US slides deeper into depression as Wall Street revels

December was the worst month for US unemployment since the Great Recession began.

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History repeating itself? President Obama has been accused by some economists of making the same mistakes policymakers in the US made in the Great Depression, which followed the Wall Street crash of 1929, pictured Photo: AP

The labour force contracted by 661,000. This did not show up in the headline jobless rate because so many Americans dropped out of the system. The broad U6 category of unemployment rose to 17.3pc. That is the one that matters.

Wall Street rallied. Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism.

The home foreclosure guillotine usually drops a year or so after people lose their job, and exhaust their savings. The local sheriff will escort them out of the door, often with some sympathy — just like the police in 1932, mostly Irish Catholics who tithed 1pc of their pay for soup kitchens.

Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody’s Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck’s Grapes of Wrath.

Judges are finding ways to block evictions. One magistrate in Minnesota halted a case calling the creditor “harsh, repugnant, shocking and repulsive”. We are not far from a de facto moratorium in some areas.

This is how it ended between 1932 and 1934, when half the US states declared moratoria or “Farm Holidays”. Such flexibility innoculated America’s democracy against the appeal of Red Unions and Coughlin Fascists. The home siezures are occurring despite frantic efforts by the Obama administration to delay the process.

Read moreUS slides deeper into depression as Wall Street revels

Top US intelligence officer: ‘Afghan Insurgency Can Sustain Itself Indefinitely’ and ‘Time Is Running Out’

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The Taliban not only has the “momentum” after the most successful year in its campaign against the United States and the Kabul government. “The Afghan insurgency can sustain itself indefinitely,” according to a briefing from Major General Michael Flynn, the top U.S. intelligence officer in the country. “The Taliban retains [the] required partnerships to sustain support, fuel legitimacy and bolster capacity.”

And if that isn’t enough, Flynn also warns that “time is running out” for the American-led International Security Assistance Force. “Regional instability is rapidly increasing and getting worse,” the report says.

Since General Stanley McChrystal took over as top commander in Afghanistan, there have been a series of dark appraisals about the state of the war. In August, McChrystal warned of an “urgent need for a significant change to our strategy and the way that we think and operate.” A report recently obtained by NBC News said Afghanistan’s security forces won’t be ready to fight the Taliban for years – if ever. Earlier this week, Flynn issued a white paper complaining that “eight years into the war in Afghanistan, the U.S. intelligence community is only marginally relevant to the overall strategy.”

But Flynn’s December 23rd presentation on the “State of the Insurgency : Trends, Intentions and Objectives” may be the gloomiest public assessment of the war yet. The “loosely organized” Taliban is “growing more cohesive” and “increasingly effective.” The insurgents now have their own “governors” installed in 33 of Afghanistan’s 34 provinces. And the “strength and ability of [that] shadow governance increasing,” according to the presentation. The Taliban’s “organizational capabilities and operational reach are qualitatively and geographically expanding.”

Improvised bomb “events” have nearly tripled since 2007 – 7228 this year, compared to 2718 two years ago. The bombs have grown bigger – the majority are now 25 pounds or more. “80 to 90 percent” of them are made with homemade fertilizer, rather than military ordnance. That makes it much harder to track and block the distribution of the bomb-making material. Add to that steady supply of cash, thanks to the drug trade and the corrupt Kabul government, and a glut of weapons and ammunition,” and it becomes clear why, in Flynn’s words, “the insurgency is confident…  looking toward post-ISAF Afghanistan.”

Read moreTop US intelligence officer: ‘Afghan Insurgency Can Sustain Itself Indefinitely’ and ‘Time Is Running Out’

UK: Gas supply rationed as temperature drops to -21C

The same is happening in China:

Freezing Beijing rations gas supply (Financial Times)

Chinese cities not ready for harsh winter (Xinhua):

Seven provinces and regions in eastern and central China have reported power rationing and Beijing declared an emergency due to the gas shortage after the new cold snap gripped much of China, resulting in soaring energy demand as coal supplies were already tight in most of the areas struck by the severe winter weather.

The China Meteorological Administration issued a cold-snap warning on Tuesday, saying temperatures in northern China had plummeted to minus 20 and 32 degrees Celsius, and the temperature in central China, including Hubei and Jiangxi provinces and the eastern coastal provinces of Jiangsu and Zhejiang, nudged close to minus 8 and minus 5 degrees Celsius respectively.


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A Nasa satellite image of a snow-covered UK: ‘It’s very unusual to have such uniform coverage,’ said the forecaster Michael Dukes

The gas was turned off for nearly 100 businesses yesterday to protect domestic power supplies after unprecedented demand brought on by the cold weather.

