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"Instant Refi"? Watch The Consequences...

nospam@example.com (Karl Denninger) — Thu, 29 Jul 2010 15:34:00 -0400

There's a rumor going around that Fannie and Freddie (remember, government-owned GSEs? Yep) are cooking up a plan to provide "instant refis" to everyone with a Fan/Fred mortgage that is current, effectively refinancing them to current rates.

This sounds like a huge win for everyone.

But of course it's not - there is never any such thing as "win for everyone." Someone always loses.

Let's remember how a mortgage-backed bond works. You take a bunch of mortgages, then slice and dice 'em into bonds. The bonds are sold; the investor pays for the bond, and then gets an interest coupon until maturity, at which point the bond principal is paid back.

With mortgages there are a lot of games played because unlike a regular bond that has defined call provisions (if any) a mortgage can prepay at any time, removing it from the pool. This creates a duration problem for the seller which is accounted for in various ways.

One of the ugly little things I've been suspicious of for a couple of years now is that the capital accounts on these notes may be "silently" deficient. That is, let's say you have 100 mortgages with an aggregate "face" of $200,000 each (average.) You thus have a $20 million "face" bond there (all this ignores your "vig"; don't get all technical on me :-))

Let's say the aggregate coupon you owe on that bond is 5%. So you have to come up with $1 million a year to pay the interest to the holders. In theory, as each note prepays or pays off, the capital account has been stacking back those funds, so when the bond retires, you can hand the principal back.

But what if some of the notes aren't paying?

Well, at first blush, you're dead, because the coupon "inbox" from the mortgagees is short. But in fact some of them have prepaid - which means that if you're not being honest you could raid the capital "box" and make the interest payments with it. Who's the wiser, up until the bond matures and suddenly the money that's supposed to be there to return to the investors is missing?

I know, I know, this can't happen. Uh huh. Pull the other one folks. How many little games have been played over the last three years with accounting? Why not here?

Now here's the problem: If Fan/Fred were to implement such a "refinance/prepay" program, suddenly all the performing loans will immediately roll off. All that's left is the non-performing ones.

Now if, and I stress "if", that sort of deceptive game up above has been played, it suddenly becomes exposed, as the capital account is dramatically deficient, and it's "game over" for those holders.

It might also be fun trying to separate out the actual prepay risk and problem with the value of these notes and the results of this sort of game.

Now again - I can't tell you it's happened, because I have no access to the security-level books and flows from the homeowners through the servicers and then through Fan and Fred. But it would certainly explain why we have the sort of delinquency numbers we've seen and yet we haven't seen huge hits to the securities issued by Fan and Fred. Remember, these guys are informally insolvent (in "Conservatorship") and while their losses have been big, I am having trouble squaring the claimed loss amounts (about 2% of their book) and the amount of funding that Treasury claims it has provided to them.

If I'm right about this - and remember - this is speculation - then some of those note-holders are about to get a truly ugly surprise, and we're also about to be treated to whether Treasury's alleged "promise" to back them was worth the breath that Geithner spent to mouth it.

Jackassery On Display (Frank/Dodd)

nospam@example.com (Karl Denninger) — Thu, 29 Jul 2010 10:22:00 -0400

File this under "No, really?"

“I am concerned the recent proposals out of Basel will result in weak and perhaps even nonbinding provisions that provide credit to banks for holding forms of capital that have little or no value in absorbing losses,” said Senator Ted Kaufman, Democrat of Delaware. “The financial reform bill includes only a promise of higher capital requirements for U.S. banks, which we were told were going to be negotiated on an international level.”

Two words "gentlemen": National Sovereignty.

Screw "international" anything. Banks are licensed in a nation by that nation's government. That license is conditioned on adherence to that nation's laws.

BIS can stick it where the sun doesn't shine if you two, along with the rest of Congress, will grow a sack and demand it.

The problem with BIS' "proposals", as I pointed out the other day, is that it permits the sort of leverage that led to Lehman and Bear Stearn's collapse. It is a direct financial rape job that, if allowed to stand, completely neutralizes the "no bailout" policy and "prudential regulation" you both claim to support.

Of course we might some day get you two clowns to admit that Hankey Pankey Paulson's original "strident request" for the SEC to be "prudent" in allowing investment banks to run more than 14:1 leverage - a request that he was sent packing with in 2000, but got in 2004, both when he was with Goldman Sachs before becoming Treasury Secretary, was the proximate cause of both of those firm's failures!

