Dead On Arrival: Financial Reform Fails:

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By Simon Johnson - June 21, 2010 at 7:04 am

The House-Senate reconciliation process is still underway and some details will still change. But the broad contours of “financial reform” are already completely clear; there are no last minute miracles at this level of politics. The new consumer protection agency for financial products is a good idea and worth supporting – assuming someone sensible is appointed by the president to run it. Yet, at the end of the day, essentially nothing in the entire legislation will reduce the potential for massive system risk as we head into the next credit cycle.

Go, for example, through the summary of “comprehensive financial regulatory reform bills” in President Obama’s letter to the G20 last week.

The president argues for more capital in banking – and this is a fine goal, particularly as the Europeans continue to drag their feet on this issue. But how much capital does his Treasury team think is “enough”? Most indications are that they will seek tier one capital requirements in the range of 10-12 percent – which is what Lehman had right before it failed. How would that help?

“Stronger oversight of derivatives” is also on the president’s international agenda but this cannot be taken seriously, given how little Treasury and the White House have pushed for tighter control of derivatives in the US legislation. If Senator Lincoln has made any progress at all – and we shall see where her initiative ends up – it has been without the full cooperation of the administration. (The WSJ today has a more positive interpretation, but even in this narrative you have to ask – where was the administration on this issue in the nine months of intense debate and hard work prior to April? Have they really woken up so recently to the dangers here?)

“More transparency and disclosure” sounds fine but this is just empty rhetoric. Where is the application – or strengthening if necessary – of anti-trust tools so that concentrated market share in over-the-counter derivatives can be confronted. The White House is making something of a show from Jamie Dimon falling out of favor, but all the points of substance that matter, Dimon’s JP Morgan Chase has won. The Securities and Exchange Commission is beginning to push in the right direction, but the reconciliation conference looks likely to deny them the self-funding – CFTC and FDIC, for example, collect fees from the industry – that could help build as a regulator. At the same time, the conference legislation would send a large number of important questions to the SEC “for further study”. None of this makes any sense – unless the goal is to block real reform.

The president also asks for a “more effective framework for winding down large global firms” but his experts know this is politically impossible. The G20 (and other) countries will not agree to such a cross-border resolution mechanism – and this was an important reason why Senators Sherrod Brown and Ted Kaufman argued so strongly that big banks had to become smaller (and be limited in how much they could borrow). Now administration officials brag to the press, on the record, about how they killed the Brown-Kaufman amendment. These people – in the White House and around the Treasury – simply cannot be taken seriously.

And as for “principles for the financial sector to make a fair and substantial contribution towards paying for any burdens”, this is a sad joke. This is not an oil spill, Mr. President. This is the worst recession since World War II, a 40 percentage points increase in government debt (attempting to prevent a Second Great Depression), loss of at least 8 million jobs in the United States, and a painfully slow recovery (in terms of unemployment) – not to mention all the collateral damage in so many parts of the world, including Europe. Could someone in the White House at least come to terms with this issue and provide the president with a sensible and clear text? Honestly, as staff work, this is embarrassing.

There is great deference to power in the United States, and perhaps that is appropriate. But those now calling the shots should remember that they will not be in power for ever and – at some point in the not too distant future – there will be a more balanced assessment of their legacies.

Simply claiming that the president is “tough” on big banks simply will not wash. There are too many facts, too much accumulated evidence, pointing exactly the other way. The president signed off on the most generous and least conditional bailout in world financial history. This is now widely understood. The administration has scrambled to create some political cover in terms of “reform” – but the lack of substance here is already clear to people who follow it closely and public perceptions will shift quickly.

The financial crisis of fall 2008 revealed serious dangers have developed in the heart of the world’s financial system. The Bush-Obama bailouts of 2008-09 confirmed that our biggest banks are “too big to fail” and the left, center, and right can agree with Gene Fama when he says: “too big to fail” is perverting activities and incentives.

This is not a leftist message, although you hear people on the left make the point. But people on the right also increasingly understand what is going on – there is excessive and abusive power at the heart of our financial system that completely distorts markets (and really amounts to a hidden, unfair and dangerous taxpayer subsidy).

This administration and this Congress had ample opportunity to confront this problem and at least wrestle hard with it. Some senators and representatives worked long and hard on precisely this issue. But the White House punted, repeatedly, and elected instead for a veneer of superficial tweaking. Welcome to the next global credit cycle – with too big to fail banks at center stage.

http://baselinescenario.com/2010/06/21/dead-on-arrival-financial-reform-fails/#more-7767

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Jobless Claims, Manufacturing Numbers Hit Stocks.:

http://finance.yahoo.com/news/Jobless-claims-manufacturing-apf-1070019902.html?x=0&sec=topStories&pos=1&asset=&ccode=

Stock traders question rebound after jobless claims increase, Philly manufacturing disappoints:

Tim Paradis, AP Business Writer, On Thursday June 17, 2010, 12:08 pm

NEW YORK (AP) -- Stocks fell Thursday after a surprise increase in new claims for jobless benefits and a weaker regional manufacturing report raised concerns about the economy.

The Dow Jones industrial average fell about 40 points in midday trading after rising four the last five days. Broader indexes also dropped. Treasury prices rose, pushing down interest rates, after traders became more cautious.

The government said that the number of people putting in new claims for unemployment benefits rose unexpectedly last week. Initial claims for jobless benefits increased 12,000 to 472,000. That's the highest level in a month and follows three straight weeks of declines. Economists had forecast another drop.

A plunge in the Philadelphia Federal Reserve's index of regional manufacturing also hit stocks. The Philly Fed said manufacturing continued to expand in June but at a slower pace than in May. Its index of manufacturing activity dropped to 8 from 21.4 the month before. Traders are concerned that the slowdown signals that a recovery is fading in one of the strongest parts of the economy.

The reports provided more reminders that the economy isn't bouncing back quickly.

"It adds up to a modest, uneven recovery," said Paul Ballew, chief economist at Nationwide Insurance in Columbus, Ohio, and a former senior economist with the Federal Reserve. "We're not expecting some light switch being turned on here."

The jobs report is often the most closely watched number of the week because a recovery in the labor market is crucial to a sustained rebound in the economy. The government's most recent monthly jobs report found that employers added only 41,000 private-sector jobs in May. That was far weaker than expected and raised concerns that a pickup in hiring was slowing. The unemployment rate fell to 9.7 percent from 9.9 percent, however.

A stronger euro helped contain some of the selling. The euro rose after a bond offering by Spain's government drew solid demand. Traders have been concerned that European countries like Spain with high debt loads would have trouble raising money because of worries about defaults. A stronger euro is seen as a sign of confidence in Europe's ability to cut its debt without jeopardizing an economic rebound. The euro climbed to $1.2357.

At midday, the Dow fell 40.06, or 0.4 percent, to 10,369.10. The Standard & Poor's 500 index fell 2.55, or 0.2 percent, to 1,112.06, and the Nasdaq composite index fell 1.69, or 0.1 percent, to 2,304.24.

Bond prices rose, pushing down interest rates. The yield on the benchmark 10-year Treasury note fell to 3.21 percent from 3.27 percent late Wednesday.

Crude oil fell 70 cents to $76.96 per barrel on the New York Mercantile Exchange. Gold rose.

Shares of BP PLC rose 31 cents, or 1 percent, to $32.16 after CEO Tony Hayward told a House panel that he was "deeply sorry" for the Gulf of Mexico rig explosion and oil spill.

Hayward's appearance on Capitol Hill came a day after BP agreed to put $20 billion into a fund for victims of the spill and to suspend dividend payments for the rest of the year. BP had been scheduled to pay $2.6 billion in first-quarter dividends next week. The company's shares have lost about half their value since the rig it operated exploded in April.

The government also reported that consumer prices fell for the second straight month, as expected. The Consumer Price Index dropped 0.2 percent because of a decline in the cost of gasoline and other energy expenses. However so-called core prices, which excludes often volatile food and energy costs, ticked up 0.1 percent in May. A tight job market and excess capacity at the nation's factories are some of the forces helping to keep inflation under control.

Three stocks fell for every two that rose on the New York Mercantile Exchange, where volume came to 400 million shares compared with 429 million shares traded at the same point Wednesday.

The Russell 2000 index of smaller companies fell 1.50, or 0.2 percent, to 664.63.

Britain's FTSE 100 rose 0.3 percent, Germany's DAX index rose 0.5 percent, and France's CAC-40 gained 0.2 percent. Japan's Nikkei stock average fell 0.7 percent.

Retail Data Put Double-Dip Back on the Table:

Hey, Big Spender...

by Irwin Kellner - Wednesday, June 16, 2010

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Commentary: Retail data put double-dip recession back on table

Where are the big spenders, now that we really need them?

The unexpected decline in May's retail sales has many economists questioning the strength and durability of the nascent recovery.

This was the first month-to-month retreat for retail sales since last autumn. What is more, it was pretty much across the board — even if you exclude autos.

On the surface, this seems at odds with consumers' attitudes. The latest survey of consumer sentiment shows a better-than-expected gain.

However, by historical comparisons, consumer moods are still fairly dour. And at any rate, these consumer surveys are not a good predictor of how much people actually spend. Rather, they mainly tell us how people felt on the day that they were queried by the pollsters.

Cheerful or not, consumers are increasingly reluctant to open their wallets. They are making fewer trips to malls and shopping centers, and when they do buy, they are buying mainly necessities — not discretionary, big-ticket, or luxury goods.

They tend to frequent big-box stores and other discount outlets — and only when these merchants run big sales.

This hunkering down extends to consumers in all income brackets.

Lower- and middle-income families are worried about jobs, their mortgage, and the rising cost of food and health care. The rich are less worried about jobs, but they have taken a beating in the stock market, second homes, art and other investments.

There's less eating out than there used to be. The only restaurants that seem to be doing well are fast-food stores and new, trendy upscale establishments.

