Tag: finance

A decision by the FHFA requiring the GSEs to finally release detailed information on loans they acquired and guaranteed uncovers an ugly truth about the GSEs that many should be aware of (as we noted the exuberance here). The release was only required on 35 million fully-amortizing, full documentation, 30-year fixed rate mortgages, which means as JPMorgan's Michael Cembalest notes the underwriting histories on another 20-30 million loans (e.g., the riskier ones) remain a mystery (and likely will forever). As Cembalest concludes, some people made up their minds on all the factors causing the housing crisis in 2009, and others in 2011. As long as new information keeps coming out, it seems premature to close the book on it, he adds, first, the private sector descent into underwriting hell took place well after the multi-trillion dollar GSE balance sheets had gone there first; and second, there are many reasons to wonder how bad the former would have been had the latter not preceded it.

Via JPMorgan's Michael Cembalest,

"The Course of Empire": A Retrospective On The US Housing Crisis

Thomas Cole’s 19th century paintings entitled Course of Empire, chronicling the rise and fall of civilizations, have been reinterpreted below as a commentary on the US housing crisis. Why now? This retrospective is made possible in part by a decision by the Federal Housing Finance Authority requiring Freddie Mac and Fannie Mae to finally release detailed information on loans they acquired and guaranteed1. The release was only required on 35 million fully-amortizing, fulldocumentation, 30-year fixed rate mortgages, meaning that the underwriting histories on another 20-30 million loans (e.g., the riskier ones) remain a mystery. Some people made up their minds on all the factors causing the housing crisis in 2009, and others in 2011. As long as new information keeps coming out, it seems premature to close the book on it; it took 30 years for Friedman to diagnose the Great Depression. This latest disclosure, though partial and purposefully incomplete, adds to the evolving understanding of what took place, why, and in what sequence. Everyone is entitled to their opinion; the charts and the data below explain mine.

“The Pastoral State”

Informed by the experience of the 1980’s housing crisis, by 1990, government sponsored enterprises Fannie Mae and Freddie Mac adhered to prudent underwriting on single family mortgages. The GSEs had a small allowance for loans outside traditional investment-grade standards: loans with debt-to-income ratios above 38%, loan-to-values above 90% on purchase loans, or loan to values on cash-out refinancing loans above 75%2. However, these exceptions were typically justified by compensating factors such as higher cash reserves or higher levels of equity. Even the Federal Housing Administration, which focuses on lower income households and first time homebuyers, acted with more restraint than in later years when measured by their LTVs over 97%.

The GSEs had a one third share of outstanding mortgages compared to GSE plus private sector lending. Private sector subprime had existed for decades, but was limited in size at ~10% of annual residential mortgage origination. Home ownership rates and home prices relative to income and replacement cost were stable at post-war averages.

“Consummation of Empire”

The era of sound GSE lending did not last. The 1992 “Federal Housing Enterprises Financial Safety and Soundness Act” enabled the Department of Housing and Urban Development to set formalized minimum affordable lending standards for the GSEs. Only George Orwell could have named a bill that was so fundamentally contradicted by its purpose and consequence. HUD first set Low & Moderate Income standards at 30% of annual GSE acquisitions, and raised them to 50% in the week before the November 2000 election. In the wake of the bill, in 1994, Fannie Mae issued a press release citing its commitment to transforming the housing finance system, vowing to provide $1 trillion in targeted lending, and citing a goal of eliminating the “no” in the mortgage application process. Prudent 1990 GSE underwriting standards, designed to benefit future borrowers and not just current ones, were discarded. Home ownership rates jumped, and home prices relative to replacement cost, rent and household income began to rise above historically stable levels.

By 2002, the revolution is complete: the GSEs increased their market share from one third to 60% as the size of the mortgage market rose by 2.5x vs. 1990; Freddie Mac’s non-traditional loans were ~45% of their annual acquisitions and guarantees; Fannie Mae claimed that the FHA was its only competitor, asserting that it had become overwhelmingly an affordable housing company; and more than 40% of Fannie Mae’s Alt A (low documentation) loans qualified for the HUD-determined affordable housing goals. These developments were celebrated by HUD as a “revolution” in affordable lending. In 2002, Nobel Laureate Joseph Stiglitz and future OMB Director Peter Orszag cited the probability of a shock to GSE balance sheets as “substantially less than one in 500,000”, and estimated the expected cost to the government of guaranteeing $1 trillion of mortgages at $2 million. Yes, you read that correctly.

Note that the GSE revolution takes place before the explosion in private sector subprime and Alt A loans. The private sector, seeing its market share shrink, organizes several not-so-successful efforts to constrain GSE expansion. Private sector subprime and Alt A market shares remain constant, but its underwriting becomes riskier as the GSEs encroach on their territory with a multi-trillion dollar balance sheet.

“Prelude to Destruction”

GSE non-traditional loans eventually converge to 40%-50% of their annual underwriting, culminating with a warning from Fannie Mae to shareholders about losses from affordable lending. There are some remarkable quotes from HUD in 2000 on how it expected this GSE revolution to result in a private sector revolution as well; it eventually did. The private sector finds a way to compete: the deepening of private mortgage backed securities markets. Propelled by demand when the Fed cut policy rates to 1% in 2002, PMBS markets did not price much of a differential between subprime and traditional risk. As a result, the funding advantage enjoyed by GSEs was conveyed to private sector originators. Privately securitized mortgages skyrocket, home prices surge further, and the mortgage market doubles in size vs. 2002. The private sector regains market share, mostly through subprime and Alt A loans which rose to 40% of annual origination. To be clear, private sector defaults and losses per dollar on subprime were much worse than on GSE loans, particularly when related to malignant derivative offshoots. To complete the circle, the GSEs support private sector origination by purchasing $275 billion of mostly subprime mortgage-backed securities by 2005. With these trends in place, it’s only a matter of time before it all comes undone.

