Zombie Capitalism: Bernanke "Marching Ignorantly Forward"

Australian economist Steve Keen has another blockbuster post on the dynamics of debt deflation and the Great Financial Collapse. Please consider Debtwatch No 41, December 2009: 4 Years of Calling the GFC.

During a debt-driven financial bubble, which is the obvious precursor to a debt-deflation, rising levels of debt propel aggregate demand well above what it would otherwise be, leading to a boom in both the real economy and asset markets. But this process also adds to the debt burden on the economy, especially when the debt is used to finance speculation on asset prices rather than to expand production�since this increases the debt burden without adding to productive capacity.

When debt levels rise too high, the process that Fisher described kicks in and economic actors go from willingly expanding their debt levels to actively trying to reduce them. The change in debt then becomes negative, subtracting from aggregate demand�and the boom turns into a bust.

So could the global economy get out of the global financial crisis the same way it got out of the 1990s recession�by borrowing its way up? That�s where the sheer level of debt becomes an issue�and it�s why I stuck my neck out and called the GFC, because I simply didn�t believe that we could borrow our way out of trouble once more. Debt did continue rising relative to GDP for several years after I called the GFC, but it has now reached levels that are simply unprecedented in human history.

For the �borrowing our way out� trick to work once more, we would need to reach levels of debt that would make today�s records look like a picnic. What are the odds that that could happen again?

Australia and US Debt to GDP



Debt has little impact on demand when the debt to GDP ratio is low�such as in Australia in the 1960s, or the USA from the start of WWII till the early 60s. But whenever the debt to GDP ratio becomes substantial, changes in debt come to dominate economic performance, as can be seen in the next two charts.

Debt vs. Inverted Unemployment Australia



Debt vs. Inverted Unemployment US



A �schoolboy error�?

In 2008 I spoke at a seminar in Adelaide that was also addressed by Guy Debelle, an Assistant Governor (Financial Markets) of the RBA. After my talk he commented that he couldn�t understand why I compared debt to GDP, since that was comparing a stock to a flow.

In dynamic terms, the ratio of debt to GDP tells you how many years it would take to reduce debt to zero if all income was devoted to debt repayment. That is an extremely valid indicator of the degree of financial stress a society (or an individual) is under.

I find that members of the general public understand this easily. Only economists seem to have any trouble comprehending it�not because it is difficult but because their own training pays almost no attention to dynamic analysis, and therefore they don�t learn�as systems engineers do�that stock/flow comparisons can be extremely important indicators of the state of a system.

Marching Ignorantly Forward

With such ignorance about the dynamics of debt, academic economists and Central Banks around the world are hoping that the crisis is behind them, even though the cause of it�excessive levels of private debt�has not been addressed. They are recommending winding back the government stimulus packages in the belief that the economy can now return to normal after the disturbance of the GFC.

In fact �normal� for the last half century has been an unsustainable growth in debt, which has finally reached an apogee from which it will fall. As it falls�by an unwillingness to lend by bankers and to borrow by businesses and households, by deliberate debt reductions, by default and bankruptcy�aggregate demand will be reduced well below aggregate supply. The economy will therefore falter�and only regular government stimuli will revive it.

This however will be a Zombie Capitalism: the private sector�s reductions in debt will counter the public sector�s attempts to stimulate the economy via debt-financed spending. Growth, if it occurs, will not be sufficiently high to prevent growing unemployment, and growth is likely to evaporate as soon as stimulus packages are removed.

The only sensible course is to reduce the debt levels. As Michael Hudson argues, a simple dynamic is now being played out: debts that cannot be repaid, won�t be repaid. The only thing we have to do is work out how that should occur.

Since the lending was irresponsibly extended by the financial sector to support Ponzi Schemes in shares and real estate, it is the lenders rather than the borrowers who should feel the pain�which is the exact opposite of the bailout mentality that dominates governments around the world.

Robbing the Poor to Bailout the Rich

Although that is a lengthy snip I left out many charts and further analysis. Inquiring minds will want to read Steve Keen's entire article.

I certainly agree with Keen on the cause of this crisis (I have been harping about the same thing for years) as well as the solution: winding down debt and letting bondholders take their share of the hit.

Instead we bailed out Fannie Mae, Freddie Mac, Citigroup, and Bank of America bondholders while raping the GM bondholders (the latter so that Obama could appease the unions). In other words, Paulson, Geithner, Bernanke, Obama, and Congress effectively conspired to rob the poor to bail out the wealthy.

Supposedly this was done so that banks would start lending, and the economy would get the Fractional Reserve benefit (using the word benefit loosely) of debt expanding 10-1.

It did not work that way, nor will it because consumer and corporate debt remain, unemployment is high and rising, debt levels are intolerable, and consumer (and bank) attitudes towards debt and credit reached a secular peak and the pendulum to deleveraging has begun.

Why Consumers Won't Borrow

Cash strapped boomers headed into retirement are finding they do not have enough money on which to retire. They are traveling less, spending less, and have too much of their assets tied up in illiquid real estate investments. Moreover, banks will not lend because there are too few qualified borrowers.

Peak Credit is in. The Effect of Household Deleveraging on Housing, Consumption and the Stock Market is massive.

Moreover, please note that the Fed cannot control sentiment of either borrowers or lenders. The Fed can merely encourage.

There is virtually no evidence consumers want to borrow. Likewise, there is virtually no evidence, none, that banks are about to go on a lending spree. Moreover, there is no evidence the Fed is attempting to force banks to lend. And finally, there is no evidence the Fed is considering charging banks a fee to keep excess reserves with the FED, or that if they did, that it would accomplish anything other than a deflationary collapse.

Bernanke's Flawed Model

The idea that excess reserves will lead to increased lending is flawed from the beginning.

What actually happens is that lending occurs and the Fed expands money supply fast enough to match reserves. Please see Fiat World Mathematical Model for details.

Factors Affecting Banks' Unwillingness To Lend

• Rising unemployment will cause ...
• Rising credit card defaults
• Rising home equity loan defaults
• Rising mortgage loan defaults
• Rising commercial loan defaults

On top of that there is an increased demand for money by cash starved boomers headed into retirement who finally realize they do not have enough savings.

Excess Reserve Mirage

Factor in all of the upcoming defaults and much of those so called excess reserves are pure fantasy!

Bernanke Pleads For His Job

The Fed is powerless to stop this even as Bernanke is bragging about preventing another depression. Meanwhile, please consider (if you have not yet done so) Ben Bernanke Pleads For His Job; My Response to Bernanke

Bernanke: The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation.