Since retail sales make up over half of all consumer spending, it is safe to say that at least one-third of the gross domestic product is now falling. It is also not a stretch to conclude that the rest of consumer spending, which is services, is soft as well.

Add to this the ongoing weakness in housing sales and new home construction, the slowing in exports as the dollar rises in world financial markets and the sharp cutbacks by states and local government, and most of the economy — except for inventories — appears to have stopped growing and may well be contracting.

In plain English, double-dip is back on the table.

Yet, policy makers have increasingly begun to discuss the need for both fiscal and monetary policies to tighten up.

Now I am as concerned as anyone else about the size of Washington's budget deficit, as well as the amount of liquidity that the Federal Reserve has injected into the financial system.

That said, now is not the time for policy to tighten. Rather we should make better use of the ease we already have.

Since we learned from the experience of the 1930s that fiscal policy is a more effective tool to support the economy than monetary policy, the administration should redirect the remaining funds from last year's stimulus program to where it will do the most good — creating jobs.

This is not as easy as it sounds, since businesses' reluctance to add to staff traces to more than the murky economic outlook.

It is also due such issues as health care, energy, climate control, regulations and tax increases — uncertainties created by the administration itself.

Irwin Kellner is MarketWatch's chief economist.

http://finance.yahoo.com/banking-budgeting/article/109816/hey-big-spender?mod=bb-budgeting&sec=topStories&pos=8&asset=&ccode=

How the Reagan Revolution Succeeded: Strangling Government in a Bathtub and Destroying Public Services:

Submitted by Mark Karlin on Monday, 06/14/2010

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As President Obama pleads for a measly $50 billion to prevent teachers, fire men and women and police from being laid off, any frank analysis of trends in U.S. economic policy -- despite the stimulus packages -- would recognize that regardless of a Democratic Congress and President the snake venom of the "Reagan Revolution" is metastasizing like advanced lung cancer throughout society. Obama, in his abundant caution and admiration for and mollycoddling of entrenched wealth and the ruling elites, is no match for the long-term, ongoing impact of the Republicans "strangling and then drowning government" in a bathtub.

The latest "conventional wisdom" among elected officials in Washington, Wall Street, the corporate mainstream media, and corporate lobbyists and the wealthy that the deficit must be lowered is just an attempt to preserve wealth for the Reagan/Bush tax-cut rich, further shrink public services, and bankrupt state and local governments, not to mention help ruin public education by denying it much-needed funds and laying off public teachers and other public employees essential to the future of our nation.

The success of the right wing strategy known as the "Reagan Revolution" is like a toxic underground river that keeps gaining in strength and can only be seen from time to time as it emerges to the surface and grows in strength and power as it undermines the common good.

The ongoing and accelerating ruinous impact of creating a society with 1% or so of economic super rich and 99% of economic losers is clear in so many ways, including the economic tanking of our economy. It can most vividly be seen in the virtual bankruptcy of countless states in the U.S., including California, which used to symbolize the promise of America's future, but now is the national bellwether in economically going down the tubes. This is a direct result of redistributing income to the few who don't need it for anything more than greed and excess riches, while the rest of us pay increased fees for what used to be free services for the common good. This is because the reduced taxpayer revenue cannot pay for services that we used to regard as part of the public commons.

And there is no serious talk of increasing taxes on the super rich to prior levels to help balance the budget; no, Washington wants to cut the meat out of government services, make public education untenable and put college out of reach except for the children of the wealthy.

Forget for the moment that in laying off tens of thousands of teachers, the Reagan "make America into a Third World Country of the obscenely wealthy, a shrinking middle class, and a growing percentage of poor" Revolution is wildly succeeding in seeing its dream of privatizing government services -- including public transportation, toll roads, schools, and even our water supplies -- by governments at all levels to obtain much-needed one-time cash payments to help plug budgets on the verge of collapse. As a result, increased flat users fee to private companies become a flat tax, just under another name, that adversely affects all but the wealthy. Meanwhile, the assets that had previously been owned by the public are now being transferred to unreliable and greedy corporations that take their cues from the likes of BP: profit before the public good.

The acceleration of privatization is just one more means of transferring wealth from the shrinking middle class and poor to the wealthy. It is the kind of economic system most often seen in the third world. On a non-governmental level, it is best symbolized by a private company like Wal-Mart which makes its money off of inadequately paid workers who do minimum wage labor in a store patronized by other underpaid or unemployed Americans buying cheap goods made in China and other slave shops that the customers at Wal-Mart used to make themselves. Meanwhile, the Walton family -- the descendants of founder Sam Walton -- move up the ranks of the wealthiest people in the world, while most Americans move steadily downward.

In the "Reagan Revolution," government only exists to allow the wealthy to become wealthier or to allow cronyism and revolving door government regulators, politicians, lobbyists and corporate executives to make fortunes from the likes of the longest war in America's history -- Afghanistan -- and to use the taxes of the already downsized incomes, if they have one, of most Americans to fund industrial-military complex industries who rely on war to justify new weapons systems and deplete current military supplies so that they can make more money by replacing them. Of course, GIs, NATO forces, Afghani military members and police, and Afghani civilians get killed in the process. But there is money to be made in the death industry, plenty of it.

And then there are wars, like Iraq and Afghanistan, that are really fought for an empire's thirst for oil and natural resources, a trillion dollars worth curiously and allegedly just discovered in Afghanistan, according to the New York Times. But we pay for the private contractors to enrich themselves and their companies as GIs who couldn't find any other jobs fight on and die as essentially soldiers of economic need for the most part, ensuring the last days of America's rein as an empire.

It's up and down the government feeding chain: "users fees," college tuition increases, education and public services cutbacks, the creation of private entities for what used to be in the public commons, the radical cutbacks in subsidies for public institutions like museums and zoos (remember when they used to be free, not $15-$25 a shot?) are all part of the Reagan Revolution's cancerous success that far out paces any ability of Obama to expand the federal budget to try -- like the Dutch boy -- to plug the wholes in the dike. Message to Obama, the dike has broken and the deluge is drowning what is left of American government, particularly at the state and local levels, and Grover Norquist is seeing his dream realized of seeing the public good breathe its last breath as its head is held under water until it breathes its last gasp.

And no one dares to speak the fiercely urgent truth. The inequitable and unjust gluttonous tax reductions on the wealthy need to be dramatically reduced with all due speed.

Otherwise, we are well on the way to becoming an over sized nation that more resembles the economic injustices and educational backwardness of the Confederacy than of a nation leading the world into a prosperous, environmentally sound, and healthy future.

But isn't that what the Reagan Revolution was about all along -- and no one in D.C. is even faintly addressing its growing and ruinous impact.

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Are We Going the Way of Rome?...

http://stockmarketchartanalyst.blogspot.com/2010/06/are-we-going-way-of-rome.html

By Lawrence W. Reed

There's an old story worth retelling about a band of wild hogs which lived along a river in a secluded area of Georgia. These hogs were a stubborn, ornery, independent bunch. They had survived floods, fires, freezes, droughts, hunters, dogs, and everything else. No one thought they could ever be captured.

One day a stranger came into town not far from where the hogs lived and went into the general store. He asked the storekeeper, "Where can I find the hogs? I want to capture them." The storekeeper laughed at such a claim but pointed in the general direction. The stranger left with his one-horse wagon, an ax, and a few sacks of corn.

Two months later he returned, went back to the store, and asked for help to bring the hogs out. He said he had them all penned up in the woods. People were amazed and came from miles around to hear him tell the story of how he did it.

"The first thing I did," the stranger said, "was to clear a small area of the woods with my ax. Then I put some corn in the center of the clearing. At first, none of the hogs would take the corn. Then after a few days, some of the young ones would come out, snatch some corn, and then scamper back into the underbrush. Then the older ones began taking the corn, probably figuring that if they didn't get it, some of the other ones would. Soon they were all eating the corn. They stopped grubbing for acorns and roots on their own.

"About that time, I started building a fence around the clearing, a little higher each day. At the right moment, I built a trap door and sprung it. Naturally, they squealed and hollered when they knew I had them, but I can pen any animal on the face of the earth if I can first get him to depend on me for a free handout!"

The moral to that story happens to be the connecting link between the course of ancient Rome and the path which America has been taking for much of the last century.

Roman civilization began many centuries ago. In those early days, Roman society was basically agricultural, made up of small farmers and shepherds. By the second century bc, large-scale businesses made their appearance. Italy became urbanized. Immigration soared as people from many lands were attracted by the vibrant growth and great opportunities the Roman economy offered. This growing prosperity was made possible by a general climate of free enterprise, limited government, and respect for private property. Merchants and entrepreneurs were admired and emulated. Commerce and trade flourished and large investments were commonplace.

It is certainly true that slavery existed within Rome's sphere of influence. That's deplorable from any standpoint, of course. But to be fair to the Romans, it must be said that slavery was far more common and far more brutal in the rest of the world in those days.

Remarkable Achievements:

Historians still talk today about the remarkable achievements Rome made in sanitation, transportation, the arts, public parks, banking, architecture, education, and administration. The city even had mass production of some consumer items and a stock market. With low taxes and low tariffs, free trade and private property, Rome became the center of the world's wealth.

At one time, the political and military power of Rome dominated Europe and the Mediterranean. Roman roads facilitated speed of travel and communication to a degree that would not be surpassed until the development of the railroad, the steamship, and the telegraph in the 19th century. Roman law and justice enabled the traveler to journey throughout the empire with a considerable degree of safety. "The benefits of the Pax Romana [the peace of Rome]", says Arther Ferrill in "The Fall of the Roman Empire," "included the development of one of man's most impressive codes of law and an administrative system that met the needs of men of varied languages, ethnic backgrounds and cultural traditions. The poet Virgil was not far wrong in claiming that his nation ruled the world in peace and justice."

