Political leanings

[Torurot]

Which makes not a jot of difference because all US polies are beholden to the SAME group of corporates, and special lobbies!! Since the recent change in US law corporates will be able to spend UNLIMITED money on their special interest (read BRIBE the politician). It's not "democracy/republic that we all knew and loved!!!

[pacman]

There were 34,750 lobbyists in Washington in 2009. That colossal number guarantees that favours are not done without payment.

The world's ultimate capitalist society has a government run on the same lines. No wonder the Israeli lobby is safe. Pay & you shall receive.

[azza33]

Clinton planted the seeds of the GFC, nobody else and the bankers took care of the rest.

I like the way you described cdos PAC!
It begs the question of why anyone would be foolish enough to purchase these instruments. I guess a fool and his money will soon part. 220 us banks have failed in the past 17 months- nearly all since the gfc ended

[Jake_Sully]

Anyone else think this is just perfect

[Lefty]

I think you could say that about the capitol city of most every country on the planet. I doubt DC is any worse than London for example.

[BlueBallz]

You know if we hadnt INCREASED our budget for the past 10 years or so, we would ave a surplus. Even NOW if we would get serious about the financial mess the govt overspending helped create, we would be in MUCH better shape.

I know everyone hammers GWBush but we had RECORD tax receipts when he was in charge. Afterall isnt THAT the reason the govt is supposed to tax?? Lets cut EVERYTHING!!!! Military, entitlemets EVERYTHING!!!!!!!!!!!!!

Hypocrties...tax the rich?? yeah how much in the onerous estate tax aka death tax has The Duke of Chappaquidick Ted Kennedy's estate paid?

[Torurot]

Something to cheer up all you financial wizards!

Warning Signs From the Bond Market
Red Flags for the Economy
http://counterpunch.org/whitney07062010.html
By MIKE WHITNEY July 6, 2010

Bonds are signaling that the recovery is in trouble. The yield on the 10-year Treasury (2.97 percent) has fallen to levels not seen since the peak of the crisis while the yield on the two-year note has dropped to historic lows. This is a sign of extreme pessimism. Investors are scared and moving into liquid assets. Their confidence has begun to wane. Economist John Maynard Keynes examined the issue of confidence in his masterpiece "The General Theory of Employment, Interest and Money". He says:

"The state of long-term expectation, upon which our decisions are based, does not solely depend, therefore, on the most probable forecast we can make. It also depends on the confidence with which we make this forecast €” on how highly we rate the likelihood of our best forecast turning out quite wrong....The state of confidence, as they term it, is a matter to which practical men always pay the closest and most anxious attention."

Volatility, high unemployment, and a collapsing housing market are eroding investor confidence and adding to the gloominess. Economists who make their projections on the data alone, should revisit Keynes. Confidence matters. Businesses and households have started to hoard and the cycle of deleveraging is still in its early stages. Obama's fiscal stimulus will run out just months after the Fed has ended its bond purchasing program. That's bound to shrink the money supply and lead to tighter credit. Soon, wages will contract and the CPI will turn from disinflation to outright deflation. Aggregate demand will weaken as households and consumers are forced to increase personal savings. Here's how Paul Krugman sums it up:

"We are now, I fear, in the early stages of a third depression....And this third depression will be primarily a failure of policy. Around the world ... governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending. ... After all, unemployment €” especially long-term unemployment €” remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

"I don€™t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times." ("The Third Depression", Paul Krugman, New York Times)

More than 8 million jobs have been lost since the beginning of the crisis, but President Barack Obama has made no attempt to initiate government work programs or even a second stimulus. Government spending must increase to make up for the slack in demand and reduce unemployment. That means larger budget deficits until households have patched their balance sheets and can spend again at pre-crisis levels. Withdrawing stimulus now, while the economy is still weak, will crimp spending, collapse state tax revenues and send unemployment skyrocketing. Here's an excerpt from an article by James K. Galbraith which helps to explain what's needed to get back on track:

"The only way to reduce a deficit caused by unemployment is to reduce unemployment. And this must be done with a substantial component of private financing, which is to say by bank credit, if the public deficit is going to be reduced. This is a fact of accounting. It is not a matter of theory or ideology; it is merely a fact. The only way to grow out of our deficit is to cure the financial crisis.

To cure the financial crisis would require two comprehensive measures. The first is debt restructuring for the entire household sector, to restore private borrowing power. The second is a reconstruction of the banking system, effectively purging the toxic assets from bank balance sheets and also reforming the bank personnel and compensation and other practices that produced the financial crisis in the first place. To repeat: this is the only way to generate deficit-reducing, privately-funded growth and employment.

To be clear: unemployment can be cured without private-sector financing, if public deficits are large enough €” as was done during World War II. But if the objective is to reduce public deficits, for whatever reason, then a large contribution from private credit is essential.

One more time: without private credit, deficit reduction plans through fiscal austerity, now or in the future, will fail. They cannot succeed." (James K. Galbraith, "Why the Fiscal Commission does not serve the American People", New Deal 2.0)

The economy cannot grow without private sector credit expansion. But the banks are constrained by toxic assets and the lack of creditworthy loan applicants. At the same time, deleveraging households and consumers are less inclined to borrow at any rate. Retirement age "boomers" have lost nearly $12 trillion in net wealth since the crisis began and must save for the years ahead. They are no longer in a position to spend freely figuring that their home equity will rise 10% or 15% per year creating a cushion for the future. Those days are over. Bond yields are telling us that retail investors have lost faith in the housing and equities markets and moved their savings into the most risk adverse, low-yielding, assets available---US Treasuries. Here's what Keynes said on the topic:

"Our desire to hold Money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future.... The significance of this characteristic of money has usually been overlooked; and in so far as it has been noticed, the essential nature of the phenomenon has been misdescribed. For what has attracted attention has been the quantity of money which has been hoarded... supposed to have a direct proportionate effect on the price level through affecting the velocity of circulation. But the quantity of hoards can only be altered either if the total quantity of money is changed or if the quantity of current money income (I speak broadly) is changed; whereas fluctuations in the degree of confidence are capable of... modifying... the premium which has to be offered to induce people not to hoard. And changes in... liquidity preference... affect, not [consumer] prices, but the rate of interest...." (John Maynard Keynes, "1937 Quarterly Journal of Economics")

So hoarding reduces spending which leads to economic contraction. But behavior can be altered by changing incentives, raising incomes or restoring confidence. Keynes was less sanguine about increasing the money supply which he compared to "trying to get fat by buying a larger belt". The point is to increase consumption, which means that money has to get in the hands of the people who will spend it to grow the economy. Bank reserves alone won't do the trick. Fiscal stimulus is the way to go.

