When you reach a certain number of zeros, the ability of the public to understand trillions or even billions approaches zero.

So when Obama asked for a pork package in the $700 billion – $800 billion range to “stimulate the economy,” Congress and most CNN viewers said, “Sure!  Why not!  I don’t know $700 billion from $700 million.   What’s a few zeros in a serious recession?”

So what does the $787 billion price tag for Obama’s porkulus compare to?  How about it’s bigger than the entire U.S. defense budget, including two full-scale wars.  That’s right.  Every time you see a gargantuan aircraft carrier, every time you think of the vast expenses of supporting two full-scale wars at once, every time you think of the hundreds of thousands of military families whose livelihoods and health care are provided for by the defense budget, yes, well, Obama’s first stimulus package alone was a lot bigger than all of that put together.  And since that first package, he’s kept piling on the pork, including the latest twenty-something billion for yet another round of Realtor bailouts.

So in the blink of an eye, your children have been sold into an unimaginable amount of debt.  But at least we kept unemployment under 8%, huh?

This is HUGE, but requires a bit of geeky background for non-Fed-watchers.

Background: Obama’s maniacal spending requires huge debt issuance. Traditionally, debt issuance was an open and honest market transaction. The U.S. Treasury auctioned debt, and individuals, banks, pension funds, and foreign governments bought it. China has been the biggest buyer recently.

But if the Treasury needs to borrow more than everyone wants to buy, the market-clearing interest rate goes up. The last thing the Fed/Treasury bubble-blowers want is for interest rates to go up. So as part of the Fed panic emergency measures, the Federal Reserve has started printing money to buy Treasury debt. China says, “Wait a minute. We don’t want to buy your debt if you are just going to print money to inflate it away.”

So last week’s Wednesday 5-year Treasury auction went poorly. It spooked the market: maybe the jig is up and nobody is going to finance Obama’s trillion-dollar deficits as far as the eye can see. Expectations for last Thursday’s 7-year auction were gloomy. Suddenly, though, there were lots of buyers! The auction went well, with primary (Wall Street) buyers taking far more than expected, and their enthusiasm encouraging foreign buyers to participate as well.

Today’s news: It was all a scam. This week the Fed printed the annual GDP of a small country to buy those exact same 7-year Treasuries off the Wall Street banks that bought them, and probably paid a little extra as a money-laundering fee.

One assumes our creditors are not amused.

You can’t handle the truth:

The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.

The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. Such a scenario might push stock prices lower for banks perceived as weak and interfere with the government’s plan to release the results in an orderly fashion later this month.

“If you allow banks to talk about it, people are just going to assume that the ones that don’t comment about it failed,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.

So they set up stressless “stress tests” designed to be so easy that no bank will fail, and yet the results are still so bad that they are going to keep them secret.

In related news, Jonathan Weil at Bloomberg and Henry Blodget at Clusterstock ask why Obama would continue Bush’s policy of bailing out bad bank billionaires at the expense of ordinary Americans. The charitable explanation is that he actually believes that giving unlimited public resources to bad businesses is the best policy. The darker view is that Obama is under the spell of his advisors who are once and future Wall Street fatcats themselves.

… and they <a href=”http://www.mercurynews.com/breakingnews/ci_11996662″><span style=”font-style:italic;”>really</span> hate the Democratic legislature</a>:
<blockquote>Schwarzenegger’s approval rating has dropped to 33 percent, his lowest ever in the poll, and the Legislature gets positive ratings from a mere 11 percent of likely voters.</blockquote>
Since the only thing of note that Schwarzenegger and the legislature have done recently is the budget deal, I think it’s fair to say the public doesn’t like the budget deal.

This is good news for those who want to defeat the deceptive tax increase <a href=”http://wcvarones.blogspot.com/2009/03/california-proposition-1a-is-fraud-and.html”>Proposition 1A</a>:
<blockquote>None of the key measures in the May 19 special election is garnering majority support among likely voters.

And the keystone proposal, Proposition 1A — which would boost the state’s rainy day reserve and potentially rein in spending over the long term — is backed by only 39 percent of likely voters.</blockquote>
To make it worse, the California Republican Party has given more than $1 million to Schwarzenegger’s campaign for the Proposition 1A tax increase.  If you want to ask Republican Chairman Ron Nehring why, here is his contact info:

e-mail: ron@ronnehring.com
phone: 619-743-6402

Arnold Schwarzenegger wants to tax the crap out of you if you work, drive, or spend in California. Perhaps we can organize to defeat Prop 1A and recall Schwarzenegger’s band of tax-hiking legislators. But there are things you can do immediately to cut your own taxes and foil Schwarzenegger’s evil plot.