All this disappeared, however, by the fifth century ad, and when it was gone, Europe was plunged into darkness and despair, slavery and poverty. In the space of 700 years, explains Max Shapiro in his book, "The Penniless Billionaires," "the Appian Way, where Roman legions had frequently paraded in celebration of victory, was clogged with rubble and weeds. Wild dogs roamed through the ruins of the Forum, in search of food. And the 60,000 souls who inhabited the desolate place which had once been called the Eternal City now referred to it as `the great cow pasture.'"

Why did Rome decline and fall? The record is abundantly clear on this point. Rome fell because of a fundamental change in ideas on the part of the Roman people-ideas that relate primarily to personal responsibility and the source of personal income. In the early days of greatness, to a considerable degree, each Roman regarded himself as the chief source of income. Each individual looked to himself-what he could acquire voluntarily in the marketplace-as the source of his livelihood. Rome's decline began when large numbers of citizens discovered another source of income: the political process or, the state.

When Romans abandoned self-responsibility and self-reliance and began to vote themselves benefits, to use government to rob Peter to pay Paul, to put their hands into other people's pockets, and to envy and covet the productive and their wealth, they set into motion Kershner's First Law: "When a self-governing people confer upon their government the power to take from some and give to others, the process will not stop until the last bone of the last taxpayer is picked bare."

The legalized plunder of the Roman welfare state was undoubtedly sanctioned by people who wished to do good. As Henry David Thoreau once said, "If I knew for certain that a man was coming to my house to do me good, I would run for my life." Another person coined the phrase, "The road to hell is paved with good intentions." Nothing but evil can come from a society bent upon coercion, the confiscation of property, and the degradation of the productive.

Early in the process, a politician named Clodius ran for the office of tribune on a "free wheat for the masses" platform and won. Candidates for office began spending huge sums to win public favor and then plundered the population afterwards to pay their campaign debts.

When Julius Caesar came to power in 48 bc, he found 320,000 persons on government grain relief. Temporarily slowing the welfare state bandwagon, he ordered the welfare rolls cut to 200,000. Within a half-century, the rolls were back up to well over 300,000.

Government Bread:

A real landmark in the course of events came in the year 274 ad. Emperor Aurelian, wishing to provide cradle-to-grave care for the citizenry, declared the right to relief to be hereditary. Those whose parents received government benefits were entitled as a matter of right to benefits as well. Aurelian gave welfare recipients government-baked bread (instead of the old practice of giving them wheat and letting them bake their own bread) and added free salt, pork, and olive oil. Not surprisingly, the ranks of the unproductive grew fatter, and the ranks of the productive grew thinner.

Surely, many Romans opposed the welfare state and held fast to the old virtues of work, thrift, and self-reliance. Just as surely, some of these sturdy people gave in and began to feed at the public trough in the belief that if they didn't get it, somebody else would. That attitude only hastened the slide into bankruptcy.

The central government also assumed the responsibility of providing the people with entertainment. Elaborate circuses and gladiator duels were staged to keep the people happy. The equivalent of a hundred million dollars per year in the city of Rome alone is one modern historian's estimate of what was poured out on the games. These days, many Americans think that by virtue of being artists they are entitled to grants from the federal government at other people's expense. If handouts for the arts constitute a legitimate function of government, by what possible rationale can just about any other handout be resisted?

In Rome, the emperors were buying support with the people's money. After all, government can give only what it first takes. The emperors, in dishing out all these goodies, were in a position to manipulate public opinion. As Alexander Hamilton observed, "Control of a man's subsistence is control of a man's will."

By the second century ad, many cities had spent themselves deeply into debt. Beginning with the emperor Hadrian, municipalities which got themselves into financial difficulties lost their independence as the central government placed them under the authority of imperial curators. Local authority was increasingly replaced by the power of the central government.

Taxes & Regulations:

Civil wars and conflict of all sorts increased as faction fought against faction to seize control of the huge state apparatus and all its public loot. Of 27 emperors or would-be emperors between 180 and 285 ad, all but two met violent deaths.

High taxes and burdensome regulations were the order of the day. Business enterprise was called upon to support the growing body of public parasites.

By the time of Emperor Antoninus Pius, who ruled from 138 to 161 ad, the Roman bureaucracy was as all-embracing as that of modern times. The historian Trever wrote that by the third century, "the relentless system of taxation, requisition, and compulsory labor was administered by an army of military bureaucrats . . . . Everywhere were the ubiquitous personal agents of the emperors to spy out any remotest case of attempted strikes or evasion of taxes."

Another writer, W. G. Hardy, said several years ago that in later Rome, "what the soldiers or the barbarians spared, the emperors took in taxes." The crushing cost of the military, the top-heavy bureaucracy, and the public programs taxed the middle class out of existence.

Clearly, the state gradually became the prime source of income for an increasing number of Romans. The high taxes needed to finance this drove business into bankruptcy and then nationalization. Whole sectors of the economy came under government domination in this manner. The first industry in Rome to be taken over was transportation-shipping in particular. Interestingly, the first industry in America to suffer comprehensive control was also transportation-specifically, railroads.

Emperor Nero may have been the original architect of urban renewal legislation. In the 10th year of his reign (64 ad), a great fire left more than half of Rome in ashes. It was rumored then, and many historians now believe, that Nero had ordered the conflagration to be lighted to clear the ground for a rebuilding of the city.

Nero is said by Gaius Suetonius in "De Vitae Caesarum" to have once rubbed his hands together and declared, "Let us tax and tax again! Let us see to it that no one owns anything!" That reminds this author of Harry Hopkins' famous allusion to the welfare state during the Roosevelt years: "tax and tax, spend and spend, elect and elect."

In 91 ad, the government became deeply involved in the business of agriculture. Emperor Domitian, to reduce the production and raise the price of wine, ordered the destruction of half the provincial vineyards.

As the old virtue of self-reliance gave way to political redistribution of income, priests, teachers, and intellectuals extolled the virtues of the almighty emperor, the provider of all things. The interests of the individual were considered a distant second to the interests of the emperor and his legions. A spiritual vacuum ensued, which was filled partly by the rise of cults and partly by worship of the emperor. The latter reached its zenith under Emperor Diocletian in 285 ad. No one could approach him without prostrating himself on the ground and kissing the hem of his garment. Formerly, the proud, free citizens of Rome had refused to render such servile adoration to any of their magistrates and rulers.

Natural Disasters:

The Roman Empire, amid this sickening spectacle of moral decay, fell victim to an unfortunate series of natural disasters and plagues. Earthquakes, volcanoes, and harsh storms caused great damage. By 200 ad at least one-fourth of the population of the whole empire, both civilian and military, had perished by a plague brought from the East. A later one, from 252 to 267, was nearly as bad. A morally righteous and strong people might have recovered and rebuilt, but these disasters only reinforced the growing despair of a desperate people. The fabric of Roman society was rotting away under the influence of government paternalism, bureaucracy, and spiritual malaise.

Cheapened Money:

Rome also suffered from the bane of all welfare states-inflation. The massive demands on the government to spend for everything created pressures for the multiplication of money. The Roman coin, the denarius, was cheapened and debased by one emperor after another to help pay for the expensive programs. Once almost pure silver, the denarius by 268 ad was little more than a piece of junk containing only .02 percent silver. American dimes, quarters, and half dollars, incidentally, contained 90 percent silver as recently as 1964; today, they contain no silver at all.

Flooding the economy with all this new and cheapened money had predictable results: prices skyrocketed; savings were eroded, and the people became angry and frustrated. Businessmen were often blamed for the rising prices even as government continued its spendthrift ways.

The easy money policies produced periodic crises in the economy. The panic of 86 ad and a severe economic contraction of a few years later are examples. The government responded by imposing penalties for trading in gold, especially for exporting it, much as Franklin Roosevelt did in 1933.

Demanding relief from economic disorder, the people of Rome cried out for a strongman. He arrived in the person of Diocletian who, in the year 301, imposed his famous "Edict of 301." This law established a system of comprehensive wage and price controls, to be enforced by a penalty of death. The chaos that followed inspired the contemporary historian Lactantius to write in 314: "After the many oppressions which he put into practice had brought a general dearth upon the empire, he then set himself to regulate the prices of all vendible things. There was much bloodshed upon very slight and trifling accounts, and the people brought provisions no more to market, since they could not get a reasonable price for them; and this increased the dearth so much that at last after many had died by it, the law itself was laid aside."

From Welfarism to Despotism:

Diocletian also ordered that all offices, trades, and professions, in so far as possible, were to be made hereditary. Young men were forced to carry on in the trade of their fathers. There was no escape from this regimentation. The welfare state had become a despotism.

This tyrant left his mark on history in other ways, too. It was during his reign that fully half the men of the Empire were on the government payroll. Not only did he impose across-the-board wage and price controls in relative peacetime, but he also resigned from office, in the year 305. Nearly 17 centuries later, Richard Nixon would become the first American president to impose peacetime wage and price controls and also our first chief executive to resign from office.

All this robbery and tyranny by the state was a reflection of the breakdown of moral law in Roman society. The people had lost all respect for the sanctity of private property. This author is reminded of the New York City blackout of 1977, when all it took was for the lights to go out for hundreds to go on a looting spree.

The Christians were the last to resist the tyranny of the Roman welfare state. Until 313 ad, they had been persecuted because of their faith and their unwillingness to worship the emperor. Under Diocletian, Christians were cast into dungeons, thrown to the wild beasts in the amphitheater, and put to early death by every other mode of torture that ingenious cruelty could devise. In this year, Emperor Constantine granted them toleration in exchange for their acquiescence to his authority.

Constantine himself professed Christianity but his personal morality belied his word. Within three years of his announced conversion, he put a nephew to death, drowned his wife in a bath, and murdered his son.

Meanwhile, Constantine showered the Church with land, gifts, and patronage at taxpayer expense. Thus corrupted, the Church lost its old simplicity and high moral standards. It, too, had jumped aboard the gravy train.

In the year 380, a sadly perverted Christianity became the official state religion under Emperor Theodosius. Rome's decline was like a falling rock from this point on.

