Posts from — August 2011

Somehow I missed this one from the CBC on August 4^th Some banks now charging for deposits

Faced with a torrent of cash from customers looking for ways to escape the market turmoil, some banks have begun charging major depositors to hold their cash.

Bank of New York Mellon Corp., a leading U.S.-based custodial bank, said in a note to clients this week that it will introduce a new fee on large cash balances effective Aug 8.

As corporations and institutions move their assets to safe havens such as cash, players such as BNY Mellon are seeing a surge in deposits. Between mid-June and mid-July demand deposit and commercial savings deposits grew by nearly US$200-billion according to Barclays Capital analyst Joe Abate.

Such deposits typically earn no interest but are covered by U.S. deposit insurance, a cost the banks must cover.

BNY Mellon said it will charge .13% on abnormally large cash deposits with an additional fee if the yield on a one-month U.S. Treasury Bill falls below a certain point.

Next I assume they will charge you a fee for charging you fees.

I found this because someone mentioned it in a comment thread, and I couldn’t believe it, so I checked. And banks are different from the check cashing stores and pay-day lenders in what way? I ask because there was a time, not that long ago, when organized crime was prosecuted for a lot of what major banks do today. We have ‘normalized’ usury and loan-sharking.

The BBC reports David Cameron: Police admit they got riots wrong

Mr Cameron told MPs that it had become clear there had been problems in the initial police response to the disorder.

“There were simply far too few police deployed on to our streets and the tactics they were using weren’t working,” said the prime minister

“Police chiefs have been frank with me about why this happened.

“Initially the police treated the situation too much as a public order issue – rather than essentially one of crime.

“The truth is that the police have been facing a new and unique challenge with different people doing the same thing – basically looting – in different places all at the same time.”

Ah, yes, the silly coppers assumed that riots were a ‘public order issue’, probably because they assumed that masses of people burning cars and throwing things at them was disorderly.

Apparently David Cameron is unaware that rioting is illegal, and criminal on its face. He was so worried about what was going on that he … remained on vacation, just like the mayor of London, but the weekend shift at the ‘cop shop’ are at fault for not calling out tanks and air strikes on the rioters, many as young as 10 years old.

The Metropolitan Police Service has about 35,000 officers to cover London and the surrounding area 24 hours per day, every day. Some percentage of the force will be on vacation or sick leave, as well as normal time off. In a normal department the weekend duty officer in charge is not going to have the authority to call in any massive number of off-duty officers, they are going to have to contact higher level officers, who may not be readily available on a weekend. The thing about ‘cop shops’ is that they have rules and procedures that must be followed, you can’t just ‘wing it’.

Oh, yes, it spite of what happened, Cameron sees no reason to re-think his plan to cut police services. He is also apparently considering a consult with Syria and Iran about cutting off social media, rather than having the police equipped to watch it to figure out where the problems are, or will be.

I have mentioned before that WalMart sales have been down for over two years, well, now sales a the dollar stores are slipping.

The upscale stores are all doing better, but now sales at the bottom of the line are in trouble. Customers are buying necessities and nothing else. While the people at the top are getting bonuses, the people at the bottom can’t afford to go to WalMart.

Despite news like this, and the statements of the traders on Wall Street, the looneytarian Local Puppy Trainer put up this – EDITORIAL: Market makes the case for cuts

That queasy feeling Americans had in September 2008, when the bottom fell out of the financial markets, has returned. Is the American economy slipping back into recession?

Last week, the Dow Jones industrial average lost 699 points, or 5.75 percent. After the stock market closed Friday, Standard & Poor’s, one of the Big Three credit-rating agencies, announced it had lowered its rating of the U.S. government’s credit, from AAA to AA-plus. It was the firm’s first-ever downgrading of U.S. creditworthiness from the top rung. Markets plunged again Monday, with the Dow declining another 634 points, before rebounding Tuesday. They were slumping again Wednesday.

Conditions deteriorated last week after Congress passed a bill raising the debt ceiling by $2.7 trillion, to $17 trillion, which was supposed to stabilize markets. The debt number is staggering. U.S. gross domestic product will be about $15 trillion this year.

The market crashed because the government refuses to even discuss the measure that we know will improve the economy, because it has always worked in the past – stimulus, ‘priming the pump’, call it what you will.

The private sector is not going to spend its trillions in cash until demand increases, and demand can’t increase until people go back to work. Government is the ‘spender of last resort’ and it refuses to spend.

