CMBS Delinquencies Hit New Record

Here are some charts and commentary from the Realpoint Research Monthly Delinquency Report for January 2010.

In January 2010, the delinquent unpaid balance for CMBS increased by another $4.3 billion, up to $45.94 billion from $41.64 billion a month prior. The overall delinquent unpaid balance is up 326% from one-year ago (when only $10.79 billion of delinquent unpaid balance was reported for January 2009), and is now over 20 times the low point of $2.21 billion in March 2007. The distressed 90+-day, Foreclosure and REO categories grew in aggregate for the 25th straight month � up by $7.42 billion (28%) from the previous month and over $27.95 billion (508%) in the past year (up from only $5.51 billion in January 2009). This included a substantial jump in 90+-day delinquency in January 2010.

click on any chart for sharper image

CMBS Delinquency Amounts



CMBS Delinquency Percentages


All deals seasoned at least a year have a total unpaid balance of $789.07 billion, with $45.94 billion delinquent � a 5.82% rate (up from only 3.15% six months prior).



Geography

• The top three states ranked by delinquency exposure have remained consistent since January 2009, as California, Florida, and Texas collectively accounted for 30% of delinquency through January 2010.
• The 10 largest states by delinquent unpaid balance reflect 57% of CMBS delinquency, while the 10 largest states by overall CMBS exposure reflect 52% of the CMBS universe.
• The state of California remains a major concern at near 13% of CMBS delinquency. By MSA, however, such delinquency is concentrated in the Los Angeles, Riverside-San Bernardino, and Orange County MSAs highlighted below.
• While by state delinquency exposure Florida ranks second, no Florida MSA is found in the Top 10 MSA�s ranked by delinquency exposure (highest being Miami, which ranked 14th in our data).
• Notably, over 10% of total CMBS exposure in the states of Florida, Arizona, Nevada and Michigan are delinquent, with the Phoenix, AZ and Las Vegas, NV MSAs accounting for the top 2 by delinquency exposure at (14% and 14.5% of the MSAs, respectively).
• Credit also appears to be deteriorating further in the Riverside-San Bernardino, CA MSA, as over 11% of the total MSA exposure was reported delinquent through January 2010.
• Texas delinquency is highly concentrated within the Dallas-Fort Worth and Houston MSAs.
• Only one MSA topped 4% of CMBS delinquency in January 2010, consistent with the prior month.
• The 10 largest MSAs by delinquent unpaid balance reflect 30% of CMBS delinquency, while the 10 largest MSAs by overall CMBS exposure reflect 34% of the CMBS universe.

Realpoint estimates delinquencies will hit 8.6% by June 2010 and that "Balloon default risk is growing rapidly from highly seasoned CMBS transactions as loans are unable to payoff as scheduled." There is much more in the 15 page PDF.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Geithner's Illegal Money-Laundering Scheme Exposed; Harry Markopolos Says �Don�t Trust Your Government�

Here are a couple of unrelated stories, one on Harry Markopolos, the man who on 4 occasions tried to convince the SEC of Bernie Madoff's Ponzi scheme, the second on how Geithner used a fictitious "Trust" to accomplish an illegal takeover of AIG.

Inuring minds are reading a post on the Sense on �ents blog by Larry Doyle called Harry Markopolos: �Don�t Trust Your Government�

In an interview on the Today show this morning (video clip after the fold), Harry Markopolos dropped a few bombshells. Harry�s statement that he had purchased a gun and mentally prepared himself to kill Bernie Madoff in self-defense if need be will likely grab the most attention. It shouldn�t.

Markopolos� biggest bombshell this morning is his warning to America, �don�t trust your government.� No surprise that Today host Matt Lauer did not probe deeper. I am not confident that other outlets will delve deeper into Harry�s statement, either. I wonder why Harry himself is reticent to specifically point out the individuals and the instances which lead him to make that statement.

Recall that a year ago Harry defined the SEC as merely incompetent while simultaneously defining FINRA (Financial Industry Regulatory Authority) as �in bed with the industry� that is Wall Street. Well, it does not take an advanced degree to connect Harry�s grenade toss into FINRA�s backyard a year ago with his volley this morning.

....

Here is the video clip on MSNBC.



Some statements by Harry Markopolos made regarding killing Madoff were so sensational that I suspect they are a promotional scheme to sell his book No One Would Listen - A True Financial Thriller

Nonetheless, his message �Don�t trust your government� is certainly worth remembering. On four occasions Markopolos went to the SEC with information and the SEC refused to follow up.

Markopolos and a few of his associates tracked the ponzi scheme across the Atlantic and found evidence of money laundering and organized crime in the US and Europe. No doubt the details will be interesting.

