Eighty Percent Chance Of Screwed

The Zero Hedge crew flags David Rosenberg's latest advice that the numbers show an 80% chance of a double-dip recession.

Last week, we pointed out that the ECRI Leading Index dipped to negative for the first time in over a year, which on a historical basis tends to predict a recession with surprising regularity. Today, David Rosenberg takes this data and expands on his views of the probability of a double dip. An interesting observation: when the ECRI drops to -10 (from the current -3.5, and plunging at the fastest rate in history), the economy has gone into a recession 100% of the time, based on 42 years of data. At the current rate of collapse, this means in two months we should know with certainty if the double dip has now arrived.

From this morning's < ahref="http://www.zerohedge.com/sites/default/files/Breakfast_with_Dave_061410.pdf"Breakfast with Dave:

The smoothed ECRI leading economic index fell in the opening week in June for the fifth week in a row and now down in nine of the past ten. The index, went from +0.3% to -3.5%, the weakest it has been in a year. After predicting the V-shaped recovery we got briefly in the inventory-led GDP data when the index soared off the bottom in late 2008, at -3.5%, we can safely say that this barometer is now signalling an 80% chance of a double-dip recession. It is one thing to slip to or fractionally below the zero line, but a -3.5% reading has only sent off two head-fakes in the past, while accurately foreshadowing seven recessions — with a three month lag. Keep your eye on the -10 threshold, for at that level, the economy has gone into recession … only 100% of the time (42 years of data).

In other words, if the ECRI Leading Index drops any more from -3.5%, we're in massive trouble.  If it hits -10%, we screwed within months.  Personally, I think we will be in a double-dip recession before the end of the year, the question is simply going to be how bad it will be and how long it will last.  if the deficit hawks get control, it could be a full-blown depression.  We'll see.

Extracting That Pound Of Flesh

Senate Dems are playing hardball with BP now and are making the "request" for BP to place $20 billion in an escrow account in order to fund liabilities and claims against it much more than a "request".  Greg Sargent:

Senate Dems have sent a harshly-worded letter to BP execs demanding the money, and note the barb directed at BP over its public relations push:

In order to ensure BP fully and quickly covers the costs of this disaster, we are calling on BP to immediately establish a special account of $20 billion, administered by an independent trustee, to be used for payment of economic damages and clean-up costs. Establishment of this account would serve as an act of good faith and as a first step towards ensuring that there will be no delay in payments or attempt to evade responsibility for damages. Although creating this account at this level in no way limits BP's liability, we believe it will do more to improve BP's public image than the costly public relations campaign your company has launched.

We appreciate your interest in fully and quickly reimbursing those who have been injured by your actions. We believe the establishment of the $20 billion account to compensate victims and provide for clean-up is a useful first step for demonstrating that BP intends to meet its commitments. In light of the urgency of this matter we ask the courtesy of your response no later than June 18, 2010.

The letter is signed by virtually the entire Dem caucus. It's a sign that Dems -- perhaps belatedly -- are displaying some real anger here and are keeping the spotlight on BP and the need to hold it accountable.

The House GOP leadership has now endorsed lifting the liability cap, but Republicans have repeatedly blocked efforts to lift it in the Senate. Dem Senate leaders, it seems, recognize they have a winning issue on their hands and intend to press the point.

Senate Dems aren't asking BP to do this, folks.  They're telling them.  You wanted them to do something about it?  Here you go.

Note the words "first step".  That part actually made me smile.  But not as much as the argument that making the $20 billion fund would do a better job than BP's current PR efforts, that one's classic.  Obama may be okay playing it cool, but the Senators up for reelection are motivated to say the least to take action.

Another Milepost On The Road To Oblivion

And this commercial for Teapublican candidate Rick Barber in AL-2 sums up everything wrong with the Tea Party movement in just 60 seconds.



The campaign platform is insanity.

You Were Always On My Mine

Reaction this morning to last night's "Oh yes, and Afghanistan's sitting on a trillion buck in minerals" story has been interesting.

Spencer Ackerman correctly proclaims this to be old news and wonders what the new endgame is.

So if you were still operating on the presumption that the real reason we remain at war after nine years is something to do with the world’s least efficient way to establish and control an oil pipeline, you’re so 2000-and-late. What, you thought it was a coincidence that the Center for a New American Security established its natural-resources/defense program so soon after the first wave of its leadership entered the Obama Pentagon and State Department? It’s a shame we can’t manufacture cellphone batteries from your vast deposits of naivete.

