US Economy: While Sequester Looms, Congress Eyes Next Fiscal Deadline

On Friday, $85 billion in automatic spending cuts are set to take effect if our elected officials fail to act. Over the next decade, a total of $1.2 trillion in government cuts to both domestic and defense spending are expected to impact the U.S. economy.

This is the sequestration process that was agreed to two years ago, which was supposed to be headed off before reaching this point, as The Daily Ticker Henry Blodget details in the accompanying clip with Yahoo! Finance senior columnist Michael Santoli.

Read more: While Sequester Looms, Congress Eyes Next Fiscal Deadline | Daily Ticker - Yahoo! Finance

US Economic meltdown:: Poverty rate in US climbs to 27-year high with 1 in 6 Americans officially poor

The number of Americans in poverty has jumped to an incredible 27-year high, with almost one in six people now falling into the bracket.More than 46 million people, or 15 per cent, are in poverty - which is up from 44 million, or 14 per cent, in 2009, the US Census Bureau said.

The number of people lacking health insurance increased to 50 million, which is a new high after revisions were made to 2009 figures. Losses were due mostly to working-age Americans who lost employer-provided insurance in the weak economy. Main provisions of the health overhaul do not take effect until 2014.

The median household income was $49,445, a 2.3 per cent fall from 2009. The 46.2 million people in poverty in 2010 represents the largest number in 52 years since estimates began. The U.S. poverty rate is only lower than three countries in 34 tracked by the Organization for Economic Cooperation and Development in France.

For more: US poverty rate climbs to 27-year high with 1 in 6 Americans officially poor | Mail Online

US Economy: The GOP’s Mythical Jobs Agenda - by

This is the House Republican’s idea of a “jobs agenda”? They must be joking. In fact, the policy platform outlined by House Majority Whip Kevin McCarthy (R-CA) offers a laundry list of half-baked policies that are resounding jobs killers. That’s because, across the board, the Republican “jobs agenda” reduces demand, undermines middle class families, blocks development of renewable energy industries, and recreates the possibility of future financial crises.

The Republican budget plan, for instance, is the most complete articulation of the GOP’s flawed strategy for job creation and economic growth. Passed by the House on a party-line vote in April, it was rejected by the Senate. But the plan still illustrates core party principles that voters should know are at stake in the 2012 elections. The Republican budget:

• Ends Medicare as we know it, kicking low income and middle class retirees into the Kafkaesque and inefficient private insurance market.

• Tears gaping holes in public investments in education and lifelong learning, efficiency enhancing infrastructure and energy modernization, and science research and technological R&D that create jobs today, “crowd-in” private investment, and provide a foundation for long-run sustained economic growth.

• Offers tax cuts to U.S. billionaires paid for by raising taxes on the middle class and shredding social protections for those hit hardest by the economic downturn, the most efficient policies to boost jobs and economic growth in the short-term.

All told, the Republican budget would kill an estimated 1 million jobs.

For more: The GOP’s Mythical Jobs Agenda | ThinkProgress

Recession? Three years after Lehman, a new debt crisis looms - by Larry Elliott

The F word is back. Back in the financial markets, back in the conclaves of central bank governors, back among the manufacturers and the high-street retailers. The four-letter word is fear.

Back in the spring, few imagined that we would be approaching the third anniversary of the collapse of Lehman Brothers on 15 September with such a sense of unease. The belief in early 2011 was that economic recovery was now well enough embedded for central banks to start raising interest rates and for finance ministries to crack on with the job of reducing budget deficits.

Although pockets of optimism remain, the mood today is different. Ben Bernanke, the chairman of the Federal Reserve, has said the US central bank will discuss possible ways to stimulate growth when it meets next month. The Bank of England appears to be heading in a similar direction. There is anxiety at the International Monetary Fund that blanket austerity will tip fragile western economies back into recession. Concerns are once again being expressed about the health of the banks, about America's national debt and, above all, about whether the eurozone can survive its current crisis intact.

For more: Three years after Lehman, a new debt crisis looms | Business | The Guardian

US Economy: Dow plunges 630 points after S&P downgrade

As Wall Street tumbled, pundits and prophets of doom pointed their fingers at the Standard and Poor's downgrade of U.S. debt. Those on the political right pointed barbed tongues at President Barack Obama and his policies. And by the end of the day, all the main stock market indexes on Wall Street pointed markedly lower.

But political theater and blame games aside, there is one important reason why U.S. and global markets are a mess, and it doesn't have all that much to do with the S&P downgrade.