Presently--according to data collected by the Federal Reserve-- companies are hoarding capital due to the lack of investment opportunities. High unemployment has led to falling demand which is stifling investment. As households cut back, more companies will opt to pay down debt rather than seek new investments. (which is what happened in Japan) This will cause a dropoff in economic activity and deepen the slump. The government must increase the deficits to offset cuts in state and private sector spending and to avoid another excruciating cycle of debt deflation.

The economy is at a tipping point. Unemployment has flattened out at 9.5%, but 650,000 discouraged workers have stopped looking for work altogether which will add to the slowdown. The cash-strapped states are laying off and furloughing workers in droves. The rate of underemployment has soared to 16.5%. There are 6 applicants for every new job created. Conservatives believe that the ongoing crisis creates a unique opportunity to crush the labor movement and to force down wages. Republican senators and congressmen have quashed a bill that would extend unemployment benefits to over a million workers. Apart from the appalling cruelty of the action, GOP obstructionism only adds to deflationary pressures. It is an entirely counterproductive move.

Nomura economist David Resler says that congress's action will have an immediate and damaging effect on the economy and could trim GDP by 0.2 percentage point this quarter and by 0.4 point in the period from July through September. (Bloomberg) Republicans are precipitating a crisis to garner support in the upcoming midterm elections, but they may not fully appreciate the knock-on effects of their vote. Here's a clip from economist Steven Keen who sheds a bit of light on the topic:

"The final debt-driven collapse, in which both wages and profitability plunge, gives the lie to the neoclassical perception that crises are caused by wages being too high, and the solution to the crisis is to reduce wages....

What their blinkered ignorance of the role of the finance sector obscures is that the essential class conflict in financial capitalism is not between workers and capitalists, but between financial and industrial capital. The rising level of debt directly leads to a falling worker share of GDP, while leaving industrial capital€™s share unaffected until the final collapse drives it too into oblivion." (Steve Keen's Scary Minsky Model, Yves Smith, Naked Capitalism)

So, yes, in the short-term, falling wages may seem desirable for management, but in the long-term, it could trigger an industrywide collapse.

The FOMC's June statement was a real stunner. The economy is losing-ground in nearly every area. Household and business spending, bank lending and home sales are all either slowing down or falling sharply. The Commerce Dept. revised its first quarter estimate of GDP from 3.0% to 2.7% due to lower than expected consumer spending. The recovery is largely a mirage created by inventory adjustments and fiscal stimulus. 46 of the 50 states are mired in huge deficits that will require substantial cuts to balance. That will be a drag on activity going forward. This is from Bloomberg News:

"States face a cumulative budget gap of $127.4 billion as 46 prepare for the start of their fiscal year on July 1, according to a report this month by the National Governors Association and the National Association of State Budget Officers. They will have to fill that hole largely on their own, as aid from the federal government under programs including President Barack Obama€™s $787 billion stimulus package starts to wind down.

State and local governments will have to dismiss 162,000 workers if Congress fails to extend about $24 billion of Medicaid payments, Lawrence Mishel, president of the Economic Policy Institute in Washington, said during the governors€™ call. Payrolls have already registered 11 straight months of year- over-year declines, the longest stretch of continuous drops since 1983, based on Labor Department data." (Bloomberg)

State budget cutting will swell the unemployment lines and slow consumer spending. With fiscal stimulus quickly running out and the deficit hawks pushing for greater austerity, the Fed will be forced to intervene in the 4th quarter resuming its quantitative easing bond purchasing program to pump more liquidity into the financial system. The recovery is not self sustaining.

In Europe, the situation is even worse. ECB head Jean-Claude Trichet has been preaching austerity while conducting a massive stealth bank bailout, providing limitless funds in exchange for dodgy collateral, overnight deposits for wary banks that no longer trust the repo market, and bond purchases of sovereign debt that is vastly overpriced given the fiscal position of the issuers. Germany is calling for additional belt tightening across the eurozone to protect against fictitious inflation. German policymakers don't understand that their trade surpluses translate into deficits in the Club Med nations, or that their solutions will only exacerbate existing imbalances, increase the budget deficits, and put the EU on course for another contraction. Here's an excerpt from the Wall Street Journal:

"Germany€™s unwillingness to accept higher domestic levels of inflation in order to alleviate the burden of debt elsewhere in the euro zone ultimately constrains the European Central Bank in how much it can do on the monetary side....

... governments already nursing fragile financial sectors are being forced into some of the most severe austerity programs ever planned in modern developed economies at a time of rigid monetary policy.

If policy goes through as planned, a severe depression is almost certain to follow across peripheral euro-zone countries and a significant downturn elsewhere across the continent. Even European countries with power over their own monetary policy are bound to suffer from a euro-zone slump." ("Euro-Zone Policy Sets Stage for Depression", Allen Mattick, Wall Street Journal)

After Lehman Bros. collapsed in September 2008, the world was pulled back from the brink of depression by an activist Federal Reserve that (arbitrarily) assumed the authority of congress and conducted a massive rescue operation that provided unlimited liquidity and government support for teetering financial institutions. And, while the Fed's uneven treatment of Wall Street has been widely criticized, (the banks have been allowed to carry on much as they had before) the precipitous slide into the abyss was halted. Now, congress seems eager to reverse that achievement for fleeting political gain.

It's important to understand the process so we can settle on a remedy. Economist Bradford DeLong explains what's going on with the economy in greater detail and why it would be a mistake to count on the so-called "self correcting" power of the market rather than government intervention. (additional fiscal stimulus) Here's an excerpt from DeLong's blog "Grasping Reality With Both Hands":

In our normal, microeconomic world it is not a big deal when excess demand emerges in one market and excess supply emerges in another.....But in macroeconomics things are different. The excess supply is economy-wide--throughout all commodity markets, producing supply in excess of demand for goods, services, labor, and capacity. Producers and entrepreneurs respond to an aggregate demand shortfall just as individual producers respond to a particular shortfall of demand for their products: they hold sales to liquidate inventories, they cut prices, they cut wages to try to preserve margins, they fire workers.

Thus workers fall into unemployment from the excess supply in the goods and services industries....