Betty Cracker is...curiously hopeful.

Seriously, as a final gesture, the US should try to help the Karzai government set up a mining infrastructure that encourages international investment and has mechanisms to distribute the wealth to all Afghans, not just the corrupt elites. (I know—hahahaha!) And then get the hell out. This kind of deus ex machina doesn’t come along every day. 

Mistermix is not.

Maybe it’s just my sour nature and dim view of humanity, but I fail to see why the discovery of trillions of dollars of minerals in Afghanistan is Good News for America®. Is it because mining companies will stuff more cash in Karzai’s pockets, so he can continue with the good works and generosity that have characterized his benevolent rule? Or is it because the Taliban will give up the fight now that the land they hold is full of precious metal?

But it's Steve M. who nails it:

Maybe the story is a signal to the Chinese (identified by Risen as the West's big rivals for these Afghan resources) that the treasure isn't going to be ceded without a fight. Maybe it's a signal that the administration, now momentarily identified with BP-bashing, isn't really anti-corporate. Whatever's going on, the story doesn't seem intended to mollify political enemies or the public at large, unless the Obamaites are really, really tone-deaf.

It's less conspiracy theory as it is "Here's how the next nine years will go."  And, as Steve points out, it's not like there was any chance of us leaving Afghanistan during this administration anyway, the GOP will never leave tehmselves, and they will never let a Democrat leave.  In the meantime, we have to keep the mines away from the Taliban, corrupt Afghan officials, and the Chinese.  Or something.  Forever.

Everything's Fine, We're Fine Here, How Are You?

St. Louis Fed chief James Bullard wants you to know everything's fine, Europe is fine, the debt crisis is fine, the banks are fine, and the economy is doing great!

The U.S. recovery is likely to continue and private-sector job creation will start to pick up in the summer, causing the jobless rate to gradually fall this year, Bullard said.

Some economists may have an overly pessimistic view of the U.S. labour market as they are excluding the number of temporary jobs created, he said.

U.S. consumer prices unexpectedly fell in April for the first time in a year, with the core annual rate recording its smallest gain since 1966, data showed last month.

Core consumer price data could be distorted by a weak housing market and if this factor is excluded the data would show prices of other goods are rising, Bullard said.

Bullard was among three Fed officials who sought an increase in the Fed's discount rate in April. The  discount rate, currently at 0.75 percent, is the rate the Fed charges commercial banks for loans.

Sure, let's just ignore the housing market, call it the Specter of Inflation, and raise interest rates as Europe's financial problems are putting a credit squeeze on all of us. Gotta stop that inflation, folks!  You know, the inflation that doesn't exist.  But it might, so we have to cut spending!  That will stimulate growth and the Invisible Hand Of The Free Market will make more jobs, or something.

We'll be fine!

Meanwhile, Over There...

Iraq's new Parliament convenes (finally) after March's elections, but if anything the situation in Baghdad is even more unstable.

The inaugural parliamentary session more than three months after the March 7 vote was a major step toward the establishment of a government but it appeared likely it would still take weeks for political factions to agree on a choice of prime minister.

Sunni Islamist insurgents have sought to exploit the sectarian tensions generated by the extended political vacuum through bombings and assassinations.

Recent weeks have also seen a spate of raids on banks and gold markets blamed by the authorities on insurgents seeking funds. But Shi'ite militia groups that took up arms after the invasion have also turned to crime as sectarian warfare fades.

The number of civilians killed each month since March has increased slowly but steadily, raising questions about whether the U.S. government can stick to its plan to end combat operations in August ahead of a full withdrawal in 2011.

Suicide bombers and gunmen on Sunday stormed the heavily-guarded central bank in Baghdad, killing 15 people and wounding dozens. They did not gain access to the vaults where piles of Iraqi dinars and U.S. dollars are stored, but fought an hour-and-a-half-long gunbattle with Iraqi security forces.

With no strong Prime Minister that's acceptable to the people as leader and the US needing to leave on time or risk destabilizing everything, I don't envy anyone trying to wrangle this country back into shape.  The reality is however that we're not going to be able to leave, and that most likely we never will.

We're trapped for a long, long time.

