Zero Hour

The Fed has cut the chief lending rate to zero.

The Federal Reserve cut the main U.S. interest rate to “a target range” of between zero and 0.25 percent and said it will do whatever is needed to end the longest recession in a quarter-century and revive credit.

The Fed “will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Federal Open Market Committee said today in a statement in Washington. “Weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”

Treasury notes rallied in anticipation the Fed will buy the securities to force borrowing costs for consumers and companies lower. Nine rate cuts in the prior 14 months and $1.4 trillion in emergency lending have failed to reverse the economic downturn.

“The focus of the committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level,” the FOMC said.

The statement noted that the Fed has already announced it will purchase agency debt and mortgage-backed securities, and said the Fed is ready to expand the program. The central bank said it continues to weigh the potential benefits of buying longer-term Treasury securities.

And the liquidity trap closes with a ghastly, echoing crunch, like something out of an Edgar Allen Poe story. We're in uncharted territory here. The other half of the Fed policy, just as expected, is to magically invent a crapload of money. Officially, the Fed has today signaled that the Japan Scenario is on.

The Bank of Japan has been the only major central bank in modern times to mix a policy of steep rate reductions with quantitative easing, or the strategy of injecting more reserves into the banking system than needed to keep the target interest rate at zero.

Japan’s central bank kept its main rate at zero from 2001 to 2006 while flooding the banking system with extra cash to encourage lending, spur growth and overcome deflation. The abundant funds failed to prompt lending by commercial banks, which expanded their reserves at the central bank almost nine times by early 2004.

So there we are. And much like Japan, the cure will be far worse than the disease. The Fed is turning on the faucet full blast in a desperate effort to stave off a deflationary depression spiral. But Japan's already high personal savings rate and low personal debt contributed mightily to their eventual freedom, it just took a decade to do it.

We have no such reserves to fall back on. Everything the Fed has tried so far has failed. We're down to the last card in the deck now, zero rate and unlimited fiat money. When this too fails to turn around the economy, what then?

We're now officially a third world economy.

Just Another Bit Of Good Housing News

...or not.

New U.S. housing starts and permits plunged to record lows in November, as long-standing problems in the housing market continued to weigh on the U.S. economy, a Commerce Department report showed on Tuesday.

Housing starts fell 18.9 percent to a seasonally adjusted annual rate of 625,000 units from 771,000 units in October.

That was much less than the 740,000 starts Wall Street analysts expected to see for November.

New building permits, which give a sense of future home construction, plummeted 15.6 percent to 616,000 units from 730,000 units in October.

That was also much below Wall Street analyst estimates of 700,000.

That's a massive drop in numbers even from just October. The bad part is if housing starts pick up faster than housing prices do...it will depress prices even further. I don't see how that could happen other than housing companies jumping the gun and building early 2009 in order to "get in on the ground floor of the new housing recovery".

It doesn't make any logical sense. Then again, the US economy has been operating on that whole "lack of logical sense" thing for the last several years, especially in housing. If people see these record low new housing starts and permits as the bottom of the market rather than a price-based bottom (which is still nowhere in sight), things could get even worse in the housing market.

American consumers aren't that dumb, are they?

Dear America:

"Obama is clearly Jimmy Carter, and four years from now another multi-decade run of Reaganism will bury liberals for another generation. Suckers!"

--Philip Jenkins, American Conservative

StupidiNews!

• VP Cheney admitted to authorizing the waterboarding of 9/11 planner Khalid Sheikh Mohammed.
• The Fed is expected to lower interest rates once again, this time to record lows.
• The Illinois legislature considers an impeachment panel for Blago.
• The US Secret Service is under fire for their slow reaction to a shoe-throwing journalist.
• President Bush could act as early as tomorrow on the auto bailout.

The Sun Is Hot Too

From today's Obama presser announcing Energy Secretary pick Dr. Steven Chu:

"My administration will value science," Obama said, in what sounded like a pointed reference to his predecessor. "We will make decisions based on facts."

Holy hell, Presidents can DO that kind of radical, facty thing with actual science and logic and crap?

Do the Republicans know this? Somebody ought to tell them.