Foreign Policy:

In another arena, the foreign policy of Rome in the third, fourth, and fifth centuries had become one of weakness and appeasement. Politicians, too busy buying votes at home with pie-in-the-sky programs, ignored the Empire's defense. Barbarian "converts," whose loyalty was still suspect, were even permitted to hold important posts in the Roman military establishment.

In 410, Alaric the Goth and his primitive Germanic tribesmen assaulted the city and sacked its treasures. For three days, Rome was plundered. Palaces and temples were stripped and Roman citizens were raped and killed by the thousands. The once-proud Roman army, which had always repelled the barbarians before, now wilted in the face of opposition. Why risk life and limb to defend a corrupt and decaying society?

The end came rather anti-climactically in 476, when the German chieftain Odoacer pushed aside the last Roman emperor, Romulus Augustulus, and installed himself as the new authority.

Some might say that Rome fell because of the attack by these foreigners. Such a claim overlooks what the Romans had done to themselves. When the Vandals, Goths, Huns, and others reached Rome, many citizens actually welcomed them in the belief that anything was better than their own tax collectors and regulators. It is more accurate to say that Rome committed suicide. Like the wild hogs, Romans first lost their freedom, and then they lost their lives.

History does seem to have an uncanny knack of repeating itself now and then. America, by elevating government power at the expense of individual responsibility, has made some of the same mistakes that Rome made centuries ago. In a famous statement, philosopher George Santayana warned that those who ignore history are condemned to repeat it.

No one reading this, however, should despair for the future. The growing intrusiveness of government in America is not inevitable; it is not something beyond the control of the American people. It is, rather, the consequence of faulty ideas, which can change if only this message is carried forth by those who cherish liberty. Indeed, there are very promising indications that the intellectual battles these days are being won-often decisively won-by the friends of freedom and limited government, not by those who foolishly seek to put government in the driver's seat.

Most people who cherish freedom oppose the welfare state for moral, philosophical, spiritual, and economic reasons. We would do well to add another reason: the lessons of history!

As we work to restore and preserve those ideas and institutions which made our nation both free and great,

let's keep these words in mind:

The penalty men pay for indifference to public affairs is to be ruled by evil men. -Plato

All that is necessary for evil to triumph is for good men to do nothing. -Edmund Burke

The hottest places in Hell are reserved for those who-in a period of moral crisis-maintain neutrality. -Dante

http://www.citizensforaconstitutionalrepublic.com/reed9-1-01.html

SEC Launches 'Circuit Breaker' Rules For Stocks:

http://www.sec.gov/news/press/2010/2010-80.htm

by The Associated Press - June 10, 2010

Federal regulators have put in place new rules aimed at preventing a repeat of last month's harrowing "flash crash" in the stock market.

Members of the Securities and Exchange Commission on Thursday approved the rules, which call for U.S. stock exchanges to briefly halt trading of some stocks that have big swings.

The exchanges will start putting the trading breaks into effect as early as Friday for six months.

The plan for the "circuit breakers" was worked out by the SEC and the major exchanges following the May 6 market plunge that saw the Dow Jones industrials lose nearly 1,000 points in less than a half-hour.

"Under the proposed rules, which are subject to Commission approval following the completion of the comment period, trading in a stock would pause across U.S. equity markets for a five-minute period in the event that the stock experiences a 10 percent change in price over the preceding five minutes. The pause would give the markets the opportunity to attract new trading interest in an affected stock, establish a reasonable market price, and resume trading in a fair and orderly fashion. Initially, these new rules would be in effect on a pilot basis through Dec. 10, 2010."

Volcker: Reconsidering Basic Tenets of Financial Theory:

http://stockmarketchartanalyst.blogspot.com/2010/06/volcker-reconsidering-basic-tenets-of.html

Today’s must read media piece comes from former Fed Chair Paul Volcker, in the NY Review of Books:

“Some five years ago, at a conference of the Stanford Institute for Economic Policy Research, I lamented that “the growing imbalances, disequilibria, risks” were giving rise to “circumstances as dangerous and intractable” as any I could recall—intractable not just because of the combination of complicated issues, but because there seemed to be “so little willingness or capacity to do much about it.”

That is merely the intro. It takes a few paragraphs for Paul to work up a good head of steam — the man who broke the back of inflation isn’t holding back:

“Has the contribution of the modern world of finance to economic growth become so critical as to support remuneration to its participants beyond any earlier experience and expectations? Does the past profitability of and the value added by the financial industry really now justify profits amounting to as much as 35 to 40 percent of all profits by all US corporations? Can the truly enormous rise in the use of derivatives, complicated options, and highly structured financial instruments really have made a parallel contribution to economic efficiency? If so, does analysis of economic growth and productivity over the past decade or so indicate visible acceleration of growth or benefits flowing down to the average American worker who even before the crisis had enjoyed no increase in real income?

There was one great growth industry. Private debt relative to GDP nearly tripled in thirty years. Credit default swaps, invented little more than a decade ago, soared at their peak to a $60 trillion market, exceeding by a large multiple the amount of the underlying credits potentially hedged against default. Add to those specifics the opacity that accompanied the enormous complexity of such transactions.

The nature and depth of the financial crisis is forcing us to reconsider some of the basic tenets of financial theory. To my way of thinking, that is both necessary and promising in pointing toward useful reform.”

Nice to see Paul is not giving up his fight to get the financial sector back on a leash...



http://www.ritholtz.com/blog/2010/06/volcker-2/

Source:

‘The Time We Have Is Growing Short' by Paul Volcker
NY Review of Books, June 24, 2010
http://www.nybooks.com/articles/archives/2010/jun/24/time-we-have-growing-short/

My God, Is There A Rule Of Law? by Karl Denninger:

http://stockmarketchartanalyst.blogspot.com/2010/06/my-god-is-there-rule-of-law-by-karl.html

Posted at 08:37 - Monday, June 7. 2010

It may not be here in the US, but this could be a start! ( http://tinyurl.com/38quko9 )
(Warning: In German!)

Interestingly enough, Der Spiegel, which usually has an English version of most articles, doesn't have one of this entry I can find. I was therefore forced to Google Translate it - take a read. ( http://tinyurl.com/2crovme )

The keys to this are the allegation that the "greek bailout" is unlawful under the Lisbon Treaty (no really?)

The government has responded (big surprise - NOT!) that if an injunction issues the result would be a self-fulfilling default and cites that "EU countries could be vulnerable."

No, really? I thought that was what you called it when you didn't have the money to pay your bills!

That of course isn't the point of the complaint. The complaint rests (properly, in my opinion) on the premise that the so-called "boom" in many parts of Europe was financed with German capital, which was effectively appropriated under false pretenses.

Gee, where have we seen this before? Banksters lying and cheating (cough-liar loans-cough!) and trading in derivatives without any money behind them (cough-AIG-cough!) and when the smoke clears suddenly the national governments are told "hand over hundreds of billions right now or the puppy dies!"

Uh huh...

G20 governments are increasingly coming to the realization that "borrow and spend" doesn't - and can't - work in the intermediate and longer term. Despite the bleating of Geithner at the G20 meeting he got nowhere trying to jawbone people into more Keynesian-style games.

We blew $4 trillion in the United States over the last two years and change and got nothing for it, and as a consequence we are stuck with the debt and haven't solved the problem. $4 trillion, of course, is about 30% of GDP, and this "support" has amounted to roughly 11% of GDP over the last three years.

We can either recognize that this won't work (just as it didn't in 2003 - all it did was create asset bubbles) and stop it, taking the pain we tried to defer (and added to) or we can take the risk of a complete detonation in the weeks and months ahead. Europe and the rest of the G20 appear to have woken up and decided that the Keynes-cum-idiocy is in fact idiocy, irrespective of the foolhardy and even criminally-insane bleating by Geithner and the Obama Administration.

The game, my friends, is afoot...

http://market-ticker.org/archives/2379-My-God,-Is-There-A-Rule-Of-Law.html

VIDEO - Fundamental & Technical Analysis of the S&P 500's Daily & Weekly Charts:

http://www.viddler.com/explore/zigzagman/videos/24/

Technical Analysis of the S&P 500's daily and weekly charts, plus a look at the important Economic and Earnings Reports due out next week...

This video is viewed best in Full-Screen Mode...Click the four arrows in the bottom right corner...Press the Escape key on your keyboard to exit back to Normal Mode...

Happy Trading this week...
zigzagman

Why U.S. Debt Matters to You:

http://money.cnn.com/2010/06/03/news/economy/U.S._debt_impact/index.htm

By Jeanne Sahadi, Senior Writer June 3, 2010: 11:38 AM ET

NEW YORK (CNNMoney.com) -- Letting U.S. debt grow unabated is often framed as an unforgivable burden to heap on one's grandchildren.

But there are plenty of reasons today's parents might be concerned for themselves and their kids.

If Congress doesn't craft a plan to address long-term fiscal shortfalls after the economy recovers, potential problems could arise sooner rather than later, debt experts say.

Slower economic growth: After examining data from dozens of countries over the past two centuries, economists Carmen Reinhart and Kenneth Rogoff found a connection between high debt and reduced economic growth. Specifically, they found that when a nation's gross debt reaches 90% of its economy, it often loses about one percentage point of growth a year.

U.S. gross debt -- currently $13 trillion -- will hit the 90% threshold this year. Gross debt includes money owed to those who hold U.S. bonds and money owed to government trust funds such as Social Security.

Reinhart has said the relationship between high debt and low growth is "self-feeding." Low growth ravishes government revenue and increases the need to borrow. More borrowing builds debt. Higher debt increases pressure to tighten fiscal policies in order to reduce the risk that investors lose confidence in the country. But tighter policies can slow economic growth.

One percentage point lower growth may not seem huge. But it's equal to roughly a third of the average annual GDP forecast over the next decade.

And slower growth can reduce the number of jobs created, which in turn can hold down household incomes.