The Kroog Versus The Confidence Game

Paul Krugman takes a look at the austerity hysteria from another angle:  if we did cut spending in order to satisfy the bond markets, would the bond markets even notice?

Consider, if you will, the comparative cases of Ireland and Spain.

Both countries appeared, on the surface, to be fiscally responsible until the crisis hit, with balanced budgets and relatively low debt. Both discovered that this was an illusion: revenues were buoyed by immense real estate bubbles, and when the bubbles burst they plunged into deficit — and found themselves potentially on the hook for large bank losses.

The countries responded differently, however. Ireland quickly embraced harsh austerity; Spain has had to be dragged into austerity, and still faces major political unrest.

So, how’s it going? This article is typical of what you read: it describes the Irish as doing what has to be done, while the Spaniards dither. And it has good things to say about how the Irish response is working:

Much bitterness but also stoicism; markets impressed by Irish resolve to bite the austerity bullet.

Well, I guess that’s right — if by “markets impressed” you mean a CDS spread of 226 basis points, compared with 206 points for Spain; not to mention a 10-year bond rate of 5.11 percent, compared with 4.46 percent for Spain.

So, I’m glad to hear that Ireland’s stoic acceptance of austerity is reassuring markets; it must be true, because that’s what everyone says. Because if I didn’t know that, I might look at the data and conclude that markets actually have less confidence in Ireland than they do in Spain, and that austerity in the face of a deeply depressed economy doesn’t actually reassure markets at all.

Surprise surprise:  Ireland's austerity actually has it in worse shape than Spain is right now and investors find the Emerald Isle an even tougher sell to invest in, because austerity means crippled growth.  The reason we've been told austerity has to happen is because the markets will demand it.  The evidence points to the opposite of that.

The reality is that austerity is political, especially in the US.  The goal of creating a permanent underclass in the US means we have to cut spending on social and jobs programs so that the rich can recover from the recession quickly and the rest of us can...well, it really doesn't matter to them, does it?  Never waste a crisis, as the saying goes.  Always time to make the inequality curve that much worse through destroying the social compact.  England is heading there next with David Cameron in charge.

Krugman's coming around, slowly.  But he's coming around.

StupidiNews!

• Thousands of refugees continue to flee ethnic violence in southern Kyrgyzstan as the country's interim government struggles to keep peace.
• A new report concludes Pakistan's ISI intelligence agency is working with the Taliban and providing then weapons and training.
• The President travels to the Gulf again amidst increasing pressure to resolve the problem.
• South Korea's top military commander has been sacked after allegations he mishandled the probe into the sinking of a South Korean frigate.
• Wizards of the Coast has streamlined and updated Dungeons and Dragons for a new generation with D&D Encounters.

Last Call

If this wasn't so deliciously perfect in its timing, I'd be crying right now.

The United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself, according to senior American government officials.


The previously unknown deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world, the United States officials believe.

An internal Pentagon memo, for example, states that Afghanistan could become the “Saudi Arabia of lithium,” a key raw material in the manufacture of batteries for laptops and Blackberries.

The vast scale of Afghanistan’s mineral wealth was discovered by a small team of Pentagon officials and American geologists. The Afghan government and President Hamid Karzai were recently briefed, American officials said.

While it could take many years to develop a mining industry, the potential is so great that officials and executives in the industry believe it could attract heavy investment even before mines are profitable, providing the possibility of jobs that could distract from generations of war. 

And just when America starts to begin to really question why we're in Afghanistan, we magically get a story that the place is sitting on a trillion in mineral reserves that gosh, we just have to help them develop.

We will never leave Afghanistan, just like we will never leave Iraq.

World Cupdate

And I thought that while yesterday's USA/England match was terrible, it didn't prepare me for the other Group C matchup today between Algeria and Slovenia: one of the outright sloppiest international games I've ever seen.  Slovenia won 1-0 scoring in the 79th minute because the Algerian keeper got bored and fell asleep, along with the entire crowd.  Slovenia is now leading in Group C.  That sums up everything you need to know about that chunk of the bracket and the bottom line is not a one of those four teams deserves any points in the standings.

In Group D action, Ghana's Asamoah Gyan scored on a brilliant penalty shot in the 84th minute to ice the Serbs 1-0, giving an African nation its first win so far in this first African World Cup.  The Serbs were just outplayed as they blew their stack and Aleksandr Lukovic got red carded at 74, although it was a close match up until the last 30 when the Serbs started racking up the silly penalties.

