ECB offers 470 billion euros

Euro-Area Banks Tap ECB for Record Amount

By Gabi Thesing

The number of financial institutions flocking to the European Central Bank’s three-year loans soared to 800 and borrowing rose to a record in an operation that may boost the euro-area economy.
The Frankfurt-based ECB said it will lend banks 529.5 billion euros ($712.2 billion) for 1,092 days, topping the 489 billion euros handed out to 523 institutions in the first three-year operation in December. Economists predicted an allotment of 470 billion euros in today’s tender, according to the median of 28 estimates in a Bloomberg News survey.
“The astonishing number this time is the number of banks participating, which signals that a lot more small banks looked for the money and it is likely they will pass it on to the economy,” said Laurent Fransolet, head of fixed income strategy at Barclays Capital in London. “So the impact may be bigger than with the first one.”
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Comment: Watch gold price, watch oil price and you'll se where it all will lead to.

Colateral damage

Pension Pain Mounts as Low Rates Boost Liabilities

By Thomas Black

General Electric Co. (GE), Boeing Co. (BA) and3M Co. (MMM) will join big U.S. employers in making a record $100 billion in 2012 pension contributions, 67 percent more than two years ago, as low interest rates boost companies’ liabilities.
Payments may total $400 billion from 2011 through 2015 to ease underfunding at the 100 largest defined-benefit programs, according to consultant Milliman Inc., which estimated that assets in January were enough to cover less than three-fourths of projected payouts.
“It’s been called the wall of contributions,” said Alan Glickstein, a senior retirement consultant at Towers Watson & Co. (TW) in New York. “All of a sudden this thing jumps up and stays there for a few years. That’s what it looks like -- a wall.”
Companies from defense contractor Lockheed Martin Corp. (LMT) to aviation-electronics maker Honeywell International Inc. are caught in a vise: the Federal Reserve Board’s vow to keep rates at current levels until 2014 means pension plans’ fixed-income investments are stagnating just as new rules shorten the time available to shore up funding.
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Comment: That's the way how it goes with interventionism: you try to cure one harm only to produce new harms.

Euro keeps on rising

EUR-USD

1.3447

+0.0049

+0.36%

A competition in counterfeiting

How the U.S. Could Pressure North Korea Tomorrow: Quit the $100 Bill

By DAVID WOLMAN .S. negotiators are heading into a second day of what have been dubbed "serious and substantial" talks with North Korean officials. Yet amidst all the discussion of how the U.S. will attempt to work with Kim Jon-un, there has been little (open) speculation as to whether Dear Leader Junior might crank up production of $100 and $50 bills. No, not North Korean 100- or 50-won banknotes, worth about as much as old tissues. I'm talking about fake greenbacks -- or, as the U.S. Secret Service has dubbed them, "superdollars."
These ultra-counterfeits are light years beyond the weak facsimiles produced by most forgers, who use desktop printers. As an anti-counterfeiting investigator with Europol once put it: "Superdollars are just U.S. dollars not made by the U.S. government." With few exceptions, only Federal Reserve banks equipped with the fanciest detection gear can identify these fakes.
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America Is Europe

By DAVID BROOKS

We Americans cherish our myths. One myth is that there is more social mobility in the United States than in Europe. That’s false. Another myth is that the government is smaller here than in Europe. That’s largely false, too...

The Organization for Economic Cooperation and Development recently calculated how much each affluent country spends on social programs. When you include both direct spending and tax expenditures, the U.S. has one of the biggest welfare states in the world. We rank behind Sweden and ahead of Italy, Austria, the Netherlands, Denmark, Finland and Canada. Social spending in the U.S. is far above the organization’s average...

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Comment: There's probably no other country in the world where there is so much belief in myth as in America. I think it was only the former Soviet Union that could beat the US in this regard. Yet I have my doubts.

Short squeeze is gaining momentum

I don't remember how many times I have warned here about the coming short squeeze that is materializing now. What I remember is that I sometimes got tired of warning about the obvious and that I became frustrated for having to fight against so much nonsense that got published in the press and that I got angry at a whole bunch of academics when they showed-off with the bliss of their ignorance.

EUR-USD

1.3463

+0.0090

+0.68%

Ron Paul is in for a surprise

Ron Paul quietly amassing an army of delegates while GOP frontrunners spar

• • Paul Harris in New York
  • guardian.co.uk, Thursday 23 February 2012 20.59 GMT

Paul's tightly-organised campaign is racking up delegates even in states where he did poorly in the popular vote. It's all part of a complex system that could make Paul the election kingmaker

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Comment:  Something they don't tell you in America.