The reporting on the riots in Britain seems to be rather strange. Anyone attempting to talk about problems in these areas is immediately pounced on for ‘excusing the violence’. There is a continuing drumbeat about the ‘lawlessness’.

First off, the ‘rioters’ are primarily young males, who are not especially noted for decorum or common sense. They don’t generally listen to adults, and they are in the middle of the transition to adulthood and are trying to prove themselves worthy. In ‘primitive’ societies they have extremely dangerous rites of passage to channel all of the excess energy, but modern societies have extended childhood and removed most of the dangers.

If the people are wondering why the rioters have no respect for the law, maybe they should spend more time reading the news. The rioters have as much respect for the law as major defense contractors, members of Parliament, or the police.

When response to the troubles is faulty because all of the major leaders are on vacation somewhere ‘ritzy’, and the police response is somewhat hampered by the recent resignations at the top of the command structure, the complaints about the rioters look a bit hypocritical.

Oh, the simple answer to why they are so destructive is that they have no stake in their communities. Society has provided them with no reason to care about it, because they have no reason to believe they will ever own anything in it.

CNN reports on today’s bond sale:

NEW YORK (CNNMoney) — The stomach-churning stock market roller coaster is ramping up demand for Treasuries, even after Standard & Poor’s downgraded the United States on Friday.

Combine stock market volatility with the Federal Reserve’s gloomy comments about the economy, and it’s no surprise then that hunger for low-risk assets remains high.

As a result, the 10-year yield fell to 2.09% Wednesday afternoon, trading near its record low close of 2.06% last seen in December 2008.

A $24 billion auction of 10-year notes also drew solid demand, even at a 2.14% yield — the lowest 10-year yield at auction, ever on record.

So, after an S&P downgrade the US is selling bonds at a lower interest rate that ever before. Does this mean if the US is downgraded again people will pay the Treasury to take their money for 10 years? If you think that’s an absurd question, you are probably unaware that the interest rate on shorter term T-bills has been negative for some time, i.e. people are already paying Treasury to take their money for shorter periods.

This isn’t as insane as it seems when you consider that the most common place people have kept large sums of money was real estate, and that’s in the tank. Bank deposits are only guaranteed up $250K, so the safest place to put large quantities of cash is in T-bills.

Yves Smith has the video of Dylan Ratigan’s Mad as Hell Moment. He unloads on Versailles, everyone in government, the financial industry, and campaign finance.

This CBC reports about an incident in Arizona, is wince-inducing if you’re a guy. All I can say is that he has probably removed himself from the gene pool, which is a good thing. 👿

In order to prove that Congress is willing to ‘tighten its belt’ to reduce the deficit, CBS announced that the House Page program ends after nearly 200 years.

Laying off these teenagers will save over $5 million, and they can’t vote, so what good are they? No word on how much Congress spends on two-year leases of cars, or their travel budget.

Attaturk bemoans the fact that he didn’t think of this ‘tweet’ from Jimmy Streich [@streicher187]:

Breaking News – S&P downgrades the tea party to KK+ #p2 #tcot

Yves Smith asks the important question: Did Standard and Poor’s Break SEC Regulations in Disclosing Its Downgrade to Select Parties? [The answer would appear to be: YES.]

Defying all logic, and the obvious fact that people moved to T-bills from stock, the media and Very Serious People continue to insist that the market drop was caused by the S&P downgrade. This has led Dr. Krugman to offer his Downgrade Doom Loop.

If I were a big player in the market who knew the downgrade was coming, I would have sold out before the official announcement and watched the little players panic. Then reentered the market after it bottomed to pick up stock at rock bottom prices. Say sell on the Friday before the announcement, and then buy back on Tuesday after the dust settled. Oh, did I mention that the Dow is up today? A coincidence, I’m sure.

Of course, that would be with clients’ money, as my personal money would already be in cash and T-bills as I waited for deflation to take hold.

Congratulations to the membership of the 112^th Congress. For the first time since polling has taken place on the issue, a CNN Poll: Time to clean house in Congress?, shows that your own constituents want you gone. Normally Congresscritters get some support from their voters [i.e. Congress is terrible, but my Congresscritter does a good job], but this poll shows that people want all of you gone. The Republicans ‘lead’ in the poll, which is to say people want the Republicans gone first.

CNN reports that on Jobs: Worse than you think

NEW YORK (CNNMoney) — The U.S. labor force is shrinking, as more Americans are giving up hope.

Last month, only 58.1% of Americans age 16 and over were employed, a significant drop from before the recession and the lowest since 1983.