The huge tax increases go into effect April 1, so that would be a good day to start implementing as many of these as possible:

Sales tax: cut consumption of taxable goods as much as possible
- No more restaurants. Buy untaxed groceries instead. You’ll save far more money than just the sales tax amount, and you’ll eat healthier and learn to cook as well!
- Buy used stuff from private parties (e.g. on Craigslist) rather than new stuff. You can find just about everything you need there.
- No more soft drinks. Unlike most food, they are taxed, plus there are outrageous recycling deposits on bottles and cans that are usually forfeited to the state with curbside recycling.
- If you must make a big purchase, make it out of state. What a good excuse for a trip to Vegas!

Car tax: keep your old car, and if you must buy, buy used
- Schwarzenegger has doubled the car tax, which is an annual tax based on the value of your car. Obvious solution: drive a cheaper, older car. This also cuts your sales tax on the purchase transaction.

Income tax: cut your taxable income where it makes sense
- Max your 401(k). If you do a Roth 401(k), consider switching back to a traditional 401(k) for the immediate deduction.
- If you are a consultant, run your own business, or otherwise have flexible income, consider cutting back your hours and enjoying life a little (with your old car and reduced consumption, you don’t need as much money any more!).
- If you are a two-income family paying for child care, consider dropping one income and staying home with the kids!

If you look at this list, most of these are things that you probably want to do anyway. Maybe we should thank the evil Schwarzenegger for inspiring us to do what we should have been doing all along.

Fight socialism and save your family finances at the same time!

California’s legislators have put a massive tax increase on the ballot disguised as a “spending limit.” What Proposition 1A really does is extend for two more years the largest tax increase in history.

The legislative analyst’s office tells the truth:

Measure Results in Tax Increases. If this measure is approved, several tax increases passed as part of the February 2009 budget package would be extended by one to two years. State tax revenues would increase by about $16 billion from 2010-11 through 2012-13.

California voters often rely on the ballot summary to decide how to vote. The lying weasels in Sacramento know that a tax increase proposition would not win, so they have written a ballot summary that doesn’t mention the tax increase at all. The biggest tax increase in history and they don’t even mention it! Worse, Senate leader Darrell Steinberg selected pro-tax Democrats to write the ballot argument against Prop 1A, so the real opponents don’t have any voice in the ballot arguments.

The Howard Jarvis Taxpayers Association is a great resource on this.

The Sacramento Bee has a calculator to estimate how much this tax increase will cost your family.

Please help expose the fraud and pass this on to all California voters you know.

We need news helicopters to find this guy and put the freeway chase on CNN.

Moderate Republican Abel Maldonado, under pressure from Schwarzenegger and Democrats to provide the final vote to crush the people of California with huge tax increases, <a href=”http://www.sacbee.com/static/weblogs/capitolalertlatest/019637.html”>has fled the capitol in violation of a legislative lockdown</a>.

Don’t squeeze the Abe!

With this gang of crooks in Sacramento, I don’t want to get my hopes up. But we haven’t had a vote yet on the massive tax hikes that Schwarzenegger wants to impose on Californians. The leftists wanted a vote today.

California already has the highest income taxes in the nation and the highest sales taxes in the nation. Schwarzenegger and the Democrats want to raise them even higher to pay for their irresponsible spending. And car taxes. And gas taxes. Schwarzenegger wants to stomp on the throats of downtrodden Californians in the worst economy since the Great Depression.

The balance of power lies with Republican legislators, who signed “no tax” pledges to get elected, but are now waffling and apparently inclined to vote for Schwarzenegger’s and the Democrats’ huge tax increases.

The fact that the vote hasn’t happened yet is a tiny sign of hope. If there was ever a time to call and scream at your California legislators, it’s now.

UPDATE: RINO whores still batting eyelashes at state employee unions, well into the night.

Those who cannot learn from history are doomed to repeat it.