Euro-dollar exchange rate

EUR-USD

1.3306

+0.0057

+0.43%

Soros blames Merkel

Soros Sees Merkel Shoving Europe Into Harsh ‘Deflationary Spiral’: Books
George Soros  is usually thought of as the man whose hedge fund broke the Bank of England with a $10 billion bet that the pound would lose its peg to other European currencies.
These days, the billionaire investor is seeking to save a currency union, not bury it. In “Financial Turmoil in Europe and the United States,” he laments that the euro has become an“existential crisis” for Europe and places much of the blame on one person: Angela Merkel.
The German chancellor’s insistence on fiscal discipline amid high unemployment threatens to hurl the euro region into“a vicious deflationary debt trap,” he writes in this collection of previously published essays. His warning brings a timely reminder that Greece’s latest bailout won’t quell the economic and political forces pulling the Old World apart.
“Germany cannot be blamed for wanting a strong currency and a balanced budget,” Soros says. “But it can be blamed for imposing its predilection on other countries that have different needs and preferences -- like Procrustes, who forced other people to lie in his bed and stretched them or cut off their legs to make them fit.”
The articles gathered here were written mostly for the Financial Times and the New York Review of Books. Taken together, they constitute what Soros calls “a real-time experiment,” his attempt over the past four years to influence policies on the fly. The authorities didn’t follow his advice, he says, though he surely helped shape the debate.
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Comment: Soros is frustrated because apparantly he couldn't get his insiders into the Bundesbank and only partly into the ECB which makes a difference when it comes to making money with knowledge from the BoE and the Fed. Let's not forget that Soros can't put his foot on French soil without the risk of being put into jail.

The new reality

Former Carter Adviser Brzezinski: US Global Supremacy ‘Is Over’

Wednesday, 22 Feb 2012 07:47 AM

By Dan Weil

Read more on Newsmax.com: Former Carter Adviser Brzezinski: US Global Supremacy ‘Is Over’
Important: Do You Support Pres. Obama's Re-Election? Vote Here Now!The United States can no longer reign supreme as the world’s sole superpower, says Zbigniew Brzezinski, President Jimmy Carter’s National Security adviser and a prolific foreign affairs scholar.

“The era of global supremacy by a major power . . . is over,” he tells Yahoo.

“The world is now much more diversified. There is now the new East in Asia. There is now a globally, politically awakened population.”

But that doesn’t mean the demise of the United States, as long as we’re willing to make some changes, Brzezinski, says.

Read more on Newsmax.com: Former Carter Adviser Brzezinski: US Global Supremacy ‘Is Over’
Important: Do You Support Pres. Obama's Re-Election? Vote Here Now!

Comment:  As to the unavoidable, the earlier one does adapt, the easier and better it is.

Leading us down the road to disaster

News alert Greek bailout sealed

Provisionary results of the eurozone Greek bailout deal:
- 130 bn euro for Greece to maintain its payment ability
- haircut o 53,5 per cent of private banks
- extension of maturities
- coupon of 3 per cent
Backgrounder: Antony Mueller, What's behind the euro crisis and how will it end?

Let's take look how the euro is doing after the news

Reversal of the American dream - from riches to rags

Living Through the Real Estate Crash and Bankruptcy, by Brad C.

Permalink

My experience with a tax audit, real estate crash, rental house woes, foreclosures, layoff and bankruptcy:

In a nutshell, we went from a 4,000 square foot home, worth more than $1 million, a vacation home, new RV, Mercedes convertible, Jeep, $50,000 SUV, 20 rental properties, a property management company and a great full time job... To living in a modest rental house in the middle of nowhere.
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Comment: Brad, this happens when you side with central bankers. They make you rich only to take it away soon thereafter. Or rather should I say that they take it away from the many to give it to the few.

Saving the euro

Zakaria: How the eurozone was saved

By Fareed Zakaria, CNN

Imagine a region of the world where stocks have had their best January in nearly 15 years; bank shares are up 20%; the rates at which governments borrow money has fallen sharply; investor sentiment is at its best in months.
You'd think I'm talking about Asia; maybe the BRIC nations. Nope.
The region is actually sclerotic, struggling Europe.
What in the world?
The story is actually quite simple - and was pointed out to me by Sebastian Mallaby of the Council on Foreign Relations. After months of endless hand-wringing, innumerable talks, and considerable pain, it seems the eurozone has actually been saved - quietly but effectively.
The savior is Mario Draghi, the new head of the European Central Bank (ECB), an institution that had been seen as powerless and obscure until now. For much of the last couple years, it had taken a backseat amid the crisis around it. Its original mandate was almost solely to keep inflation low and stable. But now, under Draghi, it has become Europe's deus ex machina.
Last December, the ECB did the equivalent of printing nearly 500 billion euros worth of cash. Essentially, the central bank lent money to more than 500 European banks at just 1% interest.
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Comment: It's that easy, isn't it? More money is the secret to prosperity, isnt' it? Please remember: central bank money is like addiction. At first it is only pleasure, pain and death will come later.