Wages should then fall. And when wages fall higher profits should induce employers to expand production even without any increase in spending. Eventually wages should fall low enough that the economy returns to full employment and to normal levels of production and capacity utilization even without any increase in asset supplies. Or will it? Falling wages means that households have even less money. Some of them will default on their loans. Some banks will find that their reserves are no longer large enough to provide an ample cushion because of these loan defaults........

Relying on nominal deflation of wages to restore full employment runs the risk of creating yet another shock of excess demand in finance and excess supply in goods and services to deepen the depression. The hoped-for cure's first effect is to worsen the disease.

We trust the market to take care of a microeconomic excess-demand excess-supply situation in a few industries in a productive way in a short period of time. Do we trust the market to do the same way to a macroeconomic imbalance, to quickly resolve a depression in a productive way without help? No, we do not. Rather than relying on economy-wide deflation to eventually restore balance, we should pursue other alternatives." ("Microeconomic and Macroeconomic Excess Supply", J. Bradford DeLong, Grasping Reality With Both Hands)

True, in some perverse sense, the market is "self correcting", but in this case, it would take years, if not decades, of high unemployment, overcapacity, dwindling investment and social unrest to put the ship aright. Are we ready for that? The preferable solution is to plug the regulatory holes that allow financial institutions to speculate in massively-leveraged instruments (that have implicit government guarantees), and promote income growth so the supply/demand balance that is essential to economic growth is restored. The way out of this mess is through more jobs and better pay. But that will take a mass mobilization of working people and whopping big deficits.

Mike Whitney lives in Washington state. He can be reached at [email protected]

[Tomcat]

I think it adds up to " the age of austerity" for most concerned. buy a hair shirt time. In US and EU

In Europe most people have the blinkers on and dont realise how badly they are going to be effected over the next 10 years.

[Torurot]

The Stress Test Fraud
EU Banking System on the Brink
http://counterpunch.org/whitney07092010.html
By MIKE WHITNEY Weekend Edition July 9 - 11, 2010

The EU banking system is in big trouble. Many of the Union's largest banks are sitting on hundreds of billions of dodgy sovereign bonds and non performing real estate loans. But writing down their losses will deplete their capital and force them to restructure their debt. So the banks are concealing their losses through accounting sleight-of-hand and by borrowing money from the European Central Bank. This has helped to hide the rot at the heart of the system.

Presently, 170 banks are having difficulty accessing the wholesale markets where they get their funding,. Financial institutions are wary of lending to each other because they're not sure who is solvent or not. It's a question of trust.

ECB chief Jean-Claude Trichet has tried to keep the problems under wraps, but markets aren't easily fooled. Stress gauges, like euribor, have been rising for the last two months. Investors smell a rat. They know the banks are playing hide-n-seek with downgraded assets and they know that Trichet is helping them out.

A week ago, stocks rallied on news that EU banks would repay most of the ‚¬442bn one-year emergency loan from the ECB. The news was mainly a publicity stunt designed to hide what was really going on. Yes, the banks borrowed significantly less that analysts had predicted (another ‚¬132bn), but just two days later, 78 banks borrowed another ‚¬111bn. The additional loans makes it look like Trichet cooked up the whole thing to trick investors.

EU banks were engaged in the same high-risk activities as their counterparts in the US. They were playing fast and loose on speculative trades that were ramped up with maximum leverage. Bankers raked in hundreds of billions in salaries and bonuses before the bubble burst. Now the securities and bonds they purchased have plunged in value, so they've turned to the ECB for a bailout. Sound familiar?

Trichet is a banking industry rep, much like Geithner and Bernanke. His job is to maintain the political and economic power of the banks and to dump the losses onto the public. Presently, the ECB provides "limitless" loans to underwater banks so they can maintain the appearance of solvency. Trichet has lowered rates to 1 percent, provided a safe haven for overnight deposits, and begun an aggressive bond purchasing program (Quantitative Easing) which keeps prices of sovereign bonds artificially high. Valuations on bank assets are supported by a central authority and do not reflect true market pricing.

The wholesale-funding market (repo) has not shut down. Banks can still exchange their sovereign bonds and real estate securities for short-term loans. It merely requires that they take a haircut on the value of their collateral, which would then have to be recorded as a loss leaving them capital impaired. This is how markets work, but the banks are not required to play by the rules.

From Bloomberg News: "European lenders had $2.29 trillion at risk in Greece, Italy, Portugal and Spain at the end of 2009, including loans to governments, according to the Bank for International Settlements...German banks€™ writedowns on loans and securities will probably reach $314 billion by the end of 2010, with state-owned lenders and savings banks facing the bulk of the losses, the International Monetary Fund said in a report in April."

See? The ECB is not buying Greek bonds because of a "sovereign debt crisis". They are buying them so the banks won't lose money. The "sovereign debt crisis" meme is all public relations hype. If it becomes too expensive to fund government operations, Greece can leave the EU and return to the drachma which would give it greater flexibility to settle its debts. That would increase demand for Greek exports and improve tourism. This is the best solution for Greece. So, where's the crisis?

If Greece, Portugal and Spain, leave the EU and restructure their debt, banks in Germany and France will default and bondholders will lose their shirts. In other words, the investors, who took a risk, will lose money---which is how the system is supposed to work.

Bloomberg again: "The region€™s banks have written down a proportionately lower percentage of their assets than their U.S. counterparts. U.S. banks will have written down 7 percent of their assets by the end of 2010 and euro-area banks 3 percent, according to the IMF. European banks still haven€™t shown analysts they have completed their writedowns." (Bloomberg)

So, the banks are underwater, but nothing has been done to fix the problem. Where are the regulators?

On Tuesday, euribor hit a 10-month high. The pressure is building despite Trichet's emergency programs. ECB bank lending is nearly ‚¬800bn while overnight deposits are roughly ‚¬240bn. Trichet is willing to drag the EU through 10 or 15 years of subpar growth and high unemployment (like Japan) to keep a handful of bankers and bondholders from accepting their losses. If things get bad enough, Trichet might invoke the "nuclear option", that is, allow a major bank to implode "Lehman-style" so he can extort hundreds of billions of euros from the EU member states. It's been done before; just ask Bernanke or Paulson.

THE "STRESS TEST" FRAUD

The bank stress tests in the US were organized by the Treasury as a "confidence-building" measure. They allowed the banks to use their own internal-models to determine the value of complex securities. The same rule will apply to EU banks. The Daily Telegraph reports that some of the banks will actually test themselves. As least that removes any doubt about the results.

