Tidbits Quotations on May 20, 2010
To Accompany the May 20, 2010 edition of Tidbits
Bob Jensen at Trinity University


PIGS =Portugal, Ireland, Spain, Greece
EU nations weakest on enforcing tax laws and national debt junkies beyond reasonable limits relative to their GDP

Watch the video at http://article.wn.com/view/2010/02/11/Europes_PIGS_Country_by_country/

A better term is US PIGS ---


Video on IOUSA Bipartisan Solutions to Saving the USA

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

One take home from the CNN show was that over 60% of the booked National Debt increases are funded off shore (largely in Asia and the Middle East).
This going to greatly constrain the global influence and economic choices of the United States.

By 2016 the interest payments on the National Debt will be the biggest single item in the Federal Budget, more than national defense or social security. And an enormous portion of this interest cash flow will be flowing to foreign nations that may begin to put all sorts of strings on their decisions  to roll over funding our National Debt.

The unbooked entitlement obligations that are not part of the National Debt are over $60 trillion and exploding exponentially. The Medicare D entitlements to retirees like me added over $8 trillion of entitlements under the Bush Presidency.

Most of the problems are solvable except for the Number 1 entitlements problem --- Medicare.
Drastic measures must be taken to keep Medicare sustainable.


I thought the show was pretty balanced from a bipartisan standpoint and from the standpoint of possible solutions.

Many of the possible “solutions” are really too small to really make a dent in the problem. For example, medical costs can be reduced by one of my favorite solutions of limiting (like they do in Texas) punitive damage recoveries in malpractice lawsuits. However, the cost savings are a mere drop in the bucket. Another drop in the bucket will be the achievable increased savings from decreasing medical and disability-claim frauds. These are important solutions, but they are not solutions that will save the USA.

The big possible solutions to save the USA are as follows (you and I won’t particularly like these solutions):



Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


Here is the original (and somewhat dated video that does not delve into solutions very much)
IOUSA (the most frightening movie in American history) ---
(see a 30-minute version of the documentary at www.iousathemovie.com )

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

Watch the World Premiere of I.O.U.S.A.: Solutions on CNN
Saturday, April 10, 1:00-3:00 p.m. EST or Sunday, April 11, 3:00-5:00 p.m. EST

Featured Panelists Include:

  • Peter G. Peterson, Founder and Chairman, Peter G. Peterson Foundation
  • David Walker, President & CEO, Peter G. Peterson Foundation
  • Sen. Bill Bradley
  • Maya MacGuineas, President of the Committee for a Responsible Federal Budget
  • Amy Holmes, political contributor for CNN
  • Joe Johns, CNN Congressional Correspondent
  • Diane Lim Rodgers, Chief Economist, Concord Coalition
  • Jeanne Sahadi, senior writer and columnist for CNNMoney.com

Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


CBS Sixty minutes has a great video on the enormous cost of keeping dying people artificially alive:
High Cost of Dying --- http://www.cbsnews.com/video/watch/?id=5737437n&tag=mncol;lst;3
(wait for the commercials to play out)

U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/

"The Looming Entitlement Fiscal Burden," by Gary Becker, The Becker-Posner Blog, April 11, 2010 ---

"The Entitlement Quandary," by Richard Posner, The Becker-Posner Blog, April 11, 2010 ---

David Walker --- http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)

Niall Ferguson --- http://en.wikipedia.org/wiki/Niall_Ferguson

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.
Niall Ferguson, "An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1
Please note that this is NBC’s liberal Newsweek Magazine and not Fox News or The Wall Street Journal.

. . .

In other words, there is no end in sight to the borrowing binge. Unless entitlements are cut or taxes are raised, there will never be another balanced budget. Let's assume I live another 30 years and follow my grandfathers to the grave at about 75. By 2039, when I shuffle off this mortal coil, the federal debt held by the public will have reached 91 percent of GDP, according to the CBO's extended baseline projections. Nothing to worry about, retort -deficit-loving economists like Paul Krugman.

. . .