High interest payments: Interest rates are still very low and may continue to be as the debt crisis in Europe makes the United States a more attractive safe haven for investors.

That means the government can borrow on the cheap right now. But rates will rise as the world economy recovers. By 2020, annual interest owed on U.S. debt will approach $1 trillion, or roughly 21% of projected federal revenue for that year, according to Congressional Budget Office estimates.

Interest rates may rise further than expected if credit rating agencies or investors start to doubt U.S. resolve to rein in the growth in debt. And that would jack up the cost of borrowing for businesses and consumers.

Ironically, some debt experts would almost prefer that rates rise so there will be more urgency to deal with the debt situation. It might hurt, but not as much as if rates stay very low for a long time -- planting the seeds for the next credit bubble and bust when U.S. debt levels are that much higher.

Less government support: The more debt the government accrues, the more it will pay in interest and the less it will have to spend on the basic services Americans expect from their government.

Spending for everything from education to infrastructure and defense could be compromised. And, many argue, not being able to make strategic investments in these areas can weaken the country competitively.

Also, the government will be hamstrung in responding to emergencies such as natural or man-made disasters, terrorist attacks or future economic downturns.

Inflation: There don't appear to be any official signs of inflation brewing today. But throughout U.S. history, high levels of debt have usually brought high rates of inflation, Reinhart and Rogoff found.

Some economists -- including Kansas City Federal Reserve Bank President Thomas Hoenig -- have said they are concerned about what could happen if the United States faces a debt crisis. In such a case, the Federal Reserve may cave to political pressure to let inflation rise, which reduces the real value of the country's debt but also devalues people's savings and income.

Harsh choices: No one can say when or even if a debt crisis will occur. But lawmakers will tempt fate if they wait too long to address the imbalances on the U.S. balance sheet, fiscal experts say.

Fiscal experts believe it's entirely possible that, absent action, the United States would experience a debt crisis within the next 10 to 20 years.

"Most believe it would happen much sooner than 20 years," said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. Many believe it could happen within the next five to 10 years, she said.

And waiting too long would force lawmakers to make much more draconian and abrupt changes than they would otherwise.

Experts are increasingly convinced that Congress won't act until a true crisis is on the U.S. doorstep -- for two reasons. The first is the sharp partisan divide. The second is that no politician likes to run on promises to implement difficult and unpopular measures.

So until there's sufficient public support for debt reduction, don't expect to see much political will for it.

"Like the proverbial frog that fails to jump out of the soup pot as the temperature slowly rises, Americans seem terrifyingly unwilling to act until the pain of debt can no longer be ignored," Syracuse University professor Len Burman wrote in a recent essay. "As the frog learns in its final moments, by then, it's too late."

Put Patients and Doctors Back in Control of Healthcare:

http://www.thedailybell.com/1095/Ron-Paul-Put-Patients-and-Doctors-Back-in-Control-of-Healthcare.html

by Dr. Ron Paul - The Daily Bell - Wednesday, June 02, 2010



Most everyone agrees that health care in the United States has major problems, the biggest problems relating to skyrocketing costs.

No one doubts the system is in need of reform. However, too many in Washington see tighter government controls as the solution. In fact, the problems are rooted in past government controls that created more problems than they solved.

Ironically, laws and policies in the 1970's promoting Health Maintenance Organizations (HMOs) resulted from desperate attempts to control spiraling costs. However, instead of promoting an efficient health care system, HMOs took far too much control away from patients and physicians and gave it to the insurers. This excessive reliance on third-party payers instead removed incentives for insured patients to economize on health care costs, and allowed the problem to snowball. Furthermore, the third-party payer system created a two-tier health care system where people whose employers could afford to offer "Cadillac" plans have access to top quality health care, while others face financial obstacles in obtaining quality health care.

For these and other reasons, I introduced the Private Option Health Care Act last week. This bill places individuals back in control of health care by replacing the recently passed tax-spend-and-regulate health care law with reforms designed to restore a free market health care system.

First, the bill would provide all Americans with a tax credit for 100 percent of health care expenses. This tax credit is fully refundable against both income and payroll taxes. It would also allow individuals to roll over unused amounts in cafeteria plans and Flexible Savings Accounts (FSAs). Next, it would provide a tax credit for premiums for high-deductible insurance policies connected with a Health Savings Account (HSAs) and allow seniors to use funds in HSAs to pay for medigap policies. In addition, it would repeal the 7.5 percent threshold for the deduction of medical expenses, and thus would make all medical expenses tax deductible.

This bill would also create a competitive market in health insurance by exercising Congress's Constitutional authority under the Commerce Clause to allow individuals to purchase health insurance across state lines. Ending these state-imposed bans would create a competitive national marketplace in health insurance.

The Private Option Health Care Act would also ensure that people harmed during medical treatment receive fair compensation while simultaneously reducing the burden of costly malpractice litigation on the health care system. The bill achieves this by providing a tax credit for negative outcomes insurance purchased before medical treatment. This type of insurance would provide compensation for any negative outcomes without having to go through lengthy litigation or giving huge sums to trial lawyers.

Finally, the Private Option Health Care Act would lower the prices of prescription drugs by reducing barriers to the importation of Food and Drug Administration (FDA)-approved pharmaceuticals. Under my bill, anyone wishing to import a drug simply submits an application to the FDA, which then must approve it unless it is either not approved for use in the United States or is adulterated or misbranded.

The Private Option Health Care Act allows Congress to correct the mistake it made last month by replacing the new health care law with health care measures that give control to individuals, instead of the federal government and corporations. Our health is too vital to allow for the typical results of government interference and "fixes".

VIDEO - Fundamental & Technical Analysis of the S&P 500's Daily & Weekly Charts:

http://www.viddler.com/explore/zigzagman/videos/23/

Technical Analysis of the S&P 500's daily and weekly charts, plus a look at the important Economic and Earnings Reports due out next week...

This video is viewed best in Full-Screen Mode...Click the four arrows in the bottom right corner...Press the Escape key on your keyboard to exit back to Normal Mode...

Happy Trading this week...
zigzagman

Slouching Toward Despotism:

http://jessescrossroadscafe.blogspot.com/2010/05/guest-post-slouching-towards-despotism.html

by Keith Hazelton May 27, 2010

Benjamin Franklin, when asked at the conclusion of the Constitutional Convention in 1787 what that assembly had created, purportedly responded, “A republic, if you can keep it,” which seems likely given his remarks to Convention members on that September day immediately prior to their vote on the proposed Constitution in its original form.

Often, but on far more occasions in the last three years, we are reminded of a portion of those remarks. Dr. Franklin, given his age (81) and health, asked to have his commentary read to delegates preceding what he hoped would be a unanimous vote in favor of a nonetheless flawed agreement.

“In these sentiments, Sir, I agree to this Constitution with all its faults, if they are such; because I think a general Government necessary for us, and there is no form of Government but what may be a blessing to the people if well administered, and believe farther that this is likely to be well administered for a course of years, (but) can only end in Despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic Government, being incapable of any other.”

And the question we keep pondering is, “Are we there yet?” Are we merely slouching toward despotism, or have we arrived? Are we already so corrupt so as to need despotic government, what with Vampire Squids and corporate/union-bought elections and Congressional bystanders and regulatory capture and Systemically Important Too Big To Fail and Gulf of Mexico oil well disasters?

(Despotism, by the way, describes a form of government by which a single entity rules with absolute and unlimited power, and may be expressed by an individual as an autocracy or through a group as an oligarchy according to Wikipedia, the world's leading source of made-up information, which is good enough for us.)

In previous posts we have observed the growing and discernible disconnect between several types of government-reported economic data such as Retail Sales and actual state sales tax collections, and the Employment Situation and withholding tax collections. Others also have made solid cases for these disconnects between statistical theory and economic reality and it occurs to me that, far from being isolated or random events, they are evidence of much more disconcerting forces at work.

Fudging on unemployment numbers or "rounding up" retail sales reports may seem like minor infractions, and many of these government data reports have been manipulated for years, maybe half a century, but they represent a pattern of conscious, calculated design of "don't worry, be happy, the government's in charge, nothing to see here, so move along."

The Bureau of Labor Statistics (BLS), for example, estimates who is working and who is not, but conveniently excludes millions of people from its composition of the unemployment rate who are not working but neither deeming them “unemployed” because they are “marginally attached” to the workforce or are “discouraged” by a lack of job prospects and no longer are looking for employment (2.3 million as of March 2010 plus another 3.4 million “persons who currently want a job,” who also aren’t counted as unemployed).

Side note: You are well aware, of course, the Social Security Administration probably could tell us monthly almost exactly how many people really are working, not working, working part time, self-employed, and so on based on its receipts of tax withholdings from employers. It is beyond the pale to imagine SSA could not furnish a version of the monthly Employment Situation that would be far more reliable by orders of magnitude than the guesses of the BLS.

As to why government statistical agencies may be reporting "happy" numbers, well, you know the answer to that...government statistics are lying's fifth circle of hell, just a shade better than Campaign Promises.

How about the major changes to the Producer Price Index and the Consumer Price Index which were made in the 1980s and 1990s to greatly reduce reported inflation numbers as a means of containing the cost of living adjustments (COLAs) for Social Security recipients, as John Williams at ShadowStats extensively has reported for years?

Or the March 2010 Monthly Treasury Statement, which understated the true government deficit last month by including a $117 billion collection described as “proprietary receipts from the public” by the Treasury, likely TARP repayments but not defined as such. Or the December 2009 Monthly Treasury Statement in which $45 billion extracted from the nation’s banks as a 13-quarter advance FDIC premium also was shown as a “negative outlay” which creates a significant understatement of the true FY2010 deficit picture (so far, $162 billion this fiscal year, which will understate our true deficit by about 10 percent).

