Neil Barofsky Promises Handcuffs; Police Pay Dispute In Miami; Workers Protest In NM; California Muni Bond Outlook, Other Potpourri

Inquiring minds note that Neil Barofsky, special inspector for the Troubled Asset Relief Program (TARP), claims Bailouts created more risk in system.

Neil Barofsky Says Handcuffs Are Coming



Police, City Square Off In Miami Over Pay

Police City Square Off Over Pay Dispute

WEST PALM BEACH � The police union used slides of a bloodied badge and beat-up officers to make its point to city commissioners Monday: officers aren't like other city employees and they deserve step-raises this year.

"No other city employee has the threat of death or serious bodily injury as a residual part of daily work routine," said Ernie George, executive director of the Palm Beach County Police Benevolent Association. George was addressing a special commission hearing, set up after city administration and the union couldn't agree on a contract for the 2009-10 fiscal year. It was the first such meeting in a quarter century.

"From their safe city hall offices, the mayor and the finance director can say, 'so what?,'" George added, as he pointed to a slide of a police officer with blood dripping down his head. "Does that look like a regular day at the job?"

After the heated three and a half hour meeting at City Hall, packed with dozens of West Palm Beach officers, commissioners decided to mull the decision another week and vote Feb. 8.

Commissioners failed to go into detail about the biggest issue, whether police can keep their yearly step increase, which gives officers a five percent bump every year for their first 10 years on the force. Eliminating the step increases would save the city $230,000.

Assistant city attorney Zoe Panarites argued the city's side, saying that police officers are doing better financially than most city employees. The average income for officers is $82,455. Sergeants average $106,010, and lieutenants average $122,037.

By eliminating step increases, raises to employees in their 10th and 20th year, holiday pay on three of the 11 city holidays, and reducing some costs in insurance benefits, equipment and overtime, Panarites said the city could save just over $1 million.

The city is facing a revenue shortfall of $20 million this year and $10 million next year. "All city employees, including management, had to make income adjustments they did not foresee," Panarites said. Both sides indicated some room for flexibility.

No Room For Flexibility

The budget hole is $20 million, the proposal saves $1 million. The city needs to politely tell the union to go to hell.

Six Figure Salaries In Phoenix

Phoenix management's 6-figure salaries worry councilman, union head

About 1,375 [city] employees earn more than $88,005, or the base salary of Mayor Phil Gordon.

In 2008, the average Arizona worker made just $34,335 a year, according to the U.S. Commerce Department.

Councilman Sal DiCiccio, who has criticized the size of Phoenix's spending on employees, said his calculations show the average total cost per worker is more than $100,000, something he sees as untenable as city leaders struggle to close a $245 million budget shortfall through the 2010-11 fiscal year.

But City Manager David Cavazos, Phoenix's highest paid official, said management has been cut at the same rate as front-line employees. And he pledged that in March the 20-person City Manager's Office will be cut by a greater percentage than any other city department.

Phoenix Salaries



That is absolutely outrageous across the board but especially an executive assistant making $170,000. Is there no one qualified who would do the job for $50,000?

Note too, the deep "pain" David Cavazos will feel if his salary is cut 3% (or whatever) just like everyone else.

New Mexico Workers Protest 2% Cuts

State workers protest proposed cuts

Angry and passionate protestors took to the roundhouse Saturday, calling for lawmakers to protect the salaries of educators and state workers.

The protest was organized by AFSCME, the union which represents many state employees.

It started on the steps leading into the roundhouse and continued as hundreds marched around the capitol building. After the protest, union members walked through the capitol and signed their names on sheets outside their representatives' doors to let them know they were there on Saturday.

The two percent cut is only a portion of the budget proposal in question. $200 million in tax increases or further spending cuts would be required.

The only solution to union arrogance is to privatize everything. Afterwords the unions can ponder how good they had it compared to everyone else.

Budget Crisis In Los Angeles - Audio

LA's budget crisis

The Los Angeles City Council is considering as many as a thousand layoffs � and extending mandatory furlough days for city employees � to address a projected $200 million deficit. City Council President Eric Garcetti says he hopes it won�t come to that, but the situation is extremely serious and drastic measures must be taken. Mayor Villaraigosa says there are concessions other than layoffs that could help, such as pay cuts and letting private contractors take over some city services. What proposals are on the table? And can the cash-strapped city avoid bankruptcy?