The national grid was forced to reduce the supply to companies in the North West and East Midlands shortly after issuing its second warning in three days that the system was running out of gas. Demand in recent days has been 28 per cent above seasonal norms and is likely to increase today after temperatures fell to minus 21C in some areas overnight — the coldest night of the winter so far.

Business groups and politicians criticised the Government’s attempts to safeguard the supply and called for more gas storage facilities to be built. “The longstanding vulnerability in our energy system has today been exposed and as a nation we now need to take security of our energy supply more seriously,” said Roger Salomone, the energy adviser of EEF, the engineering employers organisation.

John Hemming, a Liberal Democrat MP, said: “We are on the edge when it comes to our power supplies and there is no safety margin.”

National Grid issued a warning that the system would run short when pressure dropped in a pipeline that brings gas from Norway to a terminal at Easington on the East Coast of England. It said that it had been the first time in six years it had been forced to curtail the supply.

Britain’s biggest salt mine and the Government are drawing up rationing plans as councils run out of supplies to grit roads. Gordon Brown asked Salt Union, which runs the Winsford Rock Salt Mine, in Cheshire, to increase production as Richard Stokoe, of the Local Government Association, said that some councils such as West Berkshire had enough for only one round of gritting.

Supplies reach dangerous levels in arctic UK (NEWS.com.au)

Thousands of minor roads and residential streets were icebound last night. The A628 in Derbyshire and Yorkshire, the A66 in Cumbria, the A1(M) in Co Durham and the M20 in Kent all remained closed along with several roads in Wales. Bus services in Cornwall were cancelled.

Thousands of people were left waiting for delayed flights and trains and hundreds were trapped underground for two hours after a Eurostar train broke down in the Channel tunnel.

Read moreUK: Gas supply rationed as temperature drops to -21C

PIMCO’S Bill Gross: ‘Let’s Get Fisical’ (… or why the US will not make it.)

On Thursday I had posted Bloomberg’s summary on the monthly investment outlook by PIMCO’s Bill Gross:

PIMCO’s Bill Gross warns on risks of US deficit: ‘Our government doesn’t work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people.’

But that summary missed a lot of important points.

Here is just one excerpt as a starter:

“Here’s the problem that the U.S. Fed’s “exit” poses in simple English: Our fiscal 2009 deficit totaled nearly 12% of GDP and required over $1.5 trillion of new debt to finance it. The Chinese bought a little ($100 billion) of that, other sovereign wealth funds bought some more, but as shown in Chart 2, foreign investors as a group bought only 20% of the total – perhaps $300 billion or so. The balance over the past 12 months was substantially purchased by the Federal Reserve. …”

If that doesn’t bother you, then I do not know what will. The Federal Reserve is creating money out of thin air like there is no tomorrow and the bad news is that that is exactly what the elite that controls the US government and the Federal Reserve has planned for America:

In the next two years (or just a little more than that) we will see hyperinflation in the US, people in America will become desperately poor and the Greatest Depression will turn the US into a Third World country.

(In 2009 Bill Gross was named the world’s 32nd most powerful man by Forbes.)

Now here is the full article by Bill Gross, ‘The King of Bonds’ (Must-Read!):


Let’s Get Fisical

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Quixotic journeys often make for great literature, but by definition are rarely productive. I am, after all, referring to windmills here – not their 21st century creation, but their 17th century chasing. Futility, not productivity, was the ultimate fate of Cervantes’ man from La Mancha. So it is with hesitation, although quixotic obsession, that I plunge headlong into a discussion of American politics, healthcare legislation, resultant budget deficits and – finally – their potential effect on financial markets. There will be windmills aplenty in the next few pages and not much good can come of these opinions or my tilting in their direction. Still, I mount my steed, lance in hand, and ride forward.

Question: What has become of the American nation? Conceived with the vision of liberty and justice for all, we have descended in the clutches of corporate and other special interests to a second world state defined by K Street instead of Independence Square. Our government doesn’t work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people. Washington consistently stoops to legislate 10,000-page perversions of healthcare, regulatory reform, defense, and budgetary mandates overflowing with earmarks that serve a monied minority as opposed to an all-too-silent majority. You don’t have to be Don Quixote to believe that legislators – and Presidents – often do not work for the benefit of their constituents: A recent NBC News/Wall Street Journal poll reported that over 65% of Americans trust their government to do the right thing “only some of the time” and a stunning 19% said “never.” What most politicians apparently are working for is to perpetuate their power – first via district gerrymandering, and then second by around-the-clock campaigning financed by special interest groups. If, by chance, they’re ever voted out of office, they have a home just down the street – at K Street – with six-figure incomes as a starting wage.

