IMF cuts U.S. growth forecast, warns of crisis

SAO PAULO (Reuters) – The International Monetary Fund cut its forecast for U.S. economic growth on Friday and warned Washington and debt-ridden European countries that they are “playing with fire” unless they take immediate steps to reduce their budget deficits.

The IMF, in its regular assessment of global economic prospects, said that bigger threats to growth had emerged since its previous report in April, citing the euro zone debt crisis and signs of overheating in emerging market economies.

The global lender forecast that U.S. gross domestic product would grow an anemic 2.5 percent this year and 2.7 percent in 2012. In its forecast just two months ago, it had expected 2.8 percent and 2.9 percent growth, respectively.

The outlook elsewhere was mixed. The IMF said it was slightly more optimistic about the euro area’s growth prospects this year, but a lack of political leadership in dealing with that crisis and the budget showdown in the United States could create major financial volatility in coming months.

“You cannot afford to have a world economy where these important decisions are postponed because you’re really playing with fire,” said Jose Vinals, director of the IMF’s monetary and capital markets department.

“We have now entered very clearly into a new phase of the (global) crisis, which is, I would say, the political phase of the crisis,” he said in an interview in Sao Paulo, where the forecast was published.

In the United States, the political problems include a fight over raising the debt ceiling. Fears that the world’s biggest economy could default, even briefly, have rattled markets, with Fitch Ratings saying even a “technical” default would jeopardize the country’s AAA rating.

Meanwhile, Greece has edged closer to default as euro zone officials disagree on a possible second aid package for the indebted country. With strikes and protests around the country, political turmoil has added to uncertainty, stoking fears that the government will not be able to tighten its belt enough to reduce crippling deficits.

“If you make a list of the countries in the world that have the biggest homework in restoring their public finances to a reasonable situation in terms of debt levels, you find four countries: Greece, Ireland, Japan and the United States,” Vinals said.

Read the rest here.

When adding in all of the money owed to cover future liabilities in entitlement programs the US is actually in worse financial shape than Greece and other debt-laden European countries, Pimco’s Bill Gross told CNBC Monday.

Much of the public focus is on the nation’s public debt, which is $14.3 trillion. But that doesn’t include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at “nearly $100 trillion,” that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won’t find a solution overnight.

“To think that we can reduce that within the space of a year or two is not a realistic assumption,” Gross said in a live interview. “That’s much more than Greece, that’s much more than almost any other developed country. We’ve got a problem and we have to get after it quickly.”

Read the rest here.

“Most critiques of Krugman as a public intellectual begin with what is apparently an obligatory disclaimer, usually in the very first sentence — something to the effect that Krugman is a very accomplished and well-respected economist. Then comes the “But . . .” and the critique proceeds in earnest, often scathingly.

But why concede this honor to Krugman? So what if he won the Nobel Prize? The real test of Krugman’s mettle as an economist is the accuracy of his economic forecasting. The fact is that, with about three decades of evidence now in, Krugman’s track record, to use a technical term favored by economists, sucks.

He’s not always candid about this. But once, under the pressure of a televised debate with conservative talk-show host Bill O’Reilly, Krugman blurted out an understated if truthful self-evaluation: “Compare me . . . compare me, uh, with anyone else, and I think you’ll see that my forecasting record is not great.”

The most egregious example of “not great” is Krugman’s utterly incorrect 1982 prediction that inflation would soar. He made this prediction from no less lofty a perch than the White House, as staff member of the Council of Economic Advisers in the first Reagan administration. In a memo titled “The Inflation Time Bomb” Krugman wrote with co-author Lawrence Summers, “We believe that it is reasonable to expect a significant reacceleration of inflation . . . at least 5 percentage points to future increases in consumer prices. . . . This estimate is conservative.”

It also turned out to be hilariously, side-splittingly, knee-slappingly, rolling-on-the-floor wrong. Except for a tiny uptick the very next month, inflation didn’t rise; it fell. Four years later, it had fallen to 1.18 percent, a rate so low as to border on deflation.”

Read the rest here.