I did not reproduce Cole’s last painting in the series (“Desolation”) since we know what came next. The paintings above convince me of 2 things. First, the private sector descent into underwriting hell took place well after the multi-trillion dollar GSE balance sheets had gone there first. Second, there are many reasons to wonder how bad the former would have been had the latter not preceded it. I have doubts that public consciousness is aware of this timeline and the impact of public policy on it, and stronger doubts that data on the millions of undisclosed, riskier Fannie Mae and Freddie Mac loans will ever be released. Let’s just leave it at that.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/cZGkd1tesdk/story01.htm Tyler Durden

With such a spectacular source of impeccably timed, if always wrong, FX trading recommendations as Tom Stolper, who has cost his muppets clients tens of thousands of pips in currency losses in the past 5 years, and thus generated the inverse amount in profits for Goldman’s trading desks, the last thing we expected to learn was that Goldman’s currency traders, who by definition takes the opposite side of its Kermitted clients – because prop trading is now long forbidden, (right Volcker rule?) and any prop trading blow up in the aftermath of the London Whale fiasco is not only a humiliation but probably illegal – had lost massive amounts on an FX trade gone wrong. Which is precisely what happened.

According to the WSJ, “a complex bet in the foreign-exchange market backfired on Goldman Sachs Group Inc. during the third quarter, people familiar with the matter said, contributing to a revenue slump that prompted senior executives to defend the firm’s trading strategy. Revenue in Goldman’s currency-trading business fell sharply in the third quarter from the second. Within that group, the firm’s foreign-exchange options desk posted a net loss during the period, the people said.” The trade in question: “A structured options trade tied to the U.S. dollar and Japanese yen steepened the decline, according to the people. It isn’t clear how large the trade was or how long it was in place.”

Curious: does this perhaps explain why just after Q3 ended, on October 3, Goldman’s head FX strategist Tom Stolper came out with an FX trade in which Goldman “recommend going short $/JPY at current levels of about 97.30 for a tactical target of 94.00, with a stop on a close above 98.80.” Obviously, we promptly took the inverse side: “The only question we have: will the length of time before Stolper is once again Stolpered out be measured in days, or hours?” Naturally, Stolper was stolpered stopped out in a few short days, leading to a few hundred pips in profits for those who faded Stolper… and yet we wonder: was Goldman merely trying to offload its USDJPY exposure gone wrong on its clients in the days after the “trade tied to the USD and the JPY steepened the decline”? If so, that would be even more illegal than Goldman pretending to be complying with the Volcker Rule.

As for the size of the total loss we had a hint that something had gone very wrong when we reported Goldman’s Q3 earnings broken down by group. Back then we said “the only bright light were Investment banking revenues which were $1.7 billion, unchanged from a year ago, if down 25% from Q2. It’s all downhill from here, because the all important Fixed Income, Currency and Commodities group printed just $1.247 billion, down a whopping 44% Y/Y, well below expectations.” Indicatively, Goldman had made $2.5 billion in FICC the prior quarter, and $2.2 billion a year prior. Obviously something bad had happened.

We now know that that something was an FX trading crashing and burning in Goldman’s face. Reuters added:

Goldman Sachs Group Inc lost more than $1 billion on currency trades during the third quarter, recent regulatory filings show, offering some insight into why the firm, considered one of Wall Street’s most savvy traders, reported its worst quarter in a key trading unit since the financial crisis.

 

Goldman’s currency-trading problems came from the way the bank had positioned itself in emerging markets, two sources familiar with the matter said.

 

Specific positions could not be learned, but the bank was anticipating that the Federal Reserve would begin winding down its monetary-easing programs, the sources said. When the Fed unexpectedly announced that it would keep its massive bond-buying program in place, Goldman was left with positions that, “absolutely got annihilated,” as one person familiar with the matter put it.

Since as the WSJ first reported the position involved the USDJPY, which first spiked then plunged following the Fed’s non-taper announcement, and kept sliding until it hit 96.50 in early October just when Stolper suggested putting on the short USDJPY trade (when USDJPY soared), it seems that at least this one time both Goldman’s prop traders and the trade recommended by Stolper were on the same side.

Which resulted in a $1+ billion loss for Goldman.

Congratulations Tom: that in itself is worth ignoring that Goldman completely made a mockery out of any and all Volcker prop-trading prohibitions. In fact, keep it up and keep those trade recommendations coming.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3fSHvneBgws/story01.htm Tyler Durden

With such a spectacular source of impeccably timed, if always wrong, FX trading recommendations as Tom Stolper, who has cost his muppets clients tens of thousands of pips in currency losses in the past 5 years, and thus generated the inverse amount in profits for Goldman’s trading desks, the last thing we expected to learn was that Goldman’s currency traders, who by definition takes the opposite side of its Kermitted clients – because prop trading is now long forbidden, (right Volcker rule?) and any prop trading blow up in the aftermath of the London Whale fiasco is not only a humiliation but probably illegal – had lost massive amounts on an FX trade gone wrong. Which is precisely what happened.

According to the WSJ, “a complex bet in the foreign-exchange market backfired on Goldman Sachs Group Inc. during the third quarter, people familiar with the matter said, contributing to a revenue slump that prompted senior executives to defend the firm’s trading strategy. Revenue in Goldman’s currency-trading business fell sharply in the third quarter from the second. Within that group, the firm’s foreign-exchange options desk posted a net loss during the period, the people said.” The trade in question: “A structured options trade tied to the U.S. dollar and Japanese yen steepened the decline, according to the people. It isn’t clear how large the trade was or how long it was in place.”

Curious: does this perhaps explain why just after Q3 ended, on October 3, Goldman’s head FX strategist Tom Stolper came out with an FX trade in which Goldman “recommend going short $/JPY at current levels of about 97.30 for a tactical target of 94.00, with a stop on a close above 98.80.” Obviously, we promptly took the inverse side: “The only question we have: will the length of time before Stolper is once again Stolpered out be measured in days, or hours?” Naturally, Stolper was stolpered stopped out in a few short days, leading to a few hundred pips in profits for those who faded Stolper… and yet we wonder: was Goldman merely trying to offload its USDJPY exposure gone wrong on its clients in the days after the “trade tied to the USD and the JPY steepened the decline”? If so, that would be even more illegal than Goldman pretending to be complying with the Volcker Rule.

