Consumer Price Inflation Chart from the Propagandaministerium

From the New York Times

Looks like we are experiencing a really serious deflation.

Print faster Ben. Bail out those banks. Do whatever it takes. Save us!




This is from ShadowStats.com

Here is the Consumer Price Index calculated using the sames rules that were in place in 1990 before Daddy Bush, Slick Willy and Junior worked their changes on it.

We like the drop in gasoline prices. We'll like the deflation even more if and when it shows up in healthcare, food costs, tuition, electricity, insurance, appliances, and automobiles.

Until then, be happy and keep eating your government recommended Dog Chow.





We beieve we are seeing significant price declines in key commodities like oil and some building materials. Price and narrow money deflation is a natural phenomenon in periods of swift asset declines, as we had seen in 2002 before the Fed started their reflation which led to the housing and equity bubbles.

But to hold this out as an 'apples to apples' comparison back to 1920, which many will do because it either supports their econo-religious theories, or promotes an atmosphere favorable to the government interventions, is reprehensible.

AIG Has Another $30 to $200 Billion in Uncovered Losses to be Bailed Out

This is getting so brazen and so out of bounds that the atmosphere is starting to feel charged, like a college cafeteria after finals, or a big football win, or before the holidays.

You just know that at some point someone is going to throw the first piece of pie...

Bloomberg
AIG Writedowns May Rise $30 Billion on Swaps Not in U.S. Rescue
By James Sterngold

Dec. 17 (Bloomberg) -- American International Group Inc., which already has suffered more than $60 billion in writedowns and losses, may have to absorb almost $30 billion more because of flaws in the way its holdings are valued.

An examination of AIG’s credit-default swaps guaranteeing more than $300 billion of corporate loans, mortgages and other assets not covered by a $152.5 billion federal rescue shows the New York-based insurer may value some of its positions at levels that don’t reflect distress in the markets, according to an analyst at Gradient Analytics Inc. and a tax consultant who teaches at Columbia University Business School in New York. Executives at two firms that have similar investments say they account for the securities differently than AIG does....

Rescue Package

The U.S. rescue plan announced in November, the government’s second effort to save AIG, covers only its most troubled credit-default swaps, about 20 percent of the $377 billion on the insurer’s books as of Sept. 30. Under the plan, a new government-backed entity will acquire collateralized debt obligations with a face value of $72 billion that had been insured by AIG swaps. An initial transfer of $46.1 billion of CDOs was announced on Dec. 2. A second fund bought troubled residential mortgage-backed securities with a face value of $39.3 billion, AIG said on Dec. 15.

Wider losses may cast new doubt on whether the federal funds will be enough to prop up AIG, the biggest U.S. insurer by assets. The U.S. package almost doubled from the $85 billion approved in September to save the company from bankruptcy. Previous miscalculations about the swaps contributed to the ouster of Chief Executive Officer Robert Willumstad and his predecessor, Martin Sullivan.

In November 2007, when AIG reported a $352 million loss on its swaps, it said it was “highly unlikely” the insurer would have to make payments on them. And last December Sullivan assured investors that losses from swaps on U.S. subprime mortgages were “manageable.”

European Banks

Credit-default swaps are contracts that protect investors who buy bonds or other securities. If a debt issuer or borrower misses payments, the seller of the contract -- in this case, AIG -- covers some or all of the losses. Even if a borrower doesn’t default, accounting rules may require insurers to write down the swap contracts when the value of the underlying assets drops.

AIG swaps not covered by the government program include guarantees on $249.9 billion of corporate loans and residential mortgages, most of them made by banks in Europe, according to the company’s third-quarter 10-Q filing. There are also swaps covering $51 billion of collateralized loan obligations, or CLOs, and $5 billion of lower-rated mezzanine tranches.

Writedowns on these AIG holdings total less than $1.5 billion so far this year, according to company filings, compared with $20 billion for the swaps guaranteeing the $72 billion of CDOs being acquired under the federal rescue....

Even if the credit markets were to stabilize, the valuations of structured securities are still far from where they should be, said Laurie Goodman, a former head of fixed- income research at UBS Securities LLC, who recently left to join Amherst Holdings LLC in Austin, Texas.

“The losses we’ve seen so far are a fraction of what we’ll be seeing,” she said.

Goldman Sachs Offshores Its Profits and Reduces Its Taxes to 1%

"With the right hand out begging for bailout money, the left is hiding it offshore."

In fairness to Goldman, if there can be such a thing, they are taking a lot of writeoffs to reduce their taxes this year, in addition to offshoring their profits into foreign venues with favorable tax rates. That is just globalization, right?

As an aside, for some time now I have wondered if globalization has become just another enabler, wherein multinational financial corporations can play a larger set of jurisdictions and peoples against one another for the benefit of an elite minority. International trade based on an exchange of competitive advantage and surplus is a good idea.

Using globalization to undermine the values of certain countries with regard to the environment, healthcare, child labor, living standards, and the domestic laws is exploitation and victimization of the many by the few.

It is a way to reduce free nations to the lowest common denominator of victimization and indentured servitude. It does not have to be this way, but it all too often give rise to the slave and opium trade.

Without regulation free trade swiftly degenerates into manipulation and exploitation. Free trade is not a natural good in and of itself. It can be a highly destructive force, devastating entire economies.

It is never surprising anymore to see how many initiatives promoted by a certain political class like deregulation, globalization, and competitiveness are nothing more than facades for campaigns of organized looting.

We can comfort ourselves with the knowledge that most of the bailout money is being given out in bonuses anyway, and surely those multi-millionaire employees will be paying some income tax. Unless they are engaging in aggressive management of their tax returns. You think?

Goldman Sachs’s Tax Rate Drops to 1%, or $14 Million
By Christine Harper

Dec. 16 (Bloomberg) -- Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007.

The company’s effective income tax rate dropped to 1 percent from 34.1 percent, New York-based Goldman Sachs said today in a statement. The firm reported a $2.3 billion profit for the year after paying $10.9 billion in employee compensation and benefits.

Goldman Sachs, which today reported its first quarterly loss since going public in 1999, lowered its rate with more tax credits as a percentage of earnings and because of “changes in geographic earnings mix,” the company said.

The rate decline looks “a little extreme,” said Robert Willens, president and chief executive officer of tax and accounting advisory firm Robert Willens LLC.

“I was definitely taken aback,” Willens said. “Clearly they have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions.”

U.S. Representative Lloyd Doggett, a Texas Democrat who serves on the tax-writing House Ways and Means Committee, said steps by Goldman Sachs and other banks shifting income to countries with lower taxes is cause for concern.

“This problem is larger than Goldman Sachs,” Doggett said. “With the right hand out begging for bailout money, the left is hiding it offshore.”

In the first nine months of the fiscal year, Goldman had planned to pay taxes at a 25.1 percent rate, the company said today. A fourth-quarter tax credit of $1.48 billion was 41 percent of the company’s pretax loss in the period, higher than many analysts expected. David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, expected the fourth-quarter tax credit to be 28 percent.

The tax-rate decline may raise some eyebrows because of the support the U.S. government has provided to Goldman Sachs and other companies this year, Willens said.

“It’s not very good public relations,” he said.