Outrage RIP

Mish had a great post yesterday in which he asks, "Where the hell is the outrage"

http://globaleconomicanalysis.blogspot.com/2009/10/where-hell-is-outrage.html

Where's The Outrage?

I don't know about you, but I am outraged.

I am outraged and not just about Goldman Sachs, but about a process that allows, even encourages political pandering, by time and time again rewarding leveraged riverboat gamblers and failed institutions and at taxpayer expense.

I am outraged that real people are suffering massively while the influence peddlers have stolen the country for their own personal benefit.

I am outraged at a political system that is totally unresponsive to the American people.

I am outraged by campaign contribution and lobbying processes that allows corporations to buy votes with donations.

I am outraged how legislators ignored the wishes of the people who clearly did not want these bailouts in the first place.

I am outraged that very little of this is in mainstream media. Why is this stuff not on the frontpage of every newspaper in the country or at least in the editorial pages?

I am outraged that the average US citizen is not aware of any of this, instead depending on CNBC, or "The View" for their interpretation of the world.

I am outraged how special interest groups have exercised their power to monopolize the economy for the benefit of themselves, US citizens be damned.

I am outraged that all these bailout programs are doing nothing to alleviate the massive consumer debt problems. Every program, virtually every program was designed to bailout lending institutions, not consumers.

I am outraged at fees charged by banks receiving bailouts.

I am outraged over government pension plans and government pay scales massively out of line with the private sector.

I am outraged that Congress and this administration thinks the solution to massive budget deficits are still higher budget deficits in excess of a trillion dollars.

I am outraged about indictments. Paulson Admitted Coercion to force a shotgun wedding between Bank of America and Merrill Lynch yet no indictments were handed out. Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis.

I am outraged that US citizens are not concerned enough and not educated enough to demand change.

I am outraged that the two party system has failed. Neither party has delivered meaningful change on budgets, on taxes, on social security, on deficit spending, on the size of government, on military spending, or fighting needless wars.

I am outraged at a Fed that purports to be "inflation fighters" when the only source of inflation in the word are central bankers, and their fractional reserve lending policies.

I am outraged that Greenspan and Bernanke could not see a housing bubble that 1000 bloggers could see.

I am outraged at the selective memory of Bernanke when speaking to Congress about these problems.

I am outraged that Bernanke's one sided response to asset bubbles, letting them grow without end, then bailing out the financial institutions that cause them.

I am outraged the Fed exists at all. It is a useless organization that cannot see bubbles, that panders to banks, that supports inflationary policies that are tantamount to theft by fraud.

I am outraged that the Obama Administration promised changed and did not deliver. "Yes We Can" was a lie. The reality is "It's Business As Usual, Only Worse, With Higher Deficits".

I am outraged there is not enough outrage over this.

Where the hell is the outrage?

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

I can tell you where the outrage is. It is gone. It died an ignoble death when society removed the relationship between cause and effect in regards to personal choices. For political reasons it became more expedient to blame the ant for preparing for winter than to scold the grasshopper for wasting his time. So ants stopped trying to save (what's the point anyways when Greenspan knocked the savings rate down to less than 1%) and tried to be grasshoppers getting rich flipping houses for other grasshoppers using the Ant's savings.

Why be outraged when the gov't insures all of my "money" up to $250K. So what if my bank goes under, it is insured. Any it should be. Since we bailed the banks out, we should get bailed out. But if I get outraged, then I call into question my own bailout. So be quiet, stick my grubby paws out and get mine.

I know I look around and with a few exceptions, my friends, my family members, and what I see on TV, in the newspapers, etc tells me that people either don't understand what has happened, or worse don't care. They think that the crash of 2008 was a normal business cycle crash and that everything will get back to normal (heck it already is) in no time. So why be outraged. The govt can bail out everyone and everything. There is nothing that the govt can't do, so there is nothing to be outraged about.

And that is the true outrage IMO.

Peter Schiff to run against Chris "Countrywide Mortgage" Dodd

http://tpmdc.talkingpointsmemo.com/2009/09/economist-pete-schiff-announces-run-against-chris-dodd.php

Hopefully Schiff will be able to channel the publics opposition to the bailouts into a Senate win and Ron Paul will get some help in bringing some common sense back to the vipers den that is Washington DC. While I am not optimistic that he will win let alone be able to reign in the statists, I do *hope* that he wins.

For those that are late to the party, take a look at the following to get up to speed

http://video.google.com/videoplay?docid=3915119166991168859

http://www.youtube.com/watch?v=2I0QN-FYkpw

Also, while Peter Schiff (among others) was right in calling the housing crisis, his investment advice in how to deal with it, may have been a little early. See this post from Mish for more details.
http://globaleconomicanalysis.blogspot.com/2008/11/peter-schiff-hugely-right-enormously.html

Full Disclosure: I gave the Schiff campaign $100. I hope he beats Chris Dodd. Further more I hope we are able someday to charge Chris Dodd (and others) with treason.