Secretary Geithner's Got Some Explaining to Do

Not only does the SEC have a lot of explaining to do, so does Timothy Geithner. Please consider the American Thinker article Secretary Geithner's Got Some Explaining to Do.

While everyone, including Congress, the media, and the public, have focused on AIG's $100-million bonus payments to key employees, and most recently on AIG's stealth payments to counterparties like Chase and the French giant Soci�t� G�n�rale -- the latter made worse by the fact that it was the Federal Reserve (FED) that wanted to keep these payments hidden from public view -- the problem with the AIG bailout is much deeper and more fundamental.

Just about everyone has had something to say about this bailout -- mostly that it was an ugly but necessary step to stave off a domino effect that would have brought the world's financial system to its knees. But what we have not yet heard is just how Treasury Secretary Geithner, as then-head of the NY FED, got away with taking ownership of 77.9% of AIG's equity and voting rights in clear violation of the law.

The question we are left with is: Why? What motivated this illegal grab of AIG's equity and voting rights? Was it desperation in the face of the largest potential collapse in the history of modern finance? Was it unbridled power combined with supreme hubris? Or was it just criminal? The answer to this query resides in the as-yet-hidden files of the Federal Reserve Bank of New York, now subject to a subpoena issued by my office in the federal lawsuit Murray v. Geithner, pending in the Eastern District of Michigan.

In the course of discovery, resisted by the government at every turn, we have learned that the deal Geithner put together as the NY Fed's president was illegal on its face.

The Deal

Specifically, the deal Geithner put together in September 2008 was for the NY FED to pour up to $85 billion of debt funding into AIG to solve its liquidity crisis as the Credit Default Swap counterparties, the banks which had insured themselves against the sub-prime mortgage meltdown, demanded payments under their AIG insurance policies. AIG ended up drawing down $60 billion almost overnight.

But Geithner was not content with a straight debt deal where AIG promised to pay back principal and interest and handed over almost all of its assets as collateral. Geithner wanted real ownership and control (77.9%, to be exact) of AIG's equity and the voting rights to go along with that.

The problem Geithner knew he had to confront, however, was that the FED was not authorized to take ownership in AIG or any other financial institution. The law authorized the FED only to loan money and take collateral. While the FED might end up with ownership after a default and foreclosure on the collateral, the Federal Reserve Act does not authorize the NY Fed to structure the debt deal with an equity piece.

The Criminal Artifice

So what did Geithner do? He took equity, but he used a fictitious "Trust" to accomplish that which he could not do legally. The AIG Credit Facility Trust has three so-called independent, non-governmental trustees owning the 77.9% of the legal interests of AIG, and the Trust agreement assigns the U.S. Treasury the beneficial interests in the 77.9%. The highly-touted "independence" of the trustees is quite obviously critical to save the Trust from the claim that it is merely a ruse for FED ownership and control.

But there is only one problem with this Trust structure: It is invalid and illegal for two important reasons, not the least of which is that its independence is nonexistent.

Geithner's deal was all about acquiring not just voting rights, but super-majority control. Unfortunately, there was no legal authority at the time to do so.

The brute fact that now standing exposed before us is the use of an invalid Trust structure to conceal the unlawful ownership and control over 77.9% of AIG's equity and voting rights by the FED. If Geithner knew he was breaking the law, then this just happens to be the definition of criminal money-laundering under Title 18, Section 1956.

Secretary Geithner has some explaining to do to AIG's public shareholders. We suggest that he seek legal advice first -- but this time, from lawyers who actually know what they are doing.

Time To Indict Geithner

There is much more in the article, please give it a read.

I repeat my plea. It's time to indict Treasury Secretary Geithner.

I have talked about conspiracies involving Geithner, Paulson, Bernanke, and former Bank of America Lewis on many occasions. I am more than happy to add another post to the list.

April 24, 2009: Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis

June 26, 2009: Bernanke Suffers From Selective Memory Loss; Paulson Calls Bank of America "Turd in the Punchbowl"

July 17, 2009: Paulson Admits Coercion; Where are the Indictments?

October 20, 2009: Bernanke Guilty of Coercion and Market Manipulation

January 07, 2010: Time To Indict Geithner For Securities Fraud

January 26, 2010: Questions Geithner Cannot Escape

January 28, 2010: Secret Deals Involving No One; AIG Coverup Conspiracy Unravels

January 31, 2010: 77 Fraud, Money Laundering, Insider Trading, and Tax Evasion Investigations Underway Regarding TARP

I am quite sure there will be more opportunities to add to the list.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Governor Christie: "Time to Hold Hands and Jump Off the Cliff" - Chris Christie For President?