What amazes me most of all is that politicians can be bought so cheaply. Public records show that combined labor, insurance, big pharma and related corporate interests spent just under $500 million last year on healthcare lobbying (not much of which went to politicians) for what is likely to be a $50-100 billion annual return. The fact is that American citizens have never been as divorced from their representatives – and if that description fits the Democratic Congress now in control – then it applies to Republicans as well – past and present. So you watch Fox, or is it MSNBC? O’Reilly or Olbermann? It doesn’t matter. You’re just being conned into rooting for a team that basically runs the same plays called by lookalike coaches on different sidelines. A “ballot box” pox on all their houses – Senators, Representatives and Presidents alike. There has been no change, there will be no change, until we the American people decide to publicly finance all national and local elections and ban the writing of even a $1 check for our favorite candidates. Undemocratic? Hardly. Get on the internet, use Facebook, YouTube, or Twitter to campaign for your choice. That’s the new democracy. When special interests, even singular citizens write a check, it represents a perversion of democracy not the exercise of the First Amendment. Any chance that any of this will happen? Not one ghost of a chance. Forward Don Quixote, the windmills are in sight.

Distressed as I am about the state of American democracy, a rational money manager cannot afford to get mad or “just get even” when it comes to investing clients’ money. Still, like pilots politely advertise at the end of most flights, “We know you have a choice of airlines and we thank you for flying ‘United’.” Global investment managers likewise have a choice of sovereign credits and risk assets where stable inflation and fiscal conservatism are available. If 2008 was the year of financial crisis and 2009 the year of healing via monetary and fiscal stimulus packages, then 2010 appears likely to be the year of “exit strategies,” during which investors should consider economic fundamentals and asset markets that will soon be priced in a world less dominated by the government sector. If, in 2009, PIMCO recommended shaking hands with the government, we now ponder “which” government, and caution that the days of carefree check writing leading to debt issuance without limit or interest rate consequences may be numbered for all countries.

Read morePIMCO’S Bill Gross: ‘Let’s Get Fisical’ (… or why the US will not make it.)

Philip Giraldi: Yemen and the War of the Worlds

Philip M. Giraldi, Ph.D. is the Francis Walsingham Fellow at The American Conservative Defense Alliance (www.ACDAlliance.org) and a former CIA counter-terrorism specialist and military intelligence officer.

Philip Giraldi was the foreign policy advisor to Ron Paul during his last presidential run.

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Philip M. Giraldi


Imagine if you will a country dominated by heavily armed tribesmen who are fiercely independent, frequently engaged in activities that most observers would regard as criminal, deeply conservative in religion and culture but further divided along sectarian lines, and ruled over by a highly corrupt government that is fighting both a civil war and an insurgency. Throw into the hopper extremely rugged trackless terrain, porous borders, and security forces incapable of exercising jurisdiction outside of the capital city and it is a virtual witches’ brew. Many would immediately think of Afghanistan, where all of the above applies but the description equally fits Yemen, which also enjoys crushing poverty and high unemployment coupled with declining oil revenues and water supplies that can no longer sustain the population. Intelligence officers who are familiar with Yemen agree that coming to grips with the country’s tribesmen in an attempt to root out al-Qaeda will make Afghanistan look like a walk in the park.

Yemen might well become the next American quagmire if the plans of the Obama Administration in its global war on terrorism that is now referred to as “overseas contingency operations” are implemented. As is frequently the case in the imperial capital city Washington, the Obamas see another Yemen. It is an opportunity for nation building, to strengthen institutions and the economy and support an ostensibly friendly government to suppress terrorism. But it doesn’t take much to see what’s wrong with that approach. The Yemenis themselves are fearful of the consequences of too tight an embrace by Washington and are already trying to distance themselves. They see gangsterism and tribalism as their greatest internal security threats, not terrorism, and the best estimates for the number of al-Qaeda adherents in the country number in the low hundreds. And many of those are believed to be the grapes of wrath fruit of Guantanamo Bay, where the United States successfully confined Yemenis who were completely innocent, radicalizing them and turning them into terrorism proselytizers upon their return home.

Let’s face it, there is no such thing as complete security. Whatever security arrangements are made for air travel it will still be possible for someone to circumvent the system either through guile or luck. The Obama Administration’s response to a single thwarted terrorist incident involving an airline in which a small number of Yemenis were involved has proven that American presidents appear to need war, and an identifiable enemy to rally against, more than they need a foreign and security policy that is both proportionate and answerable to the national interest. Yemen is no more a threat to the United States than was Iraq even if its wild deserts do harbor a small number of terrorists. If one accepts at face value the claim of al-Qaeda in Yemen that the attempted airline bombing was in response to several American drone strikes, most particularly a devastating attack on December 17 that killed twenty-three, largely civilians, then it is clear that Congressman Ron Paul’s analysis that “they’re over here because we’re over there” is accurate.