The U.S. economy, the world's largest, is in for some seriously slow growth for the foreseeable future. And there's very little that anyone can do about it. Longer term, of course, the U.S. is struggling with a serious debt burden — an uncomfortable truth that the Washington, D.C. debt ceiling debacle and subsequent S&P downgrade made abundantly clear.

But looking deeper, there's another troubling trend to consider: globalization — which for years benefited the wide open U.S. economy by offering U.S. companies new markets and U.S. consumers cheaper prices — is today fundamentally changing the structure of how America, Inc. operates. According to Nobel Prize-winning economist Michael Spence, growth and employment in the U.S. economy are beginning to diverge. The rise of China, India and other rapidly developing countries is creating permanent shifts in the structure of the U.S. economy; namely, highly educated American workers are finding opportunities, while those with less education struggle with worsening job prospects and stagnating incomes.

This is hardly a recipe for broad-based, consumer-driven growth the U.S. economy needs. It's a gutting of the middle class that, if left unchecked, could have a devastating effect."The United States should brace itself for a long period of high unemployment," Spence warns.

So what's the solution? Most policymakers point to things that take time, cost money and, of course, add to the country's debt problems, such as sustained investments in education, infrastructure and new forms of cleaner energy that could help boost long-term economic growth.


For more: Dow plunges 630 points after S&P downgrade | GlobalPost

Economy: Impending Economic Collapse: Why All Baby Boomers Are To Blamed

Over the last few weeks there seems to be consensus among many financial bloggers, whose credibility is far more trustworthy than the corporate mainstream media, that the country is teetering on the verge of economic collapse due to the complete capture of the government, financial, regulatory, and media by a small group of oligarchs. They have also been described as the super rich, plutarchs, ruling elite, and scum sucking leeches. The bloggers that I have the utmost respect for, including Jesse, Charles Hugh Smith, Mike Shedlock, Yves Smith and Gonzalo Lira have all come to the logical conclusion the horrific economic situation of the country is a direct result of the greed, corruption, fraud, and plundering by a powerful connected group of rich financiers operating without fear of being brought to justice by the authorities.

While pondering the ruminations of these dedicated truth tellers, I was reminded of the Clint Eastwood Spaghetti Western For a Few Dollars More. The quotes above are representative of living in the USA today. There are supposed to be courageous, loyal and honest sheriffs that protect the citizens from crime, corruption and evil doers. But, just as we saw in the Old West of Clint Eastwood movies, the sheriffs are always corrupt and bought off by the evil cattle barons. In a world where life has no value and you can't rely on law enforcement to protect your interests, the citizens eventually will need to turn to bounty hunters to take care of the bad guys. The bounty hunters of truth reside on the internet. They reside at Zero Hedge, Jesse's Café Americain, Of Two Minds, Mish, Chris Martenson, and dozens of other anarchist websites. When you can't trust your government, your bankers, your church, your media, or mega-corporate CEOs, you need to seek the truth where it can be found. The insightful bloggers who courageously print the truth on a daily basis have unanimously concluded that a small band of powerful elite have accumulated undue influence and control over this country, having brought it to the verge of economic collapse. How did this happen? Who is responsible? Why were they permitted to gain this power?

For moreL Impending Economic Collapse: Why All Baby Boomers Are To Blame - Gold Matters

US default could be doomsday option for economy

The United States has never defaulted on its debt and Democrats and Republicans say they don't want it to happen now. But with partisan acrimony running at fever pitch, and Democrats and Republicans so far apart on how to tame the deficit, the unthinkable is suddenly being pondered.

The government now borrows about 42 cents of every dollar it spends. Imagine that one day soon, the borrowing slams up against the current debt limit ceiling of $14.3 trillion and Congress fails to raise it. The damage would ripple across the entire economy, eventually affecting nearly every American, and rocking global markets in the process.

A default would come if the government actually failed to fulfill a financial obligation, including repaying a loan or interest on that loan. The government borrows mostly by selling bonds to individuals and governments, with a promise to pay back the amount of the bond in a certain time period and agreeing to pay regular interest on that bond in the meantime.

For more: The Associated Press: US default could be doomsday option for economy

"AFTERSHOCK" -2010: America Will Be Bankrupt, 40-60% Unemployment Coming - by James Holland

“Don’t Worry, Not a Single Penny of your Tax Dollars Will Fund the Bailouts.”