The Fed is just getting warmed up in its battle to reignite inflation. It has already doubled the monetary base:

… and it will soon begin printing money to buy long-dated Treasury bonds, pushing down interest rates. It’s hard to wrap your head around the concept, but Congress can spend as much money as it wants without causing Treasury rates to go up, because the Fed can print as much money as it wants to buy Treasury bonds. In fact, why don’t we eliminate the income tax, and just have the Fed print the roughly $1 trillion dollars it brings in?

If it sounds too good to be true, it probably is. In the short term, it doesn’t cause inflation because the depression has crushed demand for goods and services. It also doesn’t cause the dollar to collapse in FX markets because all other major countries are simultaneously doing the same thing. But in the long run, a vastly greater number of dollars out there means that each dollar is worth a lot less.

This is, in fact, the desired outcome for the Fed/Treasury. Devaluing the dollar punishes savers and rewards debtors, which is exactly what Geithner-Bernanke wants. Cut the value of the currency in half, and everyone’s debt (mortgage debtors’, consumers’, businesses’, and the government’s) is suddenly a lot more manageable. Cut the value of the dollar by two-thirds or three-fourths, even better. And if some little old ladies can’t buy groceries because the money they saved all their lives is no longer worth anything, well, let them eat Alpo.

California Assemblyman Anthony Adams, 11/25/08:

“It is absurd for Democrat to refuse to live within their means and expect California’s taxpayers to pick up the tab for their poor spending choices,” said Adams. “California’s families have been hit hard by the economic downturn and are struggling to balance their own family’s budget. With the holiday season approaching, Californians shouldn’t have to choose between putting presents under the tree and giving more of their hard-earned money to Sacramento.”

Lying weasel Anthony Adams, 1/22/09:

“(We must be able) to tell constituents, ‘Look, we had to raise taxes, we had to go forward, but we’ve fundamentally altered the way in which Sacramento is going to be budgeted – and we will not have these problems again because of it,’” Adams said.

Every year, California Republicans promise to hold the line on taxes and spending. And every year, Schwarzenegger and the Democrats bribe or threaten enough weak RINOs to pass a budget with massive spending increases — 40% in just four years. Now that real estate bubble tax revenues have dried up, instead of rolling back spending, Democrats are pushing RINOs to pass tax increases on the most overtaxed people in the country. And Anthony Adams is the weakest RINO.

Adams will probably be rewarded for betraying his constituents with a cushy, do-nothing, $100,000+ seat on the State Board of something-or-other. That’s how Schwarzenegger and the Democrats typically bribe legislators. And Adams, an apparent four-time loser on the California Bar exam, could certainly use a do-nothing job.

Anthony Adams’ contact info is here:

DISTRICT OFFICE
540 W. Baseline Rd. Suite 16
Claremont, CA 91711
(909) 625-1038, (909) 625-1063 fax

CAPITOL OFFICE
State Capitol
Sacramento, CA 95814
(916) 319-2059, (916) 319-2159 fax

It should be obvious to everyone at this point that inflated home prices are not a good thing.  Homes should return to reasonable (3x to 4x) multiples of annual incomes, and young families should be able to save up a 20% down payment before purchasing.  We are still far from that point.

Enter dimwitted California Republican Gary Miller, who thinks the solution to a housing bubble created by easy money is to try to reinflate the bubble with more easy money.  His Keep Homes Unaffordable Act:

Economic stimulus legislation passed into law last year temporarily lifted the loan limits to nearly $730,000 from $417,000 through the end of 2008. The limits dropped to $625,500 from $729,750 on January 1.

Rep. Gary Miller, Republican of California, introduced legislation Thursday to reinstate the higher limits, arguing the move was crucial for restoring the affordability of mortgages in some regions of the country and stabilizing the housing market.

“As the crisis in housing markets continues, the availability of affordable mortgage loans remains essential to alleviating the credit crunch and stabilizing the U.S. mortgage market,” Miller said in a statement.

The Jan. 1 drop in the high-cost limit has pushed up rates on larger mortgages that no longer qualify for purchase by Fannie or Freddie. Interest rates on “conforming” loans – those that can be sold to Fannie or Freddie – are much lower than on larger loans, known as “jumbos.”

Lawmakers representing costly home markets along the coasts have vowed to attach language restoring last year’s higher limits to economic stimulus legislation.
The National Association of Realtors, the Mortgage Bankers Association and the National Association of Home Builders have been lobbying for months to make last year’s higher limits permanent.