California muni investors trim holdings

California muni investors trim holdings

Financial advisers with clients in California are increasingly recommending a cutback in exposure to the Golden State's tax-exempt bonds.

Considering California's high income taxes, that is a tough recommendation to make, but many advisers say that the state's perilous fiscal condition � worse than that of other troubled states, including Illinois and New York � will continue to pressure California bond prices.

�My clients are nervous, and I am very nervous,� said Marilyn Cohen, president and chief executive of Envision Capital Management Inc., a Los Angeles-based firm that oversees $250 million in bonds for individuals.

�Nothing has materialized to give us any confidence that this is going to be handled,� she said, referring to California's budget crisis.

Marin County California Cutbacks

Big changes in store for Marin governments

IT'S TIME to take stock of where California government, both local and state, is headed.

The first thing to understand is that there will be no future tax increases. The only exceptions are the occasional parcel tax or bond to fund specific community or school needs in prosperous communities.

The two-thirds super majority at the ballot box and in the Legislature guarantees that current revenues will not expand.

It's a pipedream to think that voter approval of constitutional reform will eliminate the existing super majority requirement for tax increases.

Accept it. The two-thirds rule, meaning veto power by the Legislature's Republican minority and anti-tax folks at the ballot box, is here to stay. Golden State voters have reached their limit. Right or wrong, that's political reality.

Excepting social services, and higher education, state cut backs will be felt more by government employees than by service recipients. Relatively few citizens are impacted by prison closures and smaller regional agencies. Infrastructure spending will decrease, but it will take some years to see the impact on highways, bridges and transit.

This isn't a threat. It's a statement of what will inevitably happen as a direct result of dysfunctional state government. The trick is adapting and replacing the old paradigm with a new way of doing business.

As in San Rafael, where police and fire personnel refused to agree to a modest 5 percent salary cut to preserve jobs, North Bay governments will be left with smaller cadres of well-paid public employees providing ever declining levels of services.

A scheme where a San Rafael police officer after five years of service earns an annual total compensation package of $175,000 isn't sustainable. A big part of the dilemma is the city paying for retirements that guarantees police and firefighters 90 percent of their salary for life at age 50.

This isn't the end of the world. Marin council members and supervisors need to design innovative methods of serving the public with less staff. Answers include privatization, moving entire tasks outside the public sector, or simply doing without.

Actually it will be the end of the world (bankruptcy), unless the cities get rid of police officers making $175,000 after 5 years with retirement at age 50 at 90% pension.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Obama's Two-Faced Poisonous Plan Sure To Please No One

Talk coming from the White House is rather amazing. On one hand Obama chastises Congress for not being fiscally prudent, on the other hand he wants Congress to approve still more funding for his pet ideas. Such talks is bound to win few fans on either side of the aisle.

Please consider the Obama Budget: Record Spending, Record Deficit

Spelling out painful priorities, President Barack Obama urged Congress on Monday to quickly approve a huge new shot of spending for recession relief and job creation, part of a record $3.8 trillion budget that would boost the deficit beyond any in the nation's history while only slowly beginning to put Americans back to work.

The spending blueprint for next year calls for tax cuts for workers and business and more aid for cash-starved state governments as well as the unemployed. The jobs initiative largely mirrors last year's stimulus bill, but is about one-third its size. The president is asking for nearly $300 billion for recession relief and job stimulus.

While proposing increases for immediate needs, he urged lawmakers to follow his lead and make cuts, even painful ones in programs dear to them. "I'm asking Republicans and Democrats alike to take a fresh look at programs they've supported in the past to see what's working and what's not, and trim back accordingly," he said.

"They're not willing to do big ideas. They're doing ideas that create perception but don't do anything big," said New Hampshire Sen. Judd Gregg, senior Republican on the Budget Committee. "The spending freeze for example. You're talking what, $10 billion on a $1.6 trillion deficit?"

Democrats, facing the prospect of major losses in November, are likely to join Republicans in balking at many of Obama's proposals. Moderate Democrats already are wary of another debt-financed economic stimulus program and may also choke on many of the recommended tax increases and spending cuts.

Obama's proposal to cut payments to wealthier farmers, for example is probably dead on arrival and his renewed push to end purchases of new C-17 cargo planes for the military is sure to incite a battle with lawmakers from California, where the planes are assembled.