As for the size of the total loss we had a hint that something had gone very wrong when we reported Goldman’s Q3 earnings broken down by group. Back then we said “the only bright light were Investment banking revenues which were $1.7 billion, unchanged from a year ago, if down 25% from Q2. It’s all downhill from here, because the all important Fixed Income, Currency and Commodities group printed just $1.247 billion, down a whopping 44% Y/Y, well below expectations.” Indicatively, Goldman had made $2.5 billion in FICC the prior quarter, and $2.2 billion a year prior. Obviously something bad had happened.

We now know that that something was an FX trading crashing and burning in Goldman’s face. Reuters added:

Goldman Sachs Group Inc lost more than $1 billion on currency trades during the third quarter, recent regulatory filings show, offering some insight into why the firm, considered one of Wall Street’s most savvy traders, reported its worst quarter in a key trading unit since the financial crisis.

 

Goldman’s currency-trading problems came from the way the bank had positioned itself in emerging markets, two sources familiar with the matter said.

 

Specific positions could not be learned, but the bank was anticipating that the Federal Reserve would begin winding down its monetary-easing programs, the sources said. When the Fed unexpectedly announced that it would keep its massive bond-buying program in place, Goldman was left with positions that, “absolutely got annihilated,” as one person familiar with the matter put it.

Since as the WSJ first reported the position involved the USDJPY, which first spiked then plunged following the Fed’s non-taper announcement, and kept sliding until it hit 96.50 in early October just when Stolper suggested putting on the short USDJPY trade (when USDJPY soared), it seems that at least this one time both Goldman’s prop traders and the trade recommended by Stolper were on the same side.

Which resulted in a $1+ billion loss for Goldman.

Congratulations Tom: that in itself is worth ignoring that Goldman completely made a mockery out of any and all Volcker prop-trading prohibitions. In fact, keep it up and keep those trade recommendations coming.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3fSHvneBgws/story01.htm Tyler Durden

China’s HSBC Flash PMI missed expectations rather notably (50.4 vs 50.8 exp) and dropped its most MoM since May as the hope-mongering of a China-led renaissance in global growth is dashed on the shores of liquidity reality. It was a mixed bag – providing just enough for everyone under the covers. New exports orders dropped to 3-month lows and employment flipped into the deteriorating camp but manufacturing output rose to its highest in 8 months (sure, why not – the “if we build it then we’ll vendor finance it” model worked before, right?) Market reactions are generally bad-news-is-bad-news with US equity futures down and the Hang Seng extending losses.

 

 

The PBOC is offering up some liquidity today but at notably higher rates once again – so the tightening bias remains…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LMoD0gU5Dwk/story01.htm Tyler Durden

Submitted by Michael Snyder of The Economic Collapse blog,

According to a whistleblower that has recently come forward, Census employees have been faking and manipulating U.S. employment numbers for years.  In fact, it is being alleged that this manipulation was a significant reason for why the official unemployment rate dipped sharply just before the last presidential election.  What you are about to read is incredibly disturbing.  The numbers that the American people depend upon to make important decisions are being faked.  But should we be surprised by this?  After all, Barack Obama has been caught telling dozens of major lies over the past five years.  At this point it is incredible that there are any Americans that still trust anything that comes out of his mouth.  And of course it is not just Obama that has been lying to us.

Corruption and deception are rampant throughout the entire federal government, and this has been the case for years.  Now that some light is being shed on this, hopefully the American people will respond with overwhelming outrage and disgust.

The whistleblower that I mentioned above has been speaking to John Crudele of the New York Post.  In his new article entitled "Census ‘faked’ 2012 election jobs report", he says that the huge decline in the unemployment rate in September 2012 was "manipulated"…

In the home stretch of the 2012 presidential campaign, from August to September, the unemployment rate fell sharply — raising eyebrows from Wall Street to Washington.

 

The decline — from 8.1 percent in August to 7.8 percent in September — might not have been all it seemed. The numbers, according to a reliable source, were manipulated.

Two years earlier, the Census had actually caught an employee "fabricating data", but according to this whistleblower the corruption at the Census Bureau goes much deeper than that…

And a knowledgeable source says the deception went beyond that one employee — that it escalated at the time President Obama was seeking reelection in 2012 and continues today.

 

“He’s not the only one,” said the source, who asked to remain anonymous for now but is willing to talk with the Labor Department and Congress if asked.

 

The Census employee caught faking the results is Julius Buckmon, according to confidential Census documents obtained by The Post. Buckmon told me in an interview this past weekend that he was told to make up information by higher-ups at Census.

Well, is it really such a big deal that some of the unemployment numbers were faked?

After all, hasn't the unemployment rate been consistently going down anyway?

Unfortunately, as you will see below, that is simply not the case.  The following are five massive economic lies that the government has been telling  you…

1. "The Unemployment Rate Has Been Steadily Going Down"

According to the official government numbers, the U.S. unemployment rate has fallen all the way down to 7.3 percent.

That sounds really good, and it would seem to imply that a higher percentage of the American people are now working.

Sadly, that is not the truth at all.

Posted below is one of my favorite charts.  The employment-population ratio measures the percentage of the working age population that actually has a job.  As you can see, this number fell dramatically during the last recession and since the end of 2009 it has remained remarkably flat.  In fact, it has stayed between 58 and 59 percent for 50 months in a row…

At the moment, the employment-population ratio is just one-tenth of one percent above the lowest level that it has been throughout this entire crisis.

So are we in an "employment recovery"?

Absolutely not, and anyone that tries to tell you that is lying to you.