Dear America:

"If the Right shows the same superhuman ability to ignore reality that they employed during the last eight years, we should have no problem impeaching Obama over this Blagojevich thing."

--Dick Polman, Philadelphia Inquirer

Zandar's Thought Of The Day

Why do I make fun of the wingnuts on the right who write things like this?

We all understand now the significance of this particular insult in the Arab world -- right? But do we really? Somehow I tend to doubt it. The true significance of this attack on President Bush and symbolically on the United States, and its enthusiastic reception in both the Arab world and in our own liberal media has not really been addressed. One part of this story is of course the breathless eagerness with which our own biased leftist MSM quickly grasps onto any story that will support their long-held conviction that the Iraq war was a foolish criminal endeavor, perpetrated on the American people by a clueless ignorant cowboy -- "the unpopular U.S. president".

But I contend that this incident provides us with an even more important lesson. One which we should have learned by now but have not. It is simply this: Why should this act of hatred and resentment come as a surprise to us? Haven't we accepted the fact yet that 'blood is thicker than water'; or in this case, that the Arab world's adherence to Islam and to Sharia law supersedes any temporary arrangements of convenience made with infidel governments. Treaties made with Arab (or any Muslim) states are in reality no more than cynical measures of expediency. Realpolitik.

Here is the cold hard truth: Islam is, was, and always will be the sworn enemy of Western civilization in general, and of the United States of America in particular. Any thoughts that we can peacefully coexist without risking subsequent betrayal are foolhardy and delusional. Every time we think we have made inroads into the Muslim world we should be automatically circumspect and on guard. For when push comes to shove, all of those minor political or regional differences between Arab/Muslim states will be quickly set aside when confronted with the common enemy of the infidel West. Until the very roots of Islam are torn out of this culture we will never succeed in establishing any meaningful and lasting peace in this region.

Because they pen breathless screeds declaring a entire religion to be the enemy of the United States of America and therefore demand the cultural annihilation of a billion Muslims or so over a pair of fucking shoes lobbed at a world leader with a 27% approval rating in his own country.

It is only through the thick clear plastic walls of sarcasm, parody and satire that these fools should be both viewed and contained in before being disposed of.

Douchebags.

A Simple Test

Which one of the three following financial news stories is the most outrageous?

1. The US auto industry is pleading for Bush to release $15 million from the TARP bailout, but odds are looking more and more like they will get nothing.
   
2. Investment guru Bernie Madoff may have defrauded investors out of as much as $50 billion.
3. Bloomberg News's lawsuit over which bank put up what as collateral for the over $2 trillion in loans and guarantees is denied on the basis of being "highly sensitive".

If you answered anything other than "three", you're frankly part of the problem.

Yes, they're all bad. But that last one should have Americans across the country out in the streets. We're not. And that's why number three there will almost certainly continue to happen even under Obama.

Not So Black And White

Here's an interesting article about how some Americans, particularly white Americans and mixed-race Americans (like myself) view Barack Obama: he's not black.

A perplexing new chapter is unfolding in Barack Obama's racial saga: Many people insist that "the first black president" is actually not black.

Debate over whether to call this son of a white Kansan and a black Kenyan biracial, African-American, mixed-race, half-and-half, multiracial — or, in Obama's own words, a "mutt" — has reached a crescendo since Obama's election shattered assumptions about race.

Obama has said, "I identify as African-American — that's how I'm treated and that's how I'm viewed. I'm proud of it." In other words, the world gave Obama no choice but to be black, and he was happy to oblige.

But the world has changed since the young Obama found his place in it.

Intermarriage and the decline of racism are dissolving ancient definitions. The candidate Obama, in achieving what many thought impossible, was treated differently from previous black generations. And many white and mixed-race people now view President-elect Obama as something other than black.

Me, I've had people assume I've everything from Samoan to Indian (Native American and from India itself), Dominican, Puerto Rican, Mexican, North African, Arab, and just about everything else. One one hand, Obama identifies himself as African-American like I do, and the world respects him for it: enough so that he's President-Elect. On the other hand, the insistence of having to classify people as a particular ethnic or racial group has always bugged me to an extent.

It's very interesting to note that a whole lot of people have different opinions about Obama and his racial identity. There's no denying having him in the White House is massive progress for race relations in general. But yeah, people see in him what they want to see in him.