From there, of course, the logical course of action would be to reinstate the former 14:1 leverage limit. That would, of course, dramatically limit the stealing, er, "profits" that those very same banks could extract from the productive economy.

The screaming that accompanies any such proposal (including claims that "they'll just go somewhere else") should be met with the following response: "That's fine. Go ahead and leave. But if you won't conform to our laws, you're not doing business here, nor with any public company that is listed here. Have a nice life, jackass, with your access to the world's largest market cut off."

Why?

Because if some bankster wants to do things that will lead to them blowing up - as all Ponzi schemes inevitably do (and leverage is always a Ponzi in some form or fashion), while operating an asset-stripping scheme (which all banking inherently is) then we want them to blow up someone else's economy - not ours.

Yes, we need a banking system. Yes, we need a way to clear payments and legitimately intermediate credit.

No, we do not need trillions of credit-default swaps, interest-rate swap contracts with notional values exceeding global GDP by a couple of orders of magnitude, and 20%+ of our economy being siphoned off for a few fat cats on Wall Street - and to your grinning delight, as Bloomberg's nice photo shows.

The new rules, informally known as Basel III, would force banks to double their capital levels, some analysts expect. Since the onset of the credit crisis in 2008, U.S. voters favor tougher bank regulations, opinion polls show.

Right. Remember that I've been saying for quite some time that some major European banks are running leverage as high as fifty to one? Yep. So this would "only" require them to run 33:1, roughly. Oh, and they get to "count" as "capital" minority stakes in other firms - even though equity has the potential to go to zero, and thus to count it as capital is an absolute FARCE.

Never mind that BIS proposes to give the banks eight years to get their leverage under "control" - defined as "equally as bad as Lehman and Bear Stearns just before they detonated."

Might I remind Frank and Dodd that after the smoking hole appears in the economy it's too late to think about putting a lid on financial weapons of mass destruction? How many smoking holes do we need to see before we recognize this little bit of reality?

30:1 leverage is a Ponzi scheme folks, and we're out of suckers.

Congress needs to tell BIS to stick it.

See, I Told You So (Again) - Deficits

nospam@example.com (Karl Denninger) — Thu, 29 Jul 2010 09:09:00 -0400

Gee Bill, it only took you three years to figure this out?

The New Normal will not be aided nor abetted by a slower-growing population nor by cyclical policy errors that thrust Keynesian consumption remedies on a declining consumer base. Current deficit spending that seeks to maintain an artificially high percentage of consumer spending can be compared to flushing money down an economic toilet.

Somebody finally pulled up a chart!

Gee Bill, how long did it take you to figure this out? Three years? Pimping yourself out for Keynesian BS games for the last two, right? You remember, you're going to "shake hands" with the government, right?

Except what you were shaking wasn't the government's hand.

Yeah.

Now, after nearly $5 trillion flushed down your economic toilet, after your firm's "customers" profited tremendously from that "shake" while the rest of us got the drips that came from it (and we didn't like the taste), now, when the Keynesian fantasy games are threatening to run into a brick wall and destroy the budgetary capacity of the government - NOW you call for a change in course.

Wouldn't it have been something special if we had taken that $5 trillion and instead of spending it on throw-away consumerism we spent $50 billion on 100 nuclear power plants and the upgrades in distribution systems to support them - two per state, with any state that attempts to block, defer, or "NIMBY" them cut off from ALL interstate power delivery? Oh yes, that's within Federal Power too by the Federal Government's view and argument (go read that "Commerce Clause" that the Obama administration, and all previous over the last 50 years, so much love to rely on.)

How about if we bought 80 or 90 of them and spent the rest on electrifying the entire US long-haul rail system? That would have been special too - bye-bye diesel consumption for rail delivery of goods and services, along with the nice, clean nuclear power.

Jobs? Oh that would have created a bunch of them. And unlike the "fun-employment" payments for 99 weeks, you'd have had to get off your fat ass in order to get a check. Yes, it's labor - real labor, with real muscles.

But that's what you finally came around to, isn't it? Something I wrote about many years ago: all production comes from mining something, growing something or manufacturing something.

"Financial engineering" is a stripping operation - that is, it's a tax and redistribution scheme on production - it is not production.

It just happens to be a private tax as opposed to a government one.

PIMpCO ran with the "tax 'em" folks, both government and private, right up until now, when it suddenly becomes apparent that it's not going to work. Now, having realized it, Bill has a great idea - let's grow a brain that extends beyond the stem!