“That’s right. The bank and corporate bailout money is not coming from our taxes. Instead we’re just borrowing it from foreign investors. We’re also printing some of it…Of course, we will never, ever have to pay it all back, because even if we tried (and we won’t), we never could.” That is why the U.S. Government will eventually be unable to borrow money and the nation will have to start living within its means. That will be the beginning of the brave new world of life in America. The book Aftershock explains this.

While Aftershock is a scary book because of what is happening all around us, it is also a hopeful book. The nation will survive after the country stops ignoring the basic laws of economics. The three authors are optimistic that the American people will be able to make the adjustments needed to achieve economic survival without having to become survivalists who have to grow their own food and defend their homes from roving mobs with guns. They feel that even dictators will be unable rise from the chaos because Americans will be frequently changing elected government officials as soon as it’s obvious that their policies don’t work.

The nation will survive because basically the country is wealthy and will still be so after the economic bubbles have all popped and forced everyone and their government to live within their means.

For the report: BASIL AND SPICE FINANCIAL WELL BEING - 2010: America Will Be Bankrupt, 40-60% Unemployment Coming

The Market Oracle: United States Economy, U.S. Dollar and the China Factor - by Jim Willie CB

The graphic on FOREX reserves firmly proves the point that the balance of power has shifted to developing nations. Wealth accumulation leads to shifts in bank power. If the existing structures do not incorporate and accommodate the new reality, then new structures will come into form and take root. The US and UK have given nothing but lip service to Chinese, Arab, and Russian demands, their creditors. The time for revolt is here.

For the complete report from the Market Oracle click on this link

United States Economy, U.S. Dollar and the China Factor - by Jim Willie CB

Foreigners are aghast at four new trends. They lose respect when the financial market rules change periodically, obviously to favor the insiders, elite, and connected. They lose respect when the approach taken by the Obama Administration is marred by lack of consistency, coordination, or even thorough research. They lose respect at the flow of $trillion$ in rescues and redemptions for failed institutions, most of which are responsible for the global crisis. They lose respect at the prospect of $trillion$ in ongoing federal budget deficits as far as the eye can see. They lose respect at the prospect of $trillion$ in monetized US$-based bonds, with the prospect of repeated announcements.

View Ben Bernanke, now turned commodity supplier. He is shoveling and humping around confetti laced with mold reinforced by a massive flow of swill, and does not even realize it! Forget the helicopter images. His partner ‘TinyTim' Geithner is an outright rookie with a very questionable past record, whose errors are too numerous to properly cite, starting with the ruinous decisions he recommended for Indonesia with the IMF during the 1998 Asian Meltdown. Details of harsh criticism, hardly reported by the US press networks, were delivered by former Australian Prime Minister Keating.

Acceleration in flow of funds is necessary to sustain a bubble, and a similar acceleration is necessary to prevent a bubble collapse. These are characteristics of a Third World nation's management of a currency that has the unique advantage of operating as the global reserve currency. Such a juxtaposition has never in modern financial history been witnessed before. The perceived abuse by the Untied States is incredible, as numerous syndicates continue to operate under the protection of the system's many appendages. It is no wonder that foreign creditors are both aghast at the situation in the Untied States, and mobilized to defend themselves.

The longer foreign nations wait to establish a multi-polar global reserve working alternative, employed broadly within their continental regions, laced within banking and commerce, the greater their loss will be to wealth funds and the greater the disruption will be to their entire economies, their standard of living, and their internal political stability. So let's see what China is up to.

Chinese leaders are openly critical and expressing deep anxiety. Debate is rampant inside China about the wisdom of continued support to purchase US Treasury bonds. These are preliminary tectonic shifts to be identified before important new financial structures come to fore. They will disturb the US Dollar system at its global foundation, with much inherent hegemony. The shock waves will come region by region, in a succession. By attracting a lot of attention to this issue, China has decided to attempt to gain influence at the G-20 meeting. The sequence is simple, from offshore manufacturer to trade partner to global adversary to large scale credit provider to angry creditor to credit master, and maybe to receivership committee governor.

HumanEvents.com: Obama in Turkey: Another Missed Opportunity ( or will he speak out for secularism) ? - by Robert Spencer

Recep Tayyip Erdogan - does he believe in Sharia Law?