But Germany has the match of the Cup so far and showed total domination of the Socceroos as they blitzkreiged the Aussies 4-0.  You can make all the German precision machine references you want to here, but they're all valid.  Four different German players scored,  and the match was essentially over after the second goal at minute 26.  To compound the Down Under Blunder, the ref nailed Aussie forward Tim Cahill with a totally craptastic and undeserved red card for a late tackle.  Everything that could have gone wrong for the Aussies went wrong and Zee Germans just dismantled them.  They will go far if they play like that all tourney, especially Thomas Muller.

The Big Squeeze

C&L's Susie Madrak argues that with Orange Julius coming around to lifting the liability cap on oil companies like BP, the stage is now set for BP to file bankruptcy, walk away, and get billions of taxpayer dollars as we're stuck with the bill.

Today on "This Week" with Jake Tapper, John Boehner and Steny Hoyer both agreed that BP's liability cap should be raised.

Be afraid. Be very afraid.

Here's what I think it means: Two corporatist lackeys want the ceremonial Kabuki dance of raising the liability cap because it will play well with voters -- but will actually make BP happy because it sets the stage for their eventual bankruptcy (or that of whichever subsidiary they'll designate as the liable party), and they'll get to walk away and stick us with the entire bill. BP will be happy, the politicians who take oil company money will be happy, and Wall Street will be happy.

Everyone will be happy -- except the people and creatures whose lives were destroyed by their criminal negligence. Whee!

It's possible that this was the plan all along:  sell off BP's holdings and wells to other oil companies who take over and leave the taxpayer with all the liability.  Not like that hasn't been done before.

We'll see.

In Which Zandar Answers Your Burning Questions

Steve Benen looks at Obama's appeal to Congress for $50 billion in direct aid to local governments to save firefighters, cops, and teachers' jobs and asks:

In what universe do Democrats think they'll be better off politically with "massive layoffs of teachers, police and firefighters"?

In the right-wing talk radio universe where multi-millionaire personalities like Glenn Beck and Rush Limbaugh declare that teachers, police and firefighters are characterized first and foremost by their status as being unionized government employees, not by their value to society as a whole, and are therefore now The Enemy.

Only in America is risking your life to protect people or to teach children a job so unimportant and reviled that we would actively seek to cut them.  The next step of course is to declare that crime has increased, fire casualties and damages have gone up, and schools are getting worse...and then blame the government for all three and start demanding more cuts for these "lazy union slobs".

Clinton Felt Your Pain, Obama Is Aware Of It And Is Taking Steps

The President plans to address the nation from the Oval Office on Tuesday night after leaving for the Gulf coast tomorrow to try to nip this whole idiotic "the President isn't doing enough to stop the spill" garbage.

Obama's televised statement will come the night before he is scheduled to meet with top BP officials.

A White House official told CNN that Obama would push BP to create a BP-funded escrow account that will pay for damage claims from the worsening oil spill.

"The president will make clear that he expects, and that if necessary will exercise his full legal authority to ensure, that BP sets aside the funds required to pay individuals and businesses damaged by this massive spill," the White House official said on condition of anonymity.

In addition, the official said, the plan would call for the money set aside by BP to be "paid out under fair, efficient, and transparent procedures administered by an independent third-party panel established just for this purpose."

Gonna have to be a hell of an escrow account.  More than likely BP's going to be on the hook for tens of billions.  But that's Obama's style:  low-key, pragmatic, and results-oriented.

The larger problem of course is that the same people who spent the last 18 months screaming that government is too involved in the free markets, that the government over-regulates industries like energy, that we need smaller government with less oversight, that we need to reduce spending on programs by eliminating government watchdogs and allowing industies to police themselves, and that government interference in the marketplace is a dangerous assumption of power by the state are the first people in line attacking Obama for not doing enough to stop this oil disaster.

From wanting to militarize BP's cleanup operation in the Gulf to actually literally nuking the damn oil geyser, these are the same folks complaining Obama isn't angry enough, isn't involved enough, isn't talking enough, isn't doing enough, and has yet to reveal his secret DARPA program where he gets bitten by a radioactive shark and develops aquatic superpowers to plug the damn hole.

