Perhaps you haven’t noticed this important little bit as you have been too distracted with digging your way out of debt, busting your ass at work just to keep up and grateful for your job regardless, or this nonsense about Obama’s choice for Supreme Court Justice. All of this noise is important, of course, because it further exposes Obama’s weaknesses; the poor cabinet choices (unless a crack team of tax cheats was the intended goal), the recklessly destructive attempts at economic repair thanks to his incredibly blind “advisers,” and the tendency to take on far more than “The State” was ever meant to handle.

Obama himself has insisted that though it may appear the opposite, he would prefer that the United States stay out of corporate affairs. Let us keep in mind that he said this just as GM was being led to the lethal injection chamber by Obama’s own team. Let’s face it, being owned by the United States government at this point is akin to a death sentence - just one more tumor devouring the host. What next? We’ve taken on the banks (who are still wandering aimlessly down Wall Street growling for braaaaaiiinnns), the automakers, the auto PARTS makers, the insurance companies; we have, at this point, even taken on ourselves. You did understand that this is what the Federal Reserve decision to buy Treasury bills on a massive scale equates to, right? Just making sure we are on the same page here.

How is that working out, by the way? Badly. The consensus amongst the armchair economists is that the bond market has begun its not-so-delicate unraveling and will shortly implode. Without this, one of the last “safe” investments remaining in a tumultuous and almost hallucinatory global financial market, Obama will have few options left to fund his promises, like the $787 billion Stimulus (no, it hasn’t been paid for).

But let us set aside the financial crisis momentarily and ignore the dollar’s red flags. Obama’s true challenge, disregarding the rest of the noise, is still ahead. Soon, he will have to start considering who he would like to replace Ben Bernanke as Chairman of the Fed.

Bernanke’s term expires on January 31, 2010 and Obama’s people have certainly made it clear that the President does not intend to keep him in his post beyond that date. The first sign Obama wasn’t too keen on another term for Helicopter Ben? Sticking Timmy the Two Bit Tax Cheat Geithner in the Treasury, leaving ex Harvard President Larry Summers’ calendar free for “Take Over the Federal Reserve” on February 1st, 2010.

So, you say?

So, Larry Summers is, as one blogger put it, “a walking, talking conflict of interest.” Summers has collected millions in speaking fees from firms like Citigroup (multiple bailouts ring a bell?), Goldman Sachs (NY Fed/Goldman scandal sound familiar?), and Bank of America (CEO Ken Lewis working with ex Treasury Secretary Hank Paulson and Ben Bernanke to possibly mislead investors, anyone?).

The New York Times paints a lovely picture of Summers saying “Mr. Summers, who will be 54 on Nov. 30, is universally described as brilliant, but is also renowned for being arrogant, occasionally rude and sometimes difficult to work with.” The article goes on to discuss Summers’ infamous reputation as a sexist after “girls don’t do economics” comments were, according to him, taken out of context some years ago.

All of this being said, please do not misconstrue my feelings for Ben Bernanke. Though a declared Republican, he does not subscribe to the exuberant idealism his predecessor Alan Greenspan brought to the Fed Chairman position. Someone described Bernanke’s politicism as being “asexually Republican” - the Ken doll with a bump of plastic under his suit and no expressed or obvious political affiliation to be found. Printing the United States into bankruptcy is certainly not a Republican trait I am familiar with.

So it cannot be Ben Bernanke’s politics which would motive President Obama to let his term expire. And even when we get rid of Bernanke, he’ll still stay on at the Fed board through 2020. 2020 until we can get rid of this money-printing manic depressive!

The Fed is failing and hard (see Treasury bills above). Whether or not this burden should rest entirely on Bernanke’s shoulders has not yet been decided. From the eyes of the funny-money-hungry Obama administration, it appears as though that doesn’t matter. Perhaps Bernanke doesn’t print quickly enough to keep up with President Obama’s promises and Summers will be better equipped to implode what remains of the dollar?

This will be interesting to watch. I sincerely hope Mr Obama manages to find a Fed Chairman who at least knows how to pay his taxes; if he picks a 7th tax cheat, and to head the Fed none the less!, I will have officially lost my faith in any chance this administration has at digging us out of this total economic disaster.