Unfortunately the $5 trillion that was utterly wasted on the stupidity of the previous course of action - a course of action that Bill Gross fully supported - is gone.

Bill Gross: INTENTIONAL FAIL

Oh, They DO Intend To Steal From You

nospam@example.com (Karl Denninger) — Wed, 28 Jul 2010 11:28:00 -0400

And what's better, now the lapdogs of Wall Street are immune from FOIA requests!

The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities." Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.

That argument comes despite the President saying that one of the cornerstones of the sweeping new legislation was more transparent financial markets. Indeed, in touting the new law, Obama specifically said it would “increase transparency in financial dealings."

Mr. President, you're a lying sack of crap.

Nor is this theoretical either. Fox News has already had an FOIA denied:

The SEC cited the new law Tuesday in a FOIA action brought by FOX Business Network.

Nice.

Oh, by the way, this would mean that a Madoff or Stanford "thing" would leave the SEC immune from FOIA requests by the Press (including the "mainstream" along with media folks like myself) to discover whether they had effective and early notice that they intentionally ignored.

Isn't that convenient, given that they did exactly that with Madoff and, it can be argued, Stanford as well?

Indeed, the SEC, The Fed, and Treasury have all tried to refuse compliance with FOIA requests into the backstories of the financial meltdown.

FOIA requests that could (and in some cases have, when they were forced to be complied with via lawsuits) reveal double-dealing, "sweetheart" treatment, and even willful blindness that, in many people's opinion (including mine) reaches the level of intentional collusion that, in a private context, would lead to civil and/or criminal racketeering charges.

To President Obama and CONgress for sticking this in FinReg (and yeah, I missed it, even though I read the entire damn thing):

Heh, Where's My Durables?

nospam@example.com (Karl Denninger) — Wed, 28 Jul 2010 09:19:00 -0400

This is amusing....

New orders for manufactured durable goods in June decreased $2.0 billion or 1.0 percent to $190.5 billion, the U.S. Census Bureau announced today. This was the second consecutive monthly decrease and followed a 0.8 percent May decrease. Excluding transportation, new orders decreased 0.6 percent. Excluding defense, new orders decreased 0.7 percent.

Well, pick your "excludings" here, it all sucked.

Let's look inside.

Machinery orders, down. Shipments up - oops, that would be backlog coming off. Not good.

Computers and electronics has an interesting divergence. The baseline is down 4.1% on shipments and 1.9% on orders. But both subclasses showed increases in new orders. Huh? Hmmmmm.... so we have a bit of uptick in communications gear and computers, but all other electronics are down more than enough to compensate? Looks that way. The subclasses are about 1/3rd of the total, so this implies strongly that consumer electronics are in the crapper.

This wasn't caught by any of the pump monkey commentators this morning. Why did I catch it? Because the electronic sub-categories are the ones I watch very carefully for signs of economic activity in the hiring space, and the implication here is for a modest improvement in that regard.

But if the consumer is in the crapper, it won't matter for long, and worse, it tells me that employers are probably responding to a false demand signal. That, incidentally, aligns with the ECRI leading indicators expectation....

Green sharts!

Interview: Chaostheorien

nospam@example.com (Karl Denninger) — Wed, 28 Jul 2010 08:33:30 -0400

Good reading here, if you're interested in my views "in a nutshell":

Karl Denninger, the publisher of “The Market Ticker”, in an exclusive interview for chaostheorien.de: “In order to honestly assess what’s going on and what has to be done to fix the problems, we first must admit our mistakes.” Furthermore he says why the financial system is more and more a farce, gives his stance on the prospects of a military dictatorship in the United States, and explains his position with regard to Peak Oil.

Have a read..... but grab a beer first.

CBO Director: A Somber Warning

nospam@example.com (Karl Denninger) — Wed, 28 Jul 2010 08:31:00 -0400

File this in the "no, really?" box:

With U.S. government debt already at a level that is high by historical standards, and the prospect that, under current policies, federal debt would continue to grow, it is possible that interest rates might rise gradually as investors’ confidence in the U.S. government’s finances declined, giving legislators sufficient time to make policy choices that could avert a crisis. It is also possible, however, that investors would lose confidence abruptly and interest rates on government debt would rise sharply, as evidenced by the experiences of other countries.

So let's see.... if you buy bonds today there's a chance you could lose some of your money, or there's a chance you could lose a whole lot of your money.