According to AFP journalist and legendary Bilderberg sleuth Jim Tucker’s inside sources, the agenda now under review includes a number of critical issues at the top of the elite’s to-do list. These breakdown as follows:

The elite are concerned that the American Congress may soon turn against the illegal and immoral invasion under humanitarian cover by NATO and the U.S. against the north African dictator Moammar Gaddafi.

As columnist Patrick Buchanan noted yesterday, Congress is rising in opposition to bogus wars launched the by the executive branch in violation of the Constitution.

“Last week, House Speaker John Boehner had to scramble to cobble up a substitute resolution to prevent half his GOP caucus from joining with Democrats to denounce President Obama’s war in Libya as unconstitutional and to demand a total U.S. pullout in 15 days,” Buchanan wrote.

More than a third of House Republicans voted to pull out of the NATO coalition attacking Gaddafi’s forces, in essence forcing a NATO withdrawal from the color revolution engineered civil war in that country.

In January, former oil industry pastor revealed that his inside sources said oil prices will skyrocket – a fait accompli with gas prices at the pump now at historically high levels – as the global elite work behind the scenes to take take down national economies. Williams appeared on the Alex Jones Show to talk about new revelations that deal with the death of the dollar, exploding energy prices, and the engineered onset of order out of chaos revolution worldwide.

The elite now meeting behind closed door in the Switzerland are pushing for a wider war and incalculable suffering in the Middle East.

The money masters have long profited from war and mass murder. Nathan Rothschild made a financial bet on Napoleon at the Battle of Waterloo and while also funding the Duke of Wellington’s peninsular campaign against Napoleon. The House of Rothschild financed the Prussian War, the Crimean War and the British attempt to seize the Suez Canal from the French and also financed the Mexican War and the Civil War in the U.S.

In addition to worrying about Congress waking up to the Libyan scam, the global elite is also concerned about a diverse liberty movement that has grown exponentially with the help of an open and free internet.

In response, the pocketed pawns in Congress have introduced a raft of bills over the last few months designed to take down the internet and blunt its impact as a medium for alternative news and information.

Read the rest here.

From: Global Economic Trend Analysis

I received an email today from TrimTabs regarding their Consumer Spendables Index and a new measure called Dependency Ratio II

The Consumer Spendables Index consists of three components.

1. Cash Extracted from Real Estate
2. After Tax Income from Other Sources
3. After Tax Income from Wages and Salaries

click on chart for sharper image
If you see a “+” sign click a second time for higher resolution without further increasing the size.

TrimTabs reports …

The Federal Reserve discontinued its data on cash-outs in Q3 2008, but we use another source of refinancing data from Freddie Mac to estimate cash-outs and thus consumer spendables.

According to the Fed, cash-outs peaked at $804 billion in the four quarters ended in Q2 2006 (we refer to four-quarter periods to smooth quarterly volatility). At that time, cash-outs were equal to 13.6% of the $5.9 trillion in after-tax income. We estimate that cash-outs amounted to only $62 billion in the four quarters ended in April, down $742 billion, or 92.2%, from the peak.

Consumer spendables peaked at $7.06 trillion in the four quarters ended in Q4 2007, more than a year after cash-outs began to decline. Then consumer spendables began to decrease, bottoming at $6.06 trillion in Q2 2010. In the past year, consumer spendables rose an estimated $245 billion, or 4.0%, to $6.31 trillion. This increase is not impressive given that it was accompanied by the payroll tax cut and $1.5 trillion in federal deficit spending.

Note that the recession ended in the second quarter of 2009. The Consumer Spendables Index is below that point now. Moreover, it has taken three full years (12 quarters) for the Wages and Salaries component to match the pre-recession high.

This is in spite of record amounts of fiscal stimulus by Congress, and record amounts of liquidity maneuvers including two rounds of Quantitative Easing by the Fed.

TrimTabs Dependency Ratio II

TrimTabs is alarmed by the rapid rise in government benefits and has a new calculation to measure consumer dependency on government.

From TrimTabs ….