Mish: Ben, you sound like an arsonist taking credit for helping put out a fire, before the fire is even out, after you lit the match and tossed on the gas in the first place. For all the problems you have caused, don't you at least have the decency to show a little humility?

Stop Bernanke

Bernanke is incompetent and his self-serving whining is simply further proof of it.

Email From Yves Smith

Yesterday evening I received an Email from Yves Smith at Naked Capitalism. Yves writes:

Mish,

Your post on Bernanke last night was terrific.

FYI, Bernanke's confirmation hearing is this week. Rallying your readers could make a difference. The Internet effort that opposed the Watt amendment (which would have neutered the Paul/Grayson bill) worked. The Watt amendment would have passed otherwise.

Tell Your Senator No On Bernanke has links to the committee members and a site that has a petition. Please encourage your readers to call their senators.

Cheers,

Yves

Thanks Yves.

Please do as she suggests. Her post has a list of the members of the Senate Banking Committee.

At the very least, please PHONE your own senators ASAP.

Here is the Online Directory For The 111th Congress. Please contact your Senators! They are the ones who decide Bernanke's fate, not the House of Representatives.

I encourage you to fax them, as well. Please see Speak Out - Audit the Fed, Then End It! for a list of fax numbers for every senator.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Female figures study, some quick drawing and render

Female figures study, some quick drawing and render.

This batch of sketch I did study over female with more muscular figures but still convey the femininity, in other word, they are not too overly buffed up. They are still pretty in the athletic way. And forget those faces in the set, they won't done up. I was doing quick sketches for all and observe the figures. :)
I did these a little while back, I thought I already post them on the site. But apparently I was either getting old or too busy juggling stuffs around and drawing at the same time.

Well, not much time today...I just want to do a quick post.

Some More Tips:
If you just start out studying figure, I would strongly advice you to go watch How to draw female body torso step by step (Easy lesson on how to draw and construct a body in the simple way for beginner.) and how to draw woman figure hip pelvis (This one I show the simple way to draw pelvis, butts, and legs). There are also figure in simple form using lines or what we called gestures figures video tutorial and learn how to draw woman proportion sheet.

And for head or face drawing tutorial go to How to draw man's head basic and Draw and render human head with different light sources. (This one is a little more challenging with different light source hit the face)
After all that you can go watch more advance stuff like Character Design Face Male Merchant Character, or Drawing Male Face Swordman and Learn how to draw and paint face. If you watch all these videos, I am sure you will learn something here and there and they will get you somewhere.

As for male figure drawing tutorial you can go watch Drawing body muscle torso anatomystep by step and video. Then Drawing arm muscles bicep tricep video is one of many readers favorite video. Enjoy the videos and hopefully you can get something good from them.

And Ah!
Almost forgot, I did the expansion on Female Fusion Manga #001 with 2 EXTRA chapters
You can go DOWNLOAD it for FREE here:
Download: (Expired)
*The link will be expired in about 5 days or so (around Dec 12, 2009) Hurry!
Enjoy the Video drawing tutorials.


Here are some quick study of Female figures in motion:







More video tutorials are coming...soon I hope :)

Oh here is another concept art for you to possibly enjoy


FEATURE TUTORIALS: *Over 60 minutes to 2 hours of video.



-Draw and Paint Women Body Tutorial I: Female Manga Fusion I
-Draw and Paint Women Body Tutorial II: Female Manga Fusion II
-Character Design Tutorial: Dark Valkyrie

Full of thanks

This post was supposed to be written last week, in preparation for Thanksgiving, but life throws you curve balls that interfere with plans. And that was precisely the point I was going to make. It's how we deal with those curve balls that matter.

I'm one of those -- an optimist, through and through. :) I can't help it. I think it stems from my teen years, which I've mentioned a bit on this blog. I had enough sad days then, and since then I just can't stand to be sad or depressed. It makes me physically uncomfortable, I hate it so much.

That's not to say I don't deal with the bad things in life -- I do. I realized a long time ago, when things are at the lowest, doing something, anything helps -- it gives you power and control back. So when things go bad, my control is to look at the good.

I was going to write about some trivial things in this post last week. Things like when the sitter cancels on your night out with friends or the hubby, and seeing that as a good turn of events -- looking at it as a chance to spend unexpected time with your children. And how many, many people in this world would do anything to have children to spend time with.

Or when the car breaks down and you can't get where you wanted to go -- I rationalize things like that by thinking it was probably best I didn't go. Would you call that fate? I just feel when something like that happens, I wasn't supposed to be in that car, at that time, on that road. I think there's a higher power at work and we often forget that, especially at the annoying times.

I was also going to talk about the more serious circumstances, like when I fell down half a flight of cement stairs a couple weeks ago -- holding my son. It was probably the scariest moment of my life. He hit his head, and I could barely walk afterwards. Within seconds he seemed fine, and after a trip to the ER, we found out he was indeed OK and my ankle (that was triple it's normal size) was only badly sprained.

I felt sorry for myself for about two seconds, and then I was overcome with thankfulness that it was just me that was hurt -- and it was just an ankle. How incredibly fortunate that my son was not hurt worse. The what ifs ran through my head and they were not good. So as I've hobbled around for the past two weeks, I've been reminding myself how thankful I am that that's all it was. I can handle with a sprained ankle any day of the week.

This is the way I deal, and it works for me. But my optimism was tested last week. We got news that my father-in-law was diagnosed with stage three pancreatic cancer. I simply cannot put into words how I feel. I won't even try. For the first few hours after we found out, I could barely breath. It was like someone was sitting on my chest. Then, there were the tears, and tears. And tears. My heart is breaking for my husband. It's breaking for my stepdaughter, my sister-in-law, my nephews, for me. For my son.

And now, this bad, horrible news, has yet again taught me to see the good. It was confirmed today that his doctors think he has at least six months with us -- maybe even a year. My heart is heavy. I want to cry again and again. But I also can't help to think how fortunate are we to be able to spend this time with him over the next year. To do special things, take pictures, to create new memories.

For our son to get to know his Grandpa even better.

Every year my father-in-law cooks an authentic Mexican fiesta meal for us and our friends, usually in the fall. He obviously hasn't been feeling great, so we skipped it this year. But now, we're going to have the fiesta the week before Christmas. We will gather around him to cook our Mexican feast with him, and it will be something I'm sure none of us will ever forget. (And yes, it is as good as it sounds!)

I just can't focus on the bad. It's against my nature. I have to look to the good, and there will be much good that will come over the next year. I am sure of that.

If I can, I am asking a favor of all of you. I would really appreciate your prayers. For my father-in-law, that he feels as good as possible for as long as possible. And for my husband and his sister, that they feel comfort and peace right now. I really, really appreciate it. I am so thankful for all of you.