In an amazingly candid appraisal of the sorry state of affairs in New Jersey, Governor Chris Christie laid it on the line in a speech to about 200 mayors at the New Jersey League of Municipalities.

The speech is 24 minutes long and well worth a listen because it is both an honest admission of the problem, and a refreshingly accurate appraisal of what the solutions are. He chastised the legislature, unions, municipalities, and affordable housing initiatives while promising to do something about all of those.

Unfortunately I cannot find a transcript, nor is there a YouTube video but you can Watch Chrstie's Speech To League of Municipalities on public television. It starts out with an ad you have to listen to, but it quickly picks up once Christie starts speaking. He starts off in fine fashion calling the legislature's budget "Alice In Wonderland Budgeting"

Partial Transcript

In the time we got here, of the approximately $29 billion budget there was only $14 billion left. Of the $14 billion, $8 billion could not be touched because of contracts with public worker unions, because of bond covenants, because of commitments we made accepting stimulus money. So we had to find a way to save $2.3 billion in a $6 billion pool of money.

When I went into the treasurer's off in the first two weeks of my term, there was no happy meetings. They presented me with 378 possible freezes and lapses to be able to balance the budget. I accepted 375 of them.

There is a great deal of discussion about me doing that by executive action. Every day that went by was a day where money was going out the door such that the $6 billion pool was getting less and less. So something needed to be done.

People did not send me here to talk, the people sent me here to do. So we took the executive action we did to stop the bleeding.

As we move forward, and we evaluate what we need to do three weeks from now in our fiscal year 2011 budget address, you all need to understand the context from which we operate.

Our citizens are already the most overtaxed in America. US mayors hear it all the time. You know that the public appetite for ever increasing taxes has reached an end.

So when we freeze $475 million in school aid, I am hearing the reverberations from school boards saying now you are just going to force us to raise taxes.

Well there is a 4% cap in place as you all know, yet school boards continue to give out raises which exceed that cap, just on salary. Not to mention the fact that most of them get no contribution towards the spiraling increase in health care benefits.

Now, we are going to reduce spending at the state level. And we are going to continue to reduce it because we have no choice but to do so. Our obligation to you is twofold. One, is to let you know that. So I'm' letting you know that.

Second to work with the legislature to give you the tools helping you to reduce spending at the municipal level. Now the pension and benefit reform package that was passed unanimously in the senate this week begins to give you some of those tools.

But it is only a beginning.

Do we need to change some of the rules of arbitration to level the playing field to allow municipalities and school boards to have a more level sense of collective bargaining?

I think the evidence of ever increasing raises being given to public sector workers as a result of the arbitration system tells us that we do. [Applause From Mayors]

But you have to stand up and give the support to the legislators in this building to get them to do that. I can guarantee you this, that more pension and benefit reforms which I will consider arbitration reform to be one of them, are things that when they come to my desk, they will be signed. [Applause From Mayors]

Because we can no longer continue on a path where we say we are going to reduce spending at the state level but we are not going to give you any tools to do that at the municipal level and the school board level.

By the same token I am tired of hearing school superintendents and school board members complain that there are no other options than raising property taxes. There are other options.

You know, Marlboro, after a two year negotiation, they give a five year contract giving 4.5% annual salary increases to the teachers, with no contribution, zero contribution to health care benefits.

But I am sure there are people in Marlboro who have lost their jobs, who have had their homes foreclosed on, and who cannot keep a roof over their family's head there is something wrong.

You know, at some point there has to be parity. There has to be parity between what is happening in the real world, and what is happening in the public sector world. The money does not grow on trees outside this building or outside your municipal building. It comes from the hard working people of our communities who are suffering and are hurting right now.

I heard someone in the legislature say two days ago that they wanted no fare hike in New Jersey Transit, no cuts in service, and no cuts in subsidy. And I was thinking to myself, man I should have made this guy treasurer. [Laughter] Because if you can pull that one off, you're obviously magic.

This is the type of awful political rhetoric that people sent me to this city to stop.

I would love to be able to do that, but I can't. I would love to tell you that municipal aid will stay level, but it's not. And it's not because we don't have the money. So you need to prepare. You need to prepare for what's coming down the line because we have no choice but to do these things.

And so we need to get honest with each other. In this instance, the political class,for which unfortunately all of us are a member of, the political class is lagging behind the public on this. The public is ready to hear that tough choices have to be made. They're not going to like it. Don't confuse the two. But they are ready to hear the truth.

In fact, they find it refreshing to hear the truth.

They are tired of hearing, don't worry I can spare you from the pain, because they have been hearing that for a decade, as we have borrowed and spent and taxed our way into oblivion.

We have done every quick fix in the book that you can do. And now we are left, literally holding the bag.

