between 1929 and 1939, so we can’t compare the impact of that period’s economic crisis to today’s turmoil. Hart is now in his mid-80s, so his take on what he saw then and what he sees now carries weight.
We met years ago at the Gwinnett County Veterans War Museum, where his military career is on display. He served with the Canadian Army in Normandy during World War II. With the U.S. Army, he saw two tours of duty in Korea and Vietnam. He received an honorable discharge in 1967.
As for the Great Depression, “I remember it well,” Hart said. “People don’t realize what it was like back then.”
He remembers people lining up at food banks to get a hunk of cheese and powdered milk. He remembers stuffing newspapers in his shoes because they were way too big. And he remembers a white pet rabbit that just disappeared one day.
“I got up one morning and asked my dad where my rabbit was,” Hart told me. “He said, ‘It’s down your stomach. You had it for dinner.’ You ate anything you could get back then. There was no waste of clothes or food. Today, when I throw out trash, wild animals won’t find any food. I don’t throw it away.”
But how does that compare to today’s economic woes, particularly among everyday people barely making it?
Every Monday, Tuesday and Wednesday morning, Hart drives to a local Publix to load his car with day-old breads, cakes and pastries. When he pulls up to the Salvation Army, where the goods are doled out, people are waiting.
“It’s gotten so bad right now that there are twice as many every day as there were a couple of months ago,” he said. “In fact, it’s so bad that, a lot of time, me or some of the women in the church have to stand there. We have a sign that says everyone is to get two loaves of bread and a pastry. If you don’t watch them, they will fill up on all they can get. That’s why I say things are getting bad, similar to the 1930s, I tell you.”
As a brass collector, Hart routinely visits Goodwill stores in search of treasures. He said he’s seen a noticeable uptick in the number of people buying clothes. And at his church, clothes donations have fallen off considerably.
“It’s not that bad yet now,” Hart said.
“But it’s getting there.”

SEE:

No Austrians In Foxholes
CRASH
Black Gold
The Return Of Hawley—Smoot
Canadian Banks and The Great Depression
Bank Run
U.S. Economy Entering Twilight Zone


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Insurance Woes and Whines

Insurance firms feel profit pinch
Industry giants blame roiling markets, high loonie for dampening fourth-quarter earnings and outlook

Sez the headline. But the reality is that it has less to do with the loonie, and more about their investments in the U.S. including of course their exposure to the sub-prime credit mess. Ah the joys of global capitalism. The reason that banks want to merge of course is to compete for positions in the global financial markets, that is the U.S. market. And this is what happens when they do.....

Manulife is Canada's largest insurer. Approximately 64 per cent of its earnings are generated in the United States and Asia. Smaller rival Sun Life faces a similar predicament with about 52 per cent of its earnings originating from the U.S., U.K. and Asia.

For the October-December quarter, Sun Life reported earnings of $555 million or 97 cents per share. That compared with net income of $545 million or 94 cents per share for the same period in 2006. "This quarter was also marked by significant market turbulence," McKenney said.

Chief executive Donald Stewart said that volatility would likely affect the industry's outlook in the near term. Echoing those sentiments, Manulife CEO Dominic D'Alessandro suggested that "unsettled markets" would likely affect wealth businesses.

Sun Life also disclosed it has $84 million in direct exposure and $961 million in indirect exposure to monoline bond insurers. Those companies, which provide insurance against default in securitized debt, have become a source of worry because certain firms have had their credit ratings downgraded.

Chief investment officer Jim Anderson said Sun Life's direct exposure to monolines is with two insurers that are "AAA rated with a stable outlook." Its indirect exposure is to insurers with "investment grade" ratings, adding most of its exposure is in the U.K.

Insurance companies used to be the most risk adverse and conservative of financial institutions. However with the shift to globalization of the marketplace in the eighties and nineties from production to FIRE (financial services, insurance, real estate,) this all changed. A renewed financial market dominated the market, as it once had prior to WWI, the result of this financial exuberance, and shift from investment in production to investment in investment instruments bailed out New York and London from their Reagan/Thatcher excesses and declines. In doing so insurance companies as well as the banks and other financial businesses exposed themselves to the dangers of the balloon and bust market. Chickens, home, roost.