** I am reposting this in Live Writer since Blogger wasn�t picking it up for some reason. I apologize for the two posts!

Virginia Borrows $1.26 billion To Pay Unemployment Benefits; Detroit Loses $400 Million on $800 Million of Bonds; Detroit's Easy Solution

Virginia is robbing Peter to pay Paul because it is plain flat out broke. Bankrupt is probably a better word. To pay unemployment benefits, Virginia will borrow $1.26 billion and pay it back plus interest by jacking up unemployment taxes.

Please consider Va. to borrow $1.26 billion for depleted unemployment funds.

As Virginia wrestles with ways to replenish its depleted fund for unemployment benefits, Hampton Roads employers expressed concern about the impact that higher unemployment taxes could have on the health of their businesses.

The sorts of tax increases described by the Virginia Employment Commission earlier this fall may be difficult for some small businesses to absorb without job cuts, said Jim Shirley, owner of Bennett's Creek Farm Market in Suffolk.

The state's average unemployment tax per employee will jump from $95 this year to $171 in 2010 and to $263 by 2012, the VEC said in a Sept. 29 presentation to the Commission on Unemployment Compensation.

For small retailers, the financial pressure from weak sales and higher unemployment taxes could be intense, Miller said. "You've got to have someone in the store, and if you're down to one person in the store, you can't cut any more."

In addition to boosting unemployment taxes on employers, Virginia will have to borrow more than $1.26 billion from the federal government in coming years to continue paying jobless benefits, the VEC said in its forecast.

That's because the deficit in its unemployment-benefits fund will hit $194 million by the end of this year and balloon to $561 million by the end of 2010, the VEC said.

Two dozen states, including North Carolina, South Carolina, New York and Texas, have already borrowed about $21 billion from the federal government to pay jobless benefits, according to the Labor Department.

One problem with borrowing to pay jobless benefits, the VEC noted, is that interest payments on this debt cannot come from the unemployment trust fund or from federal money. The interest payments on its $1.26 billion of projected borrowing are likely to total $36.7 million and come from general state funds, the VEC said in its September report.

Yet Another Reason To Not Hire

Borrowing money while jacking up taxes does nothing but give small businesses yet another reason not to hire anyone.

Local governments fork over billions in fees on investments gone bad

Inquiring minds are reading Cities find the fine print is costing millions

Detroit Mayor Dave Bing is struggling to save his city from fiscal calamity. Unemployment is at a record 28 percent and rising, while home prices have plunged 39 percent since 2007.

Against that bleak backdrop, Wall Street is squeezing one of America's weakest cities for every penny it can. A few years ago, Detroit struck a derivatives deal with UBS and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city's credit rating dropped, the banks could opt out of the deal and demand a sizable breakup fee. That's precisely what happened in January: After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab.

During late-night strategy sessions, Joseph L. Harris, Detroit's then-chief financial officer, scoured the budget for spare dollars, going so far as to cut expenditures on water and electricity. "I figured the [utility] wouldn't turn out our lights," says Harris. But there wasn't enough cash, and in June the city set up a payment plan with the banks.

Detroit Mayor Dave Bing is struggling to save his city from fiscal calamity. Unemployment is at a record 28 percent and rising, while home prices have plunged 39 percent since 2007. The 66-year-old Bing, a former NBA all-star with the Detroit Pistons who took office 10 months ago, faces a $300 million budget deficit � and few ways to make up the difference.

Against that bleak backdrop, Wall Street is squeezing one of America's weakest cities for every penny it can. A few years ago, Detroit struck a derivatives deal with UBS and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city's credit rating dropped, the banks could opt out of the deal and demand a sizable breakup fee. That's precisely what happened in January: After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab.

During late-night strategy sessions, Joseph L. Harris, Detroit's then-chief financial officer, scoured the budget for spare dollars, going so far as to cut expenditures on water and electricity. "I figured the [utility] wouldn't turn out our lights," says Harris. But there wasn't enough cash, and in June the city set up a payment plan with the banks.

Now Detroit must use the revenues from its three casinos � MGM Grand Detroit, Greektown Casino, and MotorCity Casino � to cover a $4.2 million monthly payment to the banks before a single cent can go to schools, transportation, and other critical services. "The economic crisis has forced us to move quickly and redefine what services a city can and should provide," says Bing. "While we face a tough road ahead, I believe we're on the right path." UBS declined to comment.

Detroit isn't suffering alone. Across the nation, local governments and related public entities, already reeling from the recession, face another fiscal crisis: billions of dollars in fees owed to UBS, Goldman Sachs and other financial giants on investment deals gone wrong.

Now, as many of those deals sour, Wall Street is ramping up its efforts to collect from Main Street.

"The banks stuffed customers with [questionable investments] and then extorted money from the customers to get rid of them," says Christopher Whalen, managing director at research firm Institutional Risk Analytics.

The New Jersey Transportation Trust Fund Authority, for instance, must pay nearly $1 million a month at least until December 2011 to Goldman Sachs on derivatives deals tied to municipal debt�even though the state retired the debt last year.

The Chicago Transit Authority, having entered into complex arrangements to lease its equipment to outside investors and then lease it back, could face termination fees of $30 million. The investors could collect penalties because American International Group, which backed the arrangement, has seen its credit rating tumble.

Detroit's Easy Solution

If Detroit Mayor Dave Bing pays UBS one dime over this, he is a complete fool.

The solution is easy. Detroit should declare bankruptcy. In fact, I recommend Houston and any other city in trouble to declare bankruptcy. If they do, they may not be able to go back to the bond markets for a while to raise funds, but so what?

Cities living within their means would be a good thing. Moreover, declaring bankruptcy will allow cities to rework pension benefits and union contracts.

I really do not understand this aversion to bankruptcy by cities.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Full of thanks

This post was supposed to be written last week, in preparation for Thanksgiving, but life throws you curve balls that interfere with plans. And that was precisely the point I was going to make. It's how we deal with those curve balls that matter.

I'm one of those -- an optimist, through and through. :) I can't help it. I think it stems from my teen years, which I've mentioned a bit on this blog. I had enough sad days then, and since then I just can't stand to be sad or depressed. It makes me physically uncomfortable, I hate it so much.

That's not to say I don't deal with the bad things in life -- I do. I realized a long time ago, when things are at the lowest, doing something, anything helps -- it gives you power and control back. So when things go bad, my control is to look at the good.

I was going to write about some trivial things in this post last week. Things like when the sitter cancels on your night out with friends or the hubby, and seeing that as a good turn of events -- looking at it as a chance to spend unexpected time with your children. And how many, many people in this world would do anything to have children to spend time with.