Or the “New” General Motors wasting millions of (tax) dollars for print and television ads to promote a fictitious narrative that it has “repaid” government loans of $8.1 billion (to the U.S and Canada) “plus interest” five years early when in fact SIGTARP, the Special Inspector General of the Troubled Asset Relief Plan Neil Barofsky, told Congress and Fox News that GM did no such thing, that the loan “repayment” did not come the old fashioned way from sales and earnings but from a "cash advance" on another TARP facility which both governments will count as additions to their already significant equity positions. Nothing in those ads mentions the many tens of billions of taxpayer dollars borrowed from China which flowed into General Motors and Chrysler pre-bankruptcy which never will be repaid.

And now the New GM wants to create another automobile financing company, or buy back its former GMAC/Ally unit which itself has received nearly $20 billion of government Too Big To Fail largesse, so it may become even more profitable by returning to sub-prime auto and everything-else lending and have a happy IPO later this year, because as everyone knows, including the New GM's management, there's precious little profit in building cars no one wants and few can afford. "As a dog returns to its vomit, so a fool repeats his folly," (Proverbs 26:11) as Jesse's Cafe Americain recently observed.

How about the seeming inability to legislate any significant financial reform in the wake of the worst economic crisis in 80 years, a crisis which, mind you, needed fewer than eight years to erupt once the last shred of restraint – Glass-Steagall – was forcibly removed at the end of 1999 by those who, coincidentally (paging Messrs. Rubin and Summers), have profited so handsomely from its demise.

The Banking Act of 1933 – Glass-Steagall – was a wonder of simplicity in a simpler era. It set forth in a mere 37 pages of text the safeguards necessary to separate commercial banking from everything else and to ably prevent for 66 years – two full generations – any meaningful implosion of the nation’s financial system. Any search for cause and effect of The Great Recession must begin here. The useless financial reform act – the Dodd act – weighs in at a lobbyist-induced 1,500+ pages, and will do nothing to prevent another financial crisis, nothing to dismantle Too Big Too Fail, nothing to contain derivatives, nothing to audit the Federal Reserve and nothing to curtail abuses in consumer financial practices.

Yet where are the criminal investigations? Where is the FBI? Where are the Congressional inquiries and panels and special prosecutors? Where are the indictments? Where are the perp walks and the jail sentences? Where is the justice, Mr. Holder and your 50 friends among the states? Aside from two former Bears Stearns hedge fund managers in 2007, and a pretend hedge fund manager - Mr. Madoff - in 2009, a weak SEC civil show-case against Goldman Sachs in 2010 and the mostly voluntary, golden-parachute-enabled "retirements" of a handful of TBTF C-level executives, a number of which, John-Thain-like, merely have revolved around the door a couple of times and landed at another lucrative looting opportunity, nothing has happened. Nothing, nada, zero, zip, dick. Nothing. It's breathtaking in its design and execution.

We now are reliably told the TARP program will cost less than $100 billion when all is said and done. Huh? What about the $2 trillion-plus of added government debt which itself adds tens of billions to the annual interest servicing burden, or the $1.5 trillion-plus willed into existence by the Federal Reserve? Who are they kidding?

Or a Health Care Act which, in 2,500 pages manages to spend about another trillion dollars or so and leaves no health insurance company behind, effectively criminalizing, albeit with monetary penalties far less than the cost of individually paid health insurance plans, anyone not otherwise exempted who fails to purchase health care coverage.

It seems to us, after thinking about this topic for some time now, that we have arrived. We have arrived at that point in our civilization in which our government deems it acceptable to obfuscate about things both small and large on the basis that, Jack-Nicholson/Colonel-Jessup-like, we (the rest of us who aren’t lodged in the political/oligarchical castes) “can’t handle the truth.”

And most of the time it would appear they are right, that we – the rest of us – can’t be bothered with such discrepancies and inconsistencies, falsehoods and half-truths. We're too busy trying to keep the house, make the mortgage and auto loan and credit card and student loan payments. We're too focused on our own financial survival to be concerned with what goes on at a national leadership and direction level. And doesn't it just seem a little too convenient for those who wish to plunder the wealth of the nation to keep the other 90 percent of us so strapped with indebtedness and an outdated personal moral conviction that debts should be repaid regardless of their potential to physically and mentally harm one's well being or, heaven forbid, harm one's all-important credit score, when walking away from debt has been an accepted business practice for centuries?

It only seems to matter on those rare occasions when things blow up, and the average, non-voting, non-taxpaying citizen awakens from his or her media-induced stupor to ponder that when the curtain is drawn away, it reveals only humans and not wizards, or that the outgoing tide reveals who has been swimming naked or when the emperor is shown to be undressed. But interest in such matters wanes quickly, and the thirst for change recedes silently into renewed acceptance of the status quo, as we now discover.

Soon, no doubt, when markets resume their upward trajectory and the Dow returns to and surpasses 14,250 (probably by this summer) and oh-don't-worry-about-those-6.5-million-log-term-unemployed-because-they're-just-lazy, much of this unpleasantness of the last three years will be forgotten by those more interested in only good news and Dancing With the Stars and American Idol, and the continued warnings of the Cassandras will be deemed evidence that these are, once again, merely the musings of disaffected social misfits or bad-news-opportunists who deep down must hate America (right up until the point at which the next crisis erupts, and erupt it will).

In fact, our short attention spans are relied upon by the political class of both parties and by the oligarchical class which controls it, as magnificent wealth transfer schemes blossom anew (talk about green shoots...) and the all-so-brief period which has elapsed between the “days away from financial Armageddon” of September 2008 and the "all clear, business as usual" of May 2010 insures, like the watered-down, useless "financial reform" legislation written by financial industry lobbyists which certainly will pass soon, that the laudable goal of making safe our financial system and returning it to the status of handmaiden to legitimate capital-producing and jobs-creating enterprise, will be discarded in exchange for the pretense of life as we knew it, circa 2006.

Only this time, effectively having destroyed the middle class of Boomers, Gen X-ers, Gen Y-ers, Millennials and Echo Boomers, and having bought the complicit silence of the of a near-majority (47% of Americans paid no income tax whatsoever in 2008) in exchange for bread and circuses, and having largely destroyed the previous primary mechanism by which wealth has been stolen and transferred (credit creation and personal indebtedness), the masters of the universe will have to find a new scam, which, at this writing, appears to be sovereign government debt, currencies and commodities, because turning back the calendar to 2006 alone will never recreate the consumer spending/debt orgy of 1982-2006.

In fact we think the oligarchs realize this, and they are redoubling their efforts to pillage as much as possible before the real collapse occurs, even as its seeds already have been sown in this crisis which now appears, by design and deception, to be ending. That collapse draws nigh, and Roubini and Taleb and Ritholtz and Panzer and Jesse and Tyler and Mish and Yves and Charles Hugh Smith and Joe Bageant and many, many others already see it, yet all are being dismissed - again - as those nattering nabobs of negativism who, broken-clock-being-right-twice-a-day-like, were merely “lucky” in guessing about the immediate past crisis as former Fed Chairman Alan Greenspan suggested in a recent television interview.

Tell us Greece is not the "sub-prime" of early 2007; that the US$150 billion "cure" to be soon applied by the EU and IMF is only can-kicking but will allow one and all to congratulate themselves on "containing" an isolated problem and to quickly return to the never-ending cocktail party, that is until the next Greece Fire which spreads to one after another country, including, ultimately, the possibility of the conflagration reaching bond markets in the U.S.

Or that a mere US$1 trillion of bailout/rescue/currency support recently proposed by the Eurozone and the IMF to "shock and awe" financial markets dominated by the recently rescued TBTFs who busily apace bet against the very governments which saved them (except now in Germany), is not merely another stealth rescue of these giant financial institutions which, having been caught with a bit too much Club Med sovereign debt on their books while their own prop traders work hard to destroy its value, now cry out - again - that the risk of their insolvency - again - threatens the global financial and economic systems.

Or that the battling machines of high-frequency trading, which briefly wiped out and then restored a trillion dollars worth of fictitious (paper) wealth in fewer than 15 minutes mid-afternoon May 6th in a dry-run rehearsal of things to come, won't now become even more emboldened and empowered to manipulate financial markets in any manner necessary to insure continued quarters of perfectly profitable trading days.

(May 6th should have been a non-event. We were expressly warned by the Manhattan Assistant US Attorney in a July 2009 court filing, in which it was alleged that a former Goldman Sachs quant trading programmer stole Goldman's "secret proprietary trading code," that "there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways." Well, duh. Doesn't it just seem like someone took this code, or a similar one, out for a test drive earlier this month?)

Soon, perhaps if not already, the wealth transfer will be complete, and a newly impoverished, former middle class will wake up from their recliners to find not only is Dancing With the Stars over, but also is their former debt-fueled way of life as the economy staggers, unemployment escalates, more good jobs are exported and living standards rapidly erode. (Irony alert: Their former U.S. employers, who effectively have downsized and off-shored their way to record profits, will find they have destroyed their own customer base - the former middle class - who no longer can afford their products.)

When 40 million people are receiving food stamps at one end of the economic spectrum (and probably another 20 million eligible according to the Department of Agriculture), and the bulk of financial and real assets have been concentrated into the top 10 percent of the other end of the economic spectrum, nothing good can come of it. So the well-off cohort will remain well-off and will conspire to direct through their agents in government only enough resources to buy the complicity and silence of the bottom 40 percent, like tax breaks, food stamps, health care subsidies and so on, and the soon-to-be-former middle class will be ground into yet lower levels of the economic ladder, such, that when the looting has concluded, we will see a top 10 percent and a bottom 90 percent, much as feudalistic Europe in the centuries of the Dark Ages.

(We strongly recommend two books on the subject, both of which in far more detail and eloquence lay out the symptoms, causes and effects of our slouch toward despotism: Survival +, by Charles Hugh Smith at Of Two Minds, and Deer Hunting With Jesus: Dispatches From America's Class War, by Joe Bageant at Joe Bageant (and whose recent post about the American Hologram Lost on the Fearless Plain also is required reading).