Sorry for going UA

Got tied up with work and personal injuries so I neglected my duties. Will try and not let it happen again!

China hopes the US can curb its Federal Deficit

I am glad to see that while I was gone, stupidity didn't go away. Amused readers want to take a look at this:

http://news.xinhuanet.com/english/2009-07/28/content_11786774.htm

China hopes U.S. will cut budget deficit

BEIJING, July 28 -- China expressed its hope that the U.S. government will be able to cut its budget deficit in order to prevent inflation that could jeopardize the value of China's dollar-denominated assets, as the two countries wrapped up the first of two days of high-level talks here. "We sincerely hope the U.S. fiscal deficit would be reduced, year after year," Zhu Guangyao, assistant minister of finance, told reporters after the conclusion of the first day of talks, which have been dubbed the U.S.-China Strategic and Economic Dialogue. "The Chinese government is responsible and first and foremost our responsibility is [for] the Chinese people, so of course we are concerned about the security of the Chinese [dollar] assets," Zhu said. China holds a total of more than 800 billion U.S. dollars in U.S. treasury debt, making it America's largest foreign creditor. As a result of recent American efforts to counter the financial crisis and stimulate the economy, U.S. government spending has soared, and is projected to reach 1.84 trillion U.S. dollars this year. That is more than four times the previous high. Many investors and economists fear this deficit spending will lead to inflation, as the increase in the supply of dollars drives down their value, thereby also reducing the value all dollar-denominated assets, including U.S. Treasury bonds. As a result, some investors have started to buy shorter-term bonds, which they hope will not be impacted by any longer-term inflation driven by increased government spending. U.S. Secretary of Treasury Timothy Geithner assured the Chinese delegation in his opening remark on Monday that U.S. has taken steps to overhaul its financial system, enhance regulation, and control the deficit. "We are committed to taking measures to maintain greater savings and to reducing the federal deficit to a sustainable level by 2013," he said. However, Geithner did not reveal how, specifically, the United States planned to achieve its deficit-cutting goals during the dialogue. Both American and Chinese officials, however, agreed that the economy has begun to slowly stabilize. "We have agreed that green shoots have emerged in the international economy and financial markets," said Zhu. However, the economic foundation is far from being sound, and the current situation remains severe, Zhu warned.

Of course Geither didn't reveal how the US plans to cut its deficit. He can't. Because it can't be done. Why? Because the US has strategic goals that are diametrically opposed to each other. For example, Obama wants to reform Health care by insuring everyone ,but he wants to balance the budget. Obama wants to pay for it by streamlining paperwork. No mention of rationing. No mention of the fact that you always have unlimited demand for free services. As long as the US lives the fantasy that you can get something for nothing, then we will all be treated to lie after lie from administration and administration. I suspect that behind the scenes, Geithner promised the Chinese that the US will not pursue the IP legal issues that the Chinese piracy scene nurtures. Giethner probably promised that the US will do everything in its power to get the US consumer back to consuming Chinese goods. Remember that although China calls the shots now (as evidenced from the above statement that China is the largest holder of US debt), China is still a very fragile country internally. 2012 is the 100 year anniversary of the collapse of the Chinese empire. The old hundred names in China normally suffer in silence. But occasionally that silence gets broken with revolutionary cries. Those cries will get louder and louder as unemployment goes higher and higher. So although China is in a good long term position relative to the US in regards to spending, they by no means are a lock in assuming the mantle of reserve currency. China still has problems that have to be resolved.

back from vacation & thoughts on what I saw ...

Hawaii is very nice!

I just got back from a wonderful vacation to Hawaii. We finally saved enough to go, and considering the fact that American Airlines may go out of business, I wanted to use my American Airlines points before that happened.

If you haven't gone, go. Oahu is a must see.

I spent an entire day at Pearl Harbor. It is very moving to stand on the bow of the Missouri and gaze across the harbour at the corpse of the Arizona and all the men entombed. I wondered what is was like, back in 1941 to see 353 planes (in two waves) come at you across the mountains. Dropping bombs, strafing with 40 mm and skimming torpedos. All on a Sunday morning after a night of hard partying Sat night.

Watching the sun stretch across the Pacific, I was struck by the fact that most people don't realize that a large driver for WWII was resource conflict between Japan and the USA. Japan didn't have a choice (from their perspective) when Roosevelt cut off oil supplies. They wanted to be a colonial power (like France, Great Britain, the USA, etc) and were miffed when the US said no.

No to their occupation of China.

No to their expansion.