Proposing a partial spending freeze, tax increases for wealthier people and a new fee on banks, the president's proposal still amounts to just tinkering at the edges of the larger budget problem.

While White House Press Secretary Robert Gibbs spoke Sunday of a $100 billion jobs initiative, these "temporary recovery measures" in fact total $282 billion through the autumn of 2012, according to budget documents.

At the same time, Obama wants to hand off to a commission decisions on the tough steps needed to reduce deficits and slow the growth in the federal debt to levels economists deem prudent. The panel's recommendations wouldn't be due until after the midterm election.

Obama's proposal lays out a path to reduce annual deficits to about $700 billion in four years, but ideas for tax increases or cuts in popular benefit programs like Medicare or Social Security to reduce them an additional $200 billion would have to come from the commission.

"We simply cannot continue to spend as if deficits don't have consequences, as if waste doesn't matter, as if the hard-earned tax dollars of the American people can be treated like Monopoly money, as if we can ignore this challenge for another generation," Obama said.

Obama dropped his plan into a poisonous election-year atmosphere. Republicans in Congress immediately labeled it as a toxic mix of higher taxes, big spending and debt, saying it would still produce deficits totaling $8.5 trillion over the coming decade.

Is Anyone Happy?

A quick look at the above article is all it takes to answer the question. Moreover, I am struggling to believe Obama does not comprehend how ridiculous he looks chastising both parties for spending while adding new proposals seemingly every day.

And what's with freezing 1/8 of the budget at best while adding something to every piece of the remaining pie?

Economist Paul Krugman is sure to complain the President is not spending enough, right along with House Majority Whip James Clyburn (D-S.C.) who says "We're not going to save our way out of this recession. We've got to spend our way out of this recession, and I think most economists know that." (See In Defense of Drunken Sailors for details).

Balance that with every economist in their right mind (although admittedly there are very few), who think it is impossible to spend one's way out of a debt bubble.

Meanwhile healthcare is dead, yet war spending, the one thing nearly everyone in the country thinks is a bad idea is going up.

Indeed, Obama's budget seems carefully crafted to offend as many people as possible.

As anger mounts, look for the mid-term elections to be a slaughter. Any weak incumbent is going to have a very tough time retaining his seat. Republicans now have a genuine shot at retaking the House, although many of them deserve to be booted as well.

Here's my rule for the upcoming election "If In Doubt, Vote Them Out".

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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In Defense of Drunken Sailors

Proving that he ought to be voted out of office, House Majority Whip James Clyburn (D-S.C.) wants Congress to spend like drunken sailors. More specifically Clyburn says 'We've got to spend our way out of this recession'

The U.S. government must spend its way out of the recession, the Democrats' third-ranking House leader stressed Monday.

Rep. James Clyburn (D-S.C.), the House majority whip, said that trying to find greater savings in the budget, which was released by President Barack Obama this morning, wouldn't help alleviate the recession.

"We've got to make some decisions here as to what's in the best interests of our country going forward," Clyburn said during an appearance on Fox News. "And I think the best interest is to invest in education, control these deficits, while at the same time trying to get people back to work."

"We're not going to save our way out of this recession," the majority whip added. "We've got to spend our way out of this recession, and I think most economists know that."

Drunken Sailor Chimes In

Now that we have clarified what most economists know, we also need to give equal time to drunken sailors. Fortunately, I can oblige.

My friend Paul, a self proclaimed drunken sailor is infuriated with the comparison between politicians and sailors. Paul just pinged me with ....

Mish,

I can�t take it anymore. I need to take a stand. Right here. Right now. Lately, so much hate and vitriol has been directed at drunken sailors.

Why has it become so chic in the blogosphere to make the analogy that the Congress, the States, the Municipalities all spend like drunken sailors? Why the sudden urge to besmirch, dare I say libel, drunken sailors?

I assure you, a drunken sailor is a harmless creature. I speak from experience. I have been a drunken sailor. Many of my best friends have been drunken sailors.

Whereas from my perspective, all flavors of government inflict great harm. To infer a resemblance between a politician and a drunken sailor should be actionable!

When pulling into a foreign port after many weeks or months at sea with the world�s finest navy, I always looked forward to sampling the native�s libations. Yes, I got hammered.