So how is the government getting the unemployment rate to go down?

Well, they are accomplishing this by pretending that millions upon millions of unemployed Americans have disappeared from the labor force.

According to the government, the percentage of Americans that want to work is now supposedly at a 35 year low…

If the labor force participation rate was still exactly where it was at when Barack Obama was first elected in 2008, the official unemployment rate would be about 11 percent right now.  People would be running around going crazy and wondering when the "economic depression" would finally end.

But when people hear "7.3 percent", that doesn't sound so bad.  It makes people feel better.

Of course if you are currently unemployed and looking for a job that doesn't exactly help you.  At this point there is intense competition even for minimum wage jobs in America.  For example, according to Business Insider you actually have a better statistical chance of getting into Harvard than you do of being hired at a new Wal-Mart that is opening up in the Washington D.C. area…

The store is currently combing through more than 23,000 applications for 600 available positions, reports NBC Washington.

 

That means that Wal-Mart will be able to hire one person for every 38 applications it receives — i.e., just 2.6% of applicants will walk out with a job.

 

That's more difficult than getting into Harvard. The Ivy League university accepts 6.1% of applicants.

2. "Inflation Is Low"

This is another lie that government officials love to tell.  In particular, the boys and girls over at the Federal Reserve love to try to convince all of us that inflation is super low because it gives them an excuse to recklessly print lots more money.

But anyone that goes to the grocery store or pays bills on a regular basis knows that there is plenty of inflation in the economy.  And if we were being given honest numbers, they would show that.

According to John Williams of shadowstats.com, if the U.S. inflation rate was still calculated the exact same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today.

But the Federal Reserve certainly doesn't want everyone running around talking about "Jimmy Carter" and "stagflation" because then people would really start pressuring them to end their wild money printing schemes.

And without a doubt, what the Fed is doing is absolutely insane.  The chart posted below shows that the M1 money supply has nearly doubled since the beginning of 2008…

 

3. "Quantitative Easing Is Economic Stimulus"

How many times have you heard the mainstream media tell you something along these lines…

"The Federal Reserve decided today that the economic stimulus must continue."

There is just one thing wrong with that statement.

As I showed in a previous article, it is a total hoax.

In fact, a former Federal Reserve official that helped manage the Federal Reserve's quantitative easing program during 2009 and 2010 is publicly apologizing to the rest of the country for being involved in "the greatest backdoor Wall Street bailout of all time"…

I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.

Yes, quantitative easing has most certainly helped Wall Street (at least temporarily).

Meanwhile, median household income in the U.S. has fallen for five years in a row.

Meanwhile, the federal government is now spending nearly a trillion dollars a year on welfare.

Meanwhile, 1.2 million students that attend public schools in America are now homeless.  In fact, that number has risen by 72 percent since the start of the last recession.

4. "Obamacare Is Going To Be Good For Middle Class Americans"

There were three giant promises that were used to sell Obamacare to the American people…

#1 We would all be able to keep our current health insurance plans.

#2 Millions more Americans were going to be covered by health insurance.

#3 Most Americans would be paying lower health insurance premiums.

Well, it turns out that all of them were lies.

At this point, approximately 4 million Americans have already had their health insurance plans canceled due to Obamacare, and according to Forbes that number could ultimately reach 93 million.

And so far only about 100,000 Americans have actually signed up for Obamacare, so that means that the number of Americans with health insurance has dropped by about 3.9 million since the beginning of October.

Good job Obama.

Meanwhile, Americans all over the country are being hit with a massive case of sticker shock as they start to realize what Obamacare is going to do to their wallets.

According to one study, health insurance premiums for men are going to go up by an average of 99 percent under Obamacare and health insurance premiums for women are going to go up by an average of 62 percent under Obamacare.

And if you are a young man, you are going to get hit particularly hard.  At this point, it is being projected that health insurance premiums for healthy 30-year-old men will rise by an average of 260 percent.

But you don't have to be young to pay higher premiums.  As I mentioned the other day, one couple down in Texas was recently hit with a 539 percent rate increase.

 

5. "The U.S. National Debt Is Under Control"

The mainstream media would have us believe that the budget deficit is now under control and the U.S. national debt is not a significant problem any longer.

But that is not the truth.

The truth is that we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in all of U.S. history combined.

Every single hour of every single day, our politicians are stealing about $100,000,000 from future generations of Americans.  It is a crime so vast that it is hard to put into words, and it is literally destroying the economic future of this country.

Over the last 13 and a half months, the U.S. national debt has increased by more than 1.12 trillion dollars.

If you were alive when Jesus Christ was born and you had spent a million dollars every single day since then, you still would not have spent that much money by now.

And most Americans don't realize this, but the U.S. government must borrow far more than a trillion dollars each year.  Trillions more in existing debt must be "rolled over" just to keep the game going.

For example, the U.S. government rolled over more than 7.5 trillion dollars of existing debt in fiscal 2013.

So what is going to happen someday when the rest of the world pulls out and stops lending us trillions of dollars at ridiculously low interest rates that are way below the real rate of inflation?

Our financial system is far more vulnerable than we are being told.  We are in the terminal phase of the greatest debt bubble in the history of the planet, and when this bubble bursts it is going to be an absolutely spectacular disaster.

Please don't believe the mainstream media or the politicians when they promise you that everything is going to be okay.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/HX7O_6RIPy4/story01.htm Tyler Durden

Submitted by Michael Snyder of The Economic Collapse blog,

According to a whistleblower that has recently come forward, Census employees have been faking and manipulating U.S. employment numbers for years.  In fact, it is being alleged that this manipulation was a significant reason for why the official unemployment rate dipped sharply just before the last presidential election.  What you are about to read is incredibly disturbing.  The numbers that the American people depend upon to make important decisions are being faked.  But should we be surprised by this?  After all, Barack Obama has been caught telling dozens of major lies over the past five years.  At this point it is incredible that there are any Americans that still trust anything that comes out of his mouth.  And of course it is not just Obama that has been lying to us.