Is Germany giving up on Greece?

By Bruno Waterfield, Brussels

8:16PM GMT 18 Feb 2012

Germany drawing up plans for Greece to leave the euro

Plans for Greece to default, potentially leaving the euro, have been drafted in Germany as the European Union begins to face up to the fact that Greek debt is spiralling out of control - with or without a second bailout.

The German finance ministry is actively pushing for Greece to declare itself bankrupt and to agree a "haircut" on the bulk of its debts held by banks, a move that would be classed as a default by financial markets.

Eurozone finance ministers meet on Monday to approve the next tranche of loans from the EU and the International Monetary Fund, designed to stave off national bankruptcy while the new Greek government puts the country's finances in order.

But the severe austerity measures being demanded have caused such fury in Greece, and the cuts required are so deep, that Wolfgang Schäuble, the German finance minister, does not believe that any government would be able to implement them.

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Greece is bankrupt

The Grand Myth About Greek Solvency
Independent Institute Senior Fellow Alvaro Vargas Llosa points out that no matter the austerity measures instituted by Greece, the country remains insolvent.
While the austerity measures recently approved by the Greek government may be very real, the notion that these belated actions can keep Greece from default is every bit as fictitious as the “Theogony” of the Greek epic poet Hesiod.
The reason is simple: because Greece has been in default for quite some time. Greek sovereign bonds are in fact a myth. To say otherwise is an exercise in Hellenic myth, not the kind of honest reporting that belongs on the business and financial pages.
The current negotiations between Greece’s private creditors and the Greek government (really, the European Union) – aimed at finding a solution to the more than 14-billion-Euro debt that will mature in March – is therefore fiction.
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Comment: All finance is fiction.

$ 6 tri fake US T-bonds seized

Italy police seize $6 trillion of fake U.S. T-bonds

Reuters – 32 minutes ago

POTENZA, Italy (Reuters) - Italian police said on Friday they had seized about $6 trillion of fake U.S. Treasury bonds in Switzerland, and issued arrest warrants for eight people accused of international fraud and other financial crimes.

The operation, co-ordinated by prosecutors from the southern Italian city of Potenza, was carried out by Italian and Swiss authorities after a year-long investigation, an Italian police source said.
The fake securities, more than a third of U.S. national debt, were seized in January from a Swiss trust company where they were held in three large trunks.
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Comment: Aren't they all fake?

12 facts about US public debt

12 Scary Debt Facts for 2012

By Jill Schlesinger

1. The U.S. national debt on Jan. 1, 1791, was just $75 million dollars. Today, the U.S. national debt rises by that amount about once an hour.

2. Our nation began its existence in debt after borrowing money to finance the Revolutionary War. President Andrew Jackson nearly eliminated the debt, calling it a "national curse." Jackson railed against borrowing, spending and even banks, for that matter, and he tried to eliminate all federal debt. By Jan. 1, 1835, under Jackson, the debt was just $33,733.

3. When World War II ended, the debt equaled 122 percent of GDP (GDP is a measure of the entire economy). In the 1950s and 1960s, the economy grew at an average rate of 4.3 percent a year and the debt gradually declined to 38 percent of GDP in 1970. This year, the Office of Budget and Management expects that the debt will equal nearly 100 percent of GDP.

4. Since 1938, the national debt has increased at an average annual rate of 8.5 percent. The only exceptions to the constant annual increase over the last 62 years were during the administrations of Clinton and Johnson. (Note that this is the rate of growth; the national debt still existed under both presidents.) During the Clinton presidency, debt growth was almost zero. Johnson averaged 3 percent growth of debt for the six years he served (1963-69).

5. When Ronald Reagan took office, the U.S. national debt was just under $1 trillion. When he left office, it was $2.6 trillion. During the eight Regan years, the US moved from being the world's largest international creditor to the largest debtor nation.