“All lies and jest… Still a man hears what he wants to hear and disregards the rest,” so said Paul Simon, which rings so true more than four decades later. We hear what we want to hear, and, apparently, what we want to hear is that all is back to normal, that all is good, that the wizards have everything under control, and that nothing bad can ever happen again.

So, are we there yet? Have we not already abdicated our responsibilities as citizens and tacitly embraced the despotism of which Franklin predicted 222 years ago, having become so corrupted (contaminated) as to require the despotic government of an oligarchy dedicated to insuring the truth never gets in the way of a good narrative, an enormous disparate accumulation of wealth and a firm grip on the levers of power to ensure the preservation of that wealth?

A few Tea Party primary victories and incumbent "mandatory retirements" aside, nothing will change in Washington as long as the strings of campaign cash and lobbyist perks are being pulled elsewhere. The "outs" who soon will replace some of the "ins" promptly will forget about their mandates from the voters the day they move into their new D.C. offices and townhomes and realize from moment one their only responsibility is to their own rational self-interest of being re-elected in 2012 and 2014 and 2016. Et tu, Barack?

And if Benjamin Franklin is not prescient enough for you, how about the Teacher, in Ecclesiastes, Chapter 1, v.13-18, from about 2,300 years ago:

What a heavy burden God has laid on men! I have seen all the things that are done under the sun; all of them are meaningless, a chasing after the wind. What is twisted cannot be straightened; what is lacking cannot be counted. I thought to myself, "Look, I have grown and increased in wisdom more than anyone who has ruled over Jerusalem before me; I have experienced much of wisdom and knowledge." Then I applied myself to the understanding of wisdom, and also of madness and folly, but I learned that this, too, is a chasing after the wind. For with much wisdom comes much sorrow; the more knowledge, the more grief.

Indeed, with wisdom comes sorrow, and from more knowledge, more grief. Would, sometimes, that we could empty so much of it from the mush of our remaining gray matter and then we wouldn't have to pretend it's all good, when, in fact, it’s anything but good, as soon, perhaps in a matter of a few short years, we shall see.

We first wrote the following paragraphs in June 2006, long before sub-prime lending, a bursted housing bubble, Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, CitiGroup, Bank of America, JPMorgan Chase, Goldman Sachs, GM, Chrysler, the Federal Reserve, the Treasury Department and The Great Recession began to dominate our lives, when Franklin’s predictions and our inexorable slouch toward despotism first appeared on our radar screen:
The transition from unitary executive to dictator – conservative, benevolent or otherwise – will not happen in the waning months of the current administration, so uniquely manifested by America's First Triumvirate of George Bush, Dick Cheney and, until recently, Karl Rove, but succeeding chief executives may choose overtly to expand further the envelope-pushing and Constitution-trampling of the 43rd President and his neo-conservative command-and-control cabal as the American oligarchy, and the nation, slouches slowly toward despotism.

As such, we will one day awake from our debt-financed, pleasure-induced stupors to find one person or group firmly in charge, answering to no one, especially not Congress, and in complete grasp of the military, the intelligence agencies, the treasury, the Federal Reserve and the financial and judicial systems. It will happen – it is happening – an inch at a time, until the day comes when not only will we, the fun-loving, celebrity-worshipping, civic-duty-abhoring citizens of America, so embrace the notion of despotism, we will think it entirely our own idea.

Are we there yet?...

(Keith Hazelton is an Adjunct Professor of Finance at Oklahoma City University's Meinders School of Business and an Economic Adviser to the Oklahoma Bankers Association. His opinions are his own.)

25 Questions To Ask Anyone Who Is Delusional Enough To Believe That This Economic Recovery Is Real:

http://www.blacklistednews.com/?news_id=8878

If you listen to the mainstream media long enough, you just might be tempted to believe that the United States has emerged from the recession and is now in the middle of a full-fledged economic recovery.

In fact, according to Obama administration officials, the great American economic machine has roared back to life, stronger and more vibrant than ever before. But is that really the case? Of course not. You would have to be delusional to believe that. What did happen was that all of the stimulus packages and government spending and new debt that Obama and the U.S. Congress pumped into the economy bought us a little bit of time. But they have also made our long-term economic problems far worse. The reality is that the U.S. cannot keep supporting an economy on an ocean of red ink forever. At some point the charade is going to come crashing down.

And GDP is not a really good measure of the economic health of a nation. For example, if you would have looked at the growth of GDP in the Weimar republic in the early 1930s, you may have been tempted to think that the German economy was really thriving. German citizens were spending increasingly massive amounts of money. But of course that money was becoming increasingly worthless at the same time as hyperinflation spiralled out of control.

Well, today the purchasing power of our dollar is rapidly eroding as the price of food and other necessities continues to increase. So just because Americans are spending a little bit more money than before really doesn't mean much of anything. As you will see below, there are a whole bunch of other signs that the U.S. economy is in very, very serious trouble.

Any "recovery" that the U.S. economy is experiencing is illusory and will be quite temporary. The entire financial system of the United States is falling apart, and the powers that be can try to patch it up and prop it up for a while, but in the end this thing is going to come crashing down.

But as obvious as that may seem to most of us, there are still quite a few people out there that are absolutely convinced that the U.S. economy will fully recover and will soon be stronger than ever.

So the following are 25 questions to ask anyone who is delusional enough to believe that this economic recovery is real....

#1) In what universe is an economy with 39.68 million Americans on food stamps considered to be a healthy, recovering economy? In fact, the U.S. Department of Agriculture forecasts that enrollment in the food stamp program will exceed 43 million Americans in 2011. Is a rapidly increasing number of Americans on food stamps a good sign or a bad sign for the economy?

#2) According to RealtyTrac, foreclosure filings were reported on 367,056 properties in the month of March. This was an increase of almost 19 percent from February, and it was the highest monthly total since RealtyTrac began issuing its report back in January 2005. So can you please explain again how the U.S. real estate market is getting better?

#3) The Mortgage Bankers Association just announced that more than 10 percent of U.S. homeowners with a mortgage had missed at least one payment in the January-March period. That was a record high and up from 9.1 percent a year ago. Do you think that is an indication that the U.S. housing market is recovering?

#4) How can the U.S. real estate market be considered healthy when, for the first time in modern history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together?

#5) With the U.S. Congress planning to quadruple oil taxes, what do you think that is going to do to the price of gasoline in the United States and how do you think that will affect the U.S. economy?

#6) Do you think that it is a good sign that Arnold Schwarzenegger, the governor of the state of California, says that "terrible cuts" are urgently needed in order to avoid a complete financial disaster in his state?

#7) But it just isn't California that is in trouble. Dozens of U.S. states are in such bad financial shape that they are getting ready for their biggest budget cuts in decades. What do you think all of those budget cuts will do to the economy?

#8) In March, the U.S. trade deficit widened to its highest level since December 2008. Month after month after month we buy much more from the rest of the world than they buy from us. Wealth is draining out of the United States at an unprecedented rate. So is the fact that the gigantic U.S. trade deficit is actually getting bigger a good sign or a bad sign for the U.S. economy?

#9) Considering the fact that the U.S. government is projected to have a 1.6 trillion dollar deficit in 2010, and considering the fact that if you went out and spent one dollar every single second it would take you more than 31,000 years to spend a trillion dollars, how can anyone in their right mind claim that the U.S. economy is getting healthier when we are getting into so much debt?

#10) The U.S. Treasury Department recently announced that the U.S. government suffered a wider-than-expected budget deficit of 82.69 billion dollars in April. So is the fact that the red ink of the U.S. government is actually worse than projected a good sign or a bad sign?

#11) According to one new report, the U.S. national debt will reach 100 percent of GDP by the year 2015. So is that a sign of economic recovery or of economic disaster?

#12) Monstrous amounts of oil continue to gush freely into the Gulf of Mexico, and analysts are already projecting that the seafood and tourism industries along the Gulf coast will be devastated for decades by this unprecedented environmental disaster. In light of those facts, how in the world can anyone project that the U.S. economy will soon be stronger than ever?

#13) The FDIC's list of problem banks recently hit a 17-year high. Do you think that an increasing number of small banks failing is a good sign or a bad sign for the U.S. economy?

#14) The FDIC is backing 8,000 banks that have a total of $13 trillion in assets with a deposit insurance fund that is basically flat broke. So what do you think will happen if a significant number of small banks do start failing?

#15) Existing home sales in the United States jumped 7.6 percent in April. That is the good news. The bad news is that this increase only happened because the deadline to take advantage of the temporary home buyer tax credit (government bribe) was looming. So now that there is no more tax credit for home buyers, what will that do to home sales?

#16) Both Fannie Mae and Freddie Mac recently told the U.S. government that they are going to need even more bailout money. So what does it say about the U.S. economy when the two "pillars" of the U.S. mortgage industry are government-backed financial black holes that the U.S. government has to relentlessly pour money into?

#17) 43 percent of Americans have less than $10,000 saved for retirement. Tens of millions of Americans find themselves just one lawsuit, one really bad traffic accident or one very serious illness away from financial ruin. With so many Americans living on the edge, how can you say that the economy is healthy?

#18) The mayor of Detroit says that the real unemployment rate in his city is somewhere around 50 percent. So can the U.S. really be experiencing an economic recovery when so many are still unemployed in one of America's biggest cities?

#19) Gallup's measure of underemployment hit 20.0% on March 15th. That was up from 19.7% two weeks earlier and 19.5% at the start of the year. Do you think that is a good trend or a bad trend?

#20) One new poll shows that 76 percent of Americans believe that the U.S. economy is still in a recession. So are the vast majority of Americans just stupid or could we still actually be in a recession?

#21) The bottom 40 percent of those living in the United States now collectively own less than 1 percent of the nation’s wealth. So is Barack Obama's mantra that "what is good for Wall Street is good for Main Street" actually true?

#22) Richard Russell, the famous author of the Dow Theory Letters, says that Americans should sell anything they can sell in order to get liquid because of the economic trouble that is coming. Do you think that Richard Russell is delusional or could he possibly have a point?