Reading the history books (as it usually is) it was obvious that Japan was going to do something. But it is amazing to see the remains of the destruction from the last world war. WWII was the most recent war that was fought over resource exploitation. But it certainly won't be the last.

China officials call for displacing dollar, in time

Tired from 4th of July activity, readers are looking over this article

http://www.reuters.com/article/ousiv/idUSTRE5650WO20090706?virtualBrandChannel=11569&pageNumber=1

Here are the relevant parts, with comments below:

BEIJING (Reuters) - The financial crisis has laid bare defects in the dollar-led global economy and the world should look to displace the U.S. currency, even if that will take many years, Chinese officials said in comments published on Monday...

The Special Drawing Right (SDR), a unit of account used by the International Monetary Fund, presents a viable alternative to the dollar as a global reserve currency, said Li Ruogu, chairman of the Export-Import Bank of China, a major state-run bank.

"It is a feasible plan to reform the present SDR and make it into a real settlement currency, a universally accepted 'currency basket' that would replace the dollar at the heart of the monetary system," Li was cited as saying in Financial News, a newspaper published by the central bank.

...

"The financial crisis caused the global economy to suffer heavy losses and it also let us clearly see how unreasonable the current international monetary system is," Li, a former central bank vice governor, said.

...

INTERNAL TENSION

The tension between China's vision for a radical overhaul of the global financial system and its big stake in the existing order has been on display in the run-up to the G8 summit, which starts on Wednesday in Italy.

China holds an estimated 70 percent of its $1.95 trillion in official foreign exchange reserves in the dollar and is wary of saying anything that would undermine the value of its investments.

...

Officials from other countries who will attend this week's G8 summit have said that Beijing has asked for discussion there about the future of reserve currencies. He Yafei has said that he was unaware of China making such a request.

...

"When a country that issues a reserve currency has a long-term trade deficit, then that currency is no longer suitable to be a reserve currency and the process to replace it should start," he was quoted as saying by local media.

...

Sources involved in preparation of the meetings said Brazil and India backed Beijing's call for debate but there was consensus among the G8 countries, at least, that nothing of significance could or should materialize at this stage.

What we have here is a dilemma: A situation with two or more outcomes. One bad, but the other(s) worse.

If China were to announce that they were no longer going to buy US Treasuries, then that would have an immediate and negative impact on their dollar holdings. But if China were to continue down the road that they have been on (buying US debt so to finance US Deficit spending), then they know that they (eventually) would be in deeper when it all collapses.

So what does China do? Keep buying US debt while at the same time moving behind the scenes to move away from the US dollar as the reserve currency. They aren't ready for that to happen yet, but they see where everything is headed and want to limit the damage to themselves as much as possible.

Also keep in mind the fact that China is reeling from the US consumer's decision (some voluntarily, others not) to stop spending as evidenced by the 7% savings rate. Millions of Chinese peasants have been thrown out of work (with no safety net, I might add) and are having to decide to go back to the farm or wait for another job to open up somewhere. That is why the Chinese stimulus package was passed. It has nothing to do with the world economy. It has everything to do with keeping 50 million people employed and not wanting to change things.

China smart to play dumb

4th of July ready readers are looking at this:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKAI2cOhz8oU

Dollar Gains as China Says ‘Not Aware’ of Reserve Currency Talk

July 2 (Bloomberg) -- The dollar strengthened after a Chinese Foreign Ministry official said he hoped the greenback would remain stable and was “not aware” of a plan to discuss a new reserve currency at next week’s Group of Eight meeting

“We hope that as the main reserve currency the exchange rate of the U.S. dollar will be stable,” China’s Vice Foreign Minister He Yafei told reporters in Beijing. “This international financial crisis has fully exposed the weaknesses and loopholes in the international monetary system.”

Of course they are. China needs for the US dollar to remain as stable as possible right now. They are not ready for US markets to crumble, for the US consumer to stop consuming. Unfortunately both of those things happened and now China (and everyone else) has to deal with it. The real trick will be to see how long can China, Bernake (as long as he has a job), Geither, and the ECB can convince the world that the Emperor still has really cool looking threads.

The problem with *ANY* fiat currency (even one backed with Nukes and Latte's) is that once the lumpenmasses lose faith in it, then the game is up. The problem right now is even though people have lost faith in the greenback they have lost even more faith in *every* other currency more! The real test will come when China has another Tiananmen episode and those 50 million unemployed Chinese don't meekly go back to their hovels. I still see China and the BRICS ascendant, not through their stellar performance, buty due to the US living beyond its means for too long. Because of that, you will see periods where China looks weak (and is weak), but ultimately the US's structural deficit spending will become the dominant issue.

The only way out of this dilemma, is both Dems and Reps reign in their profligate spending and all Americans champion cuts in their favorite programs. In other words, never!