Another way of doing this kind of exercise is to calculate the net present value of the unfunded liabilities of the Social Security and Medicare systems. One recent estimate puts them at about $104 trillion, 10 times the stated federal debt.

Continued in article --- http://www.newsweek.com/id/224694/page/1


Niall Ferguson is the Laurence A. Tisch professor of history at Harvard University and the author of The Ascent of Money. In late 2009 he puts forth an unbooked discounted present value liability of $104 trillion for Social Security plus Medicare. In late 2008, the former Chief Accountant of the United States Government, placed this estimate at$43 trillion. We can hardly attribute the $104-$43=$61 trillion difference to President Obama's first year in office. We must accordingly attribute the $61 trillion to margin of error and most economists would probably put a present value of unbooked (off-balance-sheet) present value of Social Security and Medicare debt to be somewhere between $43 trillion and $107 trillion To this we must add other unbooked present value of entitlement debt estimates which range from $13 trillion to $40 trillion. If Obamacare passes it will add untold trillions to trillions more because our legislators are not looking at entitlements beyond 2019.


The Meaning of "Unbooked" versus "Booked" National Debt
By "unbooked" we mean that the debt is not included in the current "booked" National Debt of $12 trillion. The booked debt is debt of the United States for which interest is now being paid daily at slightly under a million dollars a minute. Cash must be raised daily for interest payments. Cash is raised from taxes, borrowing, and/or (shudder) the current Fed approach to simply printing money. Interest is not yet being paid on the unbooked debt for which retirement and medical bills have not yet arrived in Washington DC for payment. The unbooked debt is by far the most frightening because our leaders keep adding to this debt without realizing how it may bring down the entire American Dream to say nothing of reducing the U.S. Military to almost nothing.

Niall Ferguson,
"An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1

This matters more for a superpower than for a small Atlantic island for one very simple reason. As interest payments eat into the budget, something has to give—and that something is nearly always defense expenditure. According to the CBO, a significant decline in the relative share of national security in the federal budget is already baked into the cake. On the Pentagon's present plan, defense spending is set to fall from above 4 percent now to 3.2 percent of GDP in 2015 and to 2.6 percent of GDP by 2028.

Over the longer run, to my own estimated departure date of 2039, spending on health care rises from 16 percent to 33 percent of GDP (some of the money presumably is going to keep me from expiring even sooner). But spending on everything other than health, Social Security, and interest payments drops from 12 percent to 8.4 percent.

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force. Which is why voters are right to worry about America's debt crisis. According to a recent Rasmussen report, 42 percent of Americans now say that cutting the deficit in half by the end of the president's first term should be the administration's most important task—significantly more than the 24 percent who see health-care reform as the No. 1 priority. But cutting the deficit in half is simply not enough. If the United States doesn't come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.

"We Are Out of Money:  American governance won’t begin to inch forward until the political class faces basic facts," by Matt Welch, Reason Magazine, June 2010 --- http://reason.com/archives/2010/05/07/we-are-out-of-money

American conservatives, particularly the fiscal variety, tend to hold up the European Union as a model of irresponsible, big-spending economic policy. But consider this: According to E.U. rules, member countries cannot maintain budget deficits above 3 percent of gross domestic product; nor can their total debt rise above 60 percent of GDP. As Veronique de Rugy points out in this issue, the U.S. budget deficit in 2009 was three times the E.U.’s limit, and total debt will zoom past the 60 percent threshold sometime this year. Washington makes Paris look frugal.

In March the federal government created the most expensive new entitlement in four decades, even as the bond rating company Moody’s Investors Service warned that debt levels could soon precipitate a downgrade in U.S. Treasury bonds. The main opposition party fought the bill by decrying “cuts” to Medicare, and it has kept itself at arm’s length from one of the few politicians talking seriously about long-term reform.

Today may be terrible, but tomorrow is going to be much worse, at least as measured by such metrics as deficits, debt, and entitlement spending. In an April speech, Federal Reserve Chairman Ben Bernanke laid out the misery that awaits us. “The arithmetic is, unfortunately, quite clear,” he said. “To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.”