Just as people meet and authorize someone from among their own number to take specific action on their behalf, so commodities must meet to authorize a single commodity to confer full or partial citizenship in the world of commodities. The act of exchange is the occasion for such a meeting of commodities. The social activity of commodities on the market is to capitalist society what collective intelligence is to a socialist society. The consciousness of the bourgeois world is concentrated in the market report. It is only after the successful completion of the exchange that the individual can have any insight into the process as a whole, or any guarantee that his product has satisfied a social need, as well as the incentive to begin his production anew. The object which is thus authorized by the common action of commodities to express the value of all other commodities is – money. The authority of this particular commodity develops along with the development of the exchange of commodities.

Finance Capital, Hilferding 1910

SEE:

Lenin Was Right

Petro Dollars Bail Out The CITI

Bank Smack Down

U.S. Economy Entering Twilight Zone

Lenin's State Monopoly Capitalism

40 Years Later; The Society of the Spectacle

Commodity Fetish a Definition

State Capitalism in the USSR

Plutocrats Rule

The Right To Be Greedy

Social Credit And Western Canadian Radicalism

It's the Labour Theory of Value, stupid

China: The Truimph of State Capitalism

Deconstructing Hayek

Social Insecurity- The Phony Pension Crisis


tags
taylorism,fordism, NEP, state capitalism, state monopoly capitalism, monopoly capitalism,

liberalism, state, Anarcho-Capitalism, libertarian, Von Mises,anarchism,, gold bug,, gold,, Albert J. Nock,
Bemjamin Tucker, Liberty, libertarian, anarchism, invdidualist-anarchist, Rothbard, Austrian School of Economics, mutualism,
homes, mortgages, housing, bubble, US, economy, Canada, sub-prime mortgage, Wall Street, crash, recession,
China, Greenspan, correction, capitalism, Rothbard, Keynes, Galbraith, stocks, markets, capitalism

Petro Dollars Bail Out The CITI

And here is more news from Dubai Investments Inc. Petro-Dollars from the middle east bail out the sub prime victims of U.S. excess.No not the mortgage holders or home owners, but the greedy capitalists. They can always expect to get bailed out if not by the Federal Reserve than the Oil Reserves in the Middle East.

And who is going raise the specter of American Security interests over this Wall Street take over? Why no-one, well perhaps Lou Dobbs. This is globalization in action. Just what it's proponents predicted, but not as they expected.

Citigroup Inc., the biggest U.S. bank by assets, will receive a $7.5 billion cash infusion from Abu Dhabi to replenish capital after record mortgage losses.

Citigroup rose 5.7 percent in German trading after acting Chief Executive Officer Win Bischoff said in a statement late yesterday that Abu Dhabi Investment Authority will help ``strengthen our capital base.''

Abu Dhabi will buy securities that convert into stock and yield 11 percent a year, almost double the interest Citigroup offers bond investors, underscoring the New York-based company's need for cash. Citigroup's fourth-quarter profit will be reduced by as much as $7 billion because of losses from subprime mortgages, which led to the departure of CEO Charles O. ``Chuck'' Prince III and a 45 percent slump in the company's stock.

``Clearly, Citi has a problem with capital adequacy after the subprime crisis,'' said Giyas Gokkent, head of research at National Bank of Abu Dhabi PJSC, Abu Dhabi's biggest bank by market value. ``ADIA has seen an opportunity to get cheaply into a blue-chip stock.''

With the purchase of a 4.9 percent stake, Abu Dhabi, the largest emirate in the United Arab Emirates, would rank as Citigroup's largest shareholder ahead of Los Angeles-based Capital Group Cos. and Saudi billionaire Prince Alwaleed bin Talal, data compiled by Bloomberg show.

Depleted Capital

The investment follows purchases by U.A.E. fund Dubai International Capital LLC in companies including London-based HSBC Holdings Plc, Europe's biggest bank by market value, and New York-based hedge fund Och-Ziff Capital Management LLC. In Abu Dhabi, state-backed Mubadala Development Co. agreed to buy 7.5 percent of Washington-based buyout firm Carlyle Group. ADIA also owns a stake in Leon Black's New York-based buyout firm Apollo Management LP.