However, when I ran out of money I STOPPED DRINKING! I didn�t club the patron on the bar stool next to me over the head and rob him so I could continue drinking. I didn�t call me wife and ask her to cash in the kids college funds so I could continue drinking. I didn�t write my unborn grandkids an IOU so I could continue drinking. I just stopped and stumbled back to the liberty launch for a cheeseburger. I knew I�d have some cash next payday and I could hit the bars and clubs in the next liberty port.

So please, no more comparisons of deficit spending politicians to harmless drunken sailors. Drunken sailors have feelings too.

Cheers,

Paul

On behalf of the blogosphere, apologies offered to all drunken sailors everywhere, for an inaccurate and libelous comparison.

Quotes

"To say Congress is spending like drunken sailors is an insult to drunken sailors." -- Ronald Reagan

"The difference between congressmen and drunken sailors is that drunken sailors are spending their own money." -- Rep. Tom Feeney

The above from Observations On Politicians

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Demand For Loans Weakens Again In Fed Senior Loan Survey

While the incessant drumbeat that "banks aren't lending" continues, the real story once again is that demand for loans continues to drop. Please consider the January 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices.

The January survey indicated that commercial banks generally ceased tightening standards on many loan types in the fourth quarter of last year but have yet to unwind the considerable tightening that has occurred over the past two years. The net percentages of banks reporting tighter loan terms continued to trend lower. Banks reported that loan demand from both businesses and households weakened further, on net, over the survey period.

For many major loan categories covered by the survey, the net percentages of respondents that tightened standards in the fourth quarter of 2009 were close to zero. However, banks continued to tighten a number of terms on loans to both businesses and households, although the net fractions of banks that reported doing so in the January survey generally stepped down again. Banks� policies on CRE lending were an exception, as large net fractions of respondents further tightened their credit standards during the final quarter of last year. In addition, banks reported that they had tightened terms on CRE loans substantially over the past year.

Demand from both businesses and households for all major categories of loans weakened further, on net, over the past three months. The net fractions of banks that reported weaker demand for business loans continued to decline, while changes in the comparable readings on demand for loans to households were mixed.

Other than Commercial Real Estate, which is plagued by vacancies and falling rents, there was no change in lending standards. With that fact in mind, let's once again investigate the charge "banks aren't lending".

Here is the survey question on page 23: "4. Apart from normal seasonal variation, how has demand for C&I loans changed over the past three months?" followed by the table of responses.

Demand for C&I loans from large and middle-market firms



click on chart for sharper image

Demand for C&I loans from small firms (annual sales of less than $50 million)



click on chart for sharper image

Please look at that last chart carefully. It represents demand for small business loans (firms with annual sales of less than $50 million).

Across all banks, demand for loans was modestly weaker by 31.5 percent of respondents and substantially weaker at 1.9% of respondents. Demand for small business loans was modestly stronger at only 3.7 percent of banks and substantially stronger nowhere.

Tightening Credit Standards Are Not The Reason For Weakening Demand

Here is the question on page 53: "Over the past three months, how have your bank's credit standards for approving applications for C&I loans or credit lines�other than those to be used to finance mergers and acquisitions�changed?"



click on chart for sharper image

Thus, once again, a quick look at the data shows that it makes no sense to blame banks for not making small business loans. Demand for loans is down and most likely demand from qualified applicants is down even more.

As I pointed out in Fictional Reserve Lending And The Myth Of Excess Reserves

• Banks are capital constrained not reserve constrained.
• Banks aren't lending because there are few credit worthy borrowers worth the risk.

I maintain that banks are lending responsibly for the first time in a decade. This is a good thing!

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Least and Most Affordable Housing in the World, By Nation and City; Vancouver Canada is Least Affordable City, Australia the Least Affordable Country

Inquiring minds are reviewing the results of the 6th Annual Demographia International Housing Affordability Survey. Countries in the survey include Australia, Canada, Ireland, New Zealand, the United Kingdom, and the United States.

Least Affordable Cities



The article shows the top 58, I captured the top 20 above.

Congratulations To Canada And Australia

Congratulations go to Vancouver, Canada for being the least affordable city in the survey. Vancouver thus wins the gold medal in the individual competition.

Sydney Australia proudly wins the Silver medal and the Sunshine Coast Australia wins the bronze. It was close but no cigar for Australia's Gold Coast. Honolulu Hawaii came in a respectable fifth place.