Yet in the very next paragraph, Bernanke displayed the kind of cowardice that got us into and has helped extend our awful economic mess: “Today the economy continues to operate well below its potential, which implies that a sharp near-term reduction in our fiscal deficit is probably neither practical nor advisable. However, nothing prevents us from beginning now to develop a credible plan for meeting our long-run fiscal challenges.”

States, counties, and municipalities, lacking Bernanke’s ability to print money, do not have the luxury of “beginning now to develop a credible plan” for the future. They are flat out of money in the present. But they too refuse to face reality.

The housing bubble, with its tax-generating wealth, was already bursting in 2007. Yet as recently as 2009, Montgomery County, Maryland, decided to make “phantom” cost-of-living increases to the pensions of government workers, linking contributions to salary increases that did not occur. This sweetheart deal, which added more than $7 million to the county’s annual budget (according to The Washington Post), tasted rather bitter at a time when the county’s revenue was falling short of projections by more than $24 million. Yet after one Montgomery County Council member proposed eliminating this sop to the public-sector unions, four of his colleagues joined a rally on the rooftop of the council’s parking garage, leading a crowd of 400 government employees in chants of “We’ve had enough!” and “No justice, no peace.”

In Los Angeles, former labor organizer and once-rising political star Antonio Villaraigosa, now a second-term mayor who has fallen so far that the local glossy city magazine made him a cover boy last year under the headline “Failure,” announced in April his intention to shut down “inessential” city services two days a week, after the city controller had declared that the municipality would “run out of money” by June 30. Villaraigosa’s deputy chief of staff, Matt Szabo, told The Wall Street Journal the city’s public-sector unions “have priced themselves out of a job.”

Yet those unions received significant raises from the tough-sounding mayor as recently as 2007. The city’s labor force grew by more than 9 percent from 2000 to 2009, and annual pension contributions tripled, according to the Los Angeles Times. In a March interview with National Public Radio, Villaraigosa lamented that “California cities are constrained by various propositions which limit your ability to raise revenues” (though he managed to raise the city’s sales tax from 8.25 percent to 9.75 percent) and portrayed renegotiating union contracts as an unlikely last resort. “There aren’t a lot of options here,” he said. “We have contracts with our employees that we have to abide by. So unless they agree to sharing in the sacrifice in these tough times, I won’t have a lot of options.”

Even bankruptcy isn’t necessarily a harsh enough reality check. The city of Vallejo, California, went bankrupt in 2008, largely due to impossible-to-meet pension obligations. Although the bankruptcy judge declared that pension contracts were fair game in the reorganization process, the city last December cut just about everything except pension contributions for government employees, according to a Wall Street Journal piece by Steven Greenhut. In March of this year, Vallejo agreed to a new contract with firefighters that again left pensions unchanged. “The majority [of council members] did not have the political will to touch the pink elephant in the room—public safety influence, benefits, and pay,” Vice Mayor Stephanie Gomes told Greenhut.

California, it cannot be stressed enough, isn’t necessarily worse than anywhere else; it’s just bigger (and louder). A Reason Foundation study of state spending increases during the comparatively good times of 2002 to 2007 found the Golden State to be in the middle of the pack on a percentage basis. And even after two-plus years of crisis, with unrelenting headlines about “annihilating” cuts, state bureaucracies remain bloated.

Surveying the fiscal wreckage at the end of 2009, BusinessWeek’s Joe Mysak found that the 50 states had cut their combined payrolls that year by a minuscule 0.25 percent. Mysak’s conclusion: “Politicians everywhere are talking about layoffs, of course. They have been talking about eliminating jobs, often in threatening tones, since at least January. As the numbers show, for most, it’s just talk.”

Continued in article

"Everyone Prospers With Free Trade:  Why protectionism will only make things worse," by John Stossel, Reason Magazine, April 29, 2010 ---

Trade is win-win. Two people trade only because each values what he gets more than what he gives up. That's why in a store both customer and clerk say, "Thank you."

