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US Budget Forecasts and actual reality

02-Feb-10

NYT interactive chart of forecasts and how they missed reality

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Daniel Dafoe about unemployment and government making poor poorer

02-Feb-10

Written in 1704

  • There is in England more labor than hands to perform it, and consequently a want of people, not of employment.
  • No man in England, of sound limbs and senses, can be poor merely for want of work.
  • All our workhouses, corporations and charities for employing the poor, and setting them to work, as now they are employed, or any Acts of Parliament, to empower overseers of parishes, or parishes themselves, to employ the poor, except as shall be hereafter excepted, are, and will be public nuisances, mischiefs to the nation which serve to the ruin of families and the increase of the poor.
  • That it is a regulation of the poor that is wanted in England, not a setting them to work.

The poverty and exigence of the poor in England is plainly derived from one of these two particular causes — casualty or crime. By casualty, I mean sickness of families, loss of limbs or sight, and any, either natural or accidental, impotence as to labor. The crimes of our people, and from whence their poverty derives, as the visible and direct fountains are

  • Luxury
  • Sloth
  • Pride

source Mises.org

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In August 2008 Goldman Was Willing To Tear Up AIG Derivative Contracts, Offered To Take Haircut

26-Jan-10

Great piece from Zerohedge:

As observant readers will recall, a week ago we pointed out a letter in which the New York Fed’s Steven Manzari instructed AIG to stand down on all discussions with counterparties on “tearing up/unwinding CDS trades on the CDO portfolio.” At the time we focused on the word “stand down” as an indication of the Fed’s lead role in the process. At this point there is no doubt that the FRBNY, together with its law firm, Davis Polk, were in the pilot’s seat during the entire AIG negotiation, and while Tim Geithner may not have been the responsible man for this, someone must have been - and for the record, our money is a double or nothing on recently promoted FRBNY Senior Vice President Sarah Dahlgren, who as of January 21st is in charge of the Fed’s Special Investments [AIG] Management Group. We sure hope Sarah gets the chance to recall her memories beginning in the fateful month of September 2008 when she became the person in charge of the FRBNY’s AIG relationship. But back to the letter - little did we know that our focus was on the right sentence… but on the wrong word. What should have struck us front and center, was Habayeb’s admission that contract “tear downs” had been evaluated. This means that someone, aside from AIG, must have expressed an interest in a tear down, which if true would have dramatic consequences for the entire AIG debacle. Today, the WSJ presented the missing piece of the puzzle. In tonight’s Heard On The Street section, the WSJ notes:

As everybody knows, AIG got a huge government bailout in September 2008 to help make payments on derivatives contracts with banks, including Goldman. Yet in the previous month, Goldman approached AIG about “tearing up” its contracts, according to a November 2008 analysis by BlackRock, then an adviser to the New York Fed. So was Goldman prepared to offer AIG a haircut in the month before its rescue? A legitimate question, given that Goldman refused to accept such a cut when the New York Fed raised the idea after it bailed out AIG.

The implications of this discovery are huge as they essentially destroy all the arguments presented by the FRBNY about an inability to extract concession out of Goldman (which being the largest AIG CDO counterparty, was the critical negotiating factor). It also casts doubt on the veracity of any arguments presented in Congress by Goldman representatives discussing the potential to take a haircut on their AIG exposure. What this means in plain English is that, in the month before the Fed entered the scene, GOLDMAN SACHS ITSELF OFFERED TO TEAR DOWN THE CDS ON AIG’S CDO PORTFOLIO (we don’t use caps lock lightly). This is basically a smoking gun on the moral hazard issue perpetrated by the FRBNY when it got involved, and indicates that through their involvement, Tim Geithner, Sarah Dahlgren or whoever, not only did not save US taxpayers’ money, but in fact ended up costing money, when they funded the marginal difference between par (the make whole price given to all AIG counterparties after AIG was told to back off in its negotiations) and whatever discount would have been applicable to the contract tear down that had been proposed by Goldman a mere month earlier. This, more so than anything presented up to now, is the true scandal behind the New York Fed’s involvement.

continue reading here

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Albert Edwards Alleges Central Banks Were Complicit In Robbing The Middle Classes

21-Jan-10

Theft! Were the US & UK central banks complicit in robbing the middle classes?

by Albert Edwards, Societe Generale

Mr Bernanke’s in-house Fed economists have found that the Fed wasn’t responsible for the boom which subsequently turned into the biggest bust since the 1930s. Are those the same Fed staffers whose research led Mr Bernanke to assert in Oct. 2005 that “there was no housing bubble to go bust”? The reasons for the US and the UK central banks inflating the bubble range from incompetence and negligence to just plain spinelessness. Let me propose an alternative thesis. Did the US and UK central banks collude with the politicians to ‘steal’ their nations’ income growth from the middle classes and hand it to the very rich?

Ben Bernanke?s recent speech at the American Economic Association made me feel sick. Like Alan Greenspan, he is still in denial. The pigmies that populate the political and monetary elites prefer to genuflect to the court of public opinion in a pathetic attempt to deflect blame from their own gross and unforgivable incompetence.

The US and UK have seen a huge rise in inequality over the last two decades, as growth in national income has been diverted almost exclusively to the top income earners (see chart below). The middle classes have seen median real incomes stagnate over that period and, as a consequence, corporate margins and profits have boomed.

Some recent reading has got me thinking as to whether the US and UK central banks were actively complicit in an aggressive re-distributive policy benefiting the very rich. Indeed, it has been amazing how little political backlash there has been against the stagnation of ordinary people?s earnings in the US and UK. Did central banks, in creating housing bubbles, help distract middle class attention from this re-distributive policy by allowing them to keep consuming via equity extraction? The emergence of extreme inequality might never otherwise have been tolerated by the electorate (see chart below). And now the bubbles have burst, along with central banks? credibility, what now?

continue here

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Haiti Earthquake Survivor: “My iPhone Saved My Life”

21-Jan-10

Apple’s iconic smartphone has been known to win hearts and minds, but can it also save lives? Apparently it can, according to this story from NBC Miami.
American Dan Woolley of Colorado Springs was caught in the collapse of the Hotel Montana in Port-au-Prince after the Haiti earthquake struck last week. He used a medical application he had downloaded and the light from his iPhone to diagnose and treat injuries to his foot and head, and to help prevent going into shock. continue here

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More on this topic (What's this?) Read more on IPhone at Wikinvest