From Bloomberg News -- "European stress tests on 91 of the region€™s biggest banks drew criticism from analysts who said regulators are underestimating probable losses on Greek and Spanish government bonds. The tests are designed to assess how banks will be able to absorb losses on loans and government bonds, the Committee of European Banking Supervisors said yesterday. Regulators have told lenders the tests may assume a loss of about 17 percent on Greek government debt, 3 percent on Spanish bonds and none on German debt, said two people briefed on the talks who declined to be identified because the details are private.

Credit markets are pricing in losses of about 60 percent on Greek bonds should the government default, more than three times the level said to be assumed by CEBS. Derivatives known as recovery swaps are trading at rates that imply investors would get back about 40 percent in a Greek default or restructuring." (Bloomberg)

The tests are a joke. The banks will continue to use accounting-rule changes and other gimmickry to obfuscate their losses. Trichet will use the tests to step up his bond purchasing program (QE) which will transfer the banks losses onto the member states. Many of the banks are insolvent and need restructuring. But they are in no real danger, because they still have a stranglehold on the process.

Mike Whitney lives in Washington state. He can be reached at [email protected]

[Tomcat]

Last week...

The Dutch outfit , is it IMG?, asked 450 movers and shakers in the worlds biggest Companies what their opinion is of the EU

A quarter stated that at least one member would be gone by 2013 and that a collapse may be on the cards shortly after of the Euro as a whole. Ok thats just the 25% view but still a big count.

If the Euro does collapse and it looks like a dice throw now , it will dwarf the Lehman Bros collapse and the US and EU would suffer a drop in GDP of 5-10% or worse. The darkest days imaginable would follow. If you think its bad now then it could get much worse

I get a horrible feeling that its 50-50. The glass is half empty

[Torurot]

A Short Tour of Junk Economics
America's China Bashing
http://counterpunch.org/hudson09292010.html
By MICHAEL HUDSON September 29, 2010

It is traditional for politicians to blame foreigners for problems that their own policies have caused. And in today€™s zero-sum economies, it seems that if America is losing leadership position, other nations must be the beneficiaries. Inasmuch as China has avoided the financial overhead that has painted other economies into a corner, U.S. politicians and journalists are blaming it for America€™s declining economic power. I realize that balance-of-payments accounting and international trade theory are arcane topics, but I promise that by the time you finish this article, you will understand more than 99 per cent of U.S. economists and diplomats striking this self-righteous pose.

The dollar€™s double standard gives America an international free ride

For over a century, central banks have managed exchange rates by raising or lowering the interest rate. Countries running trade and payments deficits raise rate to attract foreign funds. The IMF also directs them to impose domestic austerity programs that reduce asset prices for their real estate, stocks and bonds, making them prone to foreign buyouts. Vulture investors and speculators usually have a field day, as they did in the Asian crisis of 1997.

Conversely, low interest rates lead bankers and speculators to seek higher returns abroad, borrowing domestic currency to buy foreign securities or make foreign loans. This capital outflow lowers the exchange rate.

There is a major exception, of course: the United States. Despite running the world€™s largest balance-of-payments deficit and also the largest domestic government budget deficit, it has the world€™s lowest interest rates and easiest credit. The Federal Reserve has depressed the dollar€™s exchange rate by providing nearly free credit to banks at only 0.25 per cent interest. This €œquantitative easing€ (making it easier to borrow more) aims at preventing U.S. real estate, stocks and bonds from falling further in price. The idea is to save banks from more defaults as the economy slips deeper into negative equity territory. A byproduct of this easy credit is to lower the dollar€™s exchange rate €“ presumably helping U.S. exporters while forcing foreign producers either to raise the dollar price of their goods they sell here or absorb a currency loss.

This policy makes the dollar a managed currency. Low U.S. interest rates and easy credit spur investors to lend abroad or buy foreign assets yielding more than 1 per cent. This dollar outflow forces other countries to protect their currencies from being forced up. So their central banks do not throw the excess dollars they receive onto the €œfree market,€ but keep them in dollar form by buying U.S. Government bonds. So the €œChinese savings,€ €œyen savings€ and €œEuro savings€ that are spent on U.S. Treasury securities (and earlier, on Fannie Mae bonds to earn a bit more) are not really what Chinese people save in their local yuan, or what Japanese or Europeans save. The money used to buy U.S. Government securities consists of the excess dollars that the American military, American investors and American consumers spend abroad in excess of U.S. earning power. To pretend that these savings are €œsaved up€ by foreigners (who save in their own currency, after all) is Junk Economics Error #1.

By lowering U.S. interest rates to near zero, the U.S. Federal Reserve is doing what the Bank of Japan did after its financial bubble burst in 1990, when it helped Japanese banks €œearn their way out of negative equity€ by providing cheap credit to obtain a markup by lending to speculators and arbitrageurs to buy foreign bonds paying higher rates. This came to be known as the €œcarry trade.€ Arbitrageurs borrowed yen cheaply and converted them into Euros, dollars, Icelandic kroner or other currencies paying a higher rate, pocketing the difference. This threw yen onto foreign-exchange market, weakening the exchange rate and hence helping Japanese automotive and electronics exporters.

This is the easy credit policy that the Fed is following today. U.S. banks borrow from the Federal Reserve at 0.25 per cent, and lend to speculators at a markup of one or two percentage points. These speculators then look for companies, government bonds, corporate stocks and bonds and any other asset in a foreign currency that they believe may yield more than about 2 per cent (or that are denominated in currencies that may raise in price against the dollar by more than 2 per cent annually), hoping to pocket the difference.

Accusations that Japan, South Korea and Taiwan are €œmaking their currencies cheaper€ by recycling their dollar inflows into U.S. Treasury securities simply means that they are trying to maintain their currencies at a stable level. Even so, the yen€™s exchange rate has risen as international borrowers pay off their carry-trade debts by re-converting the Euros, dollars and other currencies they borrowed in yen to play the arbitrage game. Paying back these foreign currency loans raises the yen€™s price. To prevent this from pricing Japanese exporters out of world markets, Japan€™s central bank is trying to stabilize the yen/dollar exchange rate by recycling these payments into the purchase of U.S. Treasury securities €“ exactly what U.S. officials accuse China of doing. It is how most central banks throughout the world are responding to the global dollar glut. They are increasing their international reserves by the amount of surplus free credit€ dollars that the U.S. payments deficit is pumping out. To pretend that China is €œmanipulating its currency€ by doing what central banks have done for over a century is Junk Economics Error #2. Back in the early 1970s, U.S. officials told OPEC governments that if they did not do this, it would be deemed an act of war. And Congress has refused to let China buy U.S. companies €“ so China can only recycle its dollar inflows by buying Treasury securities, thereby financing the U.S. federal budget deficit.