That sounds comforting, doesn't it?

But it's the next sentence that ought to make you sit up in your chair:

Unfortunately, there is no way to predict with any confidence whether and when such a crisis might occur in the United States.

Right.

This is what history tells us. It is also what I have been trying to amplify now for the past three years. The reason is this graph:

What I find amusing is that the CBO is flapping its jaws over only the government's liabilities. It, by the way, is also looking only at the debt held by the public (and not the games played with FICA and Medicare):

Note: The extended-baseline scenario adheres closely to current law, following CBO’s 10-year baseline budget projections through 2020 (with adjustments for the recently enacted health care legislation) and then extending the baseline concept for the rest of the long-term projection period. The alternative fiscal scenario incorporates several changes to current law that are widely expected to occur or that would modify some provisions that might be difficult to sustain for a long period.

It never ceases to amaze me that Congress and others will flap on about this (as CNBS is this morning, as they have many mornings), but none of them want to talk about the real gorilla in the china shop that is blasting everything in sight - that's this graph:

That's total systemic debt compared to GDP - both public and private. The breakdown looks like this:

See that nice pink slice at the top? That's all the federal government is responsible for.

So.... why are we focusing only there again?

Oh, maybe it's because we don't want to talk about the rest - especially not on "business pump-monkey" television that is sponsored by all the big businesses that CREATED this crap-pile of trouble, which incidentally is focused in the following areas:

Household credit. That's "bigger mortgage, bigger house" BS. It's "A Lexus and a BMW in the driveway, so long as I can barely make the payments, because that makes me speshul", driven, of course, by the advertising revenues on that same pump TV.
Non-financial business credit. This is the "small businesses need to go broke faster with their credit cards" game. It's the "borrow your money, rather than make it" to expand your business. It's "growth at any cost, whether you can actually make a profit after all the stripping of your money by the very same big banking and business interests that run that very same pumptastic media.
And, of course, the big daddy, Financial Instruments. That's all the fun stuff. It's the banks "creating money" - well, not really money. The illusion of money. The naked short of unbacked credit issuance against nothing at all. And of course these very same pumptastic crap-spewers on our airwaves are all companies that have a very, very vested interest in seeing that bubble continue.

The problem is, it can't.

Oh sure, government has tried. It has spent and spent and spent, none of which it had, in a puerile and futile attempt to avoid truth-telling - that the above three sectors of the economy must shrink dramatically or our economy is headed straight for a collapse.

Indeed, what history tells us in both Iceland and Greece is that it is precisely when a captured government tries to protect the above three sectors of borrowing from the just desserts of their foibles that a sovereign debt crisis erupts - at least in modern economies.

In one sentence: Wake the hell up America.

I Love 33:1 Leverage - BIS

nospam@example.com (Karl Denninger) — Tue, 27 Jul 2010 15:50:00 -0400

Amusing news here out of BIS....

When it comes to the calibration, the Committee is proposing to test a minimum Tier 1 leverage ratio of 3% during the parallel run period.

Ah, now that's nice. How do we get that sort of leverage ratio being "allowed"? I wonder if Germany's banks might have something to do with that....

I've read the entire report; Bloomberg has a "sanitized" version is that is mostly ok in it's interpretation - the key point being:

July 26 (Bloomberg) -- The Basel Committee on Banking Supervision softened some of its proposed capital and liquidity rules .....

Right.

Someone needs to tell these clowns that both Lehman and Bear blew to the sky with leverage ratios around 30:1, and that their "proposal" allows more than double the former legal limit for investment banks in the US (before Hanky Panky Paulson got the SEC to remove the limit, of course.)

I suppose we need another global financial detonation before people start taking the words "leverage" and "reserves" seriously. Heh, you all know my view on this: One Dollar of Capital.

But if you do that, you have banks that are clearing agents for the economy and utility providers of credit, with each dollar of risk they take being pre-funded by an equity or debt purchaser who stuck THEIR money into the pot, knew they could lose it, and will demand a REASONABLE return.

That is, banks would be stodgy businesses again that paid out most of what they earned in dividends, and that would typically be 5 or 7% a year - and that's it.

The common bankster's salary would be a middle-class wage in the middle of America - a middling-five-figure number.

And the looting of the world's commerce through finding some way to skim off a piece of each and every transaction, amounting in the totality of the marketplace to a colossal tax of well over a trillion dollars in the United States alone each and every year, would end.