While Joe and Jane Consumer in America get no relief, which only will mean even more American retailers will go crash this shopping season as they desperately drop their prices as fast as the U.S. dollar's decline. It is a season full of desperation.

Holiday shoppers spending carefully
Deep discounts lure, but analysts wary

Discounted sweaters, laptops and personal GPS navigation systems drew large crowds during the Thanksgiving shopping weekend, according to several early surveys, but customers also appeared to temper their spending amid concerns over the economy.

Despite positive signs over the weekend, analysts cautioned yesterday that retailers must keep enticing customers with bargains to sustain momentum through the end of the year. Several retailers and economists say this holiday shopping season could be the worst in five years, in part because of the slumping housing market and higher energy costs.

Retail Desperation on Display in Early Hours

Upbeat holiday shopper traffic on Black Friday may prove short lived


Wall St little changed as investors track retail sales

The lackluster start of trading followed a market rally Friday as big retailers unveiled hefty discounts to lure shoppers into the nation's malls.

"So long as consumer spending keeps rising, the economy will stay out of recession," said Dick Green, an analyst at Briefing.com.

Other analysts said retail sales so far appeared to have been relatively robust over the weekend despite a housing market slump and a related credit crunch.

Banking giant Citigroup is meanwhile planning its second round of "large-scale" layoffs in less than 12 months, according to a report by the CNBC business television channel which cited people with knowledge of the matter.

SEE

Bank Smack Down

9/11

U.S. Economy Entering Twilight Zone

tags
homes, mortgages, housing, bubble, US, economy, CITI, sub-prime mortgage, Wall Street, crash, recession,
China, Greenspan, correction, capitalism, stocks, markets, capitalism
US dollar, oil, Islamic Banking, US, economy, petro-dollars, trade deficit, Imperialism, OMX,
NYPorts, Lou Dobbs, UAE, Dubai, Dubai Ports, MGM,

Bank Smack Down

It was a Canadian female financial wonk working for CIBC who brought down America's biggest bank.

Woman behind US banking rumble

CIBC World Markets analyst Meredith Whitney, an outspoken television pundit who is married to a professional wrestler, delivered a body slam to the U.S. banking sector this week that has sent stocks reeling in markets around the world.

The champion stock-picker even talks a bit like Rowdy Roddy Piper.

"No one had the moxie to put in print, what I put in print," Ms. Whitney said yesterday.

She had earlier hit Citigroup with a downgrade when it was already hurting from weak profits.

"Is Citigroup's dividend safe?" she demanded in a tough report that followed a 57% drop in third-quarter earnings at the world's largest bank.

Pro Wrestling of course was a popular blue collar sport in Canada well
before it became big entertainment in the U.S. Take that.

And so she was subjected to the macho American male egos in their marketplace, no uppity woman and a Canuck at that will tell them the Emperor has no clothes. Not when they keep cheering on the fiction that nothing is wrong in their market.

CIBC analyst got death threats on Citigroup - report

Meanwhile the CEO of Citigroup leaves the bank with the booty while the U.S. market crashes.

Citi Watch: A Princely Sum for CEO’s Exit?

Perhaps he will take it out with a wheelbarrow like they did in Germany way back when.



As Jim in San Marcos who blogs as The Great Depression of 2006, writes;

Economic Turpitude

Banks, hedge funds and what ever are taking billions of dollars in loan loss provisions. I have been suggesting for over a year, that a lot of this money may be coming from our retirement funds. Think about it. If your wife buys a new fur coat with your paycheck, now you can’t pay the rent, that is obvious very fast. If the wife turned a trick with the old geezer down stairs and bought the coat, you are stuck wondering how she did it. The reason I suggest Retirement funds, is that the losses suffered so far appear to affect no one. But bear in mind, retirement income funds deal with the future. Most people are not ready to retire so these funds should have plenty of time to recover losses (keep quiet, keep your job). The write downs are massive. Nobody even blinks an eye. What’s a 10 billion dollar loss? The perspective is beyond comprehension. This money has to be coming from somewhere. Whoever’s money it is, they don’t seem to need it--yet.