Most Affordable Cities



Detroit, South Bend, Youngstown, Flint, Toledo, Akron, Peoria, Cleveland, and many other "affordable" cities are not places where anyone would particularly want to live. Indeed many cities at the top of the affordability list are places that most would hope to escape from.

The high school graduation rate in Detroit is a mere 25%!

I am willing to bet that Detroit's graduation rate is far and away the worst of any city in the survey. See Michigan Forces Business Owners Into Public Sector Unions; Detroit's Aura of Hopelessness for more details.

Moreover, there are houses in Detroit, Cleveland, Flint, etc, that one could buy for $500 that have no takers. Unlivable houses no one wants at any price skew the results.

Demographia Summary by Nation

All of the affordable markets were located in Canada and the United States, while most markets in Australia, New Zealand and the United Kingdom were severely unaffordable.

Australia: House prices have continued to rise in Australia (Figure 2), which registered the worst housing affordability (the highest Median Multiple) in the
history of the Survey. Overall, housing in Australia is severely unaffordable, with a Median Multiple of 6.8, more than double the 3.0 historic maximum norm. Housing had been affordable in Australia in the late 1980s, with a Median Multiple of under
3.0. The Median Multiple remained at or under 3.5 until the late 1990s.

All of Australia?s major markets were severely unaffordable (Median Multiple above 5.0). Moreover, all markets, including smaller markets were severely unaffordable except Ballarat (Victoria), which was seriously unaffordable (Median Multiple between 4.1 and 5.0).



Canada: Housing is moderately unaffordable, as in previous Surveys. Canada?s Median Multiple is 3.7. Housing had been affordable in Canada in the late 1990s, with a Median Multiple of 3.0. Canada had 5 affordable markets, 13 moderately unaffordable markets, 5 seriously unaffordable markets and 5 severely unaffordable markets.

Vancouver remained the least affordable market of any size in the surveyed nations, at 9.3, worsening from 8.4 last year. Toronto joined Vancouver as severely unaffordable, with a Median Multiple of 5.2. However, Barrie, within the Toronto region was moderately unaffordable, at 3.4. Victoria, Abbotsford and Kelowna (all in British Columbia) were also severely unaffordable.

Ireland: Housing in Ireland has become moderately unaffordable with a Median Multiple of 3.7, showing a trend toward historic norm of 3.0.20 Housing had been affordable as late as the middle 1990s, with a Median Multiple below 3.0. The extent of Ireland?s recent housing affordability improvement is illustrated by the EBS/DKB Affordability Index, which indicates that mortgage payments have been halved in Ireland since the peak of the bubble in relation to first home buyer incomes.

New Zealand: Housing in New Zealand was severely unaffordable, with a Median Multiple of 5.7, nearly double the historic maximum norm of 3.0. Housing had been affordable in the early 1990s, with a Median Multiple of under 3.0. Auckland is the least affordable larger market, with a Median Multiple of 6.7, while Christchurch (6.1) and Wellington (5.7) were also severely unaffordable.

Tauranga-Bay of Plenty was again the least affordable market, with a Median Multiple of 6.8. Five of the 8 New Zealand markets were severely unaffordable, while Palmerston North, Napier-Hastings and Hamilton were seriously unaffordable New Zealand had no affordable markets and no moderately unaffordable markets

United Kingdom: Housing in the United Kingdom remains severely unaffordable, with a Median Multiple of 5.1, well above the historic maximum norm of 3.0. Housing had been affordable in the late 1990s, with a Median Multiple of under 3.0. Less than one-half of the United Kingdom markets were severely unaffordable (14 of 33), while the other 19 markets were seriously unaffordable. The United Kingdom had no affordable markets and no moderately unaffordable markets.

United States: Housing in the United States is rated as affordable, with the Median Multiple of 2.9.The recent house price declines have restored U.S. housing affordability to the below 3.0 historic norm (last achieved in the early 2000s), as the price bubble burst in many plan-driven markets. The United States had 98 affordable markets, 58 moderately unaffordable markets, 8 seriously unaffordable markets and 11 severely unaffordable markets.

The most affordable major market (population over 1,000,000) was Detroit. Other affordable major markets were Atlanta, Buffalo, Cincinnati, Cleveland, Columbus (Ohio), Dallas-Fort Worth, Houston, Indianapolis, Kansas City, Las Vegas, Louisville, Memphis, Minneapolis-St. Paul, Oklahoma City, Phoenix, Riverside-San Bernardino, Rochester, Sacramento, St. Louis and Tampa-St. Petersburg.