Leadership should be about making tough decisions. I'm not hear to tell you that anything you are going to have to do as mayors, council people will be easy. But I firmly believe after spending the last year traveling around the state of New Jersey, talking to regular citizens, that this is what they are expecting us to do.

They are also expecting us to ferret out waste and abuse. But they also know that old song that waste and abuse is going to balance the budget is an old and tired one, and it's not going to.

Now we are going to have a fight about COAH. And I have engaged in that fight and I have engaged in it directly. Not only will I be fighting COAH, I will be fighting the courts too. [Applause From Mayors]

That's OK.

We need to understand we are all in this together. And you know, all of you know in your heart, what I am saying is true. You all know that these raises that are being given to public employees of all stripes, we cannot afford. You all know the state cannot continue to spend money it does not have. And you all know that the appetite for tax increases among our constituents has come to an end.

And so the path to reform and success is clear. We know what it is. We just have to have the courage to go there. What we are doing is showing people that government can work again for them, not for us. Government has worked for the political class for much too long.

There's no time left. We have no room left to borrow. We have no room left to tax. So we merely have room left now, to do this. We are all reaching the edge of a cliff. And it reminds me a bit of that part of Butch Cassidy and the Sundance Kid where the had a seminal decision to make. So what did they do? They held hands and they jumped off the cliff.

We have to hold hands at every level of government, state county, municipal, school board. We have to hold hands and jump off the cliff.

I firmly believe we will land and we will be fine. It does not mean it will not be a scary ride on the way down. And it does not mean there won't be moments of fear and moments of apprehension.

But for certain, the troops of the decades of overspending and overborrowing and overtaxing have gained on us. So the ruination of New Jersey's economy, and of the quality of life we want all our citizens to have, is certain if we do not take this course.

It's time for us to hold hands and jump off the cliff. It's time for us to do the difficult things that need to be done and to stop playing the petty politics of yesterday, of lying to the people telling them they do not have to pay for it because someone else will.

We are going to make the leap because that's what people elected me to do. We are going to make the leap because it is the responsible thing to do. We are going to make the leap and we are going to do it together because that is what leadership demands for us. That is what the responsibility of the offices we hold requires of us.

Forget about the next election. Forget about the next editorial in the newspaper, and forget about the next angry letter or phone call you are going to get from someone who wants something for nothing.

One thing is certain. The alternative will lead to certain defeat. And so it is time for us to show courage, and resolve. And we can do it because we are from New Jersey. And I have never, in all my travels around the country, met a group of tougher people than we all have the opportunity to lead.

That was the best speech on spending by any government official I have ever heard.

Inquiring minds are no doubt wondering about the COAH (Committee On Affordable Housing) program Chris Christie referred to. Here is the COAH Fact Sheet.

The fact sheet shows the state of New Jersey is bragging about COAH. He expects a court fight to get rid of it.

• He froze aid to schools
• Challenged school boards.
• Wants to change arbitration rules for public workers
• Requests public-private salary and benefits parity
• Demands pension reform
• Property tax hikes not an option
  
• Wants to get rid of programs like COAH
• Is not thinking about the next election

I applaud Chris Christie. Not only is he saying the things that need to be said, he is acting with executive actions, freezing 375 government programs out of 378 suggestions. That is leadership, something sadly lacking from president Obama and Congress.

The Times They Are A-Changin'

Come Senators, Congressmen Please Heed the Call For the Times they are A-Changin'

If you have not done so already, please click on that link and read it. Not only does it contain a cool video of Dylan from 47 years ago or so, it details some of the changes cities and municipalities are starting to make.

Notably Mayor Don Robart of Cuyahoga Falls, Ohio is seeking to eliminate public sector unions. That is certainly a welcome event and hopefully the start of a major trend towards fiscal sanity in cities across the country.

Governor Chris Christie has taken that to the state level with a decisive program to cut government waste and government spending.

If Chris Christie can deliver, he deserves to be president. That is the kind of leadership we need.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Ohio Mayor Seeks To Eliminate Public Unions; Come Senators, Congressmen Please Heed the Call For the Times they are A-Changin'

Mayor Don Robart of Cuyahoga Falls, Ohio is seeking to eliminate public sector unions. That is certainly a welcome event and hopefully the start of a major trend towards fiscal sanity in cities across the country.

I found out about Mayor Robart when someone sent a link to a blog journal called Smell the Change: Ohio Mayor Suggests It's Time To Eliminate Public Sector Unions.

Here are some snips blog writer Doug Ross compiled from Mayor Robart's annual State of the City Address.

