Monstrously Dumb

An interesting post over at The Aleph Blog on FED policy actions.

The Fed always delays trouble in the modern era. Slow to tighten, quick to loosen. No wonder that we built up a mountain of debt, because the Fed would always ride to the rescue of crises, but never let the pain settle in that would liquidate poor investments.

We need fewer banks, fewer homebuilders, and fewer auto companies. But guess what we bailed out? We bailed out the very things that were the least productive in our economy, and taxed those more productive to do so. Monstrously dumb.

Extremely Over Stimulated

An interesting post over at The Economics of Oil Empire and Peak Oil pointing out that extreme government borrowing only gives the appearance of economic growth.

Thus, properly perceived, the private sector of the US economy is not growing and cannot grow with the price of oil above $40-$60. Gov't deficits of 10%+ of GDP (and 5-6% less the decline in receipts) merely give the appearance that the overall GDP is no longer contracting, whereas the private sector continues contracting yoy at a rate which occurred during the worst recessions of the 20th century.

A "double dip" for the US private sector will likely occur from a growth rate at or below zero.

My hope is that the government cuts spending, reduces "entitlements", and consumers de-leverage as orderly as possible as soon as possible. Then we can borrow again.

BFF

Bank Failure Friday (BFF) is where the FDIC shuts down banks due to violations of regulatory capital requirements. The bank is unable to honor its liabilities (your deposits) and its assets are given to another more solid bank with funds to cover the losses from the FDIC's Deposit Insurance Fund.

Even though the rate of failures is increasing the loss rate appears to be diminishing. Losses in excess of 30% were not uncommon meaning the bank was allowed to be severely broken before action was taken. Recent weeks, however, have losses to the FDIC falling below 25%. Sun American Bank in Boca Raton, FL, for instance, was seized today with $535M in assets and cost to the FDIC deposit insurance fund of $105M. Less than 20%. This is good news. The FDIC is taking prompt corrective action and following its mandate and insuring the safety of customer deposits.

iPad Pro

With speculation beginning on an iMac Touch and now on a Mac OS-X version of the iPad I'll throw my bet out there.

My hunch is we'll see the OS-X iPad in the fall refresh and expect it to be called the iPad Pro. It will have a larger screen, faster processor, at least one camera.

Time will tell.

Build America Bond Program

The Obama Administration is providing a further tacit bailout of the states and the guaranteeing of more debt by the federal government and thus the tax payers. Bloomberg indicates that the administration is seeking to extend and expand the Build America Bond Program indefinitely. It was to end this year.

Sadly the taxpayer is on the hook for ever more debt while increasing the level of moral hazard. As Bastiat wrote "Everyone wants to live at the expense of the State. They forget that the State lives at the expense of everyone."

Michigan's Budget Woes?

For all of Michigan's budget woes spending less appears to not be an option:

2003 Total Budget: $38,546,223,200
2004 Total Budget: $39,236,530,900
2005 Total Budget: $40,224,217,400
2006 Total Budget: $41,672,547,100
2007 Total Budget: $42,791,804,000
2008 Total Budget: $43,827,383,200
2009 Total Budget: $44,500,000,000 (tentative)

The governor has claimed to have cut more services than any other governor of Michigan - that may be true but it is more akin to shuffling deck chairs on the Titanic

Voter Fraud (by the legislature)

You can't make this stuff up.