Matt Taibbi Explains How Wall Street Works

This is why people have an issue with paying more taxes or getting benefits cut to reduce the debt. The nations wealthy are getting money from the FED through non-recourse loans (don't have to be paid back) and they use the money to make more money or money is being given to their wives and such. Now that money, which went to the wealthy (through bailouts, loans and such), has to be paid back by the tax payers in the form of taxes, reduced medicare and Social Security benefits and such. Maybe if all that money was taken back and used to pay the debt down, we wouldn't have to pay so much in taxes and benefit cuts to decrease the debt.  The bailed out entities say they paid money back and the Government says we are making money on it, well then why hasn't the debt decreased. The money surely doesn't seem to have made its way back and the American tax payer will pay the price. 

In this interview Matt Taibbi explains where this money went and makes several points supporting the above stated.

Inflation 101

John Taylor on the Government Stimulated Recovery

Weekly Initial Unemployment Claims

This weeks Initial Unemployment Claims report got worse and shows a spike in initial unemployed.  Initial Unemployment Claims are a measure of the number of persons whom filed for unemployment benefits for the first time in the prior week.  The forecast called for 379k, but the actual headline number was 412k.  The prior weeks 382k was revised up to 385k, giving a delta of 3k this week.  The 4 week moving average now sits at 391k and shows a possible turning point from the previous falling trend.

Government Shutdown Not So Averted

Well it is coming out on the news now that the Government Shutdown that was seemingly averted was just extended until the vote this week which is now delayed until Thursday.  Many in Government now saying they may vote against the budget which may cause the Government to shut down.  Stay Tuned.

The Budget Wolf is at the Door

David Stockman says both paries have unrealistic budget goals.

FED POMO Schedule to Purchase $97 Billion

The new FED POMO schedule came out covering the next month.  Over the next month (4/13 - 5/11) the FED will print approx ~$97 billion dollars.  Adding this to the amount printed already, this would bring the total printed by May 11th to $625.258 billion dollars which will exceed his target of $600 billion with another month and a half left to print afterward.  

FED POMO Purchase

The FED performed the last POMO (Permanent Open Market Operation) purchase on the current schedule (which ended today) in the amount of $7.861 billion dollars.  The new schedule for  the next month will be posted tomorrow, therefore no POMO tomorrow.  The current total since November 3rd 2010 (when the FED announced the printing of $600 billion dollars by June 30th 2011) is $528.258 and since August 17th 2010 the total is $592.718 billion dollars printed.

Bill Gross Shorts U.S. Treasuries

Does Bill Gross know something we don't?  Obviously, he has taken the opposite position on U.S. Treasuries through the weekend by moving from getting out of U.S. Treasuries and then converting to shorting them.  This means that Pimco is betting against U.S. Treasuries as they must see them going down in value due to the current fiscal crisis we are in.  With QE2 due to expire June 30 2010, making inflation a question mark as we wonder whether QE3 will emerge to continue liquidity and fostering additional inflation.  With China now slowing or not purchasing U.S. Debt at all, Japan being forced to sell Treasuries to raise money to recovery its devastation and now one of the largest U.S. Bond funds pulling out of U.S. Treasuries and shorting them, the path to QE3 seems to have been paved.  To read more on Pimco shorting use Treasuries see the article on Zerohedge. 

Karl Denninger on the Economy

Karl makes some very good points that have been getting raised by others as well as myself, if you cut or raise taxes the economy will suffer prompting more bailouts and stimulus. It seems to be somewhat of a double-edge sword at this point.

Weekly King World News Interviews

This week King World News interviews Eric Sprott, Dr. Marc Faber, John Embry & John Hathaway.  The focus of the interviews were heavily around precious metals and rightfully so after the action we have seen in the precious metals market this past week.  Other topics range from dollar devaulation, money printing and impacts on the standard of living.