After Federal Reserve Chairman Ben Bernanke appeared on 60 Minutes last night, few noted little from his speech besides his insistence that the recession should calm by the end of 2009 and signs of recovery might start popping up like little spring buds beneath the melting snow of a cold hard winter some time in 2010. The man is delusional at best, and the markets reacted by snapping a three-day upward swing (if you call 2 or 3 points “upward”). Sadly, Bernanke’s song and dance on national television resonated across America as a sign that things might be looking up. Hell, if this guy says everything is going to be okay, who are we to question?

Well the answer is simple, and if I’ve got to explain to you what is wrong with last night’s appearance, perhaps you’re not grown up enough to be using the computer without supervision. Turn it off, curl up into a ball, and commence to existing with your head in the sand, k?

In case you missed it, Bernanke’s national TV debut may be found in 3 parts here, here, and here. How cute, Helicopter Ben even cleaned up for his interview. That’s absolutely adorable.

Hidden in the midst of Bernanke’s interview, a little-noticed point on the Fed’s action in the face of economic crisis. While the conservatives continue to rail against the endless bailouts on behalf of helpless taxpayers believing that the Fed and Treasury promises are funded by actual taxpayer cash, Chairman Bernanke spilled the beans last night and said in no uncertain terms that his Fed is in fact funding bailouts using a process “more akin to printing money than it is borrowing.”

Average Joe reading this article, or even the most enlightened of conservatives, may not even think twice about the issue. Who cares? Isn’t it the Fed’s job to print money?

Under normal circumstances, absolutely. But in these conditions, Bernanke’s quantitative easing scheme will be the end of the dollar as we know it. Does he believe that inflation is so low that his agency has the right to crank up the presses to cover the incessant bailout of commercial banking interests at the detriment of our economy? This equates to criminal currency debasement and should absolutely be treated as such.

For our Fed chair to believe he can boldly state on national television just days after a warning from the United States’ largest creditor that we better not use the printing press to stem financial crisis is not only moronic but may send China reeling against our pleas for help in unloading our debt. And if China pushes back on Treasurys, we might as well consider the game over.

You as an American taxpayer have every right to be angry over the bailouts. And you should still believe that taxpayers are some how on the hook for this. But you as an American under the Federal Reserve’s control should be absolutely outraged to hear Bernanke boasting that his Fed is cranking up the press to the tune of some $2 trillion to cover its creative lending programs. AIG has fed at the government teat FOUR TIMES and funneling bailout funds to foreign banks due to its own irresponsible financial products risk management. But $2 trillion on the taxpayers’ behalf means little when the Fed is using the press to pump capital into floundering firms on your dime - the savings you’ve worked your life to put away? Doesn’t matter when the Fed has fully debased the currency. Is 97% of the dollar’s value lost since its inception in 1913 not enough?

The recession will only worsen moving forward if the Fed and Treasury continue to sabotage any hope at recovery by throwing billions more into the sinking ship.

Unemployment will continue to surge.

The Fed will continue to overstep its given powers by Congress and Congress will continue to allow such a fleecing until someone on Capitol Hill stops looking the other way and demands an audit of this private and essentially unregulated agency.

And Ben Bernanke will continue to crank up the press. Here’s to hoping China doesn’t notice or else we’re really in trouble.

We all know what kind of website this is, so there is absolutely no reason for me to point out that this analysis will inevitably have a conservative lean. The haters are more than welcome to throw “Neocon” and “war-mongerer!” my way because that seems to be the natural reaction when fighting the partisan fight - I assure you, the liberals should be just afraid as we are as to the long-term consequences of the passage of Obama’s stimulus, among other “creative” plans by the Federal Reserve and the Treasury to kick-start lending in America. It is more like a kick in the teeth to any hope this country had at reasonable economic recovery.

First and foremost, we’ve been hearing for weeks now that plans must be supported, reactions must be quick, and trust must be established between the government and the taxpayer through “transparency and accountability” - Tim Geithner, ever the revolutionary, announced his financial stability program and was even kind enough to provide a website for Americans to keep an eye on his little project. How cute. They grow up so fast, don’t they?

But the reality is that the American economy needs sound, well-thought-out, creative solutions to our financial malaise. Some crackpot scheme pulled out of thin air that involves an insurmountable pile of debt on top of existing American obligations is NOT that sound solution. Forcing a bill bloated with pork and questionable earmarks ($80 million for a new Health and Social Services building? Seriously? How does this help us?!) through Congress, threats from the wicked witch of the far left, and a mysterious midnight release of said unsound “solution” just hours before the final vote leads me to believe that these guys simply have no clue. They are scrambling here. And worse, the world already realizes that America may not be able to keep its promise of economic stability to its citizens without drastic measures that will certainly compromise our already instable currency.