Gold, Silver, Bronze Medals

In terms of national unaffordability (the team competition) Australia wins the gold medal, New Zealand, the silver medal, and the UK wins the bronze medal.

Because of a preponderance of "affordable" cities in the US and the way the national rankings are made, I question the results of the national survey although it likely did not affect the top three medal-winning rankings.

Email Exchange With Survey Developer

I had this exchange with Hugh Pavletich of Performance Urban Planning who helped develop the survey.

Mish: When you come up with "national affordability" are all the cities given equal weight? Does Detroit count as much as San Francisco?

Hugh: Yes.

Mish: In my opinion, a weighted average is what matters most (at least for the purpose of figuring out how big the bubble still is).

Hugh: We are NOT attempting to explain how big the bubble is on a country wide basis. We are simply illustrating what the Median Multiple is at the 3rd Qtr of each of the urban markets listed.

Other researchers are most welcome of course to take the next step and do a population weighting, if they wish to do so.

Our goal is simply to illustrate the degrees of housing stress of the urban markets listed.

Bear in mind my goal is quite different than Hugh Pavletich's. He wants to show the role local planning rules have in affordability. Hugh makes a case that local zoning rules play a huge factor on a city by city affordability basis while I am concerned with "How Big Is The Bubble?"

From my perspective, the US and Canadian bubble problems are very understated, and the national affordability rankings of the US and Canada are thus overstated. To be certain, one would have to take a weighted average of populations and rankings. One would also need to take into consideration unlivable houses offered at $500 that no one would take. If one did that, we would see the bubbles are where the most people live.

There is much more in the survey. Please give it a look.

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

A few tidbits on my daily blog and weekly web page.

:: First, regular readers will probably notice a new sponsor in the top right corner of this page. Land8 Media is a "Targeted Ad Network for Bloggers of the Built Environment" and one I'm proud to join. Advertisers are picked for their relevance to the published sites. As of now the advertisers include Hunter Industries, John Wiley & Sons, Kerb, Vectorworks and others. Publishers now are landscape heavy (nothing wrong with that!) and include Design Under Sky, Land8 Lounge, Landscape + Urbanism, Veg.itecture, among others.

:: A weekly dose of architecture remains ad-free, though I've added a PayPal donate button for those who want to help keep it this way and have some money to spare.

:: Lastly, I'm in the process of migrating a weekly dose of architecture to WordPress. This should take a couple months, and it will hopefully be a big improvement over my old-fashioned and time-consuming html site. Stay tuned.

St. Louis Fed: US Deflation No Longer A Risk

If you think the Fed is a contrarian indicator, your hair may be standing straight up after you read this: James Bullard a voting member of the Fed says US deflation no longer seen as a risk.

The US has escaped the danger of a Japanese-style deflationary trap, according to James Bullard, a voting member of the Federal Reserve�s key policy-setting committee. Mr Bullard, president of the Federal Reserve Bank of St Louis, told the Financial Times in an interview that his preoccupation throughout 2009 had been deflation, but the risk had �passed�.

Last week�s Fed meeting produced a dissenting vote for the first time in a year when Thomas Hoenig, president of the Kansas City Fed and a rate hawk, argued that financial conditions no longer warranted a policy of holding rates at �exceptionally low levels . . . for an extended period�.

Mr Bullard, who is considered a centrist member of the FOMC, said he was happy to continue with the current guidance, but he did have some sympathy for Mr Hoenig�s argument that �if you come off zero and you move up a little bit, it�s still a very easy policy. You�ve still got a very large balance sheet and you�re still at very low interest rates.�

The broader post-crisis economy was �on track� with its recovery, he said. �It�s not a real strong recovery but that�s what we had predicted anyway. But it will be above-average growth for the first half of 2010 and we�ll probably see some positive jobs growth in the first part of 2010 here.�

When the Fed does come to raise rates it may have to switch from its traditional benchmark of targeting the federal funds rate to targeting a repurchase rate because of the upheaval in the two markets over the last two years.

Be prepared for a massive slide and a resumed deflationary credit crunch. If you need a reason, look no further than Massive Layoffs Coming in NYC, Nevada, California, Colorado, Arizona, Everywhere.

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