Every currency is managed by recycling dollars to avoid distorted exchange rates

To pretend that exchange rates are determined mainly by international trade is Junk Economics Error #3. International currency speculation and investment is much larger than the volume of commodity trade. The typical currency bet lasts less than a minute, often being computer-driven by arbitrage swap models. This financial fibrillation has dislodged exchange rates from purchasing-power parity or prices for export and imports.

The largest payments imbalances have little to do with €œmarket forces€ for imports and exports. They are what economists call price-inelastic €“ money spent without regard for price. This is true above all for military spending and maintenance of America€™s vast network of foreign bases and political maneuverings to control foreign countries. During the 1960s and €˜70s U.S. military spending accounted for the entire balance-of-payments deficit, as private sector trade and investment remained in balance. Escalation of America€™s oil war in the Near East and Pipelinistan, and the hundreds of billions of dollars spent to prop up America-friendly regimes, end up in central banks €“ whose main option, as noted above, is to send them back to the United States in the form of purchases of U.S. Treasury bills €“ to finance further federal deficit spending!

None of this can be blamed on China. But any nation that succeeds economically is assumed to be doing so at America€™s expense if they do not let U.S. investors siphon off the entire surplus. This attitude that other countries should sacrifice themselves is sweeping Congress, whose China bashing is reminiscent of the Japan-phobia of the late 1980s. The United States convinced the Bank of Japan to raise the yen€™s exchange rate in the 1985 Plaza Accord, and then to turn Japan into a bubble economy by flooding it with credit under the 1987 Louvre Accord. Tokyo was humorously referred to as €œthe 13th Federal Reserve district€ for recycling its export earnings in U.S. Treasury bills, becoming the mainstay of the Reagan-Bush budget deficits that financed U.S. global military spending while quadrupling the public debt.

U.S. strategists would not mind seeing China€™s economy similarly untracked by letting global speculators bid up the renminbi€™s exchange rate €“ by enough to let Wall Street speculators make hundreds of billions of dollars betting on the run-up. €œFree capital markets€ and €œopen financial markets€ are euphemisms for setting the renminbi€™s exchange rate by U.S. and European currency arbitrage and capital flight. The U.S. balance-of-payments outflow would increase rather than shrink, thanks to the ability of American banks to create nearly €œfree€ credit on their keyboards to convert into Chinese or other currencies, gold or other speculative vehicles that look to rise against the dollar.

€œIn a world awash with excess savings, we don€™t need China€™s money,€ writes Prof. Krugman. After all, €œthe Federal Reserve could and should buy up any bonds the Chinese sell.€ It€™s all just electronic credit. From reading such diatribes, or President Obama€™s exchange with Prime Minister Wen Jiabao at the United Nations on September 23, one would not realize that Chinese savers have not sent a single yuan of their own money to the United States.

But that is the point! Krugman should have reminded his readers that the balance of payments consists of much more than just the trade balance in today€™s world swamped by financial speculation and military spending. What China €œinvests€ in the United States are the dollars thrown off by the U.S. payments deficit. China would take a loss on the yuan-value of these dollars if it revalues its currency €“ as it has lost on the dollars it has turned over to Blackrock in the hope of making more than the minimal 1 per cent available on U.S. Treasury securities.

Describing China as €œdeliberately keeping its currency artificially weak. €¦ feeding a huge trade surplus,€ Krugman adds that €œin a depressed world economy, any country running an artificial trade surplus is depriving other nations of much-needed sales and jobs.€ In his reading the problem is not that America has let easy bank credit bid up housing prices for its workers and loaded down their budgets with debt service that, by itself, exceeds the wage levels of most Asian workers. This financialization is largely responsible for the U.S. trade balance moving into deficit (apart from food and arms exports). Homeowners typically pay up to 40 per cent of their income for mortgage debt service and other carrying charges, 15 per cent for other debt (credit card interest and fees, auto loans, student loans, etc.), 11 per cent for FICA wage withholding for Social Security and Medicare, and about 10 to 15 per cent in other taxes (income and excise taxes). To cap matters, the financial burden of debt-leveraged real estate and consumption is aggravated by forced saving pension set-asides turned over to money managers for financial investment in these debt-leveraged financial instruments, and €œfinancialized€ wage withholding for Social Security. All these deductions are made before any money is left to buy food, clothing or other basic goods and services.

Chinese currency appreciation would make its exports cost more. But would this spur America rebuild its factories and re-employ the workforce that has been downsized and outsourced? To imagine that long-term investment responds to immediately is Junk Economics Error #4.

The same is true of international commodity trade. €œAn undervalued currency always promotes trade surpluses,€ Krugman explains. But this is only true if trade is €œprice-elastic,€ with other countries able to produce similar goods of their own at only marginally different prices. This is less and less the case as the United States and Europe de-industrialize and as their capital investment shrinks as a result of their expanding financial overhead ends in a wave of negative equity. To assume that higher exchange rates automatically reduce rather than increase a nation€™s trade surplus is Junk Economics Error #5. It is a tenet of the free market fundamentalism that Krugman usually criticizes, except where China is concerned.

Krugman urges the United States to do what it €œnormally does€ when other countries subsidize their exports: impose a tariff to offset the supposed subsidy. Congress is increasing the drumbeat of accusations that China is violating international trade rules by protecting itself from financialization. €œDemocrats in Congress are threatening to €¦ slap huge tariffs on Chinese goods to undermine the advantages Beijing has enjoyed from a currency, the renminbi, that experts say is artificially weakened by 20 to 25 percent.€ The aim is to make China €œlift the strict controls on its currency, which keep Chinese exports competitive and more factory workers employed.€ But such legislation is illegal under world trade rules. This has not stopped the United States in the past, but the believe that it might succeed internationally is Junk Economics Error #6.