Or when the car breaks down and you can't get where you wanted to go -- I rationalize things like that by thinking it was probably best I didn't go. Would you call that fate? I just feel when something like that happens, I wasn't supposed to be in that car, at that time, on that road. I think there's a higher power at work and we often forget that, especially at the annoying times.

I was also going to talk about the more serious circumstances, like when I fell down half a flight of cement stairs a couple weeks ago -- holding my son. It was probably the scariest moment of my life. He hit his head, and I could barely walk afterwards. Within seconds he seemed fine, and after a trip to the ER, we found out he was indeed OK and my ankle (that was triple it's normal size) was only badly sprained.

I felt sorry for myself for about two seconds, and then I was overcome with thankfulness that it was just me that was hurt -- and it was just an ankle. How incredibly fortunate that my son was not hurt worse. The what ifs ran through my head and they were not good. So as I've hobbled around for the past two weeks, I've been reminding myself how thankful I am that that's all it was. I can handle with a sprained ankle any day of the week.

This is the way I deal, and it works for me. But my optimism was tested last week. We got news that my father-in-law was diagnosed with stage three pancreatic cancer. I simply cannot put this into words how I feel. I won't even try. For the first few hours after we found out, I could barely breath. It was like someone was sitting on my chest. Then, there were the tears, and tears. And tears. My heart is breaking for my husband. It's breaking for my stepdaughter, my sister-in-law, my nephews, for me. For my son.

And now, this bad, horrible news, has yet again taught me to see the good. It was confirmed today that his doctors think he has at least six months with us -- maybe even a year. My heart is heavy. I want to cry again and again. But I also can't help to think how fortunate are we to be able to spend this time with him over the next year. To do special things, take pictures, to create new memories.

For our son to get to know his Grandpa even better.

Every year my father-in-law cooks an authentic Mexican fiesta meal for us and our friends, usually in the fall. He obviously hasn't been feeling great, so we skipped it this year. But now, we're going to have the fiesta the week before Christmas. We will gather around him to cook our Mexican feast with him, and it will be something I'm sure none of us will ever forget. (And yes, it is as good as it sounds!)

I just can't focus on the bad. It's against my nature. I have to look to the good, and there will be much good that will come over the next year. I am sure of that.

If I can, I am asking a favor of all of you. I would really appreciate your prayers. For my father-in-law, that he feels as good as possible for as long as possible. And for my husband and his sister, that they feel comfort and peace right now. I really, really appreciate it. I am so thankful for all of you.

Holiday Shoppers Shun Credit Cards Use Cash; Self-Serving Fed Infomercials

Inquiring minds note a huge shift in consumer attitudes towards credit cards. Please consider Cash is king for holiday shoppers.

Cash was king for consumers who shopped over the Thanksgiving weekend, according to survey results released on Sunday, and that factor could have cost retailers additional sales.

Only 26 percent of people who shopped over the weekend said they used credit cards for their purchases, according to a poll conducted for Reuters by America's Research Group.

"That's an amazing shift in consumers' habits," said Britt Beemer, founder of America's Research Group.

A total of 39 percent said they used cash, while the remaining shoppers used debit cards, the survey showed.

Consumers shunning credit cards is a bad sign for retailers, since people who buy gifts with a credit card tend to spend anywhere from 20 to 40 percent more on the gift, Beemer said.

Every Retailer Wants To Be A Discounter

The National Retail Federation has this Black Friday Verdict: Number of Shoppers Up, Average Spending Down.

As the closely-watched Black Friday weekend winds down, a National Retail Federation survey conducted over the weekend confirms the expected: more people spent less. According to NRF�s Black Friday shopping survey, conducted by BIGresearch, 195 million shoppers visited stores and websites over Black Friday weekend*, up from 172 million last year. However, the average spending over the weekend dropped to $343.31 per person from $372.57 a year ago. Total spending reached an estimated $41.2 billion.

Shoppers� destination of choice over the past weekend seemed to be department stores, with nearly half (49.4%) of holiday shoppers visiting at least one, a 12.9 percent increase from last year. Discount retailers took an uncharacteristic back seat, with 43.2 percent of holiday shoppers heading to discount stores over the weekend and another 7.8 percent heading to outlet stores.** Shoppers also visited electronics stores (29.0%), clothing stores (22.9%), and grocery stores (19.6%). As millions of shoppers gear up for Cyber Monday, one-fourth of Americans shopping over the weekend (28.5%) were shopping online.

�In an economy like this one, every retailer wants to be a discounter,� said Tracy Mullin, NRF President and CEO. �Department stores have done an admirable job touting both low prices and good quality, which are important requirements for holiday shoppers on a budget.�

Changing Attitudes Towards Debt

That shift away from Credit Cards usage comes from several primary sources:

1) consumers shunning credit cards over higher interest rates
2) Job losses
3) Boomers headed into retirement scared half to death about a lack of savings
4) Banks curtailing credit and lowering card limits in response to rising defaults

Those four points represent changing consumer attitudes towards debt and borrowing, and banks' attitudes to credit and landing. Changing attitudes is the key idea.

Now, after the shift is well underway .....

Self-Serving Fed Infomercials

True to form with regulators, they are always too little too late. In an effort to boost its sagging image, you can look forward to Fed Infomercials, playing soon at movie theaters near you.

5 Tips for Getting the Most from Getting the Most from Your Credit Card

1. Pay on Time
2. Stay below your credit limit
3. Avoid unnecessary fees
4. Pay more than the minimum amount
5. Watch for Changes in your account

The Fed is on a publicity campaign to boost its image.

"Get Information You Can Trust"



The above clip is at the end of the Fed's infomercial on credit card usage.

If you think the Fed is concerned about you, you are sadly mistaken. Although, the Fed is concerned about excessive credit card defaults, that concern is for the banks, not for you.

Moreover, credit card tips is not the real message of the Fed's infomercial. The no-so-hidden message "Get Information You Can Trust" (from the Fed) is what the Fed really wants to get across.

One thing you can trust is that any infomercial from the Fed will be self-serving propaganda.

I repeat what I said in Ben Bernanke Pleads For His Job; My Response to Bernanke

Bernanke: The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation.

Mish: Ben, you sound like an arsonist taking credit for helping put out a fire, before the fire is even out, after you lit the match and tossed on the gas in the first place. For all the problems you have caused, don't you at least have the decency to show a little humility?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Ben Bernanke Pleads For His Job; My Response to Bernanke

Ben Bernanke is on yet another self-serving mission to save his job. Please consider The right reform for the Fed an op-ed by Ben Bernanke in the Washington Post.

Here is Bernanke's entire article (in italics) with my comments interspersed in plain type. Most of my comments are made straight to Ben Bernanke, but they apply in general to all central bankers.