It’s bad enough that Fannie and Freddie helped create the bubble by using tax dollars to subsidize loan rates for sub-$500,000 homes.  Gary Miller wants them to do the same for houses over $500,000.

The real solution: 20% down, no rate subsidies, fully documented income on loan applications.  Without government funny money propelling a bubble, homes will return to affordable levels.

Miller is sick to want first-time homebuyers to have to take on extra debt to buy artificially inflated homes.  Either that or he is on the payroll of the real estate industry.

In You suck, Cox, we wrote:

SEC Chairman Christopher Cox became flustered when John McCain attacked him for not making stocks go up.

You don’t want to see a cowardly politician when he’s flustered.

Cox tried to appease McCain by lashing out at short-sellers about the financial crisis, which is roughly equivalent to lashing out at Siskel & Ebert for the box office failure of Waterworld. In his ill-considered, late-night order, Cox banned the short-selling of all “financial” stocks, throwing the market into chaos. The order was like changing the poker rules after everyone has placed their bets: “Okay everyone, deuces wild!” This is not how developed markets operate. Welcome to the new emerging market of 2008.

Now, the coward Cox confirms the story, though he blames Paulson, not McCain, for bullying him:

Cox said the biggest mistake of his tenure was agreeing in September to an extraordinary three-week ban on short selling of financial company stocks. But in publicly acknowledging for the first time that this ban was not productive, Cox said he had been under intense pressure from Treasury Secretary Henry M. Paulson Jr. and Fed Chairman Ben S. Bernanke to take this action and did so reluctantly.

And how about Cox’s spectacular failure to catch the Madoff Ponzi scheme, even after the SEC was repeatedly, specifically told about the fraud by outsiders?

California’s budget disaster, caused by Governor Arnold Schwarzenegger increasing spending 40% in four years, continues.

Decades ago, California voters passed Proposition 13, which requires a 2/3 vote in the legislature to raise taxes. Since then, this has been at least a minimal restraint on runaway spending and taxes.

Until now. Democrats, lacking a 2/3 majority to raise taxes, unilaterally declared that if they just call taxes “fees,” they don’t need a 2/3 majority. Among the taxes they plan to raise: income taxes and sales taxes. Fees indeed. California already has the highest income taxes and sales taxes in the nation.

Schwarzenegger, who as recently as Friday publicly called the scheme “illegal,” has already flip-flopped and said he wants to do a deal with the Democrats.

Bernie Madoff had a very short reign as the biggest investment fund fraud in the world. He’s just been surpassed by CalPERS, America’s largest pension fund. The WSJ explains the collapse:

At the height of the property bubble, California’s giant pension fund, Calpers, made a fateful decision: It aggressively poured money into real estate. As a result, today it’s one of the biggest owners of undeveloped residential land in America.

[...]

Calpers in recent weeks said it expects to report paper losses of 103% on its housing investments in the fiscal year ended June 30. That’s because Calpers invested not only its own money, but billions of dollars of borrowed money that must be repaid even if the investment fails. In some deals, as much as 80% of the money invested by Calpers was borrowed.

And just as some saw Madoff as an obvious fraud, some saw CalPERS as an obvious fraud, too. As we wrote in July:

What a coincidence. While things that have easily observable market prices (i.e. stocks) went down, everything that is valued subjectively went up! Private equity? It does great during a credit crunch when stocks are crashing! Just ask noted private equity players Blackstone Group or Babcock & Brown. And real estate? Well, whose real estate portfolio is not up at least 8% this year?

Nice numbers, CalPERS! Especially considering your investment in toxic waste CDOs at the beginning of the mortgage crisis, and your $1 billion dollar investment in the now-bankrupt LandSource at the peak of the real estate bubble.

Mark my words: CalPERS is lying about its performance, and there will be serious consequences for California retirees and taxpayers.