At the international level, trade is also win-win because it allows countries to specialize in what they do well and trade the extra for things they don't make as well. When free trade is unmolested, the world is richer and has more choices.

But I keep hearing about unfair trade. I'm told that trade allows American companies to exploit people in poor countries and makes Americans jobless.

Tom Palmer of the Atlas Economic Research Institute, one of my guests on my Fox Business News show tonight, says those are myths.

Do we exploit people in Third World countries?

"The evidence does not show that," Palmer said. "Multinational companies pay a wage premium. They pay more than local companies pay ... because they want to attract good workers. Look at the Shanghai factory of General Motors. They pay three times what Chinese-owned factories (pay)."

Yet House Speaker Nancy Pelosi says that liberalizing trade with Central America would exploit workers.

"People want to work at those factories. They line up. They compete. Are they competing to get exploited? They're competing for higher-wage jobs. I think that those people know their interests better than Nancy Pelosi does."

Sen. Byron Dorgan called free trade "a race to the bottom. This says to American workers if you can't compete against 30-cents-an-hour labor in some other country, you lose your job."

"Again, evidence doesn't support that," said Palmer. "Look at the iPod. It says, 'Manufactured in China.' But if you look in the back, it says, 'Designed in California.' Most of the value is added by American workers." My colleague at Fox, former Gov. Mike Huckabee, said, "In a country we can only be free if we can feed ourselves, fuel ourselves and fight for ourselves. When we start outsourcing everything, that's a road to being enslaved."

"I hope that Gov. Huckabee thought about that when he was governor of Arkansas, and made sure there was no jobs outsourced to Virginia or Texas," Palmer replied. "He should have protected the people of Arkansas, right?"

But that's different. We can count on Pennsylvania in a time of war. I don't know that I can count on China.

"If you're trading with them, it makes war much less likely," Palmer said. "We're not going to go to war with Canada. It's our biggest trading partner—$600 billion a year going across the U.S.-Canada border in trade along the longest non-militarized border in the world. Five thousand miles, counting Alaska. That is trade creating peace."

As the French economist Frederic Bastiat put it, "When goods don't cross borders, soldiers will."

Palmer offered another way to think about trade: as a machine—"a machine that allows Florida farmers to turn oranges into (phones). They can't grow cell phones on their trees in Florida. They grow oranges really well. What they can do is take those oranges and trade them for cell phones."

Continued in article

"Fear of a Double Dip Could Cause One," by Robert Shiller, The New York Times, May 14, 2010 ---

THE risk of a double-dip recession hasn’t abated, even after news of the huge European bailout in response to the Greek debt crisis.

World markets soared initially on the announcement of the nearly $1 trillion rescue plan, and then declined. But as the economist John Maynard Keynes cautioned long ago, such market reactions are basically a “beauty contest” — with investors trying to predict the short-term reaction that other investors think still other investors will have.

In other words, don’t view these beauty contests as a heartfelt response to a fundamental change in the economy.

In fact, there is still a real risk of a double-dip recession, though it can’t be quantified by the statistical models that economists use for forecasts. Instead, the danger stems from the weakness and vulnerability of confidence — whose decline could bring markets down, further stress balance sheets and cause cuts in consumption, investment and local government expenditures.

Ultimately, the risk resides largely in social psychology. It is the fear of fear itself, of which Franklin D. Roosevelt famously spoke.

From 2007 to 2009, there was widespread concern about the risk of an economic depression, but that scare has been abating. Since mid-2009, it has been replaced by the milder worry of a double-dip recession, as a count of Web searches for those terms on Google Insights suggests. And with that depression scare still fresh in our minds, sensitivity to the possibility of another downturn remains high.

To be sure, many economists doubt that a double-dip recession is in store. One reason may be that we have just had three solid quarters of real growth in the gross domestic product. In the past, when inflation-adjusted G.D.P. has come out of a decline and posted three or four quarters of gains, it has never immediately begun to fall again — at least not since quarterly numbers began to be issued in 1947.