6. The U.S. national debt has more than doubled since the year 2000.

• Under President Bush: At the end of calendar year 2000, the debt stood at $5.629 trillion. Eight years later, the federal debt stood at $9.986 trillion.

• Under President Obama: The debt started at $9.986 trillion and escalated to $15.3 trillion, a 53 percent increase over three years.

7. FY 2013 budget projects a deficit of $901 billion in 2013, representing 5.5 percent of GDP, down from a deficit of $1.33 trillion in FY 2012, which was the fourth consecutive year of more than $1 trillion dollar deficits.

8. The U.S. national debt rises at an average of approximately $3.8 billion per day.

9. The US government now borrows approximately $5 billion every business day.

[Also see: States with the most homes in foreclosure]

10. A trillion $10 bills, if they were taped end to end, would wrap around the globe more than 380 times. That amount of money would still not be enough to pay off the U.S. national debt.

11. The debt ceiling is the maximum amount of debt that Congress allows for the government. The current debt ceiling is $16.394 trillion effective Jan. 30, 2012.

12. The U.S. government has to borrow 43 cents of every dollar that it currently spends, four times the rate in 1980.

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Comment: I still like the first sentences of my 2008 paper "What's behind the financial market crisis?":

"The financial crisis is not over. Neither tax rebates nor low interest rates nor higher or lower exchange rates can do the job of reviving an economy that is burdened by debt loads that are too high. On the contrary: the policy measures that the US authorities have been applying will prolong the agony. Be prepared for the challenges of extended financial turmoil and economic stagnation..."

Now it's almost four years later. Time to read it again. 

The myth of American free capitalism

United States' economy -Over-regulated America -The home of laissez-faire is being suffocated by excessive and badly written regulation 

AMERICANS love to laugh at ridiculous regulations. A Florida law requires vending-machine labels to urge the public to file a report if the label is not there. The Federal Railroad Administration insists that all trains must be painted with an “F” at the front, so you can tell which end is which. Bureaucratic busybodies in Bethesda, Maryland, have shut down children’s lemonade stands because the enterprising young moppets did not have trading licences. The list goes hilariously on.
But red tape in America is no laughing matter. The problem is not the rules that are self-evidently absurd. It is the ones that sound reasonable on their own but impose a huge burden collectively. America is meant to be the home of laissez-faire. Unlike Europeans, whose lives have long been circumscribed by meddling governments and diktats from Brussels, Americans are supposed to be free to choose, for better or for worse. Yet for some time America has been straying from this ideal.
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Comment: As long as most Americans believe in the myths they are told and taught, there won't be any change soon how much most Americans indeed should yearn for "change".

How the Fed got it all wrong

Fed’s Shoddy Data, Not Greedy Bankers, Drove Wall Street Off Cliff: Books

By James Pressley

Pick a rogue, any rogue: Villains pervade the story of the worst financial train wreck since 1929.
Yet economist William A. Barnett resists the urge to wag a scolding finger at greedy bankers, feckless homebuyers or evenAlan Greenspan, whom he calls a salesman, not a monetary maestro.
“While there is plenty of blame to spread around, something deeper has happened and needs to be understood to recognize the real source” of the crisis, says Barnett, a former Federal Reserve Board staffer.
That “something” was shoddy monetary data and how they fooled some of the smartest people on Wall Street, he argues in“Getting It Wrong,” an important contribution to our understanding of the $2 trillion meltdown...
The Fed’s monetary data are poor, inadequate and “nearly useless to the public,” he says. The totals suffer from the common error of adding apples and oranges or, as he puts it, subway trains and roller skates...
Barnett’s argument culminates in two fever-line charts. They indicate that the nation’s money supply in recent decades grew at a far faster pace, when measured by Divisia, than the Fed’s data suggest.
For M1, Divisia shows about $400 billion more being added to the money supply from 1980 to 2005 than the Fed’s simple sums record. For M2, the deviation increased by an astonishing $2 trillion.
The charts offer a clue about why many Wall Street bankers were lulled into thinking that Maestro Greenspan had engineered a Great Moderation, inducing them to ratchet up leverage.
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Comment: It is amazing to read how the author who forcefully proves the incompetence of the Fed suggests that some kind of other statistics would do better. The solution is not a "better" Fed, the solution is to get rid of the Fed. Complexity cannot be regulated by the state but by the spontaneous order of the market.

Nemesis upon Greece

Shame on Europe for betraying Greece

Capitalism is triumphant as EU states sacrifice the Greek people in a desperate attempt to appease the gods of speculation by William Wall

The behaviour of the EU states towards Greece is inexplicable in the terms in which the EU defines itself. It is, first and foremost, a failure of solidarity.