Corruption and deception are rampant throughout the entire federal government, and this has been the case for years.  Now that some light is being shed on this, hopefully the American people will respond with overwhelming outrage and disgust.

The whistleblower that I mentioned above has been speaking to John Crudele of the New York Post.  In his new article entitled "Census ‘faked’ 2012 election jobs report", he says that the huge decline in the unemployment rate in September 2012 was "manipulated"…

In the home stretch of the 2012 presidential campaign, from August to September, the unemployment rate fell sharply — raising eyebrows from Wall Street to Washington.

 

The decline — from 8.1 percent in August to 7.8 percent in September — might not have been all it seemed. The numbers, according to a reliable source, were manipulated.

Two years earlier, the Census had actually caught an employee "fabricating data", but according to this whistleblower the corruption at the Census Bureau goes much deeper than that…

And a knowledgeable source says the deception went beyond that one employee — that it escalated at the time President Obama was seeking reelection in 2012 and continues today.

 

“He’s not the only one,” said the source, who asked to remain anonymous for now but is willing to talk with the Labor Department and Congress if asked.

 

The Census employee caught faking the results is Julius Buckmon, according to confidential Census documents obtained by The Post. Buckmon told me in an interview this past weekend that he was told to make up information by higher-ups at Census.

Well, is it really such a big deal that some of the unemployment numbers were faked?

After all, hasn't the unemployment rate been consistently going down anyway?

Unfortunately, as you will see below, that is simply not the case.  The following are five massive economic lies that the government has been telling  you…

1. "The Unemployment Rate Has Been Steadily Going Down"

According to the official government numbers, the U.S. unemployment rate has fallen all the way down to 7.3 percent.

That sounds really good, and it would seem to imply that a higher percentage of the American people are now working.

Sadly, that is not the truth at all.

Posted below is one of my favorite charts.  The employment-population ratio measures the percentage of the working age population that actually has a job.  As you can see, this number fell dramatically during the last recession and since the end of 2009 it has remained remarkably flat.  In fact, it has stayed between 58 and 59 percent for 50 months in a row…

At the moment, the employment-population ratio is just one-tenth of one percent above the lowest level that it has been throughout this entire crisis.

So are we in an "employment recovery"?

Absolutely not, and anyone that tries to tell you that is lying to you.

So how is the government getting the unemployment rate to go down?

Well, they are accomplishing this by pretending that millions upon millions of unemployed Americans have disappeared from the labor force.

According to the government, the percentage of Americans that want to work is now supposedly at a 35 year low…

If the labor force participation rate was still exactly where it was at when Barack Obama was first elected in 2008, the official unemployment rate would be about 11 percent right now.  People would be running around going crazy and wondering when the "economic depression" would finally end.

But when people hear "7.3 percent", that doesn't sound so bad.  It makes people feel better.

Of course if you are currently unemployed and looking for a job that doesn't exactly help you.  At this point there is intense competition even for minimum wage jobs in America.  For example, according to Business Insider you actually have a better statistical chance of getting into Harvard than you do of being hired at a new Wal-Mart that is opening up in the Washington D.C. area…

The store is currently combing through more than 23,000 applications for 600 available positions, reports NBC Washington.

 

That means that Wal-Mart will be able to hire one person for every 38 applications it receives — i.e., just 2.6% of applicants will walk out with a job.

 

That's more difficult than getting into Harvard. The Ivy League university accepts 6.1% of applicants.

2. "Inflation Is Low"

This is another lie that government officials love to tell.  In particular, the boys and girls over at the Federal Reserve love to try to convince all of us that inflation is super low because it gives them an excuse to recklessly print lots more money.

But anyone that goes to the grocery store or pays bills on a regular basis knows that there is plenty of inflation in the economy.  And if we were being given honest numbers, they would show that.

According to John Williams of shadowstats.com, if the U.S. inflation rate was still calculated the exact same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today.

But the Federal Reserve certainly doesn't want everyone running around talking about "Jimmy Carter" and "stagflation" because then people would really start pressuring them to end their wild money printing schemes.

And without a doubt, what the Fed is doing is absolutely insane.  The chart posted below shows that the M1 money supply has nearly doubled since the beginning of 2008…

 

3. "Quantitative Easing Is Economic Stimulus"

How many times have you heard the mainstream media tell you something along these lines…

"The Federal Reserve decided today that the economic stimulus must continue."

There is just one thing wrong with that statement.

As I showed in a previous article, it is a total hoax.

In fact, a former Federal Reserve official that helped manage the Federal Reserve's quantitative easing program during 2009 and 2010 is publicly apologizing to the rest of the country for being involved in "the greatest backdoor Wall Street bailout of all time"…

I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.

Yes, quantitative easing has most certainly helped Wall Street (at least temporarily).

Meanwhile, median household income in the U.S. has fallen for five years in a row.

Meanwhile, the federal government is now spending nearly a trillion dollars a year on welfare.

Meanwhile, 1.2 million students that attend public schools in America are now homeless.  In fact, that number has risen by 72 percent since the start of the last recession.

4. "Obamacare Is Going To Be Good For Middle Class Americans"

There were three giant promises that were used to sell Obamacare to the American people…

#1 We would all be able to keep our current health insurance plans.

#2 Millions more Americans were going to be covered by health insurance.

#3 Most Americans would be paying lower health insurance premiums.

Well, it turns out that all of them were lies.

At this point, approximately 4 million Americans have already had their health insurance plans canceled due to Obamacare, and according to Forbes that number could ultimately reach 93 million.

And so far only about 100,000 Americans have actually signed up for Obamacare, so that means that the number of Americans with health insurance has dropped by about 3.9 million since the beginning of October.

Good job Obama.

Meanwhile, Americans all over the country are being hit with a massive case of sticker shock as they start to realize what Obamacare is going to do to their wallets.