The money supply worldwide seems to be contracting. Usually this would imply a rise in interest rates. That doesn’t seem to be happening. Commodities are increasing in value, which could be an inflation indicator. If reserves are being added to the banking system, then this could explain why rates are not rising (using a truck is cheaper than a helicopter).

A lot of the new earned money entering into the economy is not being used to create new jobs, its being “invested” in financial instruments. Workers are not creating new product, investors are placing side bets on the financial markets. The profit is gone from home building industry. Investment in rental property is a losing enterprise. Consumption seems to be tapering off. Home remodeling appears to have hit the skids. Starbucks seems to be doing OK, you have to draw the line somewhere.

Interest rates are dropping but you can't force people to borrow money unless there is some sort of return (like a house appreciating at 20% a year). That would explain why the stock market as well as the commodity’s markets are still in play. Cramer the other night was forecasting Google at $750. Everything is still going up. The stock market had a little hiccup on Friday. Nothing to worry about, Google kept on ticking just like a Timex watch. Of course it can’t be a bubble, bubbles don’t get that big!

You have a bunch of banks forming a consortium to bail out the CDO and SIV holders . They are creating a new financial instrument called a "USA," which is short for “Up in Smoke Assets.” It ought to be a hot item if they can figure out a way to package it. It’s kind of like selling invisible goldfish. Give the buyer one or two extra for free, so he thinks he’s getting a real bargain and sell him some invisible fish food to boot.

The economy’s current condition reminds me of the embezzler and a millionaire taking a vacation at the same resort. The embezzler knows whose money he is spending. The millionaire has no idea that he is broke, but hey, everyone is having fun. Are we broke yet?

It's All Good

The Wall Street Journal came out with an article on write downs tied to mortgage debt Saturday. Their bar graph (left) displays about 20.7 billion in 3rd quarter losses. Washington Mutual with 1 billion of charges this quarter didn't even make the list. The amount shown for the Bear Sterns doesn't really reflect what happened when this mess started (BS had a 1.6 billion hedge fund bankruptcy). Of course Amaranth is long forgotten.

The above chart is mixing brokerage houses with banks. So these write offs or what ever, could be coming from several different places, bad housing loans, credit card debt and hedge fund investments. Don't worry everything is "contained." Yea, right!


Here's a list of the top world banks. The banks in the top picture seem to have a handle on projected losses if you compare their net holdings (left) to declared write downs (top). But this is just third quarter losses. So do we multiply this by four to come up with a yearly total? It sounds logically conservative and nightmarish. [Note: Morgan Stanley in the top pic and JP Morgan Chase in the one at the left are not the same company, the first is a brokerage house and the latter is a bank, they were one entity at one time]

HSBC wrote off 11 billion in March, Citibank plans to announce earnings October 15 and refers to earnings as "abysmal" in their news release last week. Two banks not saying much are Bank America, and JP Morgan. It could be an eye opener when they report quarterly earnings.

Now mix in 2.46 trillion dollars of credit card debt. Here is list of the top ten issuers of general purpose credit cards:

1. Bank of America
2. J P Morgan Chase
3. Citigroup
4. American Express
5. Capital One
6. Discover Card
7. HSBC
8. Washington Mutual
9. Wells Fargo
10.U S Bancorp


The puzzle is starting to come together. We know who the players are. Citigroup made all three lists, which doesn't sound too good. They might have company, if Bank of America and J P Morgan "measure up" in the next week or two when they announce earnings. The real problem is the three month time frame this mess transpired in. How can we believe that things are now OK?

The stock market is still going up, go figure. I guess you could call it herd (heard) mentality. Follow your favorite stock commentator over the cliff.

Good to see some American's are realizing that all those folks on the 24/7 Business News channels are wearing rose coloured glasses to go along with their ruby slippers. Of course these Market Wizards belong in the land of Oz.

'It will be a garden variety recession'
Economic Times, India -
US consumption, which is now a record 72% of US GDP, has nowhere to go but down and that has raised the risk of recession in the US and the potential impact ...

Morgan Stanley exec: US recession likely BusinessWeek

BBC NEWS | Special Reports | global credit crunch

For shaky economy, oil spike is irritant
Housing, credit messes -- now this?

