If this is the official thinking, China is doomed

Anyone in a position of power and influence in China is deeply connected to the communist party. Offering a point of view that is radically different from the party view is discouraged. The run up of the Chinese economy has been pretty darned impressive and in large part it has been a result of the consumer demand in the US and Europe. Anyone who thinks that can be replaced with a magic wave of a wand is delirious. Add to that the Chinese communist's historical failure to grasp reality with numbers, this has failure written all over it. The Olympics may turn out to be the high point of this regime before the recession ravages the authority of the current government.

Vladimir Putin tweaked sensibilities in the financial and political worlds by warning against government involvement. And Wen Jiabao went with optimism, especially on his own country's ability to avoid recession.

Looking at both East and West, the Chinese economy will stage a "quick rebound" of economic growth, but the US has a tougher job, facing the loss of $1 trillion in consumption, Zhu Min, executive vice president of Bank of China, told CNBC.com.

"In the States the housing industry has not stabilized" and there will be more deleveraging in the financial and household level leaving no doubt about a recession, he said.

And for the first time in 60 years, you'll see the developed countries contributing zero to the world economy, he added.

Quick government action in China will lead to a quick rebound, and although the economy will slow more in the first quarter, growth of 7 percent to 8 percent is manageable, he said.

Right. And everyone already recognizes that the 6.8% growth in Q4 was probably incorrect, with the real number being a point or two lower. To break even with incoming workers China needs 7% growth per quarter. I'd love to hear the theory on how that happens when their export markets have stopped buying. Do tell. Read More......

What Obama should say about the House Republicans not supporting the stimulus package...

While I have my own gripes with the House stimulus packages (wasting 1/3 of it on tax cuts that are patently unfair), we need to pass something because things are bad. Hopefully Obama will use the addition of the tax cuts to argue that he tried to give the Republicans what they wanted - he even devoted a full 33% to 40% (House bill vs. Obama's proposal) to tax cuts, and the House Republicans still refused to come together in a moment of national crisis. As I've said, I think the bill stinks in parts. But at this point, better to settle for second best (or third) than not have a bill at all. Read More......

Republican economics have consequences

Not everyone receives million dollar bonuses for losing billions and not everyone is sitting in the board rooms with friends setting their annual pay packages. For those people, life remains comfortable. For everyone else, add a few more years of hard work and hope for the best. More from the Washington Post:

Millions of Americans lost more than a quarter of their 401(k) retirement savings in 2008 because of the stock market's collapse, a setback that could force them to work longer or severely curtail their spending as they grow older.

In an analysis of their participants' accounts, Fidelity Investments, Vanguard and T. Rowe Price -- three of the nation's largest 401(k) plan providers -- also found that some employees were further eroding their savings by taking hardship withdrawals to pay for current financial needs.

Many Americans have seen their wealth evaporate with the drop in home values, the rise in the cost of living and the stagnation of wages. Now, as they tap into nest eggs to pay bills, they face leaner retirements as well. Particularly vulnerable are baby boomers who expected to retire in the next few years.

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Rush speaks for the GOP

The RNC may be meeting this week to find a new chair of the party, but it doesn't really matter. We know who is really calling the shots for the GOP. It's not McConnell, it's not Boehner, it won't be the new RNC Chair. It's all about Rush:
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Obama may name GOP Senator Judd Gregg (NH) as Secretary of Commerce

Hot news from Capitol Hill via Roll Call (sub. req.):

The Obama administration has been floating the idea of naming Republican Sen. Judd Gregg (N.H.) to be Commerce Secretary, several Senate sources said Thursday.

The sources, who spoke on the condition of anonymity, said Gregg’s nomination was far from a done deal, but remains a serious possibility. Reached by phone, Gregg, the top Republican on the Senate Budget Committee, said he had no comment on whether he has been in talks with the White House about the post.

Of course, what makes it even more interesting, is this:

New Hampshire's governor is a Democrat, who would be able to name Gregg's replacement. That pick could give the party a filibuster-proof 60-vote majority in the chamber if Democrat Al Franken is also ultimately named the winner in the contested Minnesota Senate race.

This kind of bi-partisanship works for me.

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It's over for Blago - impeached, removed from office

Impeached:

The Illinois Senate voted to remove Gov. Rod Blagojevich from office Thursday, marking the first time in the state's long history of political corruption that a chief executive has been impeached and convicted.

The 59-0 vote followed several hours of public deliberation in which senator after senator stood up to blast Blagojevich, whose tenure lasted six years. And it came after a four-day impeachment trial on allegations that Blagojevich abused his power and sold his office for personal and political benefit.

The conviction on a sweeping article of impeachment means the governor was immediately removed from office. The Senate also unanimously voted to impose the "political death penalty" on Blagojevich, banning him from ever again holding office in Illinois.

Lt. Gov. Patrick Quinn, Blagojevich's two-time running mate, has become the state's 41st governor.

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Republican party chair candidates stumbling over themselves to prove