Bernanke: For many Americans, the financial crisis, and the recession it spawned, have been devastating -- jobs, homes, savings lost. Understandably, many people are calling for change.

Mish: Ben, the reason people are calling for a change is that you and the Fed wrecked the economy. You did not see a housing bubble, nor did you foresee a recession. I would also like to point out your selective memory loss about your role in bailouts. To refresh your memory, please refer to Bernanke Suffers From Selective Memory Loss; Paulson Calls Bank of America "Turd in the Punchbowl" for details.

Bernanke: Yet change needs to be about creating a system that works better, not just differently. As a nation, our challenge is to design a system of financial oversight that will embody the lessons of the past two years and provide a robust framework for preventing future crises and the economic damage they cause.

Mish: No Ben, we need a system that works differently. You have proven beyond a shadow of a doubt that you and the Fed are incompetent and cannot be trusted.

Ben here is a compilation of your own statements made from 2005-2007 proving you have no idea what you are talking about.



Bernanke: These matters are complex, and Congress is still in the midst of considering how best to reform financial regulation. I am concerned, however, that a number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions.

Mish: Hello Ben, exactly what is that core function? Is it a dual mandate of price stability and full employment by any chance? Pray tell exactly how badly did you blow that? Did you succeed at either? Is it mission impossible in the first place?

Bernanke: Notably, some leading proposals in the Senate would strip the Fed of all its bank regulatory powers. And a House committee recently voted to repeal a 1978 provision that was intended to protect monetary policy from short-term political influence. These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States.

Mish: What Global consensus? Other Central bankers? What about the consensus of those who saw this coming? Pray tell why should anyone listen to those who were wrong every step of the way?

John Hussman has the right idea in Bernanke Sees A Recovery - How Would He Know? "We continue to expect a fresh acceleration of credit losses as we enter 2010. It would be best if we faced these challenges with more thoughtful leadership."

Bernanke: The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation.

Mish: Ben, you sound like an arsonist taking credit for helping put out a fire, before the fire is even out, after you lit the match and tossed on the gas in the first place. For all the problems you have caused, don't you at least have the decency to show a little humility?

Bernanke: The proposed measures are at least in part the product of public anger over the financial crisis and the government's response, particularly the rescues of some individual financial firms. The government's actions to avoid financial collapse last fall -- as distasteful and unfair as some undoubtedly were -- were unfortunately necessary to prevent a global economic catastrophe that could have rivaled the Great Depression in length and severity, with profound consequences for our economy and society. (I know something about this, having spent my career prior to public service studying these issues.) My colleagues at the Federal Reserve and I were determined not to allow that to happen.

Mish: Ben, that is your self-serving assertion that you saved the world. Care to debate the subject?

All the Austrian economists would disagree.

Many others disagree as well. Please see Hussman Accuses the Fed and Treasury of "Unconstitutional Abuse of Power" for one such example.

Bernanke: Moreover, looking to the future, we strongly support measures -- including the development of a special bankruptcy regime for financial firms whose disorderly failure would threaten the integrity of the financial system -- to ensure that ad hoc interventions of the type we were forced to use last fall never happen again.

Mish: Ben, it takes a lot of gall to say that while you are doing nothing to dismantle too big to fail enterprises such as Goldman Sachs, JPMorgan, Citigroup, etc. Moreover, given that you could not see the housing bubble come or the internet bubble coming, and given that you still believe that bubbles are best dealt with after they blow up, your words are meaningless.

Bernanke: The Federal Reserve, like other regulators around the world, did not do all that it could have to constrain excessive risk-taking in the financial sector in the period leading up to the crisis. We have extensively reviewed our performance and moved aggressively to fix the problems.

Mish: Ben you acted the way all regulators act: Doing nothing while Rome burns, then attempting to prevent Rome from burning after it has already burnt to the ground.

Ben, in case you did not notice, the market already shut down subprime mortgages, pay option ARMS, HELOCs, and excessive credit card debt. Your feeble cries are too little, too late. At best your efforts would prevent the last problem, but not the next one. The market has already prevented the last problem privately, even as Fannie and Freddie are once again taking on excessive risk as government entities.

The first thing any regulator in his right mind would do would be to shut down Fannie and Freddie, yet you and the Fed feed the beast, bloating your balance sheet with garbage in the process.

Bernanke: Working with other agencies, we have toughened our rules and oversight. We will be requiring banks to hold more capital and liquidity and to structure compensation packages in ways that limit excessive risk-taking. We are taking more explicit account of risks to the financial system as a whole.

Mish: Ben, wake me up when you decide to eliminate Fractional Reserve Lending because until you do, you can never eliminate the problem.

Bernanke: We are also supplementing bank examination staffs with teams of economists, financial market specialists and other experts. This combination of expertise, a unique strength of the Fed, helped bring credibility and clarity to the "stress tests" of the banking system conducted in the spring. These tests were led by the Fed and marked a turning point in public confidence in the banking system. There is a strong case for a continued role for the Federal Reserve in bank supervision. Because of our role in making monetary policy, the Fed brings unparalleled economic and financial expertise to its oversight of banks, as demonstrated by the success of the stress tests.

Mish: Stress tests?! You are actually bragging about stress tests?! Those stress tests that predicted a worst case scenario of unemployment of 9.8% in 2010 when I called for that in August of 2009?! How many times have you had to revise your stress test estimates? 3 times and counting by any chance?

Bernanke: This expertise is essential for supervising highly complex financial firms and for analyzing the interactions among key firms and markets. Our supervision is also informed by the grass-roots perspective derived from the Fed's unique regional structure and our experience in supervising community banks.

Mish: Your expertise is needed to supervise community banks?! Oh really? Let's consult the latest FDIC Quarterly Banking.

"The number of insured institutions on the FDIC�s 'Problem List' rose from 416 to 552 during the quarter, and total assets of �problem� institutions increased from $299.8 billion to $345.9 billion. Both the number and assets of 'problem' institutions are now at the highest level since the end of 1993."

Pray tell how bad would that have been if you were not an expert in such matters?

Bernanke: At the same time, our ability to make effective monetary policy and to promote financial stability depends vitally on the information, expertise and authorities we gain as bank supervisors, as demonstrated in episodes such as the 1987 stock market crash and the financial disruptions of Sept. 11, 2001, as well as by the crisis of the past two years.

Mish: Ben, did it ever occur to you that your handling of this crash is a repeat of the Fed's mishandling of the 2001 recession?

I guess not, but it is. The Greenspan Fed, of which you were a part, blew an enormous housing/credit bubble to bail out banks from stupid loans made to dotcom companies and Latin America.