...as we now know, the jobs creation promise of 2009 nationally has more closely resembled a nightmare. With unemployment a year ago at 8%, it is currently over 10% and since the signing of the stimulus bill, we have lost 2.8 million jobs. These job loss figures clearly have a direct effect on state and city budgets. Cuyahoga Falls is no exception. Cities essentially rely on two forms of revenue: property taxes and income taxes. In 2009, we saw both of these revenue sources decline.

In response to these significant drops in revenue, we mandated that the nonbargaining employees accept a wage freeze along with six furlough days. Additionally where applicable, we would cease the ability to sell back vacation and sick leave. I am proud of the AFSCME union which was the first union to step forward and agree to our proposal. Our Fire union, the UWUA electric union and finally the dispatchers, followed shortly. Unfortunately, we did not get concessions from the two police unions, which necessitated the loss of three patrolmen and a community service officer. Additionally, four sergeants were reduced to patrolman status.

In Cuyahoga Falls, we will be negotiating with all six of our public employee unions. We do not anticipate these negotiations will be easy, however, with a keen eye on fiscal responsibility, the administration will be resolute in its demands to lower expenses. And indeed, with payroll representing 75�80% of our general fund budget, the public sector unions are the obvious place to go.

Which brings up the question that I have raised in this forum in the past: Is it time to eliminate public sector unions?

The history of public sector unions goes back to 1962 when President John F. Kennedy signed executive order 10988 allowing unionization of the federal workforce. This changed everything in the American political system. President Kennedy�s order swung open the door for the unrelenting rise of the unionized public workforce in many states and cities.

And of course, 47 years ago, the American workforce landscape looked very different. As recently as 1980, there were more than twice as many private sector union members than there were public sectors. Today 51.4% of Americans 15.4 million [union] workers are employed by the government. This is the first time in American history that there are more public sector union members than there are private. So my question is, can we the taxpayers continue to afford this expense?

...As we can see from the desperate economic and fiscal woes of California, New Jersey, New York and other states with dominant public unions; this has become a major problem for the U.S. economy and smaller �d� democratic governance. The agenda for American political reform needs to include the breaking of public unions' power to capture an even larger share of private income.

Thanks for those snips, Doug.

The real thanks however, go to Cuyahoga Falls Mayor Don Robart who had the courage to say what needs to be said. Every trend change starts with 1, a single person willing to do something different.

I am aware of no other mayors expressing those views. Moreover, Cuyahoga Falls, is a fair sized city, close to 50,000 in the last census. Good luck mayor, we wish you well.

Voters Say No To Tax Hikes In Colorado Springs

In Colorado Springs, Colorado City removes trash cans, streetlights to save cash.

If you come to a neighborhood park in Colorado Springs, plan on bringing your own trash bags. To save money, the city has removed the trash cans.

Need to catch a bus? Don't try on evenings or weekends. The city has cut that service, too. And when the sun goes down, Colorado Springs is going to look a little bit dimmer. Crews are removing a third of the city's streetlight to save money on electricity and light bulbs.

It's not a new concept in Colorado Springs, touted on some Web sites as a "libertarian paradise." The city's garbage collection, zoo and philharmonic are all privately funded.

The city is even auctioning off its police helicopters on the Internet.

The problem with this response is stopping garbage collection in parks will not save much. The real meat on the bone is union wages and pensions. However, the fact that the city's garbage collection, zoo and philharmonic are all privately funded is certainly welcome.

Colorado Springs needs to take the next step of privatizing the fire department, or better yet, going to a volunteer fire department.

Change Comes To Jersey City

In Hudson County New Jersey, Members of Jersey City MUA and Incinerator Authority have to start paying toward health insurance.

Members of the Jersey City Municipal Utilities Authority and Jersey City Incinerator Authority may have to start paying for their health benefits.

Councilman Steven Fulop tried to introduce ordinances Wednesday night that would have eliminated the benefits altogether, but failed to muster the necessary votes.

The council instead introduced a measure, backed by Mayor Jerramiah T. Healy, that would limit health insurance to the member and eliminate family coverage.

The board members would also have to pay 20 percent of the cost of the premium. Currently, the agency foots the entire bill.

"This ordinance is a compromise ordinance in that it allows for a substantial savings while at the same time allowing the commissioners to pay a portion of their premium to maintain health coverage," Healy said in a statement yesterday.

According to a memo Healy sent council members, Fulop's proposal would have saved $287,569 and the "compromise ordinances" would save $155,294.

"It is absolutely shameful in a time when the lowest level city employees were laid off, they grant health benefits to politically connected cronies that the taxpayers fund," Fulop said. "Most of the City Council and administration clearly do not understand how they are hurting the regular taxpayers."