Where will this money come from?

Thin air. Just like the rest of it. And the pressure on the bond market will most certainly push Treasurys off their already precarious position.

The Federal Reserve cannot possibly support any percentage of this beast of a plan, let alone the entire $1 trillion shebang, without making some dangerous adjustments in money supply and policy. The money supply has seen a 30% increase in the last four months and bond markets are testing the Fed to see just how far they can be pushed. These are all ominous signs of what is to come.

Time to turn things around and introduce a truly intelligent solution may be running out, and who do you think will be left holding the bag when the ship sinks?

Obama’s planned “economic stimulus” passed in the House today by a 244-188 vote. There is, as with all political and economic news these days, a good and a bad to this announcement.

Above all else, if you have not reviewed the actual appropriations of Obama’s plan, I absolutely recommend doing so. After all, this set of economic shock treatments will likely cost each American taxpayer around $6700 in the long run - this number is, of course, in 2009 money, which will shortly be devalued if Ben Bernanke and the Federal Reserve have their say, running the presses non-stop to cover endless government and private bailouts.

Full disclosure of the stimulus in actual dollar figures suggested by the committee may be found here and here. Warning: the contents of this bill are not pretty. Reading of this bill may cause nausea, vomiting, shortness of breath, and vertigo. The pork is overwhelming and feels an awful lot like a giant government bailout. We have been down this road before (Citigroup, anyone?) and the scenery is certainly not entirely unfamiliar.

It is disgusting that this bill passed at all. Beyond that, it is sickening that our new President and Congress chose this as the hallmark of the new administration. Way to kick things off with this bloated joke of a bill, passing a government makeover at the taxpayers’ expense off as a stimulus to rebuild the broken economy which has damaged so many of those selfsame taxpayers.

The good? Not a single Republican in the House voted yea. It shows a strength and unity that the party has been desperate to formulate in recent years; could it be that Conservatives have once and for all learned that we are greater than the sum of our parts?

The bad? The Democrats still got their way.

It is a frightening reflection of the divide we now have to fight against; even when every single one of our conservative representatives in D.C. stand against a self-indulgent joke of a bill such as Obama’s stimulus, we are still defeated by the Spendmores on the other side of the aisle. That is a more frightening realization than the bill itself.

There is a healthy way to stimulate our floundering economy. This, my friends, is not it.

Hearing of Timothy Geithner’s confirmation today as U.S. Treasury Secretary despite his tax drama while with the IMF, I couldn’t help but feel as if Obama’s team (and his equally transfixed-by-fake-rockstarism Senate) very clearly intended to send a message to America: We are going to do whatever we want and there is absolutely nothing you can do about it.

There are still ignorant Americans bumbling along too distracted by their iPods and smartphones to realize that something insidious is at work in our country; Geithner’s confirmation only serves to clarify that point.

Who exactly is our new Treasury Secretary?

He is Dartmouth educated in government and Asian studies, pulled from the ranks of the Federal Reserve, and worst of all trained in the Robert Rubin school of economics. In case you are not aware (yes, I’m talking to you, stupid hipster bumbling around San Francisco too zoned out to realize you’re being ripped off by current Federal Reserve monetary policy), Rubin believes in greasing the dirtiest hands in corporate America; so long as he somehow makes off with part of the loot.

You may or may not know, then, that Geithner worked closely with Rubin to engineer the Citigroup fiasco. Remember? I’m glad that paid off so well.

In short, Geithner is exactly what this economy does not need. Money that has not even been created yet has been earmarked by both Geithner and Obama - with America continuously calling for stimulus. What don’t you get about inflation at this point?

Geithner, with his intimate knowledge of the inner-workings of the Federal Reserve (and more specifically, its ability to produce debt out of thin air), doesn’t care about your home or your job or your life.

Geithner’s confirmation as Treasury Secretary passed in the Senate today 60-34.

Repost from Cogito Ergo Blog.

The holiday week has been quiet.  The Big Three CEOs went home (presumably flying in Coach-class), president-elect Obama has a least slowed his moving out furniture and walking W to the door.  For now, the electorate has been left to lick their wounds from the bailout/election/bailout cycle.  And the “newsies” are focused on the terrorist attacks in India.