You are back at it once again, only bigger.

Your policy is and always has been to blow repetitive bubbles of increasing amplitude, each bigger than the last, hoping to bail out the system. You have learned nothing from 2001, from, Japan, or from the Great Depression.

You are a complete disgrace in your inability to learn anything from history, and unfortunately the US is held hostage to your foolish policies.

Bernanke: Of course, the ultimate goal of all our efforts is to restore and sustain economic prosperity. To support economic growth, the Fed has cut interest rates aggressively and provided further stimulus through lending and asset-purchase programs.

Mish: Cutting interest rates aggressively helped create the housing bubble, something Bernanke still has not figured out.

Bernanke: Our ability to take such actions without engendering sharp increases in inflation depends heavily on our credibility and independence from short-term political pressures. Many studies have shown that countries whose central banks make monetary policy independently of such political influence have better economic performance, including lower inflation and interest rates.

Mish: Ben, you are at your most disingenuous self when you harp about inflation. The ONLY source of inflation is the Fed and fractional reserve lending. To eliminate inflation, all that is required is to get rid of both. But you don't want that do you?

No! You want a target of 2% inflation while ignoring asset bubbles because that is what the banks wants. You know and I know that inflation is a tax on the middle class for the direct benefit of the government and those with first access to money (banks and the already wealthy).

Ben, have you ever looked at a chart of two percent inflation over time? Here it is:

Inflation Targeting at 2% a Year



click on chart for sharper image.

Ben, Inflation targeting "works" until the ponzi scheme blows up when interest on the debt is no longer payable, the pool of greater fools runs out, attitudes towards debt and credit change, or some other stress such as global wage arbitrage and job losses interferes with the ability of consumers and businesses to take on more debt. In this case, all of the above happened.

Ben, you remain in Academic Wonderland with formulas that long ago stopped working.

Bernanke: Independent does not mean unaccountable. In its making of monetary policy, the Fed is highly transparent, providing detailed minutes of policy meetings and regular testimony before Congress, among other information. Our financial statements are public and audited by an outside accounting firm; we publish our balance sheet weekly; and we provide monthly reports with extensive information on all the temporary lending facilities developed during the crisis. Congress, through the Government Accountability Office, can and does audit all parts of our operations except for the monetary policy deliberations and actions covered by the 1978 exemption. The general repeal of that exemption would serve only to increase the perceived influence of Congress on monetary policy decisions, which would undermine the confidence the public and the markets have in the Fed to act in the long-term economic interest of the nation.

Mish: Ben, please stop lying through your teeth. If the Fed is as transparent as you say, you should not be fearing an audit. Furthermore, Ron Paul's amendment specifically bars Congress from intervening in any aspect of monetary policy.

Your mission, is to make sure no one can ever hold you accountable for your illegal actions or to find out exactly what junk is on your balance sheet (and what it is really worth).

There is a difference between "independence" and "secrecy". The Fed is not accountable to anyone right now and you know it.

Bernanke: We have come a long way in our battle against the financial and economic crisis, but there is a long way to go. Now more than ever, America needs a strong, nonpolitical and independent central bank with the tools to promote financial stability and to help steer our economy to recovery without inflation.

Mish: Indeed, we have come a long way thanks to Ron Paul's Audit the Fed bill. There still is a long way to go. It is time to put in a plan to phase out fractional reserve lending and phase in a dollar backed by something rather than nothing before the Fed can do any more damage to the economy.

My Plea For Everyone

I ask everyone to read Murry N. Rothbard, The Case Against The Fed.

It is a short 151 pages, and easily understandable by all. Here is an online PDF of The Case Against The Fed and it is free courtesy of Mises.

The book covers many topics including Why Fractional Reserve Lending is Fraudulent, The Genesis of Money, The Optimum Quantity of Money, FDIC, and What Can be Done.

From the Introduction ...

Money And Politics

By far the most secret and least accountable operation of the federal government is not, as one might expect, the CIA, DIA, or some other super-secret intelligence agency.

The CIA and other intelligence operations are under control of the Congress. They are accountable: a Congressional committee supervises these operations, controls their budgets, and is informed of their covert activities. It is true that the committee hearings and activities are closed to the public; but at least the people's representatives in Congress insure some accountability for these secret agencies.

It is little known, however, that there is a federal agency that tops the others in secrecy by a country mile. The Federal Reserve System is accountable to no one; it has no budget; it is subject to no audit; and no Congressional committee knows of, or can truly supervise, its operations. The Federal Reserve, virtually in total control of the nation's vital monetary system, is accountable to nobody�and this strange situation, if acknowledged at all, is invariably trumpeted as a virtue. ...

Stop The Power Grab

It is imperative to stop the Fed's power grab. The Fed bailed out banks and the bondholders of banks, illegally, at taxpayer expense. Moreover, the Fed would do it again in a flash. While the bondholders were made whole (the same applies to Fannie and Freddie), taxpayers are footing the bill.

Moreover the Fed has expanded its balance sheet by $trillions and no one really knows exactly what is in it, how much it is worth, or how much taxpayers might be on the hook for it.

While making claims of transparency, the Fed has fought to kill mark to market accounting at banks and the Fed certainly does not mark its own books to market. The whole thing is a huge shell game. The FDIC and the entire banking system is insolvent.

Bernanke's self-serving mission is to make sure the Fed is not accountable for its actions and my uphill battle mission is to help move along Ron Paul's bill so that Bernanke does not succeed.

Please contact your legislative representative once again, and let them know you want a complete accounting of the Fed, what is on the Fed's balance sheet, and exactly what that garbage is worth, marked to market.

You can get Phone, Fax, and Email numbers from the Online Directory for the 111th Congress.

Please take this post and send it to anyone you think might read it.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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A Christmas mantel, au naturale

I�m so glad you all loved the mantel inspiration photos! I was so inspired by the natural looks and all the �fluff� � I think it worked for our mantel as well. I spent much of today messing around and having fun with it. I�m so pleased with the final result, I hope you love it too!

I started with natural looking pics of greenery from Big Lots � I used three at $3 each. I just laid one on each end of the mantel, one in the middle, flattening them out as much as possible:

Then, I took the magnolias and all of the glammy (word?) stuff out of the greenery I had used last year (see previous post), then just folded it in half, and it ended up being exactly the length I needed. I laid it right on top of the greenery above.

Because I really loved the look of the long pine needles, I used more garland from Big Lots, for $9, and cut it up into a bunch of pieces, just sticking it here and there in the greenery. Then I cut up some sparkly branches and stuffed them in too:

The BL garland had the huge pinecones in it, but I added a few more of my own as well.