High-Frequency Trading: Something Black?

nospam@example.com (Karl Denninger) — Tue, 27 Jul 2010 14:26:00 -0400

Now this is interesting, coming from the annual "black hat" conference in Las Vegas (for those not involved in the computer security world, that's an annual gathering of hackers where various presentations are made that amount to brags and bags that have or can be run on various parts of information technology):

Among the talks conspicuously absent from this year's schedule: a presentation exposing security vulnerabilities in banks' high-speed trading systems.

The talk, planned by security researchers Varun Uppal and Gyan Chawdhary, would have dealt with methods for hiding risky unauthorized trades in high-speed trading applications, as well as demonstrating a "sniffing" software tool capable of siphoning trading information to a faraway hacker to allow a high-tech form of real-time insider trading. But Uppal tells us that the talk has been cancelled after concerns were raised by a financial industry client of the security auditing firm he works for, Information Risk Management.

Methods eh?

I suppose we're supposed to believe that this is all theoretical, right?

Oh, somehow I doubt it.

And why?

Well, it wouldn't have anything to do with firms intentionally ignoring security capabilities for reasons of SPEED, would it? (Note that encryption, in particular, is rather slow comparatively. Plain text is of course very fast.)

While security measures for FIX programs are available, Uppal says he's audited firms that ignore them for convenience or speed. Uppal says that could allow a hacker to monitor a bank's trades and make near-simultaneous ones, or even steal a bank's unique trading algorithm.

Oh, they would do that. That's very nice.

New? Oh no. It's not new either

In a 2007 Black Hat presentation, David Goldsmith and Jeremy Rauch of Matasano Security listed systematic problems with the security of high speed trading systems such as the difficulty of encrypting trade data and banks' reluctance to add any security that might slow down the transactions,

Right. Speed before security. Engage in an arms race and if someone else gets unlawful advantage as a consequence of your refusal to follow best practices, well, that's too damn bad.

Let's contrast that with what happens in the Interbank (e.g. Visa, MasterCard, Discover, etc) networks. There if you store unencrypted cardholder data (it's faster and easier!) or if you use unencrypted transport between devices (it's faster and easier!) and indeed if you store certain information you're not allowed to at all (e.g. CVV data) you are in violation of your contract with the Interbank folks and that contract specifies that you may not only have your access to those networks terminated, but in addition you can be (and sometimes are) fined.

Looks like our so-called "secure" securities markets, those much-vaunted places where all Americans should trust that price discovery is fairly done, that everyone plays on a level field, and that best industry practices are followed for data security in point of fact are none of the above.

I'll make two wagers:

CNBS won't feature this
The SEC will not demand that each and every one of these offending systems be disconnected until all of the bypasses to good industry practice are removed, even if it does mean that your computer is one millionth of a second slower than it was before.

After all, it's far more important to be have the fastest response (that's what HFT is, right, getting in front of the other guy - a legal form of "front-running"?) and if someone manages to unlawfully glean what's going on and does a bad thing as a consequence, well, that's just tough.

For everyone else.

Hattip to the forum's Breaking News area.

We Seem To Be Out Of Suckers...

nospam@example.com (Karl Denninger) — Tue, 27 Jul 2010 11:59:00 -0400

This is rather amusing.....

July 27 (Bloomberg) -- The Federal Reserve’s policy of keeping interest rates persistently low, which has helped boost bank earnings over the last six quarters, is beginning to make it harder for the biggest U.S. lenders to make money.

Oh really? Keeping interest rates low?

Aren't you being a little backward with that, Bloomberg? I think so, and here's why:

Notice that when "QE" started the long end of the curve went higher on rates.

That's "NIM", or "net interest margin." That is, banks can borrow at near-zero (short term rates) and lend out for ten years at the longer rate, which is a higher interest point, pocketing the difference.

Now remember, Bernanke's argument for "QE" is that it would suppress rates. He was either wrong (in which case he won't do it again as he didn't get what he wanted) or he was lying, in which case he intentionally screwed every borrower in America and lied to Congress in the process.

So which is it?

Does it matter?

Well, not really.

There's no loan demand - as I have repeatedly pointed out and have posted the chart on enough times to go blue in my face, private credit capacity has been reached in the economy. People are either unwilling or unable to borrow, but which it is doesn't matter.

The attempted "can kicking" of "reflation" requires that private credit demand re-accelerate and to in fact buy "just a few more years" we would have to roughly double credit outstanding in the system.