For the complete report from HUMANEVENTS.com click on this link

Obama in Turkey: Another Missed Opportunity? - or will he speak out for Secularism) - by Robert Spencer

President Obama’s coming trip to Turkey will not feature his first “major speech” in a Muslim nation. But, as Secretary of State Clinton explained, the trip was “a reflection of the value we place on our friendship with Turkey.” She spelled out the substantive reasons for that friendship: “We share a commitment to democracy, a secular constitution, respect for religious freedom and belief and in free market and a sense of global responsibility.” For Obama to stand for those things in the Islamic world would be good. But does Turkey?

According to the Middle East Media Research Institute (MEMRI), while Mayor of Istanbul in the 1990s, Turkish Prime Minister Recep Tayyip Erdogan denounced Turkish secularism: “If the people want it,” he declared, “of course secularism will go away. You cannot rule this people by force; you don’t have the power to do that. This [i.e. secularism] cannot work in spite of the people.” And the people, he suggested, wanted Islamic law: “But the fact is that 99% of the people of this country are Muslims. You cannot be both secular and a Muslim! You will either be a Muslim, or secular!...For them to exist together is not a possibility! Therefore, it is not possible for a person who says ‘I am a Muslim’ to go on and say ‘I am secular too.’ And why is that? Because Allah, the creator of the Muslim, has absolute power and rule!” Erdogan was imprisoned for four months in 1998 for his agitation for the restoration of Islamic law in Turkey: he had declared that “mosques are our barracks, domes our helmets, minarets our bayonets, believers our soldiers. This holy army guards my religion. Almighty our journey is our destiny, the end is martyrdom.”

Islam has historically always been a political and social system as well as an individual religious faith. Islamic law, Sharia, is a comprehensive system governing every aspect of individual behavior. It also contains laws for the governance of the state and the ordering of society. If it is imposed in Turkey, women and non-Muslims would be subjugated under a system of institutionalized discrimination; the freedom of conscience and of speech would be restricted; and the relatively Westernized aspects of Turkish society would wither away. In light of all this, and especially given Clinton’s statement, Obama in Turkey could deliver a ringing defense of secular government -- that is, of the First Amendment principle of non-establishment of religion as being the only workable basis for any genuinely pluralistic society.

EU-Digest: The road to financial disaster? - by Rick Morren

EU-Digest editorial on the US economic struggles

The road to financial disaster? - by Rick Morren

A report on Wednesday from Bloomberg which showed that the US Fed is prepared to lend another $7.4 trillion on behalf of U.S. taxpayers to "further" rescue the troubled US financial system, got my attention. According to that story, this $7.4 trillion dollar amount is half of the value of everything produced in the US in the past year! This enormous pledge of funds includes $2.8 trillion already siphoned off by financial institutions in the most important response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment also dwarfs the only plan that was actually approved by the US Congress, the so-called Treasury Department’s $700 billion Troubled Asset Relief Program (TARP), better known before as the bail-out plan. The report also notes that the US Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, you can only wonder why this is happening. Worse, it is happening without much or any reaction from the Congress or the Public at large.

You don't need to be an Einstein to see that there seems to be something "fishy in Denmark", as to the huge amounts of liquidity the Bush Administration is pulling out of the US national coffers at warp speed before they leave office? Whether it’s lending or spending, it’s tax dollars that are going out the window and the US taxpayer is apparently ending up holding "collateral" they don’t know anything about. Shouldn't the "Obama team" start blowing the whistle? Where is all this transparency we were promised by all of them.

Forbes.com: Russia's Medvedev supports G-8 meeting on economy

For the complete report of Forbes.com click on this link

Russia's Medvedev supports G-8 meeting on economy

Russia's President Dmitry Medvedev said Friday he supports holding an emergency meeting of the Group of Eight leading industrialized nations to discuss the global financial crisis. Medvedev said he had discussed the idea with French President Nicolas Sarkozy, adding that consultations between the G-8 members are going on, but no time or venue has been set for the summit yet. Finance ministers and central bankers from the Group of Seven nations will meet Friday to discuss the economic meltdown. One of the potential remedies expected to be discussed at the meeting in Washington is for governments to guarantee lending between banks. Medvedev told reporters it would make sense to invite other leading economic powers to join the G-8 meeting.

EU-Digest: The Economic Crises – A chance to change Capitalism - by **Will Hutton

A special EU-Digest report on the financial crises

A chance to change Capitalism - by **Will Hutton

"This is a crisis that has been 30 years in the making - a Gordian knot of libertarian free-market fundamentalism, unregulated globalism, the collapse of social and political forces committed to fairness, the explosive impact of financial innovations such as 'secularization', and sheer greed. In the United States this first manifested itself in Newt Gingrich's 'Contract with America', that gave free license to the anti-tax, anti-government, pro-deregulation instincts of an increasingly fervent Republican party. That wasn't all. The financial markets were exploiting the new freedoms to insist that governments did Republican things. The Bush presidency sealed the market fundamentalists' victory.