This kind of propaganda does not see the United States as guilty of €œmanaging the dollar€ by its quantitative easing that depresses the exchange rate below what would be normal for any other economy suffering so gigantic and chronic s payments deficit. What makes this situation inherently unfair is that while the Washington Consensus directs other countries to impose austerity plans, raise their taxes on consumers and cut vital spending, the Bush-Obama administration blames China, not the U.S. financial system or post-Cold War military expansionism.

The cover story is that foreign exchange controls and purchase of U.S. securities keep the renminbi€™s exchange rate low, artificially spurring its exports. The reality is that these controls protect China from U.S. banks creating free €œkeyboard credit€ to buy out its companies or load down its economy with loans to be paid off in renminbi whose value will rise against the deficit-prone dollar.

The House Ways and Means Committee is demanding that China raise its exchange rate by 20 per cent. This would enable speculators to put down 1 per cent equity €“ say, $1 million to borrow $99 million and buy Chinese renminbi forward. The revaluation being demanded would produce a 20,000 per cent profit, turning the $100 million bet (and just $1 million €œserious money€) into making $2 billion. It also would bankrupt Chinese exporters who had signed dollarized contracts with U.S. retailers. So it€™s the arbitrage opportunity of the century that lobbyists are pressing for, not the welfare of workers.

The Internal Revenue Service treats such trading gains as €œcapital gains€ and taxes them at only 15 per cent, much less than the tax rate on earned income that wage-earners must pay. The Brazilian real has risen by about 25 per cent against the dollar since January 2009. Last week, Brazil€™s state oil company, Petrobras, issued $67 billion in shares to exploit the nation€™s new oil discoveries. Foreigners have been swamping Brazil€™s central bank with a reported $1 billion per day for the past two weeks €“ about 10 times its daily average in recent months €“ but this was largely to absorb money entering the country to take part in last week€™s issue by the national oil company.

The U.S. and foreign economies alike are suffering from the idea that the way to get rich is by debt leveraging, and that the wealth of nations is whatever banks will lend €“ the €œcapitalization rate€ of the available surplus. The banker€™s dream is to lend against every source of revenue until it ends up being pledged to pay interest. Corporate raiders use business cash flow to pay bankers for the high-interest loans and junk bonds that provide them with takeover credit. Real estate investors use their rental income to service their mortgages, while consumers pay their disposable income as interest (and late fees) to the banks for credit cards, student loans and other debts.

But Paul Krugman and Robin Wells blame China for Wall Street€™s junk mortgage binge. Instead of pointing to criminal behavior by the banks, brokerage companies, bond rating agencies and deceptive underwriters, they take the financial sector off the hook: €œJust as global imbalances €“ the savings glut created by surpluses in China and other countries €“ played an important part in creating the great real estate bubble, they have an important role in blocking recovery now that the bubble has burst.€

This sounds more like what one would hear from a Wall Street lobbyist than from a liberal Democrat. It is as if the real estate bubble didn€™t stem from financial fraud, junk mortgages, NINJA loans or the Federal Reserve flooding the U.S. economy with credit to inflate the real estate bubbles and sending electronic dollars abroad to glut the global economy. It€™s China€™s fault for running large trade surpluses €œat the rest of the world€™s expense.€ The authors do not explain how it helps China or other economies to let foreign investors buy their companies at a 20 per cent return and pay in dollars that must be recycled to the U.S. Treasury earning just 1 per cent. And Congress won€™t let the Chinese buy U.S. companies. It blocks such inflows, managing the economy ostensibly on national security grounds €“ in practice a structural payments deficit.

Wall Street€™s idea of €œequilibrium€ is for foreign countries to financialize themselves along the lines that the United States is doing, then global equilibrium could be restored. But the most successful economies have kept their FIRE-sector costs of living and doing business within reasonable bounds, and are not remotely as debt-leveraged as the United States. German workers pay only about 20 per cent of their income for housing €“ about half the rate of their U.S. counterparts. German practice is not to make 100 per cent mortgage loans, but to require down payments in the range of 30 per cent such as characterized the United States as recently as the 1980s.

The FIRE sector€™s business plan has priced U.S. labor out of world markets. There seems little likelihood of making Chinese and German workers pay rents or mortgage interest as high as the United States? How can American economic strategists force them to raise the price of their college and university tuition so that they must take on the enormous student loans of the magnitude that Americans have to assume? How can they be persuaded to follow the high-cost U.S. practice of adding FICA-type wage withholding to the cost of living to save up pensions, Social Security and medical insurance in advance, instead of the pay-as-you-go basis that Germany quite rightly follows?

Such suggestions are a cover story for America€™s own financial mismanagement. The U.S. idea for global equilibrium is to demand that that the rest of the world follow suit in adopting the short-term time frame typical of banks and hedge funds whose business plan is to make money purely from financial maneuvering, not long-term capital investment. Debt creation and the shift of economic planning to Wall Street and similar global financial centers is confused with €œwealth creation,€ as if it were what Adam Smith was talking about.

A Proposal

China is trying to help by voluntarily cutting back its rare earth exports. It has almost a monopoly, accounting for 97 per cent of global trade in these 17 metallic elements. These exports are €œprice inelastic.€ There is little known replacement cost once existing deposits are depleted. Yet China charges only for the cost of digging these rare metals out of the ground and refining them. They are used in military and other high-technology applications, from guided missile steering systems and computer hard drives to hybrid electric automobile batteries. This has prompted China to recently cut back its exports to save its land from environmental pollution and, incidentally, to build up its own stockpile for future use.

So I have a modest suggestion. If and when China starts re-exporting these metals, raise their price from a few dollars a pound to a few hundred dollars. According to a theory put forth by Paul Krugman and the U.S. Congress, this price increase should slow demand for Chinese exports. It also would help promote world peace and demilitarization, because these rare metals are key elements in missile guidance systems. China should build up its national security stockpile of these key minerals for the future €“ say, the next prospective five years of production. Let this be a test of the junk paradigms at work.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. He can be reached via his website, [email protected]

[Torurot]

A CounterPunch Special Report
"Riddled With Inconsistencies ... and Wastes Precious Time on Illustrations That End Up Telling Us Nothing We Didn't Already Know"
Inside the Flash Crash Report
http://counterpunch.org/martens10042010.html
By PAM MARTENS October 4, 2010

The breathlessly awaited government report that promised to shore up public confidence by explaining why the stock market briefly plunged 998 points on May 6, with hundreds of stocks momentarily losing 60 per cent or more of their value, was released last Friday, October 1. Its neatly crafted finger-pointing to a small Kansas mutual fund firm which has been around since 1937, was immediately embraced as mystery solved by the stalwarts of the corporate press. This was done with only slightly less zeal than bestowed on the story of Saddam Hussein€™s weapons of mass destruction spun out of the George W. Bush administration.