Barack Rorshach Obama.

Red Light, Red State

The GOP attack on Detroit is being led by southern Senators from non-union, non-American automaker states: Alabama, Mississippi, Tennessee, Kentucky, etc. These states are deep red and the people there have been told time and time again that unions are destroying America.

On the other side of the line are blue states with UAW workers: Michigan, Ohio, Pennsylvania, and states with tons of auto dealerships like California and New York. Make no mistake that for the GOP, this is all about red vs. blue politics. They have an opportunity to punish blue states and the people who live and work there, the gain a measure of revenge against those crazy Yankees for rejecting the party of God and America.

If GM goes under and people buy more Toyotas made in Kentucky or Hondas made in Tennessee, that's good for the southern states. People will leave cities like Detroit, Cleveland, and Pittsburgh and move to Atlanta, Nashville and Birmingham, giving southern states more people and more power.

This isn't just about wrecking the UAW, although that's a big part of it. This is about wrecking the economies of blue states. Even though Asian automakers have said on a number of occasions that their sales are down sharply too and that a Big Three bankruptcy will hurt them as well, that doesn't matter to the GOP. They have a chance to hurt blue states. Period.

Because that's how the GOP operates. Democrats are the enemy, plain and simple. And the enemy must be crushed.

[UPDATE] Glad I'm not the only one who sees this (h/t LGM)

As today's news again reminds us, the GOP doesn't seem terribly concerned about much more problematic things like the disgusting, virtually no-strings-attached re-re bailouts of Citigroup and AIG. Rather, Republican senators want to drive down wages for American autoworkers and create competitive advantages for their right-to-work states so much that they're willing to inflict massive blows to the American economy to do so. (As Molly Ivors cracks, if there was some way of putting together a bailout that would pay executives and not workers, the bailout might have had a chance.)

And that's the bottom line. Screw the blue states, victory for red ones.

The lesson the GOP learned from the 2008 election is that they weren't assholes enough.

StupidiNews!

• 800,000 are still without power after last week's brutal ice storm in New England.
• Embattled Illinois Governor Rod Blagojevich steadfastly refuses to resign.
• Tens of thousands of businesses both large and small continue to file for bankruptcy in the US.
• Still no word on the White House's effort to save Detroit automakers.
• Nintendo continues to completely dominate the video game market.

Like He's A Roach Or Something

Iraqi journalist throws shoes at Bush in Baghdad. Not meat or pies or paint or poop. Shoes. Like you would throw at a particularly bad dog or a bug or something.

That's his legacy. You are President of the United States of America and people throw shoes at you to get you to go the hell away.

Count On Me, Counting You

With yesterday's decision to actually count a number of absentee ballots in Minnesota favoring Al Franken, incumbent Senator Norm Coleman is crying foul and demanding state Supreme Court intervention, stat.

DFLer Al Franken's campaign scored significant victories in the U.S. Senate recount Friday, as the state Canvassing Board approved the use of Election Day results for 133 Minneapolis ballots that can't be found and also recommended that counties sort and count absentee ballots that were mistakenly rejected.

But the five-member board revealed some fissures. That came when its two Supreme Court justices put the brakes on the apparent hopes of its two district judges to declare in advance that the board would accept the new results that include the previously rejected absentee votes.

The board chose instead to wait until those votes come in before deciding whether to accept them.

Coleman campaign officials planned to file a request today for an order from the state Supreme Court requiring counties to follow consistent standards for counting their rejected absentee ballots. They said they hoped to have a decision by early next week.

"This is the kind of chaos the board has walked us into that we are trying to avoid," said Coleman attorney Tony Trimble.

Marc Elias, Franken's lead recount attorney, called the Coleman petition "an extraordinary action to try and halt this count and re-disenfranchise these voters. ... This is all just smoke and mirrors. They are hoping to run out the clock, delay the counting of these ballots."

Earlier this week, more than half the state's counties and larger cities began to separate out wrongly rejected absentee ballots from those legitimately turned back under state law. Based on the numbers tallied so far by 49 counties and cities, officials estimated that there may be as many as 1,600 absentee ballots that should have been counted but were mistakenly excluded.