But $100-a-barrel oil and possible higher gasoline prices would come at a bad time for the U.S. economy. As an economic force, analysts said, higher oil prices alone would not be enough to cause severe economic damage. Yet on top of other major economic concerns -- a brutal housing correction, troubled financial markets and hard-hit banks -- they could be the catalyst for a possible recession.

Recession symptoms near fever level

Scott Badesch of the United Way is used to seeing people in need. Usually, it is the homeless or the poor who tap the services of Palm Beach County's leading community fund.

But these days, Badesch notices something different.

"We're seeing more and more of the middle class falling into these situations. The demand in our shelters and in our emergency food pantries has never been as great as it is," said Badesch, chief executive of the United Way of Palm Beach County.

Ken Rappaport, a Boca Raton bankruptcy lawyer, also sees people in financial distress.

But when Rappaport received 250 applications for a $10-an-hour receptionist job in his office, that's when the area's economic troubles hit home. Many of the applicants were real estate and mortgage brokers used to sky-high salaries.

"That's scary," Rappaport said. "And that was the thing that brought me to the conclusion: I don't care what anybody says, we are in a recession."

Let's hope women are wrong

Women will be pleasantly surprised if we're not all dining at soup kitchens soon. A Los Angeles Times/Bloomberg poll asked people whether it's likely the economy will go into recession in the coming year, and women of all sorts were much more likely than their male counterparts to think that it will. Among people with household income under $40,000, for instance, 78 percent of women expect a recession, vs. 44 percent of men. There's a similar gap between college-educated women and men, 71 percent vs. 54 percent. Among Democrats, 82 percent of women and 64 percent of men expect a recession; among Republicans, the gap is 67 percent vs. 54 percent. Overall, 73 percent of women and 56 percent of men foresee a recession in the coming year.

See:

Fred Thompson WYSIWYG

U.S. Economy Entering Twilight Zone

Sub Prime Exploitation

The Cost of War

America's Debt Economy

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Liberals Favorite Tax Cut

The Liberals will support the Harpocrites mini-budget because it contains one of their favorite tax cuts.

"We certainly like the significant corporate tax cuts," Liberal Finance Critic John McCallum told CTV's Mike Duffy Live.

SEE:

How To Spend The Surplus

House Divided

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LiberalTory Surplus Story

So the Throne Speech will be a Budget Speech. The new-con men; Harper's Neo-Con Government are preparing for a confidence vote. The only way they can bring themselves down.

Fresh from closing the books on last year's massive $13.8 billion surplus - about four billion more than it had recently predicted - the department said Friday that already in the first four months of this year it was operating on a $7.8 billion surplus, about one billion more than last year's monster haul for the same period.

Despite announced spending increases in the March federal budget, fiscal analysts have been watching with mild surprise as the surplus built up in government coffers month by month since April.

The new surplus was accumulating even though program spending rose by $3.7 billion during the first third of the year on higher transfer payments and increased expenses for such things as the war in Afghanistan.

But budgetary revenues also rose significantly by $4.9 billion, spurred on by higher tax receipts from corporations and individuals.

And July saw another $1.4 billion added as money continued to flow into Ottawa faster than the government can spend it.

"Wow," reacted John Williamson of the Canadian Taxpayers Federation. "This is feeling little like the atmosphere we had prior to the Liberals rolling out their five-year tax cut plan that began in 2000.

The calls for broad-based tax relief, particularly from the corporate sector, grew louder yesterday as the federal government disclosed its surplus for the first four months of the current budget year, at $7.8-billion, is on pace to become the largest federal windfall in the country's history.

The total is nearly three times what it projected for 2007-08 and more than halfway to the $14.2-billion windfall recorded for 2006-07, which the government unveiled this week.

Assuming spending and the rate of tax revenue growth remain as they are, the surplus is headed toward $23-billion -- which would make it the highest on record, surpassing the $19.9-billion set in 2000-01.

"All the stars are aligning for the federal government to unleash some stimulus -- if not in next year's budget, then before," said Douglas Porter, deputy chief economist at BMO Capital Markets.

