Meet John Boehner Ryan – The GOP’s Favorite Fiscal Fake Folds Fast

That didn’t take long. Recall that just two months ago Speaker John Boehner announced he would abruptly resign right in the middle of his term. He said he was tired of taking gaff from conservative backbenchers on account of his serial sell-outs of even tepid House GOP efforts at fiscal discipline.

We greeted Boehner’s announcement with a Bronx cheer: Good riddance to Johnny Lawnchair, the fastest fold on the Potomac!

Supposedly a new era was dawning under his successor Paul Ryan, but not so. The lawnchair never left—-its just got a new occupant.

Now after just 51 days in office Ryan has forced the GOP to walk the plank on what under any honest form of fiscal accounting is a $2.5 trillion addition to the national debt.

Well, make that any form of accounting at all. This whole stinking pile of backroom deals was pushed through so fast that even CBO has not had a chance to fully analyze and score the bill.

In that regard, for the first time in his life, Harry Reid told the truth after this Ryan-Obama midnight special was whisked through the House and Senate. Said the man of legendary forked tongue,

Sometime in the darkness, the bill was finalized…… legislation is perfect, but this is good legislation.”

I have said all along the Paul Ryan is a complete fiscal fake. After all, he has spent years braying about the national debt, but never saw a defense program he didn’t want to fund or a bailout that would help his Wisconsin district that he couldn’t rationalize.

Fiscal conservative?  The man voted for the TARP bailout of Wall Street and the bailout of the GM/UAW thieves, too.

And year after year he proposed a “Ryan Budget Reform Plan” that was a complete fraud. He did not remove one dime from social security spending, ever.

Nor did his  fiscal plans do anything about the $700 billion in annual cost of Medicare for at least a decade into the future. And he didn’t even bother to balance the Federal budget until 2037!

But what is so obnoxious about this current pork-festooned betrayal of the taxpayers is that it was totally unnecessary.

Ryan could have simply announced that there is a new sheriff in the House and that no one would leave town until New Year’s Eve if need be—–unless the pork was excised first and the $680 billion worth of tax benefits, gimmicks and loopholes were either removed or off-set with honest “payfors”.

Needless to say, Speaker Ryan had a totally different take. While this week’s fiscal abomination is just water over the damn, there is always another chance tomorrow:

“Congress can now move into 2016 with a fresh start…..”

No it won’t. This week’s action on the FY2016 omnibus appropriations bill was just another ruse in a moveable fiscal scam which has been underway since the debt ceiling crisis of August 2011. Continue reading

The One Percent Rallies Behind IMF Director Christine Lagarde

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Washington removed Dominique Strauss-Kahn as the leading contender for the French presidency and as director of the IMF by framing him on phony charges of raping a New York hotel maid. The obviously false charge was proven to be totally fabricated and had to be dropped. In the meantime Strass-Kahn had been forced to resign from the IMF and to drop out of the French election. Washington regarded Strauss-Kahn as insufficiently compliant with Washington’s agendas and moved him aside.

Washington got its vassal, Hollande, elected President of France, and replaced Strauss-Kahn at the IMF with the “rhymes-with-witch” Christine LaGarde.

LaGarde serves only the One Percent. She overturned the decision by the IMF’s professional staff that the Greek debt had to be written down to a sum that the country could afford to service. Instead, LaGarde enabled the One Percent to loot the Greek nation and the Greek people, forcing many young Greek women into prostitution in order to have money for food.

As Stephen Lendman points out below, LaGarde’s crimes have caught up with her. When she was French finance minister she ruled against the interest of France in order to benefit the tycoon Bernard Tapie. Corrupt prosecutors tried to cover it up, but the French judicial system has ruled that she must stand trial. the judicial order that she stand trial, she has not had to resign as IMF director. The One Percent protects its own. The IMF’s executive board “continues to express its confidence in the Managing Director’s ability to effectively carry out her duties.”  Continue reading

The FOMC Decision, US Money Supply and the Economy

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Giving the Kremlinologists Something to Do

As is well known by now, on Wednesday the US central monetary planning bureau finally went through with its threat to hike the target range for overnight bank lending rates from nothing to almost nothing.



Photo credit: Luca Brenta


The very next day, the effective federal funds rate had increased from 15 to 37 basis points – moreover, as illustrated by the trend in short term rates prior to the FOMC meeting, the markets had already fully anticipated the rate hike:


1-short term ratesUS 3-month t-bill discount rate and the one year t-note yield: between the October and December FOMC meetings, the markets fully discounted the impending rate hike. Once again we can see that there is actually a feedback loop between the Fed and the markets, and that it is not true that the Fed has absolutely no control over interest rates (even though the degree of its control is limited) – click to enlarge.


Of course, some markets still managed to act surprised (and/or confused), most prominently the US stock market, which is traditionally the very last market to get the memo, regardless of what is at issue. This is why asset bubbles so often end in crashes – market participants tend to very “suddenly” realize that something is amiss.

This time, the trusty WSJ FOMC statement tracker reveals that the planners have given us Kremlinologists something to do, by changing the statement’s content quite a bit. By contrast to the previous carbon copy approach, it tells a completely new story. Well, almost. Continue reading

The Velocity of the American Consumer

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

DPC Times Square seen from Broadway 1908  

I was reading something yesterday by my highly esteemed fellow writer Charles Hugh Smith that had me first puzzled and then thinking ‘I don’t think so’, in the same vein as Mark Twain’s recently over-quoted quote:

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

I was thinking that was the case with Charles’ article. I was sure it just ain’t so. As for Twain, I’m more partial to another quote of his these days (though it has absolutely nothing to do with the topic:

“Eat a live frog first thing in the morning, and nothing worse will happen to you the rest of the day.”