The correct response to the Nigerian underwear bomber Umar Farouk Abdulmutallab is to fix the information sharing problems and modify existing screening procedures in light of the new developments. That would be the sane thing to do, but apparently it is not good enough for the White House. Instead, President Obama has designated a new front for a military confrontation with the terrorist menace, and that will be Yemen. There are reports that special ops soldiers are already in country with plans to introduce still more US soldiers and double the military assistance to Sana’a. By my tally, the US is now actively fighting terrorists in a number of lands to include Iraq, Afghanistan, Pakistan, Somalia, the Philippines, and Yemen. That makes a minimum of six separate and distinct overseas wars all being engaged in without an act of war from Congress and directed against enemies that do not actually directly threaten the United States.

Read morePhilip Giraldi: Yemen and the War of the Worlds

Chinese official: More than 106,000 officials punished in first 11 months of 2009

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Gan Yisheng

BEIJING, Jan. 7 (Xinhua) — A total of 106,626 officials across China were penalized for disciplinary violations from January to November last year, an official with the Communist Party of China (CPC) Central Commission for Discipline Inspection (CCDI) said Thursday.

Gan Yisheng, vice secretary of the CCDI, said about 80 percent of them received punishments handed down by the CPC, accounting for 0.11 percent of all Party members, and the rest were penalized by the government.

They included Party members, government workers or leaders, and leaders of state-owned enterprises.

About 2.6 percent of those punished by the CPC were expelled from the Party and referred for prosecution for embezzlement or bribery, Gan said.

Of the almost 14,000 commercial corruption cases investigated and handled by disciplinary and supervisory organs, about 21 percent involved civil servants.

A total of 3,743 leaders at county level or above had been punished and about 20 percent were referred for prosecution.

Investigations into a series of accidents involving serious consequences led to the identification of 298 corrupt officials.

Read moreChinese official: More than 106,000 officials punished in first 11 months of 2009

H&M and Wal-Mart Destroy and Trash New, Unsold Clothes

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Cynthia Magnus holds up unworn, destroyed clothing she found in the garbage. Photo by Suzanne DeChillo/New York Times

This week the New York Times reported a disheartening story about two of the largest retail chains. You see, instead of taking unsold items to sample sales or donating them to people in need, H&M and Wal-Mart have been throwing them out in giant trash bags. And in the case that someone may stumble on these bags and try to keep or re-sell the items, these companies have gone ahead and slashed up garments, cut off the sleeves of coats, and sliced holes in shoes so they are unwearable.

This unsettling discovery was made by graduate student Cynthia Magnus outside the back entrance of H&M on 35th street in New York City. Just a few doors down, she also found hundreds of Wal-Mart tagged items with holes made in them that were dumped by a contractor. On December 7, she spotted 20 bags of clothing outside of H&M including, “gloves with the fingers cut off, warm socks, cute patent leather Mary Jane school shoes, maybe for fourth graders, with the instep cut up with a scissor, men’s jackets, slashed across the body and the arms. The puffy fiber fill was coming out in big white cotton balls.”

The New York Times points out that one-third of the city’s population is poor, which makes this behavior not only wasteful and sad, but downright irresponsible. Wal-Mart spokeswoman, Melissa Hill, acted surprised that these items were found, claiming they typically donate all unworn merchandise to charity. When reporters went around the corner from H&M to a collections drop-off for charity organization New York Cares, spokesperson Colleen Farrell said, “We’d be glad to take unworn coats, and companies often send them to us.”

Read moreH&M and Wal-Mart Destroy and Trash New, Unsold Clothes

Shock Study: 12% of Children Sexually Abused in Government Custody

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Some 12 percent of minors held in government custody are sexually abused, and in some facilities the rate reaches a stunning one in three children, says a report released Thursday by the Bureau of Justice Statistics.

The first-ever National Survey of Youth in Custody found that no less than 10 percent of the 26,550 juveniles being held in detention facilities in the US are abused by staff at the facility, while another 2.6 percent report abuse at the hands of other inmates.

