The CBO has foretasted that the U.S. budget deficit will be in the neighborhood of $1.3 trillion at year end, adding to the current national debt of $13.3 trillion.

“Forget the official debt“, says Boston University economics professor Laurence Kotlikoff:

The “real” deficit – including non-budgetary items like unfunded liabilities of Medicare, Medicaid, Social Security and the defense budget – is actually $202 trillion, the professor and author calculates; or 15 times the “official” numbers.

“Congress has engaged in Enron accounting,” says Kotlikoff, who recently penned an op-ed for Bloomberg entitled: The U.S. Is Bankrupt and We Don’t Even Know It. …

In time, the U.S. will have a major inflation problem to rival that of Germany’s post World War I Weimar Republic, he predicts. “We have to think about the fact that unless the government gets its fiscal act in order we’re going to have the government printing lots and lots money to pay these enormous bills that are coming due over time.”

America is in need of major reform of the health-care, retirement, tax and financial system, Kotlikoff continues. “We need (to perform) heart surgery on this economy, not putting on more band-aids which is what we’ve been doing.”

Barring that, your hard-earned dollars will soon be worthless, he declares.

Technorati Tags: US Debt, US Deficit, Laurence Kotikoff, Bankrupting America, Stimulus and Other Failed Big Government Ideas, Barack Hussein Obama the Dangerous Choice, Obama the Amatuer in Charge

The blogosphere is abuzz with news that market indicators met the requirements of the Hindenburg Omen twice this month, only 8 days apart.

Glenn Beck does a fair job of explaining the implications of the phenomena:

Looking back at history — the probability of all these things happening means that there is a market move greater than 5 percent to the downside after confirmed Hindenburg Omen. That means we’re going to have a market go down at least 5 percent and the chances of that, with all of these things happening, is about 77 percent.

So, a “market crash” is not a “mortal lock” when the omen is in effect, but every New York Stock Exchange crash since 1985 has been preceded by the Hindenburg Omen. And the 5 percent move usually takes place within the next 40 days.

Forty days — 40 days, why does that sound — you know? We’ll almost be in October in 40 days. October — October, why does that one ring a bell?

I remember! The last time the Hindenburg Omen conditions were met in a big way was October 2008, when the market crashed. And then before that, it was October of 1987 and then October of ’29. Oh, the humanity!

I don’t suggest reading the whole thing, because there is some empty rhetoric, not to mention that the unemployment numbers that he quotes are too low (I prefer the seasonally-adjusted SGS Alternate Unemployment Rate rather than U-6).

For those wishing an alternative view of the accuracy of this particular Hindenburg Omen, read MarketWatch and (even better) iStock Analyst.

One thing is certain: the Fed has little to no idea what it’s doing. Bernanke is using a “majority rules” strategy with a deeply divided committee of bankers.

The talking heads are little better. Martin Sosnoff, writing for Forbes in the excellently-titled piece Bernanke’s Fed Full Of Blind Mice, calls for a “huge shot of quantitative easing”. Charles Hugh Smith, writing for Daily Finance, makes the eminently sensible suggestion of dropping the quantitative easing and instead dropping money into household bank accounts. Goldman Sach’s Jan Hatzius wants the Fed to pour another $1 trillion into the economy in an effort to further ease monetary policy, yet predicts unemployment rising to 10 percent next year. But former IMF chief economist Raghuram Rajan wants the Fed to boost interest rates by as much as 2 percentage points to avoid fanning asset bubbles or propping up inefficient companies (what would that do to unemployment rates?).

And if the Hindenburg Omen occurs again by September 22nd, there will be panic on Wall Street. Or, at least, in the media which – in the end – usually means the same thing.

Related topics:

• Federal Reserve Bank of Chicago President Charles Evans says
  the likelihood of a double-dip recession is not high, although
  admitting that it is higher than it was six months ago.
• My favorite Fed, Kansas City
  Federal Reserve Bank President Thomas Hoenig, declares “too big to fail”
  places smaller banks at a competitive disadvantage and tells investors
  to stay away from the housing market.

Technorati Tags: Hindenburg Omen, Bankrupting America, Bernanke’s Folly, Jobless Recovery, Double Dip Recession, Rising Unemployment in America, Stagnant Economic Conditions, Barack Hussein Obama the Dangerous Choice, Obama the Amatuer in Charge

This little bit of humor is going viral. Whether you believe gold is overvalued or continues to be a great investment, the video is still funny.

Technorati Tags: Gold, I Love Gold, Bankrupting America, Barack Hussein Obama the Dangerous Choice, Obama the Amateur in Charge

The biggest earmark in American history is going to a “green” initiative in Obama’s home state of Illinois.

President Obama is earmarking $1 billion in Stimulus money “to build FutureGen 2.0, a clean coal repowering program and carbon dioxide (CO2) storage network” in his home state of Illinois.  …

The Department of Energy projects 1,900 jobs as a result of $1,000,000,000 in new spending.  This works out to $526,315.79 of your tax dollars spent per job.  A half million dollars per job seems to be a bad deal for the taxpayer. Of more concern to the taxpayer, Senator Tom Coburn believes this project to be more about bringing home pork to Illinois than providing stimulus to average Americans.