The New York Times headlined with €œSingle Sale Worth $4.1 Billion Led to Flash Crash.€ The Washington Post went with €œHow One Automated Trade Led to Stock Market Flash Crash.€ The Wall Street Journal led with €œHow a Trading Algorithm Went Awry.€ Hundreds of similar headlines followed in similarly expensive media real estate. But as with the rush to war on bogus intel, the corporate press may be further damaging its credibility with the American people by ignoring the dangerous market structure that emerges in a closer reading of this report.

The so-called Flash Crash report was the product of the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) and consists of 104 pages of data that is unintelligible to most Americans, including the media that are so confidently reporting on it. It names no names, including the firm it is fingering as the key culprit in setting off the crash. Earlier media reports say the firm is the mutual fund manager, Waddell and Reed, and Waddell has conceded that it made a large trade that day to hedge its positions in its mutual funds which total $70 billion according to its web site.

As the official report goes, Waddell set off a computerized algorithm to sell 75,000 contracts of the E-mini futures contract that is based on the Standard and Poor€™s 500 stock index and trades at the Chicago Mercantile Exchange. At roughly $55,000 per contract, the total amount Waddell was seeking to sell to hedge its mutual fund stock positions was $4.125 billion.

But here€™s where the official theory comes apart: fourteen days after the Flash Crash, Terrence Duffy, the Executive Chairman of the CME Group which owns the Chicago Mercantile Exchange testified before the U.S. Senate€™s Subcommittee on Securities, Insurance, and Investment of the Committee on Banking, Housing and Urban affairs that €œTotal volume in the June E-mini S&P futures on May 6th was 5.7 million contracts, with approximately 1.6 million or 28 per cent transacted during the period from 1 p.m. to 2 p.m. Central Time.€ In other words, the government investigators are suggesting that a trade that represented 1 per cent of the day€™s volume in a futures contract in Chicago and less than 5 per cent of contracts traded in the pivotal 1 to 2 p.m. time frame in Chicago (2 to 3 p.m. in New York) caused stocks in the cash market to plunge to a penny.

Of the 104 pages of the report, there is one sentence that is noteworthy:

€œDetailed analysis of trade and order data revealed that one large internalizer (as a seller) and one large market maker (as a buyer) were party to over 50 per cent of the share volume of broken trades, and for more than half of this volume they were counterparties to each other (i.e., 25 per cent of the broken trade share volume was between this particular seller and buyer).€

Broken trades or €œbusts€ (as the street refers to them) were only allowed for trades occurring between 2:40 p.m. and 3 p.m. (New York time) and where the stock had moved 60 per cent or more from its 2:40 p.m. value. This was an extremely controversial decision and left small investors with heavy losses of 30 to 59 per cent with nowhere to turn. The busts that were allowed covered 5.5 million shares and two-thirds of these trades had been executed at less than $1.00, some for as little as a penny. We now learn from this one sentence on page 66 of the Flash Crash report that half of the share volume in these bizarre trades came from just two firms and half the time they were exclusively trading with each other. Let me state this another way: two trading firms were predominantly involved in handing investors€™ losses of 60 per cent or more in their stocks on May 6 but a staid old mutual fund company trading an S&P futures contract in Chicago has been fingered as the culprit of the Flash Crash.

An €œinternalizer€ is a benign way for the SEC to acknowledge that the big brokerage firms serving retail customers (which have morphed into investment banks and commercial banks as well) are running their own secretive, quasi stock exchanges inside their firms. They are matching their retail customers€™ buy and sell orders with no public transparency. Only after the trades are matched out of public view are the trades then printed at an exchange. Clearly, anyone carefully reading the above sentence from the report wants to know the names of these two entities. But in the report they remain nameless.

Another key area that gets short shrift in the report is quote stuffing, a practice by high frequency traders to blast out millions of bids to buy and offers to sell specific stocks, only to cancel them fractions of a second later. Mary Schapiro, Chair of the SEC, told the Economic Club of New York the following on September 7:

€œThese high frequency trading firms can generate more than a million trades in a single day and now represent more than 50 per cent of equity market volume. And many firms will generate 90 or more orders for each executed trade. Stated another way: a firm that trades one million times per day may submit 90 million or more orders that are cancelled.€

What€™s the science behind cancelling 90 orders to get one trade done? If you blast out millions of orders in microseconds, then cancel them just as fast, you are confusing your competition as to what your true intention is. Your competition learns from this and fires a similar volley back at you. (Left in the blaze of digital ticker tape is the average investor, who doesn€™t own a trading algorithm.) Questions are being asked as to whether some of these practices may constitute market manipulation, similar to painting the tape, where the sole purpose of the order is to mislead the market. If retail stockbrokers tried doing this for the small investor, they would be expeditiously led off in handcuffs.

Four days before the official Flash Crash report was released by the CFTC and SEC, Nanex, a creator and developer of a streaming datafeed that brings trading prices to workstations in real-time, put out its own impressive analysis of the Flash Crash. Among numerous areas covered, Nanex highlighted significant quote stuffing that occurred on May 6. (The full report is available at www.Nanex.net) Among the findings of Nanex:

€œWhile searching previous days for similarities to the time period at the start of the May 6th drop, we found a very close match starting at 11:27:46.100 on April 28, 2010 -- just a week and a day before May 6. We observed it had the same pattern -- high, saturating quote traffic, then approximately 500ms later a sudden burst of trades on the eMini and the top ETF's [Exchange Traded Funds] at the prevailing bid prices, leading to a delay in the NYSE quote and a sudden collapse in prices. The drop only lasted a minute, but the parallels between the start of the drop and the one on May 6 are many.€

A potential implication of the Nanex report is that by blasting out bogus quote data, the data feeds carrying stock prices to investors could be slowed down, giving an edge to traders who understand what€™s actually happening.