But the respite will not linger.  December 2nd is the date that the Big Three need to present an “acceptable” plan to Congress in order to earn another bailout and the next ill-fated stimulus package is being negotiated (defining how the newly-elected will pay back their support groups with tax payer handouts).  As expected, the line for more handouts is starting to form, as city transit agencies are due to come, cup in hand to the Hill this week.  Beyond economics, the world is watching the terrorist attacks in India, the fact remains that pirates now hold at least a dozen ships, shoppers are trampling to death fellow human-beings to save $50 on the newest gadgets, and the constant rumblings from Iran continue.  As Peggy Noonan says, there are many disturbances still ahead.

So before the holes start springing in the economic dike, this is a good time to re-group and see what we have created.  In a post last week, a discussion ensued about how the government is perpetuating a moral hazard of undefined scale and scope.  Moral hazard is an economic concept founded in the insurance business.  The premise is that people will take greater risks, or engage in more risky behavior than otherwise, because they believe they will not bear the full consequence of their actions.  And while much has been made of the Wall Street / Detroit bailouts ($4.3 Trillion, so far), the next group of over-spenders is getting ready to put out their hands – and taxpayer will soon be asked to stem the impending failure of state governments to meet required balanced budgets.

Some 41 states are facing budget shortfalls.  According to the Center on Budget and Policy Priorities, the current total gap is expected to be $24.3 billion, and will continue to grow as economic growth slows.  The shortfall is expected to double for fiscal year 2009, to close to $48 billion. And unlike the federal government, most states cannot run a deficit (by the force of constitutionally bound balanced budget requirements) or borrow to cover expenditures.

One reason for the budget woes; state revenues have been negatively impacted by reduced state sales tax revenue, reduced property tax revenues, and as the employment situation deteriorates income tax revenues will weaken.  Further pressure will be felt as local governments will seek relief from the state government to offset reductions in local education budgets.

As a result, cuts will occur at the state level for public health programs, for elementary and secondary education, and to impose workforce reductions.  Some states will tap “rainy-day funds” to make up shortfalls, but even these measures may fall short. At the end of FY06 reserves averaged 11.5% of state spending.  This number has declined to 7.5% as the economy enters the FY09 recession.

How have states managed their income statements?  Of course it varies by state, but using California as an example – during FY08, the state spent $13 billion more than it has received in revenue, spending $108 billion, while bringing in $95 billion as of March 29, 2008.  Is this a new phenomenon?  Hardly - there has been a 32 percent increase in California’s spending from 2003 to 2008, with revenues falling far behind.

California is spending $10.5 billion annually to fund benefits for illegal immigration, according to the Federation of American Immigration Reform.  On an aggregate basis, the total K-12 school expenditure for illegal immigrants costs states nearly $12 billion annually, and when the children born here to illegal aliens are added, the costs more than double to $28.6 billion.

And while California has budget shortfalls of large scale proportion, 41 other states have the same issues on a smaller scale.  The politician’s response so far – hope.  That is, they hope to find “efficiencies” in consolidation of some departments, or hope to out-source certain functions, and last the always popular “across-the-board” cuts.

There is no doubt that states have been spendthrifts over the past four to six years.  And the inertia from this spending will need to be slowed now that the inevitable economic downturn drags down revenues.  And unlike the current cycle of governmental actions (guarantees, capital infusions, et. al.), the state budget problems will be felt on a very local level.  Education funding will be cut, affecting school programs and administration.  Infrastructure maintenance will be reduced.  And to make matters worse, individual cities are also facing huge deficits, causing cities to find ways to increase revenues (see NYC tax on plastic bags).

Over the next six months Americans will see the results of years of out-of-control spending at the state and local levels.  And we will face the consequence of the failures of our elected officials to act as fiduciary stewards of our state and cities.  The split between Republican and Democratic governors is about even - 22 (R) to 28(D) – and each state has their own reasons for success or failure (immigration funding, managed health care debacles, etc.), but in the end, the governors and legislatures have spent our taxes like a sub-prime borrower.  The bill will soon come due.  And has become the practice of the day – the failed managers (CEOs, Mayors, Governors, and just about every other failed enterprise), will make their way to DC for a taxpayer bailout of their economic malfeasance.  As for the rest of us - in the words of an Obama-mentor (at least before his fall from grace) – “the chickens have come home to roost”.