Told you it had nothing to do with anything.

Charles’ article deals with money supply and the velocity of money. Familiar terms for Automatic Earth readers, though we use them in a slightly different context, that of deflation. In our definition, the interaction between the two (with credit added to money supply) is what defines inflation and deflation, which are mostly -erroneously- defined as rising or falling prices.

I don’t want to get into the myriad different definitions of ‘money supply’, and for the subject at hand there is no need. The first FRED graph below uses TMS-2 (True Money Supply 2 consists of currency in circulation + checking accounts + sweeps of checking accounts + savings accounts). The second one uses M2 money stock. Not the same thing, but good enough for the sake of the argument.

In his piece, Charles seems to portray the two, money supply and velocity of money, as somehow being two sides of the same coin, but in a whole different way than we do. He thinks that the money supply can drive velocity up or down. And that’s where I think that just ain’t so. I also think he defeats his own thesis as he goes along.

Before going into details, two things: One, he doesn’t mention the term deflation even once, though he shows money velocity has been going off a cliff like a mountain range and a half full of lemmings. I find that curious.

Two, he doesn’t mention consumers in the context. That can’t be right either. 70% of US GDP is consumers. You can’t ignore that. You can’t just look at financial markets, at investors, even though they use up most of the stimulus, and think they are the main factor determining money velocity. Not when they’re less than a third of GDP.

Moreover, and this I think is crucial, the velocity of money talks to you about consumers in a way that the money supply never could. Continue reading

Vulnerable Stocks Question What Might Be Left of the Economy To Overheat

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

For an economy that is supposed to be on the verge of overheating, or at least moving decisively in that direction, there are an inordinate number of indications of a cyclical stall and termination rather than some beginning (or ripening). I’m not referring exclusively to economic indications, either, such as the Federal Reserve’s own industrial production figure that just showed up yesterday fully and completely within recession territory. A survey of even stock market indications suggest more end times and exhaustion than those that might occasion FOMC confidence.

From a valuation standpoint, many calculations have turned over given the August liquidations. Tobin’s Q, for example, fell from 1.04 all the way to .934. Some of that was due to the Fed’s revisions and updates in the Financial Accounts of the United States Z1 (formerly Flow of Funds) regarding corporate net worth, but given that Tobin’s Q peaked at 1.107 at the end of the second quarter of 2014 you can’t help but notice the “dollar” effect. In other words, outside of the major indices that increasingly move on fewer and fewer stocks, the broader stock market has hit a pause if not a wall (given that this sideways to lower activity has lasted now more than a year).

ABOOK Dec 2015 Valuations Tobins Q Modified Q

Even with that in mind, valuations remain at historical extremes. Just like the historic inventory imbalance that hasn’t been dented despite an obvious and deepening slowdown in production, the potential inflection in stock prices hasn’t yet reached serious enough (even away from the major averages) to quite yet bring down extreme valuations. In my modified Q ratio, where I subtract the market value of real estate from non-financial corporate net worth so that one bubble (real estate) does not support the valuation of another (stocks), that is perhaps most evident and clear. The crash in August, which remains the numerator in that ratio since the Z1 data is through the end of Q3, only brought the valuation level down to slightly above where it was at 2007’s peak – and -60% on the S&P 500 from there.

ABOOK Dec 2015 Valuations Modified QABOOK Dec 2015 Valuations Net Worth

While Z1 finds nothing but increasing (and increasingly upward revised) corporate net worth, it isn’t clear as to what is driving that in real terms outside of the accounting. In other words, if net worth were truly rising steadily there should be at least an enterprise entry into that equation – cash flow and profits. Instead, departing Z1 for the BEA’s GDP figures, we find enterprise cash flow and profits to be highly lacking. In fact, corporate profits from current production (operational profits) fell by nearly 5% year-over-year in Q3; the worst decline in this “cycle” so far. For three full years now, profits from current production have basically stagnated in what is clearly lingering after effects of the 2012 slowdown. Continue reading

The Fed Awakens

I got the following from a friend at J.P. Morgan just a few minutes ago. You might have had something like it hit your inbox as well.

WASHINGTON – Federal Reserve officials said Wednesday they expect a more gradual pace of short-term interest rate increases in coming years than they did three months ago.

They also tweaked very modestly their views on the outlook for the economy, according to forecasts released after the conclusion of the Fed’s two-day policy meeting. Officials made small changes in their views of future economic activity, and they still don’t expect to achieve their 2% inflation rise target until 2018.

Clearly not a surprise and in line with what I’ve recently been saying. I think the Fed is going to be raising rates a lot more slowly than even they project. When you look at the “dots,” the median projection for the Fed funds rate is 3.75% in the much longer run.

Side bet? I think we see 0% again before we see 2%. I’ll take the overs on that bet, thank you very much. If you make the number 3%, I’ll even give you odds.

Today’s Outside the Box is from my friend Danielle DiMartino Booth, who used to work at the Dallas Fed for Richard Fisher. She has gone out on her own and has begun to write occasional pieces that seem hit my inbox at least weekly. The cover a wide range of topics, but many of them deal with the Fed. Continue reading