I took my clearance WalMart lanterns from our deck and repurposed them to work on the mantel. I was so pleased with how it turned out�

I was still craving a little somethin� though � some color! I just can�t do completely natural � it�s against my nature. ;) So I cut up some red beady stuff I had and stuffed it in here and there, and then hung my dollar store stars from each piece of ironwork:

I took some of the beady thingamabobs and sprinkled them on the pinecones in the lanterns:

 

Which was super easy to do, because the blasted things were flying off everywhere anyway. Argh.

The result? Lurve:

I found this little reindeer at HomeGoods and I seriously could not resist him. Adorable. He picks up the red touches in the mantel perfectly:

         

Hang in there � I took a crazy amount of pictures�

   

    

I used dollar store candleholders in the lanterns, and made them a bit taller by putting them on top of blocks of wood. I wanted to put faux snow in the lanterns, but they only open in the front, so it was next to impossible to get the snow in there. (Believe me, I tried.) So I just used my fluffy snow stuff instead:

Because the greenery is so full (sigh), I propped up the lanterns and the tree with books and boxes so they wouldn�t disappear. You can�t even see them when you look at the mantel:

Do you luuuuurve it? Huh? Do ya??

I hope so! I do. I had so much fun with this! One more mantel to go, and I hope to have that up this week. It�s MUCH simpler though. :)

The winner of Pampering Beki�s necklace giveaway is Melissa Howard from Melissa and Cas � please email me and I�ll get you in touch with Beki! I still haven�t heard from Kat at Measuring my life in love who was the winner of the vinyl giveaway � Kat, give me a holler! Enjoy ladies!

P.S. Did anyone watch the Behind the Magic Disney special on HGTV tonight? OMG � it was fantastic. (Popcorn as big as my head! Sixty-five foot trees people!) Check out a rerun if you get a chance! Spectacular!!

Bank of America Has "Good Excuse" for Not Offering Mortgage Modifications; HAMP a Spectacular Failure

The Obama Administration is pressing for more home modifications, so why the high failure rate, especially at Bank of America?

Bank of America's answer can be found in U.S. Treasury to Push Lenders to Finish More Home Modifications.

The U.S. Treasury Department will step up public pressure on lenders to finish modifying more home loans to troubled borrowers under a $75 billion campaign against the record tide of foreclosures.

More than 650,994 loan revisions had been started through the Obama administration�s Home Affordable Modification Program as of last month, from about 487,081 as of September, according to the Treasury. None of the trial modifications through October had been converted to permanent repayment plans, the Treasury data showed. That failure is getting the administration�s attention.

�We are taking additional steps to enhance servicer transparency and accountability as part of a broader focus on maximizing conversion rates to permanent modifications,� Treasury spokeswoman Meg Reilly said in an e-mail yesterday. The Obama administration plans to announce additional steps tomorrow, including new private-public partnerships and resources for borrowers.

Bank of America Corp. was among the worst performers in the program, with 14 percent of loans in modification in October, according to the Treasury. The bank, the largest in the U.S. and the biggest mortgage servicer, has 990,628 eligible loans, a greater total than any other company on the Treasury�s list. A spokesman for the Charlotte, North Carolina-based bank, Dan Frahm, has said the eligibility data may be overstated.

�As many as one-in-three of those borrowers listed as eligible for the program will not actually qualify for HAMP because the home is vacant, the customer has a debt-to-income ratio below 31 percent or is unemployed,� Frahm said in a Nov. 10 interview.

Citigroup, the third-largest U.S. bank by assets, began 88,968 trial modifications, or 40 percent of its eligible mortgages. JPMorgan, the second-largest U.S. bank, has started 133,988 modifications, or 32 percent of those eligible, the Treasury said.

The administration�s $75 billion Making Home Affordable program includes the mortgage modification initiative and loan refinancing through Fannie Mae and Freddie Mac.

Problem Loans at Bank of America

Bank of America has 990,628 eligible loans except for a few details like 1/3 of the portfolios consists of vacant homes, the homeowner is unemployed, or the customer has a debt-to-income ratio below 31 percent. Anyone care to assign probabilities to each of those three categories?

Spectacular Failure

Forget about Bank of America, note the spectacular failure of the plan in general. 650,994 loan revisions have been made and 0% of them have been converted to permanent repayment plans.

Taxpayer Risk

Notice how the plan operates. It takes mortgages and dumps them on the taxpayer via a passthrough of Fannie Mae and Freddie Mac.

If you get the idea that Fannies and Freddie are going to need another bailout you have the right idea.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Draw and paint man anatomy review

Draw and paint man anatomy review.

I was doing some study on male anatomy and muscle structure review for myself so that I can somehow apply and improve my painting technique and skill. Anyway, I thought it would be cool if I make it a mere stylize body rather than realistic and still maintain the realistic muscle structure.
Here are some of the video that might help you, go watch Character Design Face Male Merchant Character, or Drawing Male Face Swordman and Learn how to draw and paint face. After you watch these three videos, you should be able to get the idea on constructing a facial structure and stuff.

And the following videos should help you with male anatomy study: Drawing body muscle torso anatomy and Drawing arm muscles bicep tricep I know they are short, but they are very useful for drawing body and muscle.







Some video that might be helpful: Male anatomy drawing and rendering (shading)


FEATURE TUTORIALS: *Over 60 minutes to 2 hours of video.



-Draw and Paint Women Body Tutorial I: Female Manga Fusion I
-Draw and Paint Women Body Tutorial II: Female Manga Fusion II
-Character Design Tutorial: Dark Valkyrie


Oh and some GW concept art here:

law school professor advises underwater homeowners to walk away from mortgages

The LA Times is reporting Brent T. White, a University of Arizona law school professor, says that it's in the homeowners' best financial interest to stiff their lenders and that it's not immoral to do so. I commented on this story twice before but it's worth another recap.

Please consider Professor advises underwater homeowners to walk away from mortgages

Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.

That's the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

"Homeowners should be walking away in droves," White said. "But they aren't. And it's not because the financial costs of foreclosure outweigh the benefits."

Sure, credit scores get whacked when you walk away, he acknowledges. But as long as you stay current with other creditors, "one can have a good credit rating again -- meaning above 660 -- within two years after a foreclosure."

Better yet, homeowners can default "strategically": Buy all the major items they'll need for the next couple of years -- a new car, even a new house -- just before they pull the plug on their current mortgage lender.

"Most individuals should be able to plan in advance for a few years of limited credit," White said, with minimal disruptions to their lifestyles.