According to one study, health insurance premiums for men are going to go up by an average of 99 percent under Obamacare and health insurance premiums for women are going to go up by an average of 62 percent under Obamacare.

And if you are a young man, you are going to get hit particularly hard.  At this point, it is being projected that health insurance premiums for healthy 30-year-old men will rise by an average of 260 percent.

But you don't have to be young to pay higher premiums.  As I mentioned the other day, one couple down in Texas was recently hit with a 539 percent rate increase.

 

5. "The U.S. National Debt Is Under Control"

The mainstream media would have us believe that the budget deficit is now under control and the U.S. national debt is not a significant problem any longer.

But that is not the truth.

The truth is that we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in all of U.S. history combined.

Every single hour of every single day, our politicians are stealing about $100,000,000 from future generations of Americans.  It is a crime so vast that it is hard to put into words, and it is literally destroying the economic future of this country.

Over the last 13 and a half months, the U.S. national debt has increased by more than 1.12 trillion dollars.

If you were alive when Jesus Christ was born and you had spent a million dollars every single day since then, you still would not have spent that much money by now.

And most Americans don't realize this, but the U.S. government must borrow far more than a trillion dollars each year.  Trillions more in existing debt must be "rolled over" just to keep the game going.

For example, the U.S. government rolled over more than 7.5 trillion dollars of existing debt in fiscal 2013.

So what is going to happen someday when the rest of the world pulls out and stops lending us trillions of dollars at ridiculously low interest rates that are way below the real rate of inflation?

Our financial system is far more vulnerable than we are being told.  We are in the terminal phase of the greatest debt bubble in the history of the planet, and when this bubble bursts it is going to be an absolutely spectacular disaster.

Please don't believe the mainstream media or the politicians when they promise you that everything is going to be okay.

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We’ve previously noted:

• The American public doesn’t believe the NSA … and thinks that the government has gone way too far in the name of terrorism

• A huge majority of Americans wants the director of intelligence – Clapper – prosecuted for perjury

• Only 11% of Americans trust Obama to actually do anything to rein in spying

• Snowden is considered to be a hero by the American public

Despite the massive propaganda push by the NSA and its lackeys in Congress, the people still aren’t buying it.

Bill Moyers notes:

A new poll finds that Americans are increasingly concerned about their online privacy — and it’s the result of increased media attention on NSA surveillance. The poll, USA Today’s Byron Acohido writes, is the “latest proof point of what could, at the end of the day, take hold as a tectonic societal shift: the return of privacy as a social norm. Call it the Edward Snowden effect.” The poll, conducted by Harris Interactive and commissioned by software company ESET, found that four out of five Americans have changed their social media security settings, and most of those people have made the changes in the last six months. Acohido writes:

…[T]he steady flow of revelations from the Snowden documents, detailing the pervasive nature of the National Security Agency’s anti-terrorism surveillance activities, has kept privacy top of mind for many consumers.

 

Of course the NSA can tap into online data to the extent it does largely because commercial companies, led by Google and Facebook, pursue business models that treat consumer privacy as a free profit-making resource.

 

It took a wild card, in the form of Edward Snowden, to get the masses focused on who is doing online tracking and profiling, and for what agendas.

Huffington Post notes:

A majority of Americans think that current oversight over data the NSA can collect about Americans is inadequate, and almost half think oversight of the data the NSA collects about foreigners is inadequate, according to a new HuffPost/YouGov poll.

 

According to the new poll, 54 percent of Americans think federal courts and rules put in place by Congress do not provide adequate oversight over the phone and Internet data the NSA can collect about Americans, while only 17 percent said that the oversight is adequate.

And the Washington Post writes:

[A] poll of 1,000 people, conducted by YouGov from Oct. 5 to Oct. 7 …  indicated, however, that the National Security Agency had not demonstrated that its phone and Internet data-collection programs were “necessary to combat terrorism” as it tried to deal with recent disclosures based on documents released to journalists by former NSA contractor Edward Snowden.

Postscript: It probably doesn’t help that – instead of coming clean – the NSA and its supporters have been caught lying again and again, or that they are still so tone deaf that they are cheerfully trying to sell singing the glories of a surveillance state.

3 Senators with Top Secret Clearance “Have Reviewed This Surveillance Extensively and Have Seen No Evidence That The Bulk Collection of Americans’ Phone Records Has Provided Any Intelligence of Value That Could Not Have Been Gathered Through Less Intrusive Means”

Mass spying by the NSA has never stopped a single terrorist attack.

Mass surveillance actually interferes with our ability to stop terrorism.

Today, 3 current U.S. Senators (Ron Wyden, Mark Udall and Martin Heinrich)  who are all on the Senate Intelligence Committee – with top security clearance and access to classified NSA briefings – filed a “friend of the court” brief pointing out that the NSA’s mass spying hasn’t stopped a single attack:

Now that the government’s bulk call-records program has been exposed, the government has defended it vigorously.  Amici [i.e. friends of the court … the 3 Senators, along with numerous security experts] submit this brief to respond to the government’s claim, which it is expected to repeat in this suit, that its collection of bulk call records is necessary to defend the nation against terrorist attacks.  Amici make one central point: As members of the committee charged with overseeing the National Security Agency’s surveillance, Amici have reviewed this surveillance extensively and have seen no evidence that the bulk collection of Americans’ phone records has provided any intelligence of value that could not have been gathered through less intrusive means. The government has at its disposal a number of authorities that allow it to obtain the call records of suspected terrorists and those in contact with suspected terrorists. It appears to Amici that these more targeted authorities could have been used to obtain the information that the government has publicly claimed was crucial in a few important counterterrorism cases.

 

***

 

As Amici and others have made clear, the evidence shows that the executive branch’s claims about the effectiveness of the bulk phone-records program have been vastly overstated and, in some cases, utterly misleading….