Fulop and Councilwoman Viola Richardson voted against Healy's ordinances. Councilman Bill Gaughan abstained on the MUA vote since his daughter, Eileen, is chairwoman and Councilwoman Willie Flood abstained on the JCIA vote because her husband is chairman.

Councilman Steven Fulop had the right idea "eliminate the benefits altogether". Notice the two complete wimps, Councilman Bill Gaughan and Councilwoman Willie Flood opting out of a vote, effectively preserving huge benefits for their daughter and husband respectively.

Nonetheless a change was made in the right direction. Expect to see similar changes elsewhere.

Atlanta Must Change Pension Approach

An editorial opinion in the Atlanta Journal Constitution says City must change pension approach.

A sobering report released last week by the pension reform panel convened by Mayor Kasim Reed clearly laid out the city�s red-ink problem.

In part, Atlanta�s payments toward pensions have risen 13 percent annually during the past decade. The city paid out $144 million for pensions last year, up 162 percent from 2001�s $55 million cost.

Worse yet, the gap between the funded and unfunded portions of the pension plans has grown 21 percent a year since 2001. That means the plans are now barely more than halfway funded. In 2001, 83 percent was covered.

For the sake of taxpayers, the city must choose quickly on how to climb out of its pension hole. Paying roughly 20 percent of the city�s general fund budget for pensions is simply not sustainable. Fixing the problem will require sacrifices from both the city and its public servants.

The big reforms should apply to non-vested current workers and future hires. That means a two-tier benefits system going forward.

That said, the city should also consider rolling back at least part of the formula changes that boosted pension costs in 2001 and 2005.

The Journal did not go far enough in its recommendations. However, the Journal did recognize the system is insolvent, in need of change, and its recommendation of a two-tiered pension system is a big step in the right direction if it happens.

Bob Dylan Revisited

In regards to public pensions, Bob Dylan was right, just 45 years early.

However, there is always change, something that Dylan recognized in his protest song
The Times They Are A-Changin'. Think about how attitudes towards Russia and China have changed and the pace of that change compared with technology changing. Technology changes orders of magnitudes faster than attitudes regarding unions and pensions.

Here is a pertinent verse to sing.

The Times They Are A-Changin'

Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside ragin'.
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.

-- Bob Dylan

Inspiration and Composition

Inquiring minds might be interested in the Inspiration and Composition for the song.

Dylan appears to have written the song in September and October 1963. Dylan recalled writing the song as a deliberate attempt to create an anthem of change for the moment.

Dylan critic Michael Gray called it "the archetypal protest song." Gray commented, "Dylan's aim was to ride upon the unvoiced sentiment of a mass public�to give that inchoate sentiment an anthem and give its clamour an outlet.

Literary critic Christopher Ricks suggests that the song transcends the political preoccupations of the time in which it was written. Ricks argues that Dylan is still performing the song, and when he sings "Your sons and your daughter/Are beyond your command", he sings inescapably with the accents not of a son, no longer perhaps primarily a parent, but with the attitude of a grandfather.

Ricks concludes: "Once upon a time it may have been a matter of urging square people to accept the fact that their children were, you know, hippies. But the capacious urging could then come to mean that ex-hippie parents had better accept that their children look like becoming yuppies. And then Republicans..."

Less than a month after Dylan recorded the song, President John F. Kennedy was assassinated in Dallas, Texas, on November 22, 1963. The next night, Dylan opened a concert with "The Times They Are a-Changin'"; he told biographer Anthony Scaduto: "I thought, 'Wow, how can I open with that song? I'll get rocks thrown at me.' But I had to sing it, my whole concert takes off from there.

I found a You-Tube clip of Dylan singing The Times They Are A-Changin'.

Dylan is at some small obscure bar early in his career. It's a great clip, well worth a play, and the play is free, just not embeddable.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Rep. Suzie Bassi: "Illinois in Utter Crisis, Next to Bankruptcy, $13bn Hole in a $28bn Budget"; Ambrose Evans Pritchard Inflicted with FIV

Ambrose Evans-Pritchard has the right facts but the wrong cure in Don't go wobbly on us now, Ben Bernanke, an article detailing the problems in many US states, notably Illinois.

Barack Obama's home state of Illinois is near the point of fiscal disintegration. "The state is in utter crisis," said Representative Suzie Bassi. "We are next to bankruptcy. We have a $13bn hole in a $28bn budget."

The state has been paying bills with unfunded vouchers since October. A fifth of buses have stopped. Libraries, owed $400m (�263m), are closing one day a week. Schools are owed $725m. Unable to pay teachers, they are preparing mass lay-offs. "It's a catastrophe", said the Schools Superintedent.