We have been alarmed at the rapid growth in government social programs. Several months ago, we introduced the TrimTabs Dependency Ratio, which compares income from government social benefits to income from wages and salaries. The ratio increased from 9% in 1960 to 36% in March.

We are introducing the TrimTabs Dependency Ratio II, which adds income from government wages and salaries to income from government social benefits and compares it to income from wages and salaries. This modified ratio rose to 66% in March, from 33% in 1960 and 45% in 2000.

The principal driver of the increase in TrimTabs Dependency Ratio is the rapid rise in government wages and salaries and social benefits over the past decade. From 2000 to 2010 private sector wages and salaries grew 29%, whereas government wages and salaries plus social benefits grew 89%, nearly three times the growth rate of private sector wages and salaries.

The government is playing an increasingly dominant role in the economy by borrowing massive sums to fund social welfare programs. This borrowing is financially unsound if not morally wrong. Instead of creating new wealth, it is simply piling more debt on an economy with the same capacity. At some point, the carrying capacity of the economy will be exhausted. We believe the economy is at or near that point.

Read the rest here.

Seriously, the CDC is preparing you for a Zombie Apocalypse.

Read the rest here.

Currently, the CDC does not appear to be prepared for all the incoming traffic as they prepare us for the Zombie Apocalypse. This link to the CDC blog works a little better. Hopefully in the case of a real Zombie Apocalypse, they will have updated their ability to handle the increased bandwidth, you know, since like in the case of a real epidemic, I bet a great many folks will be visiting the CDC site.

“Our benchmark point estimates suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to off-set state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.”

Read the rest here.

We could definitely use another Abraham Lincoln to emancipate us all from being slaves to words.

In the midst of a historic financial crisis of unprecedented government spending, and a national debt that outstrips even the debt accumulated by the reckless government spending of the previous administration, we are still enthralled by words and ignoring realities.

President Barack Obama’s constant talk about “millionaires and billionaires” needing to pay higher taxes would be a bad joke if the consequences were not so serious. Even if the income tax rate were raised to 100% on millionaires and billionaires, it would still not cover the trillions of dollars the government is spending.

More fundamentally, tax rates — whatever they are — are just words on paper. Only the hard cash that comes in can cover government spending. History has shown repeatedly, under administrations of both political parties, that there is no automatic correlation between tax rates and tax revenues.

Tax Rates Vs. Hard Cash

When the tax rate on the highest incomes was 73% in 1921, that brought in less tax revenue than after the tax rate was cut to 24% in 1925. Why? Because high tax rates that people don’t actually pay do not bring in as much hard cash as lower tax rates that they do pay. That’s not rocket science.

Then and now, people with the highest incomes have had the greatest flexibility as to where they will put their money. Buying tax-exempt bonds is just one of the many ways that “millionaires and billionaires” avoid paying hard cash to the government, no matter how high the tax rates go.

Most working people don’t have the same options. Their taxes have been taken out of their paychecks before they get them.

Even more so today than in the 1920s, billions of dollars can be sent overseas electronically, almost instantaneously, to be invested in other countries — creating jobs there, while millions of Americans are unemployed. That is a very high price to pay for class warfare rhetoric about taxing “millionaires and billionaires.”

Nothing New

Make no mistake about it, that kind of rhetoric wins votes for political demagogues — and votes are their bottom line. But that is totally different from saying that it will bring in more tax revenue to the government.

Time and again, at both state and federal levels, in the country and in other countries, tax rates and tax revenue have moved in opposite directions many times. After Maryland raised its tax rates on people making a million dollars a year, there were fewer such people living in Maryland — and less tax revenue was collected from them.

Read the rest here.

“The news media in this country are in a stupor. Either out of ignorance, or complete leftist bias and fraud to protect their socialist hero Barack Obama, the mainstream media has turned a blind eye toward the enormous disaster facing our economy. The greatest Ponzi scheme in world history is coming to an end, leaving America on the precipice of economic Armageddon. Here are the facts the mainstream media does not want you to see- hiding in plain site just like Osama bin Laden was.”

