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..There's a little Samuel Pepys in all of us..

Tuesday, August 30, 2011

Okay.. back to the stories of the day..
Libya's interim leader gave forces loyal to deposed ruler Muammar Gaddafi a four-day deadline today to surrender towns they still control, or face a bloody end to a war that the new leadership said has so far killed 50,000 people..
As the hunt for Gaddafi himself goes on, Libyan officials accused Algeria of an act of aggression for giving refuge to his fleeing wife and three of his children, as well as, it turned out, to a new grand-daughter, born this morning..
Algeria's Foreign Ministry said Gaddafi's wife Safia, and his sons Hannibal and Mohammed had entered Algeria yesterday, along with their children..
But what the rebels want to bring a definitive end to this, is Mohammar himself.. and again, until he's found, the struggle will continue..
Anti-Gaddafi forces have converged on Sirte from east and west, but have stopped short of an all-out assault in hopes of arranging a negotiated surrender of Gaddafi's birth-place..
Mustafa Abdel Jalil, head of Libya's interim council, told a news conference.."By Saturday, if there are no peaceful indications for implementing this, we will decide this matter militarily. We do not wish to do so but we cannot wait longer.."

Meanwhile, in the States.. Consumers' confidence in August dropped almost 15 points to the lowest level since April 2009 as worries about the economy fueled the wildest stock market swings since the financial meltdown in 2008..
At a time when Americans are increasingly worried about a weak job market, higher costs for food and clothing and recent stock market turmoil, the falling confidence numbers raise new concerns about their willingness to spend and jump start the economy.. That's particularly important since consumer spending accounts for 70% of U.S. economic activity..
The Conference Board said Tuesday that its Consumer Confidence Index fell to 44.5, down from a revised 59.2 in July.. The number was the lowest level since April 2009 when the reading was 40.8.. It also is far below the 53.3 that analysts had expected..
A reading above 90 indicates the economy is on solid footing.. above 100 signals strong growth..
Today's figures do not bode well.. Besides debt talks and market fluctuations, Americans are still plagued by old economic worries.. The nation's unemployment rate is stuck at 9%.. Home values remain weak.. And shoppers are facing rising costs for everything from food to clothing as retailers try to offset their higher costs for labor and materials..

And, closer to home.. There has rarely been a gloomier bunch of central bankers and other top-level finance officials than the ones who gathered at Jackson Hole last week for their annual August gabfest.. It’s not as if most of them are a load of laughs at the best of times, but as part of their job, they can usually be counted on to find some ray of sunshine on even the darkest days..
Now, most of them acknowledge.. at least privately.. that they have pretty much run out of options if the sputtering global economy slides back into reverse and the financial system starts to come unglued again..
Then we had newly minted IMF Chief Christine Lagarde spelling out the problem for anyone willing to listen.. essentially warning that the European banks can’t be held together with Crazy Glue and paper clips much longer and that if they aren’t fixed soon, we’re heading for another whopper of a financial and economic crisis.. Freed of her government shackles, the former French finance minister pulled no punches in her first major speech to the August audience.. Lagarde declared flatly that European banks “need urgent recapitalization. They must be strong enough to withstand the risks of sovereigns and weak growth. This is key to cutting the chains of contagion. If it is not addressed, we could easily see the further spread of economic weakness to core countries, or even a debilitating liquidity crisis.”
Now just where this recapitalization is going to come from, is anyone's guess..
Her proposal amounts to basically this.. “mandatory substantial recapitalization.. seeking private resources first, but using public funds if necessary.” and that means adopting the much-criticized but largely effective U.S. policy that forced major banks to accept capital infusions from Washington whether they wanted the money or not.. Lagarde suggested the European Financial Stability Fund or some other form of European-wide financing could be used to pump money directly into the banks and hence ease pressure on vulnerable governments facing bond market assaults..
The response, predictably, has been howls of outrage in European political and banking circles. A Reuters headline summed up the attitude: “Europe snubs IMF call to force-feed bank capital.”..
European policy-makers and bankers insist they have done more than enough to cushion the banks from major blows. They said her remarks only served to undermine confidence in the international financial system..
That begs the question.. what confidence..?