Eric Sprott - Discusses Gold and Silver, saying that silver demand is outweighing the purchase of Gold currently.  Eric says talks about how much of a tough time he had getting 15 million ounces of silver and indicating the silver market is pretty tight currently.  Eric believes Silver will perform better than Gold currently.  Eric talks about how Gold is very managed right now by the government as they don't want to see Gold go to high, therefore it gets suppressed to keep the price from rising$100 in a day.

Dr. Marc Faber - Discusses the amount of debt we have in the U.S. and that the amount they want to cut from the budget is too little.  The big categories likes Social Security, Military and Medicaid will be too hard to cut.  He believes that Gold shares are way under valued here, but is due for a correction sometime soon.  Dr. Faber discusses the loss of strength in the dollar and how people are genuinely concerned about the loss of purchasing power in the dollar.  Dr. Faber makes the point that people are slowly coming to the realization that Gold and Silver are not necessarily a commodity as much as it is a real currency, which is causing increased demand.  Dr. Faber thinks the living standard in the U.S. is already bad, but is going to get worse.  A lot more good information in this interview, worth a listen.

John Embry - Discusses Gold and Silver, how the price should be much higher.  He points out that if it wasn't for the paper market the real price would be higher.  He says that Silver Eagles on Ebay are going for 49.00 currently when the price is 40.00 and that could be the real price of Silver currently (I verified 2011 Silver Eagles going for 49.00).  John makes the point that to recover the U.S. Debt problem you would have to raise taxes so high and lower spending that the economy would just crater totally making the issue mute.  John discusses how Bill Gross brings up that the real debt including unfunded liabilities is $75 trillion dollars which would be 500% of GDP and is in horrible financial condition.  John talks about more valuable information as it pertains to Gold that is very worth listening to. 

John Hathaway- Discusses how Gold surged Friday with no significant news, which meant that it was a meaningful move.  John points out that hedge funds that are shorting the Gold stocks are going to get roasted as Gold continues to rise higher.  John has a hard time seeing the austerity that would be required to cut $5 trillion dollars out the debt over a number of years.  John sees risk of interest rates rising causing interest on debt to be unmanageable. 

Weekly Unofficial Problem Bank List

CalculatedRisk published their "Weekly Unofficial Problem Bank List" which now sits at 982 institutions, down from 985 the prior week.  There were 5 removals and two additions to the list, 2 of the removals from bank failures (reported on the FDIC failed bank list), 2 action terminations and 1 unassisted merger.  For more details click here.

FDIC Weekly Bank Failures

This week the FDIC reported the loss of 2 banks, this brings the total for the year to 28 institutions failed.  For the week ending 4/8/2011 we lost Nevada Commerce Bank in Las Vegas Nevada and Western Springs National Bank and Trust in Western Springs Illinois.  So far we have slowed down in the number of actual bank failures compared to 2009 and 2010 (which is a good thing).  

Weekly M1/M2 Money Supply

This week M1 and M2 diverged away from each-other slightly.  M1 (consisting of Currency, Traveler's checks, demand deposits and other checkable deposits) grew by 0.62%.  M2 (consisting of M1 plus retail Money Market Mutual Funds, savings and small time deposits) shrank by -0.012%.  Y-o-Y M1 has grown 10.08% and M2 has grown 4.18%, this is way ahead of Y-o-Y growth from 2009 to 2010 at this time.  Growth for Mar 30 2009 to Mar 29 2010 was 8.13% (M1) and 1.63% (M2).  So, the printing presses over the last year have really rev'd up.

FED POMO Week Summary

This week the FED executed 4 POMO (Permanent Open Market Operation) purchases; $8.030, $7.566, $1.97 and $6.58 (all in billions) for a total of $24.146 billion printed for the week.   This brings the total since November 3rd 2010 (when the FED announced the printing of $600 billion by June 2010) to $520.397.   With 12 weeks to go before June 30th and an average run rate of $24.562 billion per week, this should add an additional $294.751 of POMO bringing the total for QE2 to $815.148 billion dollars ($215.148 billion over the stated $600 billion).  Since August 17th of 2010 a total of $584.857 billion has been printed to date.