Mr. Duffy of the Chicago Mercantile Exchange had voiced a similar area of potential concern taking place in the futures market on May 6 in his Senate testimony, noting that 3 million system messages occurred around the trading meltdown. According to Mr. Duffy, the exchange has €œimplemented automated controls which monitor for excessive new order, order cancel and order cancel/replace messaging. If a session exceeds a designated message per second threshold over a three-second window, subsequent messaging will be rejected until the average message-per-session rate falls below this threshold.€

I asked Eric Scott Hunsader of Nanex for his thoughts on the Flash Crash report, given that quote stuffing was glossed over. Mr. Hunsader said that he believed the report to be €œriddled with inconsistencies, makes conclusions without supporting evidence, and wastes precious time on illustrations that end up telling us nothing we didn't already know. Looking for the cause of the xFlash Crash using one-minute snapshot data is like trying to find the Higgs boson with a 10x microscope.€ Mr. Hunsader goes on to note the €œNYSE's admission of the delay we discovered in June; however, the executive summary tells us regarding this delay: €˜Our findings indicate that none of these factors played a dominant role on May 6.€™ Later in the report, the findings presented in making that determination are only anecdotal: we would have expected to see a per centage break down of the traders affected, for example.€

The official report does not break out the wealth destruction to the small investor on May 6, but Ms. Schapiro shared that information on September 7 with the Economic Club of New York: €œA staggering total of more than $2 billion in individual investor stop loss orders is estimated to have been triggered during the half hour between 2:30 and 3 p.m. on May 6. As a hypothetical illustration, if each of those orders were executed at a very conservative estimate of 10 per cent less than the closing price, then those individual investors suffered losses of more than $200 million compared to the closing price on that day.€

A stop-loss order is the dull Boy Scout knife with which the small investor attempts to protect himself from the star wars gang. It is an order placed with an unlimited time frame that sits in the system and says if my stock trades down to this level, sell me out. Unfortunately, most of these orders are placed as market orders rather than indicating a specific €œlimit€ price that the investor will accept. (That alternative order is called a stop-loss limit order.) Stop-loss market orders go off on the next tick after the designated price is reached. In a liquid and orderly market, that should be only a fraction away from the last trade. On the day of the Flash Crash during that pivotal half hour, the next tick was frequently 10 to 60 per cent away from the last trade.

Quite contrary to restoring confidence to investors, the Flash Crash report has unmasked what many of us have suspected but couldn€™t prove until this report proved it for us. While the fancy dressers in the Wall Street investment banks were absorbed in building warehouses of subprime mortgage fireworks that dazzled right up until the moment they blew up the street, techies in blue jeans were building star wars trading technologies in the bowels of Wall Street with a sole set of marching orders: beat the competition.

The marching orders to make these trading programs transparent, friendly to the small investor, fair and orderly, were noticeably absent from the job assignment. And as the new technology proliferated, showing ever greater speed, opacity, and fragmentation, the regulators stood down as the abuses mushroomed. The regulators were cowed by the same threat that Wall Street has used successfully in gutting regulation of derivatives and repealing the Glass-Steagall Act: if you don€™t let us do it, we€™ll move our trading business to another country. (In my early days on Wall Street, I was similarly threatened by a branch manager to sell a dubious limited partnership to my clients. He said, €œIf you don€™t, some other broker will.€ I smiled and gently nodded in anticipation of just that eventuality. The majority of those late 1980s limited partnerships blew up, taking broker careers and firm reputations with them. The mantra remains unchanged today on Wall Street: push short term profits and ignore long-term reputational risk to the firm and loss of investors€™ savings and confidence.)

A search of the U.S. Patent and Trademark Office turns up thousands of patents with star wars diagrams of computers linked in incomprehensible ways to replace human traders. The patents are held by Goldman Sachs, Morgan Stanley, Citigroup, Merrill Lynch and numerous other firms that were bailed out by the U.S. taxpayer for their last innovation that attempted to spin subprime mortgages into gold.

This is an abstract for a patent held by ITG Software:

€œA computer-implemented system and method for executing trades of financial securities according to a combination passive/aggressive trading strategy that reliably executes trades of lists of securities or blocks of a single security within a desired time frame while taking advantage of dynamic market movement to realize price improvement for the trade within the desired time frame. A passive trading agent executes trades at advantageous prices by floating portions of the order at the bid or ask to maximize exposure to the inside market and attract market orders. An aggressive agent opportunistically takes liquidity as it arises, setting discretionary prices in accordance with historical trading data of the specified security.€

Does this sound like something the small investor could compete with?

The market is also dangerously fragmented. SEC Chair Schapiro describes it this way, throwing out the confidence-draining words €œdark pools€ with the casualness that she might utter, €œtea anyone?€ The regulated New York Stock Exchange, which commanded an 80 per cent market share just five years ago, today €œexecutes approximately 26 per cent of the volume in its listed stocks. The remaining volume is split among more than 10 public exchanges, more than 30 dark pools, and more than 200 internalizing broker-dealers. Indeed, today, nearly 30 per cent of volume in U.S.-listed equities is executed in venues that do not display their liquidity or make it generally available to the public. The percentage executed by these dark, non-public markets is increasing nearly every month.€

And exactly what has all this star wars trading innovation on Wall Street done for the average investor? According to the Wall Street Journal, the Standard & Poor€™s 500 stock index €œhas fallen at an annualized rate of 3 per cent a year over the past 10 years, including dividends and controlling for inflation.€ The index itself, closing last week at 1146, is back to the level it set in July of 1998; 12 years of believing in the illusion that Wall Street planned to share its wealth.

Pam Martens worked on Wall Street for 21 years; she has no security position, long or short, in any company mentioned in this article. She writes on public interest issues from New Hampshire. She can be reached at [email protected]

More on the Flash Crash by Pam Martens:

The May 6 Stock Crash Revisited, May 12, 2010

http://www.counterpunch.org/martens05122010.html

SEC Admits to Inadequate Tools to Conduct Investigation, May 17, 2010

http://www.counterpunch.org/martens05172010.html

Scientists, Secrets and Wall Street€™s Lost $4 Trillion, September 27, 2010

http://www.counterpunch.org/martens09272010.html

[alan1chef]

Governor Moonbeam is back....lol....now I suppose Linda Ronstadt will make a comeback too. California will be really screwed up.

Of course, I am sure Jerry Brown's win in California and the return of Barbara "botox" Boxer just makes all the liberals perfectly giddy.

[BlueBallz]

Of all the results, I was crushed that cunt Boxer won. What an undeserving, unctous, odious old hag......California deserves her.

[perth_couple]

On the other had it was cool that Whitman blew over a hundred mil trying to buy her seat, hehehehe, that'll help California's bottom line a little even if prop 19 failed...