In Alexander County, the sheriff's patrol cars have been repossessed; three-quarters of his officers are laid off; the local prison has refused to take county inmates until debts are paid.

Florida, Arizona, Michigan, New Jersey, Pennsylvania and New York are all facing crises. California has cut teachers salaries by 5pc, and imposed a 5pc levy on pension fees.

This is not to pick on America. Belt-tightening is the oppressive fact of 2010-2012 for half the world. Hungary, Ukraine, the Baltics and the Balkans are already under the knife. Latvia's economy may contract by 30pc from peak to trough as it carries out an "internal devaluation", ie wage cuts, to hold its euro peg.

The eurozone's fiscal squeeze is well advanced in Ireland. Brussels has told Greece to cut by 10pc of GDP in three years, Spain by 8pc, Portugal by 6pc. Britain must slash soon, or face a gilts strike.

The Bank for International Settlements says Britain needs a primary surplus of 5.8pc of GDP for a decade to stabilise debt at pre-crisis levels, given the ageing crunch as well. The figure is 6.4pc for Japan, 4.3pc for the US and France. It warns of "unstable dynamics", posh talk for a debt spiral. "Action is needed now."

The West risks a slow grind into debt-deflation unless central banks offset fiscal tightening with monetary stimulus � QE, of course � to keep demand alive. Yet the Fed and the European Central Bank are letting credit contract.

So why has Bernanke broken ranks with King and begun to flirt with disaster by tightening too soon? Has he lost control to regional hawks, as in mid-2008? Have critics in Congress and the media got to him? Has China vetoed QE, fearing a stealth default on Treasury debt?

Don't go wobbly on us now, Ben. If the governments of America, Europe, and Japan are to retrench � as they must � their central banks must stay super-loose to cushion the blow. Otherwise we will all sink into deflationary quicksand.

More Quantitative Easing? Praising Mervyn King, the Bank of England's Governor?

Has Ambrose Evans-Pritchard lost his marbles?

In regards to Quantitative Easing, how many times do we have to prove it does not solve a thing? Hasn't Japan proven that for two decades? What does Japan have to show for it?

The answers to those questions should be obvious but obviously they are not. Proof is in the title to Prichard's post "Don't go wobbly on us now, Ben Bernanke".

Please consider the following chart on excess reserves.



QE Is Useless

There is already over $1 trillion in "excess reserves" sitting around that theory (wrong theory) suggests banks could lend.

Pray tell what difference would it make to bank lending if excess reserves was 3 times that or even 10 times that?

Quantitative Easing (QE) is useless. All it does is complicate exit strategies down the road.

The problem is debt. Illinois is swamped in it. So is California, New Jersey, New York, and for that matter nearly every state in the union. Consumers are swamped in debt as well. Businesses have no reason to borrow.

What states need to do is live within their means. To do so requires lower union wages and benefits, and the end of defined benefit pension plans for public workers. There simply is no other way. Consumers are too tapped out to support tax hikes for union parasites. More federal stimulus will result higher debt levels and more bridges to nowhere.

On the QE side of things, Bernanke can make any amount of money he wants available for lending and it will not do a thing. Banks are too capital impaired to lend, and credit worthy consumers and businesses do not want to borrow.

I have talked about this on many occasions, most notably in Fictional Reserve Lending And The Myth Of Excess Reserves, something that monetarists believing in QE ought to read.

Fiscal Insanity Virus Strikes Again

Ambrose Evans Pritchard, Paul Krugman, Joseph Stiglitz and scores of other economists all think it is possible to spend one's way to prosperity. Simple logic would suggest the idea is nonsense. Moreover, in practice it has failed every time.

Greenspan tried stimulating the economy by holding interest rate low, and all he accomplished was creation of the biggest global housing bubble and debt bubble on record.

Japan is proof as well. Japan tried both Quantitative Easing (a Monetarist policy), and Fiscal Stimulus (a Keynesian policy).

Both failed (which is what one should expect following a collapsed debt bubble) and all Japan has to show for it is debt to the tune of 200% of GDP, with an aging population now needing to live off savings. Sadly those savings were squandered building bridges to nowhere. Yet, there is no end in sight to Japanese deflation.

I do not know why economists believe in fairy tale economics and free lunches when the average 6th grader would know better. The only theory I can come up with to explain this phenomenon is a renewed outbreak of the Fiscal Insanity Virus rapidly spreading the globe.

Ambrose Evans-Pritchard is no doubt, infected.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Consumer Preference for Saving vs. Spending Jumps in 2009; Major War Coming Between Union "Haves" and Non-Union "Have-Nots"

Perhaps by necessity, perhaps by desire, but most likely by both, An increasing percentage of Americans say they more enjoy saving than spending.