So once G.D.P. gains momentum this way, it generally doesn’t stop in its tracks. And there have been encouraging factors — like continuing low interest rates, as well as lower inventory-to-sales ratios and lower growth of stocks of new homes and consumer durables — which suggest that pent-up demand will lead to more sales.

But forecasters who focus on the next four quarters may be missing the real worry that many people harbor about the economy.

I use a definition of a double-dip recession that doesn’t emphasize the short term. Instead, I see it as beginning with a recession in which unemployment rises to a high level and then falls at a disappointingly slow rate. Before employment returns to normal, there is a second recession. As long as economic recovery isn’t complete, that’s a double-dip recession, even if there are years between the declines.

Under that definition, there has been only one serious double-dip recession in the last century — and it was serious indeed. It started with the 1929-33 recession, which was followed by a recession in 1937-38. Between those declines, the unemployment rate never moved below 12.2 percent. Those two recessions, four years apart, are now typically lumped together as one event, the Great Depression.

Many negative factors persisted between those dips. High among them was a widespread sense then that something was amiss with the economy. There was a feeling of uncertainty that discouraged entrepreneurship, lending and spending, and most important, hiring.

We have to deal with a similar — though less extreme — problem today. Many of us are unsettled by images that are preventing a return to normal confidence — images of rioting in Athens, or of baffled American traders during the nearly 10 percent drop in the stock market on May 6. And if the BP oil spill is not soon contained, and eventually wreaks havoc on the gulf economy, we may need to add it to the list, too.

Consider the May 6 stock market plunge. Though it reversed quickly, it awakened fears of instability, which can change the atmosphere and delay recovery from a recession, possibly even until the next one comes around.

There has been a similar historical example. On Sept. 11, 1986, the Standard & Poor’s 500-stock index fell 4.8 percent, then the biggest one-day percentage drop since April 21, 1933. It called public attention back to the Great Depression, even though the decline was reversed within a couple of weeks. The New York Times attributed that one-day drop to “anxiety, with computer spin,” referring to trading programs that generated huge sales. Readers were left with ambiguous interpretations of that drop, as they have been in the wake of the recent one-day decline.

That 1986 event stuck in people’s minds. It was followed a year later by several aftershocks, then by what is still the biggest one-day drop in history, the 20.5 percent fall in the S.& P. 500 on Oct. 19, 1987.

FOSTERED by mass psychology, the same kind of aftershocks could occur in the next year or two. This time, in our more delicate economy, the consequences could be more severe.

Since 1989, I have been compiling the Buy-on-Dips Stock Market Confidence Index, now produced by the Yale School of Management. It shows that confidence to buy on market dips has been declining steadily for individual investors since 2009. (The measure is holding steady for institutional investors.) Will individuals continue to support the market, which is now highly priced?

Confidence indexes and other measures of public thinking show gradual trends, often over years, that don’t match up precisely with economic events, which are often sudden. We need to look at short-run events, like the market reaction to the Greek bailout, as no more than side effects. Slowly moving changes in our animal spirits represent the real risk of a double-dip recession.

Robert J. Shiller is a professor of economics and finance at Yale and a co-founder and the chief economist of MacroMarkets LLC.


"Extend the Bush Tax Cuts—For Now:  Deficits are a real problem but the recovery is still too fragile to choke off growth with higher rates," by Martin Feldstein, The Wall Street Journal, May 12, 2010 ---

This is not the time for a tax increase. But unless Congress acts, under current law the existing income tax rates will rise sharply at the beginning of next year. Congress should vote now to extend all of the current tax rates for two years, including the tax rates on dividends, interest and capital gains. Limiting the resulting tax-rate cuts to two years would reduce the projected future fiscal deficits. The sooner Congress acts, the stronger our prospects for continued economic recovery.

A tax increase next year could easily derail the current fragile expansion. The economic upturn since last summer has been nurtured by Federal Reserve credit like the mortgage purchase program and by the fiscal incentives such as the tax credits for car buyers and first-time home buyers that are now coming to an end.