The board decision on the Minneapolis ballots means that Franken trails Republican Sen. Norm Coleman by 192 votes. Had the board accepted Coleman's argument that only the ballots that were recounted be accepted, his lead would be 238 votes.

The Franken campaign was plainly delighted with the outcome. The campaign believes he stands to gain from counting improperly rejected absentee ballots.

"It was a good day for the Franken campaign. It was a good day for all the voters of Minnesota who were concerned that their lawful ballots may not be counted," said Elias.

Those 1,600 votes will almost certainly give Franken the win, and Coleman knows it. Either way, I see this issue going before SCOTUS in the next couple of weeks. Coleman will not accept a result where he loses as a sitting US Senator, and Franken will certainly challenge SCOTUS should the Minnesota Supreme Court overturn the state election board.

Would a precedent set by SCOTUS stemming from a challenge based on a "unified standard" be interpreted by lawmakers as a national standard on voting procedures? Possibly, but this is the type of case SCOTUS has been loathe to take up, claiming states can and should run their own elections.

But...this is a federal office. I'm not a legal scholar by any means, but the ramifications of this could be far-reaching. This won't be the last close election...and let's not forget Bush v. Gore either. The court had no problem deciding our President in 2000.

Keep an eye on this case. It could go a lot further than just the Land of 10,000 Lakes.

How Bad Would Auto Bankruptcies Be?

Just how bad would it get it GM and/or Chrysler declared bankruptcy as the GOP wants them to do? The estimates aren't pretty at all.

Industry experts and economists say the automakers would close plants, fire tens of thousands of workers and cut production. That would cause many of their suppliers to collapse, triggering more job losses, straining the cities and states where the car and parts companies operate, as well as federal safety-net programs.

It would also deliver another psychological blow to consumers and a major shock to Main Street following the crises on Wall Street.

“The auto industry is a key element in the economy,” said Bob Schnorbus, chief economist at J.D. Power & Associates in Troy, Michigan. “Anything that disrupts it is going to slow the economy down more than we have already seen.”

Economists say it’s difficult to estimate the full impact, given the large number of possible scenarios. The outcome hinges on which companies filed for bankruptcy and when, and whether they would be able to continue building cars and trucks while in reorganization -- assuming they don’t go into liquidation.

“It would be unprecedented,” says Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. “So it’s hard to say exactly what would happen.”

In other words a bad situation would get significantly worse at minimum. How quickly would that happen after a filing?

Still, a GM or Chrysler bankruptcy “would be the start of a cascade of failures,” says Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. “The economy will be in chaos within weeks.”

That quickly.

And it won't be just obvious auto jobs that are lost, but millions of non-auto jobs too, especially in communities where auto plants are a primary employer.

If there were just a 50 percent contraction in the auto industry, nearly 2.5 million jobs would be lost in the first year, resulting in $125 billion less in personal income before a partial rebound in later years, according to the Center for Automotive Research in Ann Arbor, Mich. State and federal coffers would lose $50 billion from lost tax dollars, the center said.

"We believe the economy is in such a weakened state right now that adding another possible loss of one million jobs is just something our economy cannot sustain at the moment," White House spokeswoman Dana Perino said Thursday.

Experts say it's not just the obvious — car companies, suppliers and dealers — who'll be affected. Failure of these companies could affect national security, television studios and even sports teams.

"If you knock out these suppliers who are also providing powertrains and axles to the military, what are you supposed to do then?" former Energy Secretary Spencer Abraham said Friday in a phone interview.

The economy is so weak right now that there's no slack to absorb the blow. The system is already stretched to breaking, especially in Big Three auto plant states like Michigan, Ohio, Indiana, and Pennsylvania.

GM is already in talks this weekend with the White House and the Treasury department to try to get something going, so we'll see what happens.

StupidiNews, Weekend Edition

• Obama has named former NYC Housing Commissioner Shaun Donovan as HUD Secretary.
• The Bush DoJ is stalling on Obama's requests for wiretap and torture documents.
• A combination of bailout fatigue and anger against the UAW and the Democrats fueled the GOP revolt against the auto bailout.
• Could there be an actual market for betting big on the box office in the future?
• More women than men would give up sex for the internet, a new survey reveals.