The recession and financial crisis have resulted in a significant change in the way many Americans feel about spending and saving. Six in 10 Americans (62%) now say they more enjoy saving than spending -- while 35% say the reverse. This reflects a shift that began in December 2008 and a marked change from the first half of the decade, when Americans were about evenly split regarding whether they more enjoyed spending or saving.



Demographics



Changing Consumer Psychology

Essential to the "go forward" economic outlook is whether consumer spending will return to pre-recession levels or reflect a "new normal" spending pattern. The significant shift to saving in American preferences, as opposed to spending, suggests an important change in consumer psychology. Most likely, this change in consumer preferences results from the severity of the recession, the financial crisis, many Americans' severe loss of wealth in their homes and investments, and the significant change in the availability of credit throughout the economy.

At the same time, many consumers also say their spending behavior has changed. More than half of the nation's consumers across socioeconomic groups say they are continuing to spend less, despite the claims of many economic observers that things are getting better and recovery is underway. Two-thirds of consumers who are spending less -- and 38% of all Americans -- say their current reduced level of spending is their new, normal spending pattern. And significant percentages of Americans across all major demographic groups say this is their new normal.

Further, Gallup's continuous tracking of consumer spending behavior in early 2010 shows that consumers are actually doing as they say by spending at a new-normal level -- consistent with their 2009 spending, and much lower than their spending at the beginning of the recession in 2008.

Peak Boomer Spending Is In Rear View Mirror

The key takeaway is that consumers are saying they will spend less and actually do so. 38 percent say that spending less is the new pattern. I expect that percentage to jump.

Look at those areas I circled in red. Boomers have tossed in the towel on spending. Peak income, and purchasing ability is highest for those 45-60. Salaries are peaking and the kids have moved out of the house (perhaps in this economy starting to move back home).

No doubt boomers are headed into retirement scared half to death about not having saved enough. In general, that demographic is downsizing, not buying new boats. Peak boomer spending has come and gone. It is only visible in the rear view mirror.

Birds Return To The Nest

At the other end of the working age ladder, students are coming out of college, hundreds of thousands of dollars in debt, with no way to pay those loans back.

Think they are about to go on huge spending sprees? Many will delay family formation and buying of houses. Some, fresh out of college with no job are moving back home.

I'm Sure Glad The Recession Ended

All of this is a much needed deleveraging, and yet another reason why cash strapped states are going to remain cash strapped for a long time. Sales tax revenue coming out of this recession is not going to jump as it has out of previous recession.

Here are two of the seven charts from I'm Sure Glad The Recession Ended.

State Income Tax Receipts



State Income Tax Receipts Percent Change From Year Ago



If you believe retail sales are going up because of government reports on Advance Sales, then please think again.

You owe it to yourself to read Retail Sales Rise: Where? Let's Take a Look; Expect Nothing Less Than Panic.

After you click on and read the above link, take a good hard look at that last chart and ponder the implications in regards to union salaries, school budgets, pension promises, medical benefits, etc.

Next think about what the massive wave of boomer retirements might do to boomer spending habits and future tax revenue.

Next think about the implications on consumer spending habits were tax hikes attempted to cover any shortfalls.

....

At some point retail sales and tax levels will stabilize, but it will not be at a level that will support rising wages for public unions, or even current benefits promised to public workers via defined benefit pension plans.

A major war is coming between the union parasite "haves", and the non-union "have-nots", the latter already forced to live in the real economy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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I'm Sure Glad The Recession Ended

It's a good thing the recession ended. Otherwise, key economic charts might look something like this.

Total Loans and Leases Percent Change From Year Ago



Total Loans and Leases



Total Revolving Credit



Total Revolving Credit Percent Change From Year Ago



Housing Starts



State Income Tax Receipts



State Income Tax Receipts Percent Change From Year Ago



If you believe retail sales are going up because of government reports on Advance Sales, then please think again.

You owe it to yourself to read Retail Sales Rise: Where? Let's Take a Look; Expect Nothing Less Than Panic.

After you click on and read the above link, take a good hard look at that last chart and ponder the implications in regards to union salaries, school budgets, pension promises, medical benefits, etc.

Next think about what the massive wave of boomer retirements might do to boomer spending habits and future tax revenue.

Next think about the implications on consumer spending habits were tax hikes attempted to cover any shortfalls.

Then please consider just what might happen if the US stock market went sideways for five years.

Finally, please consider just what might happen if the US stock market were to mimic the Japanese Nikkei like this.

Nikkei Monthly Chart



click on chart for sharper image

But hey, not to worry, after all the recession is over, the above charts are a mere figment of everyone's imagination, and what happened in Japan cannot possibly happen here.

Or can it?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List