#23) Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010. In fact, that was almost twice the level of a year earlier. Does that look like a good trend to you?

#24) In March, the price of fresh and dried vegetables in the United States soared 49.3% - the most in 16 years. Is it a sign of a healthy economy when food prices are increasing so dramatically?

#25) 1.41 million Americans filed for personal bankruptcy in 2009 - a 32 percent increase over 2008. Not only that, more Americans filed for bankruptcy in March 2010 than during any month since U.S. bankruptcy law was tightened in October 2005. So shouldn't we at least wait until the number of Americans filing for bankruptcy is not setting new all-time records before we even dare whisper the words "economic recovery"?

"Warning: Crash Dead Ahead. Sell. Get Liquid. Now"...

http://www.marketwatch.com/story/crash-is-dead-ahead-sell-get-liquid-now-2010-05-25

MarketWatch: by Paul B. Farrell May 25, 2010

ARROYO GRANDE, Calif. (MarketWatch) -- "This game's in the refrigerator! The door's closed, the lights are out, the eggs are cooling, the butter's getting hard and the Jell-O is jiggling ..."

That was legendary Lakers' radio announcer Chick Hearn's signature way of calling a game early, telling fans the home team won ... you can head for the exits before the final buzzer. Chick wrote the book with popular sports phrases like "slam dunk," "air ball," "charity stripe," and a "bunny hop in the pea patch" for a traveling violation.

Niall Ferguson: Investing amid uncertaintyEconomic historian and author of The Ascent of Money: A Financial History of the World, Niall Ferguson gives his predictions on gold prices, emerging markets and the Swiss franc. Ferguson also tells Dow Jones Veronica Dagher where he's investing his money amid the uncertainty.

Chick's our inspiration today: Last March I wrote "6 reasons I'm calling a bottom and a new bull." Today it's time for a new call. We've had a good year. Net gains over 50% in 2009. But now: "Game over, head for the exits." Bears beating bulls.

No, no, "it's a buying opportunity," says another legend, hedge fund manager, Barton Biggs. Buying opportunity? For who? Remember, Biggs isn't advising Joe Lunchbox about what to do with his little 401(k). Biggs' customers are mega-millionaires in his $1.5 billion Traxis Partners Fund. Main Street investors like Joe are prey in his casino.

Read on, you decide: As you stare from high up in the nose-bleed bleachers watching the game, staring at a Dow that not long ago was above 11,000 and heading for 12,000. Now the Dow's sitting on the bench, ready for the showers, weak after a couple air balls around 10,000. No more timeouts. "This game's in the refrigerator."

How bad is your bookie's point spread in this game? A blowout? Will the Dow drop below 9,000 again? Now that it's broken technical supports, will it drop below 6,470, where the last bull rally started in early 2009? Can you handle the nerve-racking volatility generated by Wall Street's high-frequency traders playing the game at warp-speed with algorithms making thousands of micro-bets in milliseconds, betting billions daily?

So who should you listen to? Barton and I arrived at Morgan Stanley about the same time. He stayed decades longer, became one of the world's leading strategists, advising the kind of high-rollers who also bet at private tables in a Vegas casino.

You remember Biggs: In his book "Wealth, War & Wisdom" he advises his high rollers to prepare for a "breakdown of the civilized infrastructure." Buy a farm: "Your safe haven must be self-sufficient and capable of growing some kind of food ... It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc. Think Swiss Family Robinson." Biggs is not advising small investors on what to do with their 401(k)s.

If you're gambling at Wall Street's casino, folks, the odds-makers are betting against Biggs. It's "game over."

Main Street lost 20% last decade ... yet like sheep keep going back.

Yes, if you're channeling Chick, here's your "mixed metaphor" cue card: "This game's in the refrigerator ... Wall Street won (proof, Goldman's $100-million-profit trading days and Blankfein's $68 million bonus) ... Main Street's headed for another losing streak ... Congress' lights are out ... the refrigerator door's closing on financial reforms ... the lobbyists are laying some rotten eggs, poisoning capitalism ... the Tea Party-of-No-No ideologies are hardening ... the bull's Jell-O is jiggling to a flat line ... and this market's going into hibernation, with the bears ... run, don't walk, to the exits, folks."

But will Main Street exit? Will we ever learn? No. The Wall Street casino makes mega-billions for insiders like Blankfein and the Goldman Conspiracy. Yet "The Casino" is still below the 2000 record of 11,722. So after accounting for inflation, Wall Street lost over 20% of Main Street's 401(k) retirement money between 2000 and 2010. Yes, Wall Street's a big loser the past decade. Their advice is self-serving. Period.

Given their miserable track record, only a fool would bet with Wall Street. Betting odds are Wall Street will lose another 20% in the next decade from 2010-2020. Yes, today's market is a "buying opportunity," but only for Wall Street casino insiders like Biggs, Blankfein and even low-level staffers inside "The Casino." But not for our 95 million Main Street investors, there's more pain ahead, this market's dropping.

Correction? New crash imminent, worse than 2008
More proof: Earlier economist Gary Shilling said price-to-earnings ratios are at a "nosebleed 22.5 level." The Dow was around 11,000. Money manager Jeremy Grantham recently said the market's overvalued 40%. That could mean a collapse to 6,600. Last week in Reuters' "Markets Could Be Derailed Again," George Soros echoed a "game over" warning with a "stark warning ... that the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis."

Now Dow Theory's Richard Russell is warning the public of an imminent crash:

"Sell ... get liquid ... by the end of this year they won't recognize the country."

A bigger meltdown than the credit crisis? Yes, Bush's team drove America into a ditch. But now Obama and his money men, Summers, Geithner, Bernanke, are digging the hole deeper. Soros says we have not learned "the lessons that markets are inherently unstable." As a result, "the success in bailing out the system on the previous occasion led to a super-bubble." Now "we are facing a yet larger bubble." Worse than 2008?

Yes, the game may be "in the refrigerator," the lights will go out, but as Soros hints, the electricity may get turned off too. Get it? This may not be a correction. Not even a bear. What's coming could be worse than the 2000 dot-com crash and the 2008 meltdown combined, a "Super-Bubble" says Soros. And the biggest reason, Nouriel Roubini and Stephen Mihm tell Newsweek, is that "the president's half-measures won't fix our failed financial system" because he refuses to "bust up the too-big-to-fail banks."

Yes, Congress will pass something. But unfortunately, as reported on MSNBC, Senator Dodd, the reform bill's sponsor, is a turncoat, working overtime with Wall Street lobbyists "to weaken financial reform," leave us vulnerable to a new, bigger crash in the near future. And Wall Street lobbyists are spending hundreds of millions to kill reform.

'White Swans:' 2000 and 2008 crashes were predictable, next one too.

Recently Roubini was interviewed by Charlie Rose in BusinessWeek. His message confirms the worst. Roubini was questioned about his new book, "Crisis Economics." Rose began by asking, "what have we learned from these crises of capitalism?" Roubini could easily have said, "nothing, we learned nothing." His actual reply:

"The first lesson is that crises are not 'black swan' events ... they're not just random outcomes. They are the result of a buildup of financial and policy vulnerability and mistakes -- excessive risk-taking, leverage, debt, and so on." They are 'White Swans' "because these events are predictable. But generation after generation, we seem to forget the past. When there's a bubble, there's euphoria. There's irrational exuberance. Consumers can use their homes like ATM machines. Governments and policy makers are happy because they get reelected. Wall Street makes billions of dollars of profits. Everybody's delusional."

Sound familiar? Yes indeed, in "This Time Is Different: Eight Centuries of Financial Folly," economists Carmen Reinhart and Kenneth Rogoff pinpoint the key signal that will blow the whistle and call the game: The "90% ratio of government debt to GDP is a tipping point in economic growth." For 800 years "you increase it over and beyond a high threshold, and boom!"

Warning, fans, the numbers on the game-clock are flashing wildly. America's ratio is now 92%, thanks to Obama's $1.7 trillion budget, future deficits, exploding debt. Soon, Ka-Booom! Another great nation bites the dust. Depression follows. Goodbye retirement.

Warning: 800 years of history are calling 'game over'
But can't we change destiny? Or are Dodd, Congress, Obama, Wall Street, the Party of No-No and 300 million Americans all just playing their parts in a historical script well-known to historians like Reinhart and Rogoff, Kevin Phillips, Niall Ferguson and others? The message of "This Time Is Different" is very simple:

"We have been here before. No matter how different the latest financial frenzy or crisis always appears, there are usually remarkable similarities from past experience from other countries and from history. ... no country, irrespective of its global importance, appears to be immune to it. The fading memories of borrowers and lenders, policy makers and academics, and the public at large do not seem to improve over time, so the policy lessons on how to 'avoid' the next blow-up are at best limited."

So please listen closely: All the TARP bailouts, stimulus debt and Fed loans won't work. Neither will a new conservative government. This is not a basketball game. We are not channeling Chick Hearn, calling this game before the final buzzer. While we prefer the illusion that "this time really is different," eight centuries of history suggest otherwise:

"The lesson of history, then, is that even as institutions and policy makers improve there will always be a temptation to stretch the limits. ... If there is one common theme to the vast range of crises ... it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. ... Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang -- confidence collapses, lenders disappear and a crisis hits. ... Highly leveraged economies ... seldom survive forever ... history does point to warnings signs that policy makers can look to access risk -- if only they do not become too drunk with their credit bubble-fueled success and say, as their predecessors have for centuries, 'This time is different'."

No, "this time" it's never different. Get it? In the end, it doesn't matter what happens to the Dodd-Obama financial reforms. The endgame's never a Black Swan, it's a very White Swan well known to historians -- guaranteed, inevitable and inescapable. This time is never different.

The clock's flashing. Huge point spread. Think bear, think crash, think end of capitalism, think Great Depression II ...

This is no buying opportunity, this game's in the refrigerator, call it...