September 2010

Geithner Hearts China with Tough Love?

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Treasury Secretary Timothy Geithner testified today before the Banking, Housing & Urban Affairs Committee. The headlines blaze with a Geithner quote, it is past time for China to move on Yuan re-evaluation, as if some sort of action might actually happen against China and their currency manipulation.

In reading Geithner's hearing testimony, we have this:

We have very significant economic interests in our relationship with China. With over 1.3 billion people and an economy continuing to grow at or near double-digit rates, China is our fastest-growing major overseas market. China’s record of bringing hundreds of millions out of poverty, building a rapidly growing middle class, and now its efforts to encourage growth led by domestic demand, ultimately mean more demand for American goods and services. Increasing opportunities for U.S. firms and workers through expanded trade and investment with China will be an important part of the success of the President’s National Export Initiative and our efforts to support job growth more broadly.

Triumph of the Money Party!!! Warren's role downgraded, reports to Geithner

Michael Collins

The White House snatched back one of the few bones it's thrown to the people outraged at the looting of the United States Treasury by failed financial concerns - the big banks and Wall Street. The promised appointment Elizabeth Warren as head of the new agency to protect consumers from the financial services industry has been seriously downgraded. Instead of running the Consumer Finance Protection Agency, Warren's role has been diminished to that of special assistant to the president and adviser to Treasury Secretary Tim Geithner.

"President Obama, sidestepping a possibly heated confirmation battle, will appoint Harvard law professor Elizabeth Warren as a special advisor to the Treasury Department to launch the government's powerful new Consumer Financial Protection Bureau, according to two Democratic officials familiar with the decision." LA Times, Sept 15

Elizabeth Warren in Obama Administration, Friend or Foe?

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Keep your friends close and your enemies closer? It appears either the Obama administration is doing a run around Congress or possibly muzzling Elizabeth Warren. Warren has been strongly desired to head the new Consumer Financial Protection Agency. Supposedly it would be difficult to get her confirmed in Congress. The Obama administration is hiring Elizabeth Warren as an assistant to the President, to de facto run the Consumer Financial Protection Agency claims The New York Times:

Elizabeth Warren, who conceived of the Consumer Financial Protection Bureau, will oversee its establishment as an assistant to President Obama, an official briefed on the decision said Wednesday evening.

The decision, which Mr. Obama is to announce this week, would allow Ms. Warren, a Harvard law professor, to effectively run the new agency without having to go through a potentially contentious confirmation battle in the Senate. The creation of the bureau is a centerpiece of the Wall Street financial overhaul that Mr. Obama signed in July.

IMF - Global Employment Crisis

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The schizophrenic IMF has declared the world has a global jobs crisis:

AMERICA and Europe face the worst jobs crisis since the 1930s and risk ''an explosion of social unrest'', the International Monetary Fund has warned.

''The labour market is in dire straits. The Great Recession has left behind a wasteland of unemployment,'' said IMF chief Dominique Strauss-Kahn at an Oslo jobs summit with the International Labour Federation.

A joint IMF-ILO report said 30 million jobs had been lost since the crisis, three-quarters in richer economies. Global unemployment has reached 210 million. ''The Great Recession has left gaping wounds. High and long-lasting unemployment represents a risk to the stability of existing democracies,'' it said.

The study cited evidence that victims of recession in their early 20s suffer lifetime damage and lose faith in public institutions. A new twist is an apparent decline in the ''employment intensity of growth'' as rebounding output requires fewer extra workers. As such, it may be hard to re-absorb those laid off even if recovery gathers pace. The world must create 45 million jobs a year for the next decade to tread water.

How does this square the IMF demanding austerity measures, gutting employment benefits, wages and security? It doesn't.

Retail Sales - August 2010

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Retail sales increased 0.4% for August 2010, but July 2010 was revised down to 0.3%. The increase is all necessities, gas, up 1.9% for the month, groceries, up 1.4% and clothing up 1.2%. Auto sales & dealers were down -1.1% for the month. Electronics down -1.1%.

 

 

For the year, retail sales have increased 3.5%. On a quarterly basis, retail sales ae down -0.5% in comparison to the March to May 2010 time period.

The below graph is retail sales excluding autos, with minus autos & parts, retail sales increased 0.6%.

 

Poverty Hits Record for 2009, 1 in 7 Americans are Flat Broke

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The United States is looking at record poverty rates for 2009, according to the Associated Press. AP interviewed demographers, for information on an upcoming Census report, to be released this Thursday. 1 in 7 Americans lives in poverty, something not seen since the early 1960's.

Interviews with six demographers who closely track poverty trends found wide consensus that 2009 figures are likely to show a significant rate increase to the range of 14.7 percent to 15 percent.

Should those estimates hold true, some 45 million people in this country, or more than 1 in 7, were poor last year. It would be the highest single-year increase since the government began calculating poverty figures in 1959. The previous high was in 1980 when the rate jumped 1.3 percentage points to 13 percent during the energy crisis.

Among the 18-64 working-age population, the demographers expect a rise beyond 12.4 percent, up from 11.7 percent. That would make it the highest since at least 1965, when another Democratic president, Lyndon B. Johnson, launched the war on poverty that expanded the federal government's role in social welfare programs from education to health care.

Demographers also are confident the report will show:

_Child poverty increased from 19 percent to more than 20 percent.

_Blacks and Latinos were disproportionately hit, based on their higher rates of unemployment.

Higher Capital Reserve Requirements for Banks

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The Basel III rules just increased capital requirements for banks, from 2% to 7%.

Global regulators, aiming to prevent any repeat of the international credit crisis, agreed on Sunday to force banks to more than triple the amount of top-quality capital they must hold in reserve.

The biggest change to global banking regulation in decades, known as "Basel III," will require banks to hold top-quality capital totaling 7 percent of their risk-bearing assets, up from just 2 percent under current rules.

The rules may oblige banks to raise hundreds of billions of dollars of fresh capital over the next decade. Germany's banking association, for example, has estimated its 10 biggest banks may need 105 billion euros ($141 billion) of additional capital.

But to ease the burden on banks and financial markets, regulators gave the banks transition periods to comply with the rules. These periods, extending in some cases to January 2019 or later, are longer than many bankers originally expected.

But wait, some can hold off for up to 9 years! Believe this or not, many banks objected and it gets worse, it's total assets, not just capital capital. That includes derivatives:

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