The fact is there's no easy answers to a lot of the problems we're facing right now:  the economy, the two wars we're in, unemployment, that damn oil geyser, and a host of other deadly real we're facing together.  The problem is being compounded by those who don't have any solutions, but have plenty of blame to pass around...and it's amazing how all that blame always lands on the same pair of shoulders at 1600 Pennsylvania Avenue no matter what.

There are problems that Obama is responsible for fixing, yes, but not responsible for creating.  There's difference.  The American people are aware of that difference, even if the President's knee-jerk detractors aren't.

Af-Gone-Istan

In his column this morning at the NY Times Bob Herbert says what is needed to be said about our war in Afghanistan, now the longest war America has ever fought:  it's time to go.  Obama's surge has failed completely.

What’s happening in Afghanistan is not only tragic, it’s embarrassing. The American troops will fight, but the Afghan troops who are supposed to be their allies are a lost cause. The government of President Hamid Karzai is breathtakingly corrupt and incompetent — and widely unpopular to boot. And now, as The Times’s Dexter Filkins is reporting, the erratic Mr. Karzai seems to be giving up hope that the U.S. can prevail in the war and is making nice with the Taliban.

There is no overall game plan, no real strategy or coherent goals, to guide the fighting of U.S. forces. It’s just a mind-numbing, soul-chilling, body-destroying slog, month after month, year after pointless year. The 18-year-olds fighting (and, increasingly, dying) in Afghanistan now were just 9 or 10 when the World Trade Center and Pentagon were attacked in 2001.

Americans have zoned out on this war. They don’t even want to think about it. They don’t want their taxes raised to pay for it, even as they say in poll after poll that they are worried about budget deficits. The vast majority do not want their sons or daughters anywhere near Afghanistan.

Why in the world should the small percentage of the population that has volunteered for military service shoulder the entire burden of this hapless, endless effort? The truth is that top American officials do not believe the war can be won but do not know how to end it. So we get gibberish about empowering the unempowerable Afghan forces and rebuilding a hopelessly corrupt and incompetent civil society.

Our government leaders keep mouthing platitudes about objectives that are not achievable, which is a form of deception that should be unacceptable in a free society. 

And America will have to have a long discussion with itself about "who lost the war" just like Vietnam.  Republican war hawks will blame Obama as the President who lost Afghanistan and will attack him as such in 2012.  Democratic war hawks will say he inherited a war from Bush that was made impossible by the invasion of Iraq.  Both will be wrong.

The reality is there was never a way to win, and the war never should have been fought.  More resources, more troops, more bombs, more guns, more drones, more money will not win this war, because the war is lost.  It's past time for us to go home.  If the point of Obama's surge in Afghanistan was to prove to the American people that our war in Afghanistan is not winnable, then in that he has succeeded.

July 2011 cannot come fast enough.  Bring them home.

Zandar's Thought Of The Day

Does anyone believe the Republicans won't open up a full assault of the Democrats over this in November, despite the fact that nearly all the Republicans will vote against it too?

After passing health care legislation to make health care more affordable, deficit hawk Democrats have let COBRA subsidies lapse for millions of Americans, who will lose their health insurance as a result.

Some conservative Democrats, however, say they don't understand why the government should subsidize workers who lose jobs with employer coverage and not others who are equally deserving — for example self-employed people priced out of the private market.

"You're paying 65 percent of (one) family's health care costs, but the neighbor next door, there's no help for," said Rep. Dennis Cardoza, D-Calif. "So we're picking and choosing. There's an inequality there between our constituents." Not to mention that Congress has treated the program as emergency spending, adding its cost to the deficit.

In Marietta, Ohio, boiler operator Neil Davis is facing the loss of his job as the coal-burning power plant he works at prepares to shut down for good. Davis, 33, has marketable skills but he's unsure how quickly he'll be able to find comparable work. His wife is a stay-at-home mom raising two elementary-age children.

"Being able to have coverage at an affordable rate, we wouldn't be afraid to take the kids to the doctor if they get sick," said Davis. "The economy might be getting better some place, but I don't know where at."

Those folks aren't exactly going to be inclined to think the Dems are any better than the Republicans come November. They're going to not vote at all, or worse, vote for the Republicans just to make a point of firebagging the Dems.

I'm sure the Republicans have the best interests of the Democrats in Congress when they advise conservative Dems to vote against health insurance subsidies, too.  The problem is plenty of Democrats believe it...or are believing in it as a way to justify being deficit hawks when doing so now will knock the blocks out from what little recovery there is going on.