Back to the international picture for a moment..
He should be a member of the Federal Reserve Board.. Peter Diamond, the MIT professor who shared the Nobel Prize in economics last year for his work on labour markets, failed to convince some stubborn Republicans that he was qualified to work at the central bank..
Alabama’s Richard Shelby, the ranking Republican on the Senate Banking Committee, was adamant that Prof. Diamond was ill-suited for the Fed because he lacked a background in monetary policy. Few thought Mr. Shelby’s refusal to clear Prof. Diamond’s nomination was anything more than crass partisan obstructionism. The Fed, after all, has a legislative mandate to maintain maximum employment..
Forget the debt-ceiling debate.. the failure of the President to put a Nobel laureate at the central bank was the moment when it became clear something was seriously wrong in Washington. But if there’s a silver lining to this episode, it’s that Prof. Diamond is free to air his views on economic policy at an important time..
Here's a rough sketch of the package Diamond would have put in place..
It would recapitalize smaller banks and it would allow bankruptcy judges to rewrite mortgages.. The former are the primary lenders to entrepreneurs, who create jobs faster than established companies; the later would create an incentive for banks to avoid foreclosures..
Prof. Diamond’s centrepiece would be a “big” infrastructure program.. But not for the reasons you are thinking.. “This is not Keynes, let’s dig holes.”.. Diamond dislikes infrastructure spending as a stimulus in a normal recession because it takes too long to get the money in the system..that's the the “shovel-ready” problem..
The persistent problem, even with this plan, remains.. And that would be the raising of new capital.. With this being a global problem, traditional markets will shrink.. “Absent another insanity over the debt limit, we’ve got a decade before anyone is going to worry about the U.S.’s ability to pay for these things,” Diamond said. “What I worry about is we have an elephant sized problem and I hope we don’t just get flea-sized proposals.”..
In the flea-sized camp is the current Obama administration proposal to create an infrastructure bank.. “The government should just up and do it,” Diamond said, explaining that creating a new entity that would use tax money to leverage private funds would only waste time.. A bank might bring private-sector expertise into the lending process, and it might help keep politicians’ hands off the money, but “it seems like something that will slow down something that is inherently slow anyway,” says the Professor..
He's got a point, but still, even though the analysis is essentially correct, the solution is anaemic.. It's going to take much more than getting workers back in the old jobs.. It's going to take the creation of an entirely new industry, and the education of those collecting benefits to work in this 'new industry'..
But the U.S. isn’t fighting a recession.. it’s fighting a protracted period of weak economic growth that will condemn millions of people to welfare.. An infrastructure program works in the present context because the goal is to reduce long-term unemployment.. The U.S. needs to upgrade its roads, bridges and schools, so why not do so now?
“This is a real problem widely acknowledged to exist,” Prof. Diamond said of the U.S.’s crumbling infrastructure. “In so far as we do now something that we are going to do in a few years because the American economy needs infrastructure upgrading, we’re not hurting the long-run debt position..
So essentially, what we're looking at is a new 'New Deal'.. and that's not new at all..
And to bring today's look to an end..
President Obama has discovered how serious the recession is..
That's what he told an audience in Chicago last week.. To be fair, he was referring to revised data from the Commerce Department showing that the falloff in GDP was larger than originally reported..
But a little ridicule is appropriate..
He and we knew all along how many people were out of work.. the employment numbers told us the size of the hole and the desperate need for government action..
This sort of ridiculous comment, and President Obama's weak response to the recession over the first two and a half years of his presidency, explains the tidal wave of scepticism facing his widely hyped upcoming speech on jobs after the Labor Day weekend..
The list of remedies leaked ahead of time does little to inspire hope..
We'll discuss these points after Barack's speech..

Flooding across parts of the East Coast is still a major issue after Hurricane Irene as the death toll rises to 40 across 11 states.. Thousands still find themselves stranded and without electricity for days to come..
The death toll, which extended from North Carolina to Vermont, rose sharply as bodies were pulled from floodwaters and people were electrocuted by downed power lines..
Eighteen of the 40 Irene-related deaths were in the New York tristate area and New England.. 7 in New Jersey, 6 in New York, 2 in Connecticut and 3 in Vermont..
In Vermont, where a number of towns remained cut off by flood-damaged roads and bridges, National Guard helicopters on Tuesday were delivering food and water..
About a dozen towns in the southern part of the state were rendered inaccessible by road after the torrential rainfall from the remnants of Hurricane Irene..
Deputy state Transportation Secretary Sue Minter said state crews hope to re-establish ground contact with all isolated communities some time today..

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