Among the facilities studied were six identified to have rates of sexual abuse as high as three in 10. According to the Associated Press, those six facilities are Pendleton Juvenile Correctional Facility in Indiana; Corsicana Residential Treatment Center in Texas; Backbone Mountain Youth Center in Swanton, Maryland; Samarkand Youth Development Center in Eagle Springs, North Carolina.; Cresson Secure Treatment Unit in Pennsylvania; and the Culpeper Juvenile Correctional Center, Long Term, in Mitchells, Virginia.

“The widespread sexual abuse of children in juvenile facilities shows that public officials either aren’t paying attention or can’t be bothered to do the right thing,” said Jamie Fellner, senior counsel for Human Rights Watch. “The high rates of victimization are powerful testimony to the failure of governments to safeguard the boys and girls in their care.”

The study was mandated by a 2003 law, the National Prison Rape Elimination Act, which also created the National Prison Rape Elimination Commission. Human Rights Watch notes that six months ago the commission set out “comprehensive, effective standards for the prevention, detection, and punishment of prison rape,” but the Justice Department has yet to act on those recommendations.

“Every day Attorney General Eric Holder fails to promulgate national prison rape elimination standards is another day in which kids and adults are being abused behind bars,” Fellner said. “The attorney general already has on his desk proposed standards that reflect the best thinking and effective practices to end this widespread scourge. There is no need to reinvent the wheel or to delay moving forward.”

The survey found that gay youth were at higher risk than heterosexual youth, with one in five reporting abuse at the hands of a staffer or fellow inmate. Males were more likely to report being abused than females (10.8 percent to 4.7 percent). And 95 percent of those abused by staff reported that the abuser was female. But that number may be influenced by the fact that 91 percent of youth in custody are male.

The AP reports:

Although advocates said the level of abuse wasn’t surprising, the prevalence of sexual abuse by staff, particularly female workers, was shocking, said Linda McFarlane, deputy executive director of Just Detention International, which fights to end sexual abuse of those who are detained.

“Many of these are already the most vulnerable and traumatized youth from all of our communities and they’re placed for custody because they’re considered to be a danger,” she said. “If sexually abused in those very institutions that are supposed to help them prepare for life in the community, then it’s just an incredible travesty.”

Read moreShock Study: 12% of Children Sexually Abused in Government Custody

US: Massive Jump In Emergency Unemployment Compensation Benefits – Up 43% In One Month!

I was intrigued by a post by Zero Hedge asking Is The Government Misrepresenting Unemployment By 32%?

“…government spent a record $14.7 billion on Unemployment Insurance Benefits as of December 30, a 24% jump sequentially from the $11.8 billion in November. Yet the DOL has disclosed a mere 1.7% increase in those to whom insurance benefits are paid: from 9.4 million to just under 9.6 million. To put the $14.7 billion number in perspective, in December the Federal Government paid a total of $14 billion ($700 million less) in Federal Salaries!

And some more perspective: in calendar 2009 the government has paid $140 billion in Unemployment Insurance Benefits. This is yet another economic stimulus that nobody in the administration discusses, yet which undoubtedly has the biggest impact on the economy, as all those millions unemployed can moderate their pain courtesy of a passable weekly check from the government which should just about cover the rent and beer.

Which is why more than anything, Obama is dead set on extending insurance benefit payments in perpetuity: because if the 10 million official and 14 million unofficial people who are on benefits (not to mention the tens of millions of unemployed unlucky enough to even get their weekly allowance from Uncle Sam) start thinking about their true predicament and their real “employability”, then a landslide loss by this administration at the mid-term elections will actually be an upside surprise to what it can objectively expect.

I figured the explanation would show up in charts somewhere and I asked Chris Puplava at Financial Sense for a chart of Emergency Unemployment Compensation (EUC) Benefits as well as an update on other charts he has graciously provided on request.

Click on any chart below for a crisper image.

From Chris Puplava …

My answer would be a MASSIVE jump in the Emergency Unemployment Compensation (EUC) benefits, which jumped from 3,594,253 (11/07/09) to 5,143,410 (12/19/09), up 43% in just over a month!

The increase in EUC more than offset the decline in continuing claims and we are now at a new record when combining all measures of unemployment benefits. Economists were pointing out that continuing claims and initial claims were falling as a bullish sign, however what was happening was that those benefits were exhausting for people who used up that benefit, leading to the decline in the numbers which is proved by a record (52.24%) exhaustion rate.

Record Unemployment Deterioration

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However, these people were not finding employment which is why the House passed a bill in December to extend benefits, thus leading to a massive 43% jump in the aptly named “EMERGENCY” Unemployment Compensation program. The jump was so large that now the EUC numbers surpass continuing claims!

Read moreUS: Massive Jump In Emergency Unemployment Compensation Benefits – Up 43% In One Month!