Eighty percent of the latest quarterly GDP increase consisted of a rise in consumer spending that was the result of an unrepeatable sharp drop in the saving rate. Without that decline in the saving rate, the first-quarter annual GDP growth rate would have been less than 1%. A 2011 tax increase that reduces economic incentives and household spending would raise the risk of a new economic downturn.

President Obama proposes to increase tax rates on high-income households while making the existing tax rates permanent for taxpayers below the top tax brackets. While the increase would hit only a relatively small fraction of all households, that group represents a large share of total taxes and of private spending. Raising their tax rates would be a substantial blow to overall spending and therefore to GDP growth. Small business investment and hiring would also be adversely affected because half of all profits, including most of small business income, is taxed at personal rates rather than at the corporate rate.

Although it is important to avoid increasing the current tax rates until the recovery is well established, the enormous budget deficits that are now projected for the rest of the decade must not be allowed to persist. While legislation to reduce future government spending or faster-than-expected income growth could shrink the out-year deficits, it would be dangerous to depend on either of them.

It would be wrong therefore to commit to the permanent reduction in tax rates for all taxpayers below the top brackets that is called for in the Obama budget. Changing the Obama budget proposal to limit all tax cuts to two years would reduce the total deficits over the next decade by more than $2 trillion. No single policy change could do as much to limit the future deficits and the national debt.

Such a limit on the future tax cuts should be combined with policies to slow the growth of spending. According to the Congressional Budget Office (CBO), the president's budget implies that total federal spending, excluding interest on the government debt, will rise to 21.1% of GDP in 2020 from 17.9% in 2007. If Congress cares about future deficits, it will prevent that unprecedented rise in government spending. It will also do more to deal with the spending programs that are hidden in the tax law like the health-insurance subsidy, the child-care credits, and the deductibility of local property taxes.

Failure to cut future deficits would mean a weaker recovery and slower long-term growth. The CBO estimates that annual deficits under the Obama budget will average more than 5% of GDP between now and 2020, enough to absorb all of the current saving of households and corporations. If that happens, the U.S. will be forced to depend on a greater inflow of funds from the rest of the world to finance investments in housing and in business structures and equipment. The result is likely to be much higher interest rates, reducing investments and therefore slowing the growth of our standard of living.

According to the CBO, the large projected budget deficits imply that the government debt would rise to 90% of GDP by the end of the decade, about twice the debt-to-GDP ratio in 2008. Paying the interest on that government debt in 2020 would require about 40% of all personal income tax revenue. With half of the government debt already held by foreigners and with that share inevitably rising in the years ahead, there might well be a temptation to erode the real value of the debt with higher inflation.

The fragility of the economic recovery means that it would be dangerous to allow any taxes to rise in 2011. The inherent uncertainty about the out-year deficits means that it would be unwise to enact tax cuts that stretch beyond the next two years. Congress should move quickly to reassure taxpayers and financial markets that the current tax rates will be preserved for two years but that further tax cuts will depend on the future fiscal outlook.

The Pentagon and the IRS are Deemed Unauditable by the GAO.  What About the FED?
"Alan Grayson On The Passage Of The Partial "Audit The Fed" Amendment," by Alan Grayson, Zero Hedge, May 12, 2010 ---

The Senate just voted, 96-0, to audit the Federal Reserve. Soon, we will know what the Federal Reserve did with the trillions of dollars that it handed out during the financial crisis.

A few months ago, such a vote would have been unthinkable. One senior Treasury official claimed he would fight to stop an audit 'at all costs'. Senator Chris Dodd predicted that an audit would spell economic doom, while Senator Judd Gregg attacked accountability for the Fed as "pandering populism".

Today, both the Treasury Department and Senator Dodd support this amendment. As for Judd Gregg, he was just on the floor of the Senate discussing -- of all people -- 19th century populist Presidential candidate William Jennings Bryan.

What happened?

People Power is what happened. We built a coalition of people on the right and the left, ordinary citizens and economists, ex-regulators and politicians, all with one question for which we demanded an answer: "What happened to our money?"