"The confluence of events we have here is that there is pressure on the economy from the currency and the credit crunch; we have surplus numbers well above last year's lofty levels; and we have an election possibly looming."

He said the scenario was reminiscent of the fall of 2000, when the former Liberal government unveiled a $100-billion tax-cut package in an early mini-budget. Weeks later, an election was called, and the Liberals secured a third consecutive majority government.

For the four-month period ended July 31, the $7.8-billion surplus represents an increase of 15%, or just over $1-billion, compared with the same time last year. Corporate tax revenue climbed 25%, while revenue from personal taxes gained 3.5%, to $37.7-billion. On the whole, revenue for Ottawa increased 6.5%, to $80.5-billion.

The stars are aligning for Harper with a few clouds gathering. A budget speech means the government can fall, bets are increasing for a fall/winter election. Place your wagers now.

Harper pledges $725-million in tax cut

Harper's team gears up for election

Liberals ready for election, adviser says

And Harper uses his executive authority to pay down the countries debt, Alberta style, despite previously calling for parliamentary oversight. But then he was leader of the opposition and had to say that. Yeah right. $14 billion gets ya less than a billion in tax cuts. Peanuts.

The national debt now stands at $467 billion.

And speaking of peanuts,this surplus, shows that $1 billion in program cuts made last year, and those now pending in the Department of Environment, were not needed. They were purely for partisan political purposes.

With all the ceremony of an election stump speech, Prime Minister Stephen Harper announced Thursday that a $13.8-billion surplus - one which exceeded the federal government's own projections - has gone towards paying down the debt.

The move is an interesting role reversal for Harper, considering how loudly the Conservatives used to crow from the opposition benches when the previous Liberal government delivered massive surplus after massive surplus.

But when asked about the difference, Harper replied like a man headed to the polls: Liberals tax to spend, while Conservatives tax to put the fiscal house in order.

Despite that stance, echoed by Finance Minister Jim Flaherty as he fielded questions following Harper's quick exit, critics weren't impressed.

NDP Leader Jack Layton this week questioned the wisdom of using the surplus to pay down the national debt, suggesting that the government's failure to adequately fund social programs and infrastructure while swimming in dough makes it less likely his party would prop up the minority government.

Liberal finance critic John McCallum said the party's position on surpluses would be made clear when it releases its election platform, but noted that in the past Liberals have favoured a splitting the "surprise" windfalls between tax cuts, new spending and debt repayment.

"The lessons I draw from this is that there was certainly no need to raise the income tax rate and no need to cut the most vulnerable people, like women's groups, literacy programs and museums," he added. In the first Flaherty budget, the Conservatives reversed former Prime Minister Paul Martin's half-point reduction in the lowest income tax bracket in order to pay for a cut to the GST tax.

Paying down the debt Alberta style, meant that while Ralph Klein could symbolically burn the provincial mortgage, declaring Alberta debt free, the province was a mess.

On July 13, 2004, Premier Ralph Klein announced that Alberta was the only debt-free province in Canada. It had owed $23 billion when he took office in 1992

In order to pay down the debt it deferred much needed infrastructure funding, had unfunded pension liabilities, contracted out services and cut staff. Now in order to play catch up by funding infrastructure and services, and paying off pension liabilities, the costs are skyrocketing in an overheated economy. Causing the current treasurer to cry gloom and doom, hinting at future debt and deficits.

Paying down the debt is an illusion, it sounds good but it is unsound economics.

Like cuts to the GST rather than its elimination.

At least one neo-con press pundit, from Calgary of course, has claimed that Harpers good fortune economically has less to do with the belt tightening cuts made by then Finance Minister Paul Martin, than to the long term wisdom of Brian Mulroney.

No seriously, the man who left Canada in a debt and deficit crisis should be thanked for introducing NAFTA which she says is now paying off. Sure in sales of Canadian iconic industries to foreign capital and our link to the declining credit market.

Actually paying down the debt was Federal Liberal policy, and the debt reduction act was adopted under PM Paul Martin, one which was modeled on Ralph's. The Harpocrites are merely following through, well actually pushing through debt reduction as a priority. It is after all a policy of theirs since they were the Reform Party,created in those halcyon days of the debt and deficit bugaboo.