 

For example, the executive branch has defended the program by claiming that it helped “thwart” or “disrupt” fifty-four specific terrorist plots…. But that claim conflates the bulk-collection program with other foreign-intelligence authorities.  In fact, as Amici know from their regular oversight of the intelligence community as members of the SSCI, “it appears that the bulk phone records collection program under section 215 of the USA Patriot Act played little or no role in most of these disruptions.” …. Indeed, of the original fifty- four that the government pointed to, officials have only been able to describe two that involved materially useful information obtained through the bulk call-records program…. Even the two supposed success stories involved information that Amici believe—after repeated requests to the government for evidence to the contrary—could readily have been obtained without a database of all Americans’ call records….

 

In both public statements and in newly declassified submissions to the SSCI, intelligence officials have significantly exaggerated the phone-records program’s effectiveness. Based on the experience of Amici, the public—and this Court—should view the government’s claims regarding the effectiveness of its surveillance programs with searching skepticism and demand evidence rather than assurances before accepting them.

Indeed, NSA spying is not very focused on terrorism at all.  And even if some mass surveillance program were somehow necessary, counter-terror experts say we can keep everyone safe without violating the Constitution … more cheaply and efficiently than the current system.

The NSA’s whole domestic spying program is a sham …

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ToHHCM40zKQ/story01.htm George Washington

By: Mark Wallace at http://www.capitalistexploits.at/

We just concluded our Meet Up in Singapore, center of the SE Asian financial universe. It’s a vibrant and energetic place where capitalism is thriving. 

Over the course of about a week we heard from experts in the banking, legal, brokerage and risk control industries. CEOs of companies we’ve funded, merchant bankers and residency experts were present to address our attendees, answer questions and provide insight into their businesses and the SE Asian markets they operate in.

We also had the privilege of attending a Bitcoin pitch session held by the guys that run Seedcoin. Founders of a half dozen Bitcoin startups presented their companies to our group of about 30 interested and engaged investors from about a dozen countries. We all walked away impressed and convinced that Bitcoin is a force to be reckoned with!

But today we’re going to talk about crowdfunding startups in SE Asia...

Once upon a time small startups relied almost exclusively on bootstrapping, friends and family, or perhaps a handful of angel investors, for startup capital. The recent buzzword however in small-scale fundraising, is Crowdfunding.

In the North Americas, the Crowdfunding trend has gone mainstream. With the Jumpstart Our Business Startups (JOBS) Act back in 2012, unaccredited investors now have a regulatory framework for investing in equity based Crowdfunding in the United States. The implications of the JOBS act promise to be far reaching and entrepreneurs are moving rapidly forward, setting up a variety of platforms aimed at assisting both startups as well as investors looking to participate in exciting growth companies.

We’ve spoken extensively about Crowdfunding on our site.

Growth in the Crowdfunding space on the other side of the Pacific, here in Southeast Asia where we tend to hang our collective hats, is picking up as well despite the language, regulatory and platform barriers.

Figure 1: Selected GDP Growth Rate of Major South East Asian Economies

The majority of South East Asian economies withstood the shocks from the Global Financial Crisis relatively well, and those who fared worse than their counterparts are now rebounding (Figure 1).

Southeast Asia is now home to a rapidly emerging entrepreneurial ecosystem. Recent developments indicate that global investors are taking notice of the colossal growth opportunity offered by startups in the region. When compared to North America a lack of Crowdfunding platforms in the region has meant that only more recently have Crowdfunding opportunities arisen.

The task of screening companies in Southeast Asia is complicated due to the lack of information available on startups from a centralized platform, such as Indiegogo. Additionally language barriers have made it difficult, even for investors from neighbouring countries, to cross-invest. A lack of regulatory support from Governments across the region is also holding back the growth potential of Crowdfunding as general solicitation is still not permitted in most countries. Beside a few exceptions, Crowdfunding growth in Southeast Asia is dependent on local, national level, platforms.

KitaBisa, Indonesia

KitaBisa is an Indonesian version of KickStarter. In Bahasa Indonesia, KitaBisa means, “we can” and the founders have certainly proved they can. Since the soft launch in June 2013, a few projects have successfully raised tens of millions of Indonesian Rupiahs through the platform. Based on the KickStarter’s all or nothing formula, KitaBisa has so far funded interesting projects such as the one to empower out-of-work housewives by teaching them how to build handmade crafts and marketing it to local communities.

SeedAsia, China

Based in Shanghai, SeedAsia is offering accredited investors a platform to find and invest in a range of pre-screened Chinese and South East Asian startup companies in the technology niche. Unlike many donations based platforms in Asia, SeedAsia is an equity based Crowdfunding platform. The company screens potential investors and sets a minimum floor of US$2,000 to ensure only serious investors get the opportunity to fund the next Asian Google.

Crowdbaron, Hong Kong

The Hong Kong based Crowdvesting platform , Crowdbaron recently secured funding from Grow VC Group, and are planning to help investors make substantial investments in real estate. The innovative idea behind Crowdbaron is that, unlike timeshares, you will not actually own the right to occupy the premises. A pool of investors will own a property, which will then be rented out. Investors earn periodic rents based on their percentage of stake and may profit from price appreciation. Crowdbaron hopes that people who either can’t or don’t wish to purchase whole properties will be able to utilize their service to gain from the continued appreciation of Hong Kong’s real estate market.

ToGather.Asia

Unlike the others ToGather.Asia is focused on the entire Southeast Asian regional market. Started in 2012, ToGather.Asia is a Singapore based company targeting a broad range of countries in Southeast Asia. It is slowly gaining traction in terms of project creators and crowd funders. According to Bryan Ong , the founder of ToGather.Asia, the majority of the international Crowdfunding sites feature projects from North American, if not European locations. Due to cultural difference, Asian funders find it difficult to trust projects found on existing international sites. Moreover, Asian project creators often fear that due to rampant copyright infringement in the region their ideas might be stolen if they try to Crowdfund their projects. Rather than becoming disheartened by this, ToGather founders saw this as an opportunity to educate people in Asia about Crowdfunding and to converge local creative types and their potential patrons within the region.