That’s especially worrisome to economists, who say a steady increase in those dropping out of the work force and not being counted in the unemployment rate is disguising just how bad the labor market really is.

“People are dropping out of labor force for all types of reasons,” said Robert Brusca of FAO Economics. “And it’s not a good trend. A good part of the wealth of a nation has to do with the proportion of population that works.”

The unemployment rate drop isn’t real, it reflects only those ‘actively seeking employment’, and not those who have just given up. It also doesn’t include the self-employed who have run out of work.

Austerity is not going to put people back to work, but no one in Washington understands that reality.

Israel finally joined the rest of the nations with a border on the Mediterranean in massive demonstrations. In addition to the common problem of high unemployment among young people, middle class people in Israel are finding it increasingly difficult to cover their monthly expenses with their current salaries.

The riots in and around London have spread to other cities, finally causing the mayor of London and the Prime Minister to end their vacations and return to deal with the situation. While the initial riot in Tottenham was tied to a police shooting of a local man, it has triggered the release of the pent up frustration of unemployed young people in cities all over. They have skipped the mass demonstrations and gone directly to the riot stage.

No doubt the government will appoint a commission to study the problem, while the communities continue to boil with frustration, and without hope of anything better.

There are a lot of American cities about one incident away from riots.

[Updated for the market close]

Showing why they are ‘Masters of the Universe’, investors have reacted to the S&P downgrade last Friday by selling stocks and buying US Treasury bonds. As a result of S&P’s analysis of the US credit-worthiness, investors have decided to ‘punish’ the US by forcing the Treasury to pay lower interest rates on its bonds.

This isn’t from The Onion. The US cost of borrowing has gone down since the S&P downgrade.

NEW YORK (CNNMoney) — U.S. stocks plunged deep into the red on Monday as fearful investors faced the news that the United States had lost its coveted “AAA” credit rating.

All three major U.S. stock indexes were down between 4% and 5%, pushing the Dow below 11,000 for the first time since November.

The stock market has now lost 14% during the past two weeks.
…

The VIX (VIX) — Wall Street’s so-called “fear’ index — jumped 39% to 44.38, the highest level in more than a year.
…

With so much uncertainty, investors were leaving little to chance. Despite the downgrade of U.S. debt, Treasury prices rose, pushing yields lower, as investors fled into the relative safety of government-backed debt.

The yield on the benchmark 10-year U.S. Treasury fell to 2.44% from 2.56% late Friday.

“The Treasury market seems to be oblivious to the fact the U.S.’ credit rating was downgraded,” said Quincy Krosby, market strategist with Prudential Financial.

[Read more →]

Via Lambert at Corrente an interesting post by Marshall Auerback, More Bad Beer From S&Ps David Beers

Like the horrible aftertaste that comes from throwing up the contents of one’s stomach after a night of binge drinking, the ratings agencies have reared their ugly heads again. David Beers, head of S&P’s government debt rating unit, announced Friday night that S&P has downgraded the U.S. credit rating for the first time, from AAA to AA. It’s a sham: S&P’s whole analytical framework reflects ignorance about modern money. If the US government, Treasury, and the Federal Reserve, capitulate to this outrageous act of economic extortion, it will effectively be sanctioning a beer hall putsch by the rentier class.

Don’t you love the cool, controlled, understatement of the British?

Digby makes an important distinction in her post, Yes, both sides are wrong: the Democrats are wrong for accepting the Republican framing that the deficit was the most important problem the economy faced. They should have been focusing on jobs, but diverted their attention to the deficit, and gave away the tools necessary to create jobs.

Leon Panetta is upset about the possibility of further cuts to the Defense Budget, saying it would harm our security. Garbage!

There is no justification in terms of threats to the US for the billions wasted on the Missile Defense System. The system has never passed a real-world test, and only passed a bare majority of the fraudulent ‘tests’ that were designed to prove its success.

Not only does it not work, major portions of the infrastructure for the system are going to need major work to repair shoddy initial construction that was hurried to meet a deadline.

You save money by eliminating systems, not trimming around the edges.

The F-35 needs major scrutiny because all of the ‘working’ examples have just been grounded again because of problems with its ground power system. This happened before and was supposedly faulty maintenance procedures, but it has occurred again after the procedures were changed.

This program is so over time and budget, that many of the countries that signed on are looking at alternatives before they lose their air forces. Locally there is a wing of personnel polishing the seats of office chairs because they have only one recently arrived aircraft to work on and none they can fly.

We spend all this money, and can’t seem to supply the people on the ground the tools they need to actually do their jobs.