The "austerity package", as the newspapers like to call it, seeks to impose on Greece terms that no people can accept. Even now theschools are running out of books. There were 40% cuts in the public health budget in 2010 – I can't find the present figure. Greece's EU "partners" are demanding a 32% cut in the minimum wage for those under 25, a 22% cut for the over 25s. Already unemployment for 15-24-year-olds is 48% – it will have risen considerably since then. Overall unemployment has increased to over 20%. The sacking of public sector workers will add to it. The recession predicted to follow the imposition of the package will cause unbearable levels of unemployment at every level.

In addition the "package" demands cuts to pensions and public service pay, wholesale privatisation of state assets – a fire-sale, since the global market is close to rock bottom – and cuts to public services including health, social welfare and education. The whole to be supervised by people other than the Greeks. An entire disciplinary and punishment system.

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Comment: Greece was invited to join the EU and later the euro based on the myth that the Greece of today is the modern version of ancient Greece. Both sides have committed a costly error.

The trouble with Ben

Backgrounder:
Antony Mueller, Trouble at the Fed

Greece crashing

What to do about Greece

Its insolvent economy needs a bigger debt reduction. A precipitous exit from the euro would be a disaster

GREECE, progenitor of the euro zone’s debt drama, is back at centre-stage. The reason is a battle between the Greek government, its European and IMF rescuers, and the holders of Greek bonds over the terms of a “voluntary” reduction in its private debts. Greece’s economy is in far worse shape than when the outlines of a deal were put together last October, so there is a bigger financial hole to plug. Germany and other rescuers don’t want to offer more money, not least because Greece’s politicians have broken so many of the promises they made to reform. Bondholders don’t want to take a bigger hit.
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Comment: Tragedy or farce? Hardball or chicken game? High finance deep under.

Signing of the Federal Reserve Act in 1913

President Woodrow Wilson signing the Federal Reserve Act in 1913. Source: Woodrow Wilson Birthplace Foundation, painting by Wilbur G. Kurtz Sr. More
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Indicators of Greece in crisis

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Debt structure of major economies

More shortsqueeze ahead?

EUR-USD

1.3256

+0.0059

+0.45%

Peak time

Peak Everything -- Why Everything Costs More

By Tom Randall and Eric Roston | Bloomberg – Fri, Feb 10, 2012 2:18 PM EST

Peak Oil--No Longer the Right Question

A Shell Oil geologist named M. King Hubbert predicted in 1956 that U.S. oil production would peak in the early 1970s. When it did, Hubbert became the geologist equivalent of a rock star and gave the young environmental movement evidence for something it was seeking: a limit to growth.

When is -- or was -- peak world oil production? It's just not the right question anymore. Deepwater drilling, tar sands extraction, and the shale gas boom have extended the supply of hydrocarbon fuels. The new question: What's the smartest way to use them?

The iconic Peak Oil example has inspired parlor-game questions about other resources. Some, like coal, are finite; others, like water, are renewable but have limits to how quickly reserves can be replenished. Can Earth keep up with our demand? Call it Peak Everything.

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How's the euro doing after the Greek parliamentary vote in favor of the austerity package?

Chronolgoy of Greece's debt crisis May 2, 2010 - Feb 2012

Timeline: Greece's debt crisis

Reuters

(Reuters) - Here is a look back at Greece's financial crisis since a deal with the EU and IMF was sealed in 2010.

May 2, 2010 - Prime Minister George Papandreou says he has sealed a deal with the EU and IMF, opening the door for a bailout in return for extra budget cuts of 30 billion euros ($43 billion) over three years. The package represents the first rescue of a euro zone member.
May 4/5 - Public sector workers stage 48-hour nationwide strike. Three people are killed when a bank is set on fire.
May 6 - Greek parliament approves austerity bill.
...

February 9 - After repeated delays and all-night talks with leaders of the three Greek coalition parties and EU and IMF inspectors, political leaders clinch a deal on austerity measures needed to secure the bailout.
-- Unemployment in Greece rises to 20.9 percent, a new record, after austerity measures already in place.
-- Greece's two major labor unions GSEE and ADEDY say they will hold a 48-hour strike for February 10/11 against the reforms that the party chiefs agreed on.
-- Euro zone finance ministers demand more steps by Greece and a parliamentary seal of approval before providing aid under the new bailout.
...
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Comment: The birthplace of democracy has become its deadbed.