Read the rest here.

ALBANY – Escape from New York is not just a movie – it’s also a state of mind.

A new Marist College poll shows that 36% of New Yorkers under the age of 30 are planning to leave New York within the next five years – and more than a quarter of all adults are planning to bolt the Empire State.

The New York City suburbs, with their high property values and taxes, are leading the Exodus, the poll found.

Of those preparing to leave, 62% cite economic reasons like cost of living, taxes – and a lack of jobs.

“A default would inflict catastrophic far-reaching damage on our nation’s economy, significantly reducing growth and increasing unemployment,” said Geithner in the letter to Bennet which was dated May 13. “Even a short-term default could cause irrevocable damage to the economy.”

Read the rest here.

Los Angeles (May 3, 2011) — As the federal government rapidly approaches the $14.3 trillion debt ceiling, 96 percent of Americans say it is important to reduce the national debt, according to a new Reason Foundation-Rupe poll. Of those surveyed, 69 percent believe reducing the national debt is “very important.”

With the debt piling up, it is also clear that taxpayers do not trust the federal government to live within its means. In fact, the Reason-Rupe survey finds 74 percent of Americans support implementing a spending cap that would prohibit the government from spending more money than it takes in during a fiscal year. Only 19 percent oppose a government spending cap.

The most popular policy prescription for reducing the national debt is spending cuts: 45 percent of people say Congress should bring down the debt by reducing spending without raising taxes. Another 16 percent favor reducing the debt primarily through spending cuts, but are open to some tax increases; 14 percent prefer an equal emphasis on spending cuts and tax increases; 8 percent want to reduce the debt primarily through higher taxes with some spending cuts; 4 percent say current spending levels should be maintained and taxes should be raised as needed; and 1 percent of Americans say we shouldn’t do anything about the debt.

Read the rest here.

“Could Osama bin Laden have been found faster if the CIA had followed the advice of ecosystem geographers from the University of California, Los Angeles? Probably not, but the predictions of UCLA geographer Thomas Gillespie, who, along with colleague John Agnew and a class of undergraduates, authored a 2009 paper predicting the terrorist’s whereabouts, were none too shabby. According to a probabilistic model they created, there was an 88.9% chance that bin Laden was hiding out in a city less than 300 km from his last known location in Tora Bora: a region that included Abbottabad, Pakistan, where he was killed last night.”

Read the rest here.

Via MSNBC.com

Read CNN World report here.

Click on chart to enlarge. WordPress is cutting off the right hand side, which shows the surge on the Bid Laden news.

Confirmed that he is dead and the U.S. has his body.

President Obama due to make statement. Watch it here: White House Live Stream

Update: Was he shot in the head?

Update: CBS saying he was killed in Afghanistan.

Update: President Obama states that Bin Laden was killed in a “firefight.”

Update: Reuters is saying that Special Forces led the operation.

“U.S. prosecutors have joined regulators’ investigation into whether some high-speed traders are manipulating markets by posting and immediately canceling waves of rapid-fire orders, two officials said.

Justice Department investigators are “working closely” with the Securities and Exchange Commission to review practices “that are potentially manipulative, like quote-stuffing,” Marc Berger, chief of the Securities and Commodities Task Force at the U.S. Attorney’s Office for the Southern District of New York, said today at an event in New York.”

Read the rest here.

“ExxonMobil’s earnings are from operations in more than 100 countries around the world. The part of the business that refines and sells gasoline and diesel in the United States represents less than 3 percent – or 3 cents on the dollar – of our total earnings. For every gallon of gasoline, diesel or finished products we manufactured and sold in the United States in the last three months of 2010, we earned a little more than 2 cents per gallon. That’s not a typo. Two cents.”

Read the rest here.

“Rather than demonstrating the advantages of centrally planned long-term investment, as its foreign admirers sometimes suggested, China’s bullet-train experience shows what can go wrong when an unelected elite, influenced by corrupt opportunists, gives orders that all must follow — without the robust public discussion we would have in the states.”

Read the rest here.