What kind of law school professorial advice is this? Aren't mortgages legal contracts? In so-called anti-deficiency states such as California and Arizona, mortgage lenders have limited or no legal rights to pursue defaulting homeowners' assets beyond the house itself, White said. In other states, lenders may decide that it is not worth the legal expense to pursue walkaways, or consumers may be able to find flaws in the mortgage documents, disclosures or underwriting to challenge the original contract.

The main point, he said, is that too often people's emotions get in the way of clear financial thinking about mortgages, turning them into what he calls "woodheads" -- "individuals who choose not to act in their own self-interest." Most owners are too worried about feelings of shame and embarrassment after a foreclosure, and ignore the powerful financial reasons for doing so.

While I generally agree with the advice, it is extremely important to Consult An Attorney Before Walking Away.

For more on this story please see "Strategic Defaults" a Mortgage Broker Comments on Fear and Shame Tactics which in turn was in response to Government and Lender Policies of Fear and Shame Help Keep Homeowners Debt Slaves.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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More on Wells Fargo Pay Option ARMs Extend and Pretend

Here is an email from the Healdsburg Housing Bubble (HHB) about Wells Fargo Chief Economist: "There is no clear, easy way out for housing".

HHB writes ...

Hi Mish,

I saw you linked to an istockanalyst article that quotes extensively from a piece I wrote on Wells Fargo Option ARMs. In his piece, and subsequently in your post, it is hard to tell where his analysis ends and mine begins (due to lack of blockquotes).

For the record the istockanalyst opinion that Option ARMs don't pose a threat to Wells is not one I agree with, despite the fact he relies on my data to get to this conclusion.

You hit the nail on the head. This is a version of extend and pretend, granted one that was written into the terms of the loans from the start. RECASTS won't automatically happen until 2014/15.

But the point of my article was simply to point out that that the widely used reset chart by Credit Suisse had a major error by assuming contractual 5 year recasts (when the Golden West 10Ks clearly state 10 year recasts) and most people were not paying attention to how this played out on Wells' balance sheet.

In fact, I made a point of saying "Of course, none of this is to say that Wells Fargo is out of the woods. They are essentially stashing away on their balance sheet tens of billions of neg-am loans that will recast into 20-year fixed rate mortgages in 2014 and 2015."

Here is my original piece:

Reset Chart from Credit Suisse has a Major Error

If you click through, I also put together a chart showing that while recasts won't technically occur until 2014, people will definitely be walking away long beforehand as those yearly 7.5% increases start to stack up. It's a mess for Wells and they know it.

They are trying to outrun the problem racking up earnings now while short rates are near zero, hoping they'll be able to absorb these losses down the road. We'll see how it turns out.

Again, good analysis of the problem. I just wanted to clarify my opinion from the istockanalyst article given you both quoted me at length.

Keep it up the good work...

-HHB

Thanks HHB.

One of the limitations of blogger is that one cannot put a blockquote in a blockquote and layers of referbacks are not easy to represent. I handle it with italics as best I can.

In this case however, I never made it back to the original post because it was clear that istockanalyst missed the boat. Inquiring minds may want to take a look at HHB's post for a couple nice charts and graphs on the situation with Pay Option ARMs.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Hidden Cost of War

In 2003 Donald Rumsfeld estimated a war with Iraq would cost $60 billion. Five years later, the cost of Iraq war operations is over 10 times that figure.

So what's behind the ballooning dollar signs? Joseph E. Stiglitz and Linda J. Bilme's exhaustedly researched book, "The Three Trillion Dollar War: The True Cost of the Iraq Conflict," breaks down the price tag, from current debts to the unseen costs we'll pay for years to come.



Obama May Add 30,000 Troops in Afghanistan

Please consider Obama May Add 30,000 Troops in Afghanistan

President Obama said Tuesday that he was determined to �finish the job� in Afghanistan, and his aides signaled to allies that he would send as many as 25,000 to 30,000 additional American troops there even as they cautioned that the final number remained in flux.

The White House said Mr. Obama had completed his consultations with his war council on Monday night and would formally announce his decision in a national address in the next week, probably on Tuesday.

At a news conference in the East Room with Prime Minister Manmohan Singh of India, Mr. Obama suggested that his approach would break from the policies he had inherited from the Bush administration and said that the goals would be to keep Al Qaeda from using the region to launch more attacks against the United States and to bring more stability to Afghanistan.

�After eight years � some of those years in which we did not have, I think, either the resources or the strategy to get the job done � it is my intention to finish the job,� he said.

Ms. Pelosi said she did not want to sacrifice the party�s domestic agenda to the cost of the troop buildup. �The American people believe that if something is in our national security interest, we have to be able to afford it,� she said. �That doesn�t mean that we hold everything else� hostage to that.

Cost Per Soldier = $1 Million

War mongering costs are rising. Please consider High Costs Weigh on Troop Debate for Afghan War.

While President Obama�s decision about sending more troops to Afghanistan is primarily a military one, it also has substantial budget implications that are adding pressure to limit the commitment, senior administration officials say.

The latest internal government estimates place the cost of adding 40,000 American troops and sharply expanding the Afghan security forces, as favored by Gen. Stanley A. McChrystal, the top American and allied commander in Afghanistan, at $40 billion to $54 billion a year, the officials said.

Even if fewer troops are sent, or their mission is modified, the rough formula used by the White House, of about $1 million per soldier a year, appears almost constant.

The estimated $1 million a year it costs per soldier is higher than the $390,000 congressional researchers estimated in 2006.

Military analysts said the increase reflects a surge in costs for mine-resistant troop carriers and surveillance equipment that would apply to troops in both Iraq and Afghanistan. But some costs are unique to Afghanistan, where it can cost as much as $400 a gallon to deliver fuel to the troops through mountainous terrain.

Some administration estimates suggest it could also cost up to $50 billion over five years to more than double the size of the Afghan army and police force, to a total of 400,000. That includes recruiting, training and equipment.

At a stop at a military base in Alaska on Thursday, Mr. Obama told a gathering of soldiers that he would not risk more lives �unless it is necessary to America�s vital interests.�

Double The Idiocy

Any expectations that Obama would show some sense of restraint about military spending have long ago vanished.

"It is my intention to finish the job� translates to "I will blow another $3 trillion war mongering if that is what it takes". And of course Pelosi does not think war idiocy should be at the expense of domestic idiocy.

War mongers want war but they do not want to pay for it. Sadly, Obama, Bush, Pelosi are all alike. Thus, Congress and the Administration is committed to having military idiocy and domestic idiocy at the same time.

God do we ever need a balanced budget amendment and a sound currency. We should not fund a damn thing unless we are willing to raise taxes to pay for it. Virtually no one but the war mongers and the military beneficiaries would be in support of raising taxes to pay for this monstrosity.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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