US debt addiction

Debt Slavery: 30 Facts About Debt In America That Will Blow Your Mind

Overall, consumer debt in America has increased by a whopping 1700% since 1971.
We always criticize the federal government for going into so much debt, but we rarely criticize ourselves for our own addiction to debt.
Debt slavery is destroying millions of lives all across this country, and it is imperative that we educate the American people about the dangers of all this debt.
The following are 30 facts about debt in America that will absolutely blow your mind....
Credit Card Debt
#1 Today, 46% of all Americans carry a credit card balance from month to month.
#2 Overall, Americans are carrying a grand total of $798 billion in credit card debt.
#3 If you were alive when Jesus was born and you spent a million dollars every single day since then, you still would not have spent $798 billion by now.
#4 Right now, there are more than 600 million active credit cards in the United States.
#5 For households that have credit card debt, the average amount of credit card debt is an astounding $15,799.
#6 If you can believe it, one out of every seven Americans has at least 10 credit cards.
#7 The average interest rate on a credit card that is carrying a balance is now up to 13.10 percent.
#8 According to the credit card calculator on the Federal Reserve website, if you have a $10,000 credit card balance and you are being charged a rate of 13.10 percent and you only make the minimum payment each time, it will take you 27 years to pay it off and you will end up paying back a total of $21,271.
#9 There is one credit card company out there, First Premier, that charges interest rates of up to 49.9 percent. Amazingly, First Premier has 2.6 million customers.
Auto Loan Debt
#10 The length of auto loans in America just keeps getting longer and longer. If you can believe it, 45 percent of all new car loans being made today are for more than 6 years.
#11 Approximately 70 percent of all car purchases in the United States involve an auto loan.
#12 A subprime auto loan bubble is steadily building. Today, 45 percent of all auto loans are made to subprime borrowers. At some point that is going to be a massive problem.
Mortgage Debt
#13 Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.
#14 Mortgage debt as a percentage of GDP has more than tripled since 1955.
#15 According to the Mortgage Bankers Association, approximately 8 million Americans are at least one month behind on their mortgage payments.
#16 Historically, the percentage of residential mortgages in foreclosure in the United States has tended to hover between 1 and 1.5 percent. Today, it is up around 4.5 percent.
#17 According to Dylan Ratigan, 46 percent of all mortgaged properties in Florida are underwater, 50 percent of all mortgaged properties in Arizona are underwater and 63 percent of all mortgaged properties in Nevada are underwater.
#18 Overall, nearly 29 percent of all homes with a mortgage in the United States are underwater.
#19 If you can believe it, the mortgage lenders now have more equity in U.S. homes than the American people do.
Medical Debt
#20 Medical debt is a major problem for a growing number of Americans. One study discovered that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt.
#21 Sadly, the number of Americans that are protected by health insurance continues to decline. An all-time record 49.9 million Americans do not have any health insurance at all right now, and the percentage of Americans covered by employer-based health plans has fallen for 11 years in a row.
#22 But even if you do have health insurance, there is still a good chance that you could end up with huge medical debt problems. According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States. Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.
Student Loan Debt
#23 Total student loan debt in the United States is rapidly approaching 1 trillion dollars.
#24 If you went out right now and starting spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.
#25 In America today, approximately two-thirds of all college students graduate with student loan debt.
#26 The average student loan debt load is now approximately $25,000.
#27 After adjusting for inflation, U.S. college students are borrowing about twice as much money as they did a decade ago.
#28 One survey found that 23 percent of all college students actually use credit cards to pay for tuition or fees.
#29 The student loan default rate has nearly doubled since 2005.
#30 Student loans made to directly to parents have increased by 75 percent since the 2005-2006 academic year.
At this point, most Americans are up to their eyeballs in debt. According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.
Our entire economy has become based on credit.
Do you need a car?
Just get an auto loan.
Do you need a house?
Just get a mortgage.
Do you need to fill up your house with stuff?
Just get a credit card.
Do you need an education?
Just get a student loan.
Read more
Comment: Debt leads the way from freedom to bondage, from posperity to destitution, from aspiration and hope to nihilism and despair.