No longer can Ben Bernanke get away with saying, "I don't know."

Now, we're going to know who got what, and why.

Releasing this information will show that the Federal Reserve's arguments for secrecy are -- and have always been-- a ruse, to cover up the handing out of hundreds of billions of dollars like party favors to the Wall Street favorites who brought the American economy to the brink of ruin.

But our work isn't quite done. The Senate audit provision isn't as strong as what we passed in the House. The Senate provision has only a one-time audit, whereas what we passed in the House would allow audits going forward. There will be a conference committee that will merge the provisions from the two bills.

The need for audits and oversight over Fed handouts going forward is great. The financial crisis isn't over, and neither are the Fed's secret bailouts. Earlier this week, the Federal Reserve announced it was going underwrite the Greek bailout by lending dollars to the central banks of Europe, England, and Japan. The loans may never be paid back, the Fed accepts the risk that the dollar will strengthen in the meantime, and the interest rate charged by the Fed is very likely at below-market rates. So such loans are in effect just a subsidy, to bail out foreigners.

The Fed has not been chastened. It is bolder and more of a rogue actor than ever. It's clear that without full audit authority going forward, the Fed will continue to give out "foreign aid" without Congressional or even Executive permission.

And it will do so in secret.

So we will be fighting on to get a full audit from the conference committee.

But let's not lose sight of what we have accomplished so far - real independent inquiry into the Fed, and its incestuous relationships with Wall Street banks. For the first time ever.

Our calls, emails, lobbying, blogging, and support really mattered. We made it happen.

Today, we beat the Fed.


Alan Grayson

Jensen Comment
It's important to trace where the bailout funds eventually ended up after being laundered. For example, billions went to AIG that in turn sent it on to Goldman Sachs. Without the Bailout, Goldman Sachs would've been left holding the empty bag.

Bob Jensen's threads on the bailout are at

From The Wall Street Journal Accounting Weekly Review on May 14, 2010

Pound Falls as Focus Shifts to U.K. Deficit
by: Bradley Davis
May 13, 2010
Click here to view the full article on WSJ.com

TOPICS: Advanced Financial Accounting, Foreign Currency Exchange Rates

SUMMARY: "Sterling fell Wednesday as investors focused on the U.K.'s shaky fiscal position, even as the new coalition government announced belt-tightening measures to cut the country's hefty deficit. The euro also slipped against the dollar as lingering concerns over euro-zone sovereign debt [e.g., Greece] eclipsed slightly better-than-expected economic growth throughout the zone, and as the euphoria over the European Union's $1 trillion aid package continued to dissipate." Exchange rates between the U.S. dollar and four currencies-the euro, the yen, the U.K. pound, and the Swiss franc-are quoted in the article as well as the exchange rate between the euro and the yen.

CLASSROOM APPLICATION: The article can be used to introduce foreign currency exchange transactions in advanced financial accounting classes.

1. (Introductory) List three economic factors that generally cause a change in any currency's currency exchange rate with other currencies.

2. (Introductory) What events have been occurring in Greece?

3. (Advanced) How are the three general factors listed in answer to question 1 combined with the events occurring in Greece currently influencing the value of the euro? Of the dollar?

4. (Introductory) Exchange rates between the U.S. dollar and four currencies are quoted in the article: the yen, the euro, the Swiss franc, and the British pound. Which of these exchange rates for the U.S. dollar are quoted indirectly, and which are quoted directly?

5. (Advanced) Define the terms "spot rate" and "forward rate."

6. (Advanced) Refer to the table of currency exchange rates associated with the article. For which currencies are forward rates quote? In general, are any trends evident in these forward rates quoted in the table?

Reviewed By: Judy Beckman, University of Rhode Island




Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

Return to the Tidbits Archives ---


Shielding Against Validity Challenges in Plato's Cave ---

Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
By Bob Jensen

What went wrong in accounting/accountics research?  ---

The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---


Bob Jensen's threads on accounting theory ---

Tom Lehrer on Mathematical Models and Statistics ---

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---

Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/