In the early Nineties came a breakthrough that would transform the financial landscape. Goldman Sachs took the concept hitherto used by mortgage companies of packaging up mortgage payments and selling them as a financial security and applied it to an Arizona trailer park. The site pledged its income to a new company, specially set up, which then issued securities - backed by Goldman. The market bought them. 'Secularization' took off: there are more than $8 trillion of securities backed by a weird and wonderful range of income streams. America, followed rapidly by Britain, did not have to worry that it did not save enough cash to support its borrowing ambitions; it could sell these securities to all bidders from all over the world - especially in Asia and to China's central bank - to finance ambitions to borrow. Each has contributed to the fiasco - and all now need to be unraveled if the economy is to have a sustained recovery.

What we are witnessing now is a system failure that requires a systemic response – the creation of a new system that sponsors a fairer, more productive capitalism in its place, while maintaining high flows of credit and debt. Banks issued bonds allowing huge takeovers. Hedge funds and private equity companies blossomed. Money flowed into residential housing. New York and London were in an unseemly race to regulate less. And if regulators raised an eyebrow they were told not to worry. The securitized bonds - this packaged income - could always be sold to raise cash; and on top of that banks took out insurance against the risk of default. Nor should regulators worry if banks directed the investment funds under their management to buy any unsold bonds which might look like a fraudulent conflict of interest; one day they would rise in value. So confident did bank directors become that they authorized their managers to run hidden portfolios of securitzsed assets offshore in secret tax havens; thus would profits be boosted at no risk. Bonuses also grew larger and larger, residential and property prices kept rising, fees from ever-bigger deals became juicier and juicier. And when there were setbacks, such as the dot.com bubble bursting, the then chairman of the Federal Reserve Alan Greenspan was on hand to flood the markets with cheap money. The free-market fundamentalists seemed to be right. Markets never did make mistakes, financial business kept booming, leverage became astronomical. The ever more extravagant school fees were easily paid and Britain's Home Counties - like New York and the Hamptons - became home to parties of astounding luxury and lifestyles of grotesque opulence. Gentlemanly capitalism became super-gentlemanly capitalism. The Financial Times' How to Spend it magazine is studded with dresses that cost up to euro 40.000. Private submarines, jets and yachts became the rage. Some hedge fund managers even considered themselves underpaid at euro 150 million for one year's work.

The left's critique of capitalism - that markets delivered instability, booms and busts, monopoly and gross inequity that paradoxically undermined the values of integrity and trust that bind markets together - was proven wrong. There should not even be a mixed economy between private and public sectors. The job was to enlarge the role of markets. There was no effective opposition. The left and organized labor collapsed as intellectual, social and political forces; there was no conviction that any alternative to this shareholder value-driven, financial, 'securitised' capitalism existed, or any political muscle to support it, even if there were. Mainstream culture moved away from public purpose and fairness; the new priorities were individual self-fulfilling, personal experience and loyalty to self. The past 20 years also saw an unparalleled boom in the money markets. As the free market blossomed, so too did cheap debt, huge bonuses and ostentatious wealth.

Now, as the world financial system lies on the brink of collapse, it is time to build a new one, based on fairness instead of naked greed, and with long-term commitment to building businesses and supporting investment. This is a terrifying moment; but it is also our generation's once- in-a-lifetime chance to change world capitalism.

**Will Hutton was the former editor-in-chief for The Observer in London and is currently the Chief Executive of The Work Foundation (formerly the Industrial Society). The analysis in his books is characterized by a support for the European Union and its potential, alongside a disdain for what he calls American conservatism. He is a governor of London School of Economics, a visiting professor at the University of Manchester Business School and Bristol University, a visiting fellow at Mansfield College Oxford, a trustee of the Scott Trust that owns the Guardian Media Group, rapporteur of the Kok Group and a member of the Design Council's Millennium Commission.[2] . Hutton's most recent book The Writing On The Wall' was released in the UK in January 2007. The book examines Western concerns and responses to the rise of China and the emerging global division of labor, and argues that the Chinese economy is running up against a set of increasingly unsustainable contradictions that could have a damaging universal fallout. On February 18, 2007, Hutton was a featured guest in BBC's “Have Your Say program” discussing the implications of China's growth.