Stunning, even given the vast hubris of the man that once said:

Absolutely, we need earmark reform. And when I’m president, I will go line by line to make sure that we are not spending money unwisely.

Technorati Tags: Earmarks, Another Broken Obama Promise, Ignoring Small Business, Jobless Recovery and Other Myths, Stimulus and Other Government Lies, Bankrupting America, Declining Jobs in America, Barack Hussein Obama the Dangerous Choice, Obama the Amatuer

Michael Shulman, writing for Seeking Alpha, points out that you can’t call it a double dip if (as he predicts) the GDP numbers end up negative for 2010:

It is time to start feeling bad for we are not only in a recession, it is going to get worse before it gets better. We are in a period of radical asset deflation unmatched since the Depression.

Why the prediction of another deep recession? A gigantic drop-off in the workforce participation rate, leading to a fall in national income. A 75% drop in new home building (the source of more than 40% of new jobs between 2002 and 2007); massive credit contraction among consumers; more than two thirds of the economy and one in four homeowners underwater on their mortgages; more than six million foreclosures looming in the next 24-30 months; Europe about to go into an austerity driven recession; governments at all levels in the US facing voter demands for austerity, not stimulus; the Fed out of ammunition.

Meanwhile, Paul Price notes the historic lows of the small business optimism index and states:

Our political leaders are NOT helping small businesses in any of their legislative activities.

Now that’s an understatement. Billions in stimulus and nothing to really help the people that made this country great.

And let’s not forget that actual unemployment is ticking back up to 22 percent.

Technorati Tags: Double Dip Recession, Jobless Recovery and Other Myths, Stimulus and Other Government Lies, Bankrupting America, Declining Jobs in America, Barack Hussein Obama the Dangerous Choice, Obama the Amatuer

Today’s must read is titled Fooled By Stimulus: Economists Still Missing The Huge Economic Regime Change. Here’s a bit from the middle of this article from Business Insider:

If there is another round of stimulus accompanied by another uptick in the economy (the former is likely coming but probably not the latter), I have no doubt economists would think we are off to the races again and this was just another “soft patch”.

In contrast, I propose we are going to flirt in and out of recession for perhaps a decade, just as Japan did. Interestingly, every time the Japanese economy rebounded slightly, economists thought “thank God, deflation is over”, only to see the Japanese economy relapse.

Problems Many, Solutions Nonexistent

    * Tide of Debt: Consumers are swimming against a tide of debt with no way to pay it back.
    * Demographics: Boomers are heading into retirement scared half to death because they did not save enough.
    * Jobs: There is no source of jobs
    * Wages: Global wage arbitrage
    * Attitude Changes: a secular shift in the attitudes of consumers towards housing and risk taking is underway.
    * The Fed is powerless to change attitudes.

In all, a well written and substantiated article. While it is true that economics seems to be a guessing game at which very few academics seem to be very good, this one has the advantage of matching with the layman’s common sense observational approach. That is, the stimulus was wasted and ended up making it worse for us in the long run, nothing has changed that will fix anything, and the government remains out of control.

Sit back and try to relax. It’s going to be a long, very uncomfortable ride.

Technorati Tags: Stimulus and Other Failed Programs, Bankrupting America, American Recession, Rising Unemployment, Jobless Recovery that Doesn’t Recover, Barack Hussein Obama the Dangerous Choice, Barack Hussein Obama the Amateur in Charge

Rasmussen finds that only 25 percent of likely voters think the financial bailouts were a good idea. A full 56% think they were out-and-out a bad idea. [Note: the 19% who are still undecided on the issue should have their voter registration cards taken away. How can you not have an opinion on this vital issue by now?

Unsurprisingly, political insiders don’t share this view:

There also continues to be a strong divide between the Political Class and Mainstream voters. While a strong majority of Mainstream voters are still against both of the bailouts, at least half of the Political Class think they were a good idea.

This dichotomy is supported by a recent Politico poll:

Only 27 percent believe the country is headed in the right direction, compared with 61 percent who think the nation is on the wrong track. Likewise, when asked whether the national economy is heading down the right or wrong track, just 24 percent chose the right track, compared with 65 percent for the wrong track.

Yet among the 227 Washington elites polled, more think the country is on the right track, 49 percent, than the wrong track, 45 percent. On the economy, 44 percent of elites think the country is on the right track, compared with 46 percent who believe it is not.

Politico also found that compared to mainstream Americans, the political elites were more supportive of Obama, less supportive of Palin, and tended to think of the Tea Party movement as a “fad”. And that’s just sad.

Further, a Bloomberg poll shows that 7 out of 10 Americans see even more joblessness and an increasing deficit, believing that the country is mired in recession.

Seven of 10 Americans say reducing unemployment is the priority. At the same time, the public is skeptical of the Obama administration’s stimulus program and wary of more spending, with more than half saying the deficit is “dangerously out of control.”

