An EBL "Perfect Storm" Roundup ...

polifrog





EBL:

Greece's deal is tottering and again facing default (I know this is like the movie Groundhog Day...)
U.S. unemployment up over 9%
Spain's debt becoming unsustainable
Greece's problems are now dooming Portugal
Chinese economy slows more than expected
The threat of Iran
Greece downgraded to restricted default
U.S. Fed tinkering
Goldman cuts Q1 GDP forecast
New U.S. hiring mostly part time
For whom the bailout tolls

Keeping the plates spinning.







out

Our Government Induced High Fuel Prices...

polifrog




Thieving the savings of Americans through inflation to stimulate an economy with higher import costs is no solution.


Via George:







out

How Bad Do Our Banks Think the Economy Is?

polifrog


What if our banks refused to give loans to fully collateralized businesses? In most cases they don't; an incentive is needed to make the loan happen.

In this post I explored a loan made to Mortex, a textile company located in Wendell. ( Eastern Wake News story. )

Get this:

• Mortel needed nearly $4 million to continue operating
  
• Mortel's loan was fully collateralized
  
• Mortel only got the loan when Capital Bank was assured by the USDA that the bank would be protected from losses on the loan of up to 80%

Think about that: This was a fully collateralized loan that only went forward when the USDA guaranteed Capital Bank that it would be protected from 80% of any losses should Mortex default. This is essentially a no-risk loan for Capital Bank. Aside from the owners, the risk of the loan is carried by Taxed Americans while any interest earned on the no-risk loan is pocketed by the banks.


A few questions have to be asked:

• Just how bad do the banks expect to economy to get that they require an 80% loss back-stop on fully collateralized loans before considering going forward?
  
• Just how bad does our government think things might get that they agree to this 80% back-stop?
  
• Is inflation considered in measuring losses on these? A bout of inflation would not only increase the likely hood of default but it would run up the losses that could be counted against the %80 back-stop.
• Is the USDA program needed because there are lower risk investments that are more attractive to the banks? (Ex. the fact that they can borrow money from the Fed. for less than 1% then invest the money in T-Bills at 4% to 5% )
  

out

From the Scariest Jobs Chart to the Most Frightening Tax Hike:

polifrog


Three waves of tax hikes.


1) First comes the loss of the Bush tax cuts,

2) followed by tax increases due to ObamaCare,

3) finally comes employer tax increases, and alternative minimum tax.



Ouch!

It appears the graph below is headed in the right direction.

But everything is A-OK! According to Pelosi Unemployment checks are the fastest way to create jobs:

out

A Scary Jobs Chart

polifrog



Some charts need no verbal help:

out

Is There No Place to Hide From a Deflating Credit Bubble?

polifrog


During the market crash in late 2008 and the ensuing government measures I wondered: Inflation or Deflation? The actions seemed inflationary at the time. This clearly has not been the case... If the deflationary pressures are great enough, can the Federal Reserve actually win a deflationary battle and more importantly can the Fed win a war of attrition with deflation.

Via SafeHaven .com:

The CRB quantifies the fact that ill-conceived money printing and socialization of "too big to fail" investment losses generated almost zero economic traction, and that the "coordinated" monetary effort can only be characterized as a failure of historic proportions.

...

Why did this central bank effort fail so spectacularly? Why not one hint of hyperinflation? Simple. The credit bubble was imploding (and continues to implode) and credit losses sustained worldwide faster than the sum total of all additional artificial money created.

The normal economic stabilizers have been firing full throttle for nearly two years, and some of the propping up of home prices through purchasing incentives and Fed induced low interest rates through Quantitative Easing are coming to an end. The gains have been minimal and the fact that the fuel behind the stabilizers is running low has to make one wonder...what next?

Real estate's own relief rally has been built on historically low interest rates, massive government subsidy including socialization of mortgage losses, socialized refinance giveaways and buyer tax incentives, the banking industry's wink-nod holding off on foreclosures ("extend and pretend"), and the corporate media's daily hypnotic suggestion ("you're getting sleeeepy") that the bottom is in. But take a moment to ponder this: What if mortgage interest rates stood at even 8 or 9%, Federal and state real estate tax incentives never existed, the Fed and Treasury left mortgage debt issues to the market to contend with and foreclosures were brought to market without delay? The answer is that values would probably have sustained another 50% haircut right off the top. But governments can only prop up markets temporarily; in the end, it's all about gravity. Finding a true free-market bottom will be a slow and painful process, and history will show that everything the government and policymakers attempted to do to keep the bubbles afloat ended up making everything that much worse.

The Great Depression had a second leg down......





out

More of that Socialist Cow Bell:

polifrog


Interesting quotes making the rounds this weekend.

Christopher Booker:

We have still scarcely begun to wake up to the gravity of the crisis now upon us, not just for the eurozone but also for us here in Britain and for the entire global economy.

Angela Merkel:

the current crisis facing the euro is the biggest test Europe has faced for decades, even since the Treaty of Rome was signed in 1957

and

If the euro fails, Europe fails.

Richard Russell (Dow Theorist):

Sell everything, you won't recognize America by the end of the year.

Of course there is this piece of fun posted earlier:



Obama:

The international order we seek is one that can resolve the challenges of our times,

Obama apparently sees Europe and thinks we need more of that socialist Cow Bell right herein America. If we aren't headed for a second leg down in the image of the Great Depression, we are at best driving head long into an extended ObamaDebt fueled morass.

out