We keep trying to cheat reality. We did it in the 1990s and we did it after 2000. The 2000-2007 run in credit was truly impressive - we doubled, roughly, outstanding total credit in the system, while GDP expanded somewhat less than 40%.

The game's over. The Fed has done all they can really do to stimulate further credit demand, and has failed.

“When banks can’t find yielding assets and their book is shrinking, the cash flow on their book is shrinking,” said Whalen of Institutional Risk Analytics. “Everybody’s starving to death.”

With luck it will be a slow, nasty, and painful death by starvation for those banksters and their enablers who intentionally created this mess, despite having actual knowledge that on a perpetual basis what they were doing wouldn't work - it was mathematically impossible for it to do so.

Home Prices In May Were Higher!

nospam@example.com (Karl Denninger) — Tue, 27 Jul 2010 09:31:00 -0400

What a downright amusing screamer, er, headline - "S&P/Case-Schiller Home Prices Rise 4.6% .vs. Year Ago"

Hmmmm...... so let's see, what's $8,000 (the tax credit, which didn't exist a year ago but did in May) of ~$180,000 (median home price, according to the NAR)

Oh wait, that's 4.4%!

That's a funny number, and a funny confluence. Is it really difficult for anyone to figure out what happened here, and why?

Well, you'd think not. In fact, sans the $8,000 credit, prices were down a couple of tenths.

Yeah.

So how's it feel to be a sucker, if you bought in the first few months of this year? Doing good, are 'ya? Overpaid, you did.

And isn't it amusing how the government is so interested in intentionally disadvantaging you as a buyer of houses, in that with the credit now gone it is very likely you ate that entire $8,000 "credit" immediately (and maybe more) in the form of a price adjustment as soon as the credit expired.

Thank Congress for this one - and they didn't give you any lube first.

Fractal Update, 7/26/2010

nospam@example.com (Karl Denninger) — Mon, 26 Jul 2010 12:20:20 -0400

New Home Sales: They Sucked

nospam@example.com (Karl Denninger) — Mon, 26 Jul 2010 11:45:00 -0400

You know, I have to love the mainstream media.

July 26 (Bloomberg) -- Sales of U.S. new homes rose in June more than forecast following an unprecedented collapse the prior month, a signal the worst of the slump triggered by the end of a government tax credit is over.

Yeah, ok. Whatever.

Note that June is the start of the "summer selling season" for houses, in that kids are out of school and, when possible, families prefer not to disrupt educations. They therefore try to move in the summer.

Why is this important?

Because this is the weakest new home sales number ever recorded (records began in 1963) for June.

Remember as well that new home sales reflect contracts signed, not closings. As such some of these "sales" will undoubtedly not close, and thus not really be sales. That, however, won't be reported (at all.)

Best-a-luck with believing the "bottom" callers.... again.

Wither The Economy?

nospam@example.com (Karl Denninger) — Mon, 26 Jul 2010 10:42:39 -0400

Wither is right. We'll look at the contradictory signals being given by earnings reports and various leading indicators, along with the likely impact and try to decipher the news of the last two weeks, including earnings and the market, against the backdrop of a deteriorating macro environment.

Come join us at http://blogtalkradio.com/marketticker at 3:30 Central today.

Green Sharts! Chicago Fed Index -0.63

nospam@example.com (Karl Denninger) — Mon, 26 Jul 2010 09:50:07 -0400

Oops....

Led by deterioration in production- and employment-related indicators, the Chicago Fed National Activity Index declined to –0.63 in June, down from +0.31 in May. Three of the four broad categories of indicators that make up the index made negative contributions in June, while the sales, orders, and inventories category made the lone positive contribution.

Well now let's see... we add this to the ECRI leading index (which is now recording a -10% number) and you have yet more indications of the dreaded "double dip."

Or is it?

Naw.

We simply never left recession, and now the Federal Government's attempts to prop up the economy with a full 11% of GDP in debt-based-spending (just like you might with your credit card if you lost your job!) are failing too.

The government should have left well-enough alone and forced the insolvent to take their lumps in 2007. We'd be done with this by now.

Instead, we've dug an even bigger hole, and one that is now threatening to collapse on us.

Just as it did in 1932 - or 1937.

(Heh wait, didn't FDR fix it all? If so, how in the hell did we get a Depression inside a Depression? Yes, we really did... go look it up.)