If Obama’s “stimulus” had actually created jobs instead of rewarding failure, the recession might be in the rear view mirror and public opinion would be much different. Instead, 70 percent think the economy is still in recession and 13 percent think we are headed for a double-dip. Meanwhile, real unemployment hovers just short of 22 percent.

Amity Shlaes compares today’s economy with that of 1932, the end of Hoover’s presidency and just when things started getting better. She notes that although there are factors that differenciate the two, there are a number of similarities. Read the whole thing, but here’s the money quote:

The takeaway from 1932? Resetting the euro’s criteria for existence and member countries’ obligations when it comes to bailing out one another should happen sooner rather than later. Democrats and the president should ignore unions and cut trade deals with Latin America. John F. Kennedy, a Democrat, supported tax cuts. Obama can too, or at least block rate increases. The president might also want to suppress his lawyer- Keynesian reflexes and reconsider policy when it comes to wages. But the 1932 crisis talk actually impedes such consideration.

If anyone believes that these can take place in today’s partisan environment just hasn’t been paying attention. Get settled folks, this recession isn’t going away any time soon.

Technorati Tags: Bankrupting America, Bailouts and Other Bad Ideas, Stimulus and Other Failures, Rising Unemployment in America, Unions and Other Drags on the Economy, Political Elites and Other Yammerheads, Barack Hussein Obama the Dangerous Choice

Stephen Roach, Morgan Stanley’s chairman for Asia, warns that because consumers are wary to spend the US economy is headed toward a period of “protracted sluggishness.”

The U.S. economy grew at a 2.7 percent annual rate in the first quarter, less than previously calculated, reflecting a smaller gain in consumer spending and a bigger trade gap, data showed last month. Consumer confidence slumped in July to the lowest level in a year, signaling that the biggest part of the economy is losing momentum, according to the Thomson Reuters/University of Michigan preliminary index of consumer sentiment published on July 16.

“The dynamism that we’ve gotten hooked and accustomed to, is just not going to be” there, Roach said.

The U.S. housing market took another step back in June as construction and purchases dropped, and a gauge of the outlook for growth signaled the expansion will lose steam, economists said before data due to be published later this week. Housing’s inability to maintain a rebound is one reason the economic recovery is not gaining speed.

But don’t worry. Change is coming with another Obama “stimulus” just around the corner.

Technorati Tags: Bankrupting America, Faltering Jobless Recovery, US Economy, Barack Hussein Obama the Dangerous Choice

Barclays Wealth is a private UK-based wealth management firm that handles some $231 billion in client assets. Earlier this month Barclays’ Chief Economist Michael Dicks set the chances of a UK “double dip” recession at 1 in 3, saying:

All in all, we would say that it is more likely than not that the fiscal tightening takes the edge off of the recovery, rather than completely wrecking it. But, a double-dip scenario certainly cannot be completely ruled out.

Today Barclays is in the news again due to a reduction in its estimate for gains in the S&P 500 this year. Although still predicting that the S&P will end the year in the neighborhood of 1,110 (an increase of 4.2 percent from last Friday’s close), this is 9.8 percent lower than earlier predictions.

“The probability of something really horrible happening has risen,” Dicks said in a press briefing in London today. “With growth in both the U.S. and Asia set to slow in the second half of the year, fears may rise. Expectations could remain polarized between either a stock market boom or a deflationary bust.”

Dicks is more pessimistic than most economists, citing continued risks to growth in either the US or China, falling US consumer confidence, China’s failure to hit the GDP growth forecast, and the threat to the European union:

As European governments slash their budget deficits, gross domestic product in the 16-nation euro region may fall and monetary union may “break up entirely,” adding to uncertainty in equity markets, according to Dicks.

A jobless recovery and even that seems to be at risk. The lesson is to keep your money at work in the stock market, but hedge your bets and be ready to cash out if, as Dicks says, “something really horrible” happens.

You can follow Michael Dicks on his blog.

Technorati Tags: Double Dip Recession, Bankrupting America, Barack Hussein Obama the Dangerous Choice

Defending his Wall Street “reform”, Obama attacked Republicans by saying that their ideas have been tried and failed. He did not mention that Democrats now control the House, Senate and White House and that the numbers to be released Friday will likely show a rise in unemployment (now that all his little Census workers have been released).

Meanwhile, the market fell again, extending the first quarterly drop in the S&P 500 Index in more than a year.

The S&P 500 fell 1 percent to 1,030.71 at 4 p.m. in New York. It has declined 12 percent since March 31, breaking a four-quarter winning streak that drove the benchmark index for U.S. stocks up 47 percent. The Dow decreased 96.28 points, or 1 percent, to 9,774.02 today, giving it a second-quarter decrease of 10 percent. The Nasdaq-100 Index, which gets 63 percent of its value from technology companies, slumped for an eighth straight day, the longest stretch of losses since 2006.

So just exactly what have the Democrat policies got us? Besides trillions in debt with more to come and a real unemployment rate just shy of 22 percent, I mean.