The sleazy Detroit automakers are trying to blackmail Congress into preventing a bankruptcy, claiming that the public would not buy cars from a bankrupt company (which is nonsense. The Feds would guarantee people’s warranties, and the automakers would continue making and servicing cars. Do you know people who refuse to fly United because they’ve been through bankruptcy?). The real reason is that in bankruptcy, stock and bondholders lose money, management loses pay packages and/or their jobs, and workers lose their overly generous benefits. So this isn’t about keeping the automakers alive; it’s about taxpayers bailing out investors, management, and unions. When you invest in a bad company, you’re supposed to lose money. That’s the way capitalism works. You’re not supposed to go crying to the government that your industry is special so you deserve a handout. Bankruptcy is ideal for this situation. They shed the crushing debt, the unmanageable pension and health care costs, and they become leaner, more efficient companies.

I drive a new Ford and and old Buick. I am happy with them. But if these bloated companies manage to steal my tax dollars for their stupid and greedy investors and overpaid unions, I will never buy another one of their cars. Toyota and Honda and Kia hire American workers to make American cars in American factories, and they don’t leech off the taxpayers.

Please join me in this pledge to boycott bailout beggars, and call/fax/e-mail your Senators today to let them know.

While the pro-bailout crowd has yet again announced an agreement, the rank-and-file have not yet signed on.
Here is Pelosi’s summary of the bill.

Note some obvious flaws:

• No salary caps for executives of firms that take taxpayer money.
• Vague language around taxpayers getting equity; my guess is that many firms would get taxpayer money without giving up equity.
• Automatic additional funding unless blocked by a supermajority. If this is a bipartisan solution, why not require affirmative Congressional action for additional funds?

There is still time to press the rank-and-file to fix this stuff. Investment advisor Mike Shedlock says to hit the switchboard!

There is a bill in the house. There is not one in the Senate so we need to create as much doubt as we can, as soon as we can.

Do they have the votes? That is another story. They won’t if we can scare every junior member in the house, or appeal to the right few in the Senate.

There are still changes worth getting. So let’s get them

.

Here is the draft of the bailout plan. It gives Henry Paulson absolute, unchecked power to give any banks he chooses good cash for bad assets. Courts are specifically excluded from questioning his almighty will.

This amounts to a direct transfer of wealth from Joe Taxpayer to the wealthy Wall Street bankers who got us in this mess — at least to those wealthy Wall Street bankers Paulson chooses to shower with favors. Remember: there are no checks and balances.

Read More →

I always worried that HillaryCare would nationalize one of the biggest sectors of our economy.

Little did I know that PaulsonCare would nationalize an even bigger one.

Read More →

reposted from the W.C. Varones Blog.

University of Wisconsin professor Menzie Chinn:

In response to the largest de facto nationalization in US history, we have this example of Governor Palin’s comprehension of this issue (ABC News):

Saturday in Colorado Springs, Colo., Alaska Gov. Sarah Palin said, “The fact is that Fannie Mae and Freddie Mac have gotten too big and too expensive to the taxpayers. The McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need help.”

I can’t even start to dissect what’s wrong with this statement, so I will let the reader assess Palin’s understanding of the role of the GSEs in the financial system. From my perspective, I would have hoped to have more comprehension from a candidate at a time when the estimate of a resulting $300 billion taxpayer liability is viewed as plausible.

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Well, McCain and Obama both opposed a taxpayer bailout of Fannie Mae and Freddie Mac

Just before Labor Day, Sen. Obama derided Fannie and Freddie as a “weird blend,” advocating that “If these are public entities, then they’ve got to get out of the profit-making business, and if they’re private entities, then we don’t bail them out.” He said later that he has “no sympathy” for the CEOs of Fannie and Freddie, and that the government shouldn’t bail out “investors who had made a killing.”

McCain, similarly, railed in an editorial that “if elected, I’ll continue my crusade for the right reform of the institutions: making them go away. I will get real regulation that limits their ability to borrow, shrinks their size until they are no longer a threat to our economy, and privatizes and eliminates their links to the government.” McCain attributed the growth of the agencies to “crony capitalism,” and Washington selling out to Wall Street.

(until they supported it) and the just-adopted Republican Party platform was abundantly clear on the subject:

We support energetic federal investigation and, where appropriate, prosecution of criminal wrongdoing in the mortgage industry and investment sector. We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself.

Nevertheless, U.S. Treasury Secretary Henry Paulson is selling your children into debt in order to bail out his Wall Street pals. Initial estimates put the likely cost to taxpayers in the hundreds of billions, with the chief beneficiaries being large speculators in Fannie and Freddie debt, led by Communist China and billionaire Bill Gross’s PIMCO.