After the deal - more pressure on Greece

Euro Finance Chiefs to Defer Decision on Greece

By Simon Kennedy and Josiane Kremer

European finance chiefs are set to defer ratifying a 130 billion-euro ($173 billion) rescue for Greece, pressing the government in Athens to put a newly struck austerity plan into action.
“It’s up to the Greek government by concrete actions --through legislation, other actions -- to convince its European partners that the second program can be made to work,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said today as he arrived for an emergency meeting of euro-area finance ministers in Brussels.
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Comment: Greece is faced with an immense challenge. It is not only about money and debt and default and bailout. What's going on is that Greece is forced to change its political and social culture. Greece is confronted with the task to perfrom a cultural revolution in a very short time. The transition Greece has to make is also called modernization and in no part of the world and for no country this change has been easy.

Bonds - the most dangerous of assets, says Buffett

Buffett: Bonds Among Most Dangerous Assets

By Noah Buhayar

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said low interest rates and inflation should dissuade investors from buying bonds and other holdings tied to currencies.
“They are among the most dangerous of assets,” Buffett said in an adaptation of his annual letter to shareholders that appeared today on Fortune magazine’s website. “Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as these holders continued to receive timely payments of interest and principal.”
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Comment: This time at least words of wisdom come out of Omaha that investors better should heed. Bonds are assets whose other side is debt and we're past the peak of the age of debt, government debt in particular.

Greece accepts austerity plan

Greece reaches austerity deal

By DEREK GATOPOULOS and NICHOLAS PAPHITIS | Associated Press

ATHENS, Greece (AP) — Greece has reached a tentative agreement on new austerity cuts demanded by creditors to release a euro130 billion ($173 billion) bailout, hours before a crucial meeting of finance ministers in Brussels, Prime Minister Lucas Papademos' office said Thursday.

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Comment: It's one thing to make a deal, it is another thing to make sure it gets honored.

Next U|S downgrading ahead

U.S. Faces Downgrade If No Plan: Chambers

By John Detrixhe

The U.S., lacking a plan to contain $1 trillion deficits, faces the prospect of another rating cut in six to 24 months depending on the outcome of November elections, according to John Chambers of Standard & Poor’s.
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Comment: Rating agencies are not prognosticating agencies, they rather trail the facts, which in this case means that the US situation is much worse than the next downgrade would indicate.

The Bernanke trap

Bernanke-Led Economy Shows Critics Wrong About Fed

By Caroline Salas GageThe numbers are proving Federal Reserve Chairman Ben S. Bernanke’s critics wrong.
More than a year after Republicans from House Speaker John Boehner of Ohio to presidential candidate Ron Paul of Texas warned that the Fed’s second round of asset purchases risked a sharp acceleration in prices, the surge has failed to materialize. The personal-consumption-expenditures price index rose 2.4 percent for the 12 months ending in December, near the central bank’s 2 percent target.
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Comment: Between monetary expansion and prices there is "a long and variable lag", as Milton Friedman explained, and if this is so, and it is, the long lag can easily get longer as well as the variation of the lag can get larger. If this is the case, and most likely it is, we may expect
a) price inflation to show up only after many years
b) when price inflation finally will show up it may be much bigger than any model based on historical data would foresee.

MBA in finance party is over

Wall Street: Is the Party Over for MBAs?

For a certain type of MBA, but certainly not all, the degree is all about landing a job on Wall Street. And not just any job, an investment banking job, the kind that promises untold riches—a lifetime of high six-figure salaries and bonuses to match.
But that kind of job is rapidly disappearing. UBS, Deutsche Bank, Barclays, Morgan Stanley, Citigroup and Credit Suisse have all announced massive pay cuts for investment bankers in recent weeks, and many of the same institutions have also reported job cuts. In fact the global financial services industry is hemorrhaging jobs of all sorts, not just investment banking, with the total now somewhere north of 200,000 in the latest purge. For a withering view of life among the Masters of the Universe these days—and a good explanation for why lower pay may be a semi-permanent condition—check out this week’s New York magazine cover story, “The Emasculation of Wall Street.” If you’re contemplating a banking career, or already have one, it will give you second thoughts.
These banks are big employers of MBAs, or at least they were. At Chicago’s Booth School of Business and Wharton, big banks hired nearly 70 full-time MBAs at graduation; at Columbia, in Wall Street’s backyard, the number approached 100.
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Comment: This is not a dip, it is a long-term trend. Devil takes the hindmost.