Meanwhile the rising dollar has offset the immediate impact that the credit market meltdown has had. And the surplus gives the illusion all is well in the marketplace.

One fly in the ointment is that the Canadian economy has yet to feel the full brunt of a credit crisis, which first surfaced in August and could result in fewer revenues for the government. But few expect that a mild economic downturn will do more than slow down the flow of cash from taxpayers.

But the inevitable storm clouds are gathering, despite the voluntary efforts of another Tory right winger; Purdy Crawford point man for Canada's big banks and credit unions.And despite viewing the melt down with rosy glasses for the past two months, David Dodge, finally had to bite the bullet Friday.

The Bank of Canada injected almost $1-billion into money markets yesterday, a stark reminder that all is not right in Canada's credit market.

Just two days after Bank of Canada Governor David Dodge declared that "the overnight market is now well on its way back to normal operations in Canada," the bank found itself having to defend its key interest rate with one of its largest cash injections to date.

The central bank also increased the amount that it leaves in its settlement system to allow for easy money transfers between banks. It has set aside $300-million, instead of the $150-million target of the past few weeks, and the $25-million during normal market conditions.

Something is definitely amiss in Canada's money markets.

The Bank of Canada, for the third business day in a row, injected about $1-billion into the overnight market to defend its key interest rate.

A bank spokesman said the liquidity provision was simply a technical move, a normal quarter-end demand for more cash.

But for the Bank of Canada's monetary policy to work properly, it's not enough to just defend the overnight rate. That rate needs to act as a benchmark for the short-term borrowing rates that corporations, home buyers and consumers pay.

That bail out was announced the same day that the second budget surplus was declared. And since paying down the debt results not in any real economic savings for Canadians simply a better credit rating, it is ironic that it could be wiped out in a credit market melt down.

But the Canadian economy is facing difficulties other than the strong loonie and the risk of a protracted U.S. slowdown, Mr. Hall said.

New elements in play have led the Bank of Canada to adopt a neutral approach to interest rates, Mr. Hall said. Those factors include the implicit tightening as a result of the widening of credit spreads and a reduction of liquidity as banks reverse a process in which they could push loans off their books by securitization. "It will take time for these effects to be felt," Mr. Hall said.

The freeze-up in the Canadian asset-backed commercial paper markets along with the rise in the Canadian dollar will make this Friday's release of the Bank of Canada's quarterly business outlook survey an important report, said David Wolf, economist and strategist for Merrill Lynch Canada Inc.

Government can only effectively pay down the debt when they have the secure asset base to do it. That is your infrastructure is paid for.

Instead of paying down the debt, the government needs to expand investment in its assets, not selling them off. Infrastructure needs investment which the Harpocrites deny since it runs counter to their neo-con monetarist policy.

Debt reduction only works if you have no liabilities, such as infrastructure. And to show exactly how hidebound the government is, they would rather have parliament literally fall down around their ears than abandon their neo-con ideology.

“Paying down the debt” means “reducing the public’s supply of T-bonds.” In other words, it means “reducing the public’s net financial wealth”

When the public’s T-bond supply gets too low, it puts a damper on the money creation process. And, as we saw in article 1 of this series, when new money is not created at a sufficient pace (or worse, when the money supply contracts), it results in economic stagnation or contraction. To me, that goes a long way to explaining our dubious history of paying down the debt.

As we reviewed in article 1, inflation is caused by too much money deflation is caused by too little money. But T-bonds are not money, they are merely “proto-money.” Because of that, and because it takes money to create inflation, it follows that increasing the public’s T-bond supply does not cause inflation. Let me say that another way: Deficits do not cause inflation, because deficit spending is the process of increasing the T-bond supply, not the money supply. Monetary policy causes inflation or deflation; fiscal policy does not.

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The Cost of War

That's Trillions of dollars.


U.S. NATIONAL
DEBT
CLOCK

The Outstanding Public Debt as of 14 Aug 2007 at 09:16:31 AM GMT is:

The estimated population of the United States is 302,702,356

so each citizen's share of this debt is
$29,645.27.

The National Debt has continued to increase an average of

$1.47 billion per day since September 29, 2006!

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