While the majority of the Crowdfunding platforms are mushrooming as a copy of the western model, there are some innovative Crowdfunding hubs to keep an eye on in Southeast Asia.

As we’ve mentioned many times before, we believe these emerging economies will become the leading economies within the next few decades, if not sooner. Investing into startups in the region can prove to be an exceptionally well-timed investment as well as provide a good vehicle for diversification for small investors.

Accredited investors can contact us directly if they wish to receive more information about our private, members-only service dedicated to finding such opportunities.

–

– Mark

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jvT0UXgEGFc/story01.htm Capitalist Exploits

While we hope that the attached Bloomberg chart showing the best paying jobs for people without a high-school diploma will be of no use to our readers (for the simple reason that we assume Zero Hedge readers are well-educated in anything but conventional economics – that subset will likely be found at the end of a Krugman column), as more and more Americans finds themselves questioning not only the utility of a university education (and especially the associated loans) but the educational system in general, the reality is that there are many well-paying jobs available regardless of one’s educational level, most of which pay above the median US income. Some notable omissions – any position on Wall Street. Some notable inclusions – tapers. Maybe this is why the Fed never wants to mention the “trimming the pace of asset purchases” by its true name.

Source: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jBRAWTdgnrA/story01.htm Tyler Durden

That the Fed has a problem is increasingly well known – despite the blather from the mainstream media that QE monetization can continue ad infinitum. Their problem, of course, is running out of government-provided liabilities to monetize (as deficits shrink and their ownership of the entire Treasury complex surges). They face other problems (as we have noted before) but the admission that they are boxed in would have major ramifications in the market's faith. So, how does the Fed, faced with the knowledge that they have created asset bubbles, broken the bond market, and are boxed in by their own excess still meet the market's undying desire to keep the flow going? Bill Dudley just, perhaps inadvertently, dropped a hint of the next 'market/scapegoat' for monetization – Student loans.

Bear in mind that the "taper" is all about economic cover for a forced move the Fed has to make, because:

1. Deficits are shrinking and the Fed has less and less room for its buying

 

2. Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them).

 

3. Sentiment is critical; if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly – and we suspect they fear we are close to that tipping point

 

4. The rest of the world is not happy. As Canada just noted, the US monetary policy will be discussed at the G-20

Simply put, they are cornered and need to Taper; no matter how bad the macro data and we are sure 'trends' and longer-term horizons will come to their rescue in defending the prime dealers' clear agreement that it is time…

 

So they need a scapegoat!

• *DUDLEY SEES `VERY RAPID RISE IN STUDENT LOAN DEBT'

Yes – Mr. Dudley – Very Very Rapid indeed…

As we recently noted, student and car loans are responsible for 99% of all consumer credit created this year.

Thank you Uncle Sam for making yet another generation of indentured servants who are studying geology on the taxpayers' dime, who will never get a job, who are up to their neck in debt, but at least can afford a Chevy Silverado.

 

And while the Fed itself is responsible for the $1trillion bubble that has grown in easy cheap student loan debt…

as the NY Fed disclosed moments ago, federal student loans officially crossed the $1 trillion level for the first time ever. Notably: the quarterly student loan balance has increased every quarter without fail for the past 10 years!

 

It would appear Mr. Dudley is getting the joke that a younger generation burdened with debt is a problem…

• *DUDLEY: RISE IN STUDENT LOAN DEBT COULD IMPAIR ECONOMIC OUTLOOK

 

and, as we notd here,  the delinquency rate on student loans is soaring and has just hit an all time high of 11.83%, an increase of almost 1% compared to last quarter. Even according to just the government lax definition of delinquency, a whopping $120 billion in student loans will be discharged. Thank you Uncle Sam for your epically lax lending standards in a world in which it is increasingly becoming probably that up to all of the loans will end up in deliquency.

 

 

and furthermore, as we noted here, of the 28 million Americans with federal student loans, 60%, or 17 million, don't pay the US government a single cent!

Hopefully this highlights just how acute the severity of the student loan bubble is when stripped of all spin and mitigating rhetoric.

########################

So where does that leave us?

1. The Fed knows it needs to taper at some point – no matter what the rhetoric, unless the Fed admits the US is still in crisis mode, it risks losing its credibilit entirely (and control of the bond market) if it does not taper.

2. Smaller deficits mean the Fed is boxed in with its ability to monetize Treasuries and keep the "flow" flowing…

 

How to escape that box?

1. Identify a bubble (but it cannot be an asset-bubble because if it were then the collateral chains and rehypothecation would contagiously collapse every other asset class).

2. Scapegoat that 'Bubble' as potentially a headwind for growth that needs to helped by government intervention.

3. "Help" the people by monetizing that bubble (and implicitly keeping the "flow" flowing)

 

The Answer – as Bill Dudley just opined – is Student Loans.

1. A perfect bubble (forget about who created it) that needs to be popped by a responsible overseer

2. Lots of debt to monetize (keep the "flow" flowing)

3. A perfect excuse to slow Treasury buying (economy stabilizing, jobs stabilizing, stocks doing well)

4. A voter-friendly way of "helping" those in need that does nothing but enable more flow.

 

How will they monetize Student Loans? No one is sure yet, but Dudley's comments on Human Capital

• *DUDLEY: `BUILDING HUMAN CAPITAL' IMPORTANT FOR FUTURE ECONOMY

make one think of the book "The Unincorporated Man"

 

The Bottom Line – Bill Dudley just floated a strawman that the Fed will taper Treasuries and the scapegoat will be Student Loans – which they will directly monetize to save us all from ourselves (and the problem they created).

 

(as an addenda – we warn of the unintended consequence of this action – should they do it – that will merely encourage banks to securitize student loans and flip them to the government en masse, creating demand for moar student loans and enabling supply – ths growing the bubble ever larger).

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Jn-oxXlboVk/story01.htm Tyler Durden