The show is over, now the hard times come

Wall Street & Markets

Wall Street: Doom and Gloom After No-Good, Very-Bad Year

By Sam Gustin How bad has the mood gotten on Wall Street? Judging by an article in the new issue of New York magazine, the answer is bleak indeed. Even as the broader economy shows signs of improving, Wall Street is coming off a year in which earnings — and the all-important bonuses dependent on them — were down sharply. Some 200,000 financial-sector workers lost their jobs. Public outrage against the big banks remains high and the Dodd-Frank financial reform bill has already curtailed some of Wall Street’s more aggressive practices — and it hasn’t even been fully implemented yet. In short, bankers and traders now face a significantly-altered landscape, and they’re not happy about it

Read more: http://business.time.com/2012/02/06/wall-street-doom-and-gloom-after-no-good-very-bad-year/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+time%2Fbusiness+%28TIME%3A+Top+Business+Stories%29&utm_content=Google+International#ixzz1ldNTb0qD

Comment: The first most powerful source behind of Wall Street's decline is demography. The second most powerful reason of Wall Street's decline is that the Wall Street model has come to an end, because stock market capitalism has led to the erosion of personal ownership and thereby has opened up the box for the self-service of the executive class who plunder the companies at broad daylight with no owners around to watch.

Lack of pricing power keeps inflation in check

Huggies Price Cut Shows Why Bond Market Backs Fed QE3

By John Detrixhe and Cordell Eddings

Procter & Gamble Co.’s failure to raise the price of Cascade dishwashing soap shows why investors are buying Treasuries at the lowest yields in history, giving the Federal Reserve more scope to boost the economy.
The world’s largest consumer-products company rolled back prices after an 8 percent increase lost the firm 7 percentage points of market share. Kimberly-Clark Corp. (KMB) started offering coupons on Huggies after resistance to the diapers’ cost. Darden Restaurants Inc. (DRI) raised prices at less than the inflation rate as patrons order more of Olive Garden’s discounted stuffed rigatoni than it anticipated.
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Comment: As long as the new money is in the hands of the banks, one gets asset price inflation. It is when money will finally find its way into the hands of the consumers and business people when goods price inflation will occur.

Towards a new international monetary system

Coggan: China Will Shape Next Bretton Woods Pact
When the world economy heads into crisis, the international currency system often breaks down. This occurs either because debtors can’t meet their obligations, or because creditors fear they are not being repaid in sound money. The first condition exists today in the euro zone; the second is likely to emerge in the China-U.S. relationship.
So how might these conditions change the system? Much discussion concerns whether the U.S. dollar will be replaced as the global reserve currency by the Chinese yuan or whether it will simply be one of a number of reserve currencies that includes the euro, yuan and yen.
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Backgrounder: Antony Mueller, Dollars and Politics

When educational expenditures will pave the way to the poorhouse

Parents Snared in $100 Billion College Debt Trap Risk Retirement

By Janet Lorin

Terry Williams borrowed about $7,000 to earn a degree from Spelman College 38 years ago. For her youngest child, a sophomoreat Belmont University in Nashville, she will take on almost $40,000 in parental loans.
Williams, a 59-year-old widow who runs a nonprofit that helps black families navigate private-school admissions, is watching her retirement savings dwindle as she pays college bills for her three children, Bloomberg Businessweek reports in its Feb. 6 issue.
“I’ll probably work until I fall dead at my keyboard,”the Decatur, Georgia, resident said in an interview.
It’s not just graduates who are staggering under the weight of educational loans. Parents, too, are borrowing record amounts to put their kids through college, jeopardizing their retirements. With the housing crisis, many families can no longer avail themselves of one popular option for financing university studies: taking out a second mortgage.
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Comment: Each bubble is also rip-off.  Price doesn't equal value. This also holds for education.

In search of the cause of the crisis

A Crisis in Two Narratives

Raghuram Rajan

In the related Project Syndicate video, Raghuram Rajan expands upon the views expressed in this commentary. Click here to watch.
CHICAGO – With the world’s industrial democracies in crisis, two competing narratives of its sources – and appropriate remedies – are emerging. The first, better-known diagnosis is that demand has collapsed because of high debt accumulated prior to the crisis. Households (and countries) that were most prone to spend cannot borrow any more. To revive growth, others must be encouraged to spend – governments that can still borrow should run larger deficits, and rock-bottom interest rates should discourage thrifty households from saving...
The second narrative starts with the 1950’s and 1960’s, an era of rapid growth in the West and Japan. Several factors, including post-war reconstruction, the resurgence of trade after the protectionist 1930’s, the introduction of new technologies in power, transport, and communications across countries, and expansion of educational attainment, underpinned the long boom. But, as Tyler Cowen has argued in his book The Great Stagnation, once these “low-hanging fruit” were plucked, it became much harder to propel growth from the 1970’s onward...
Mais

Krugman's recipe for the US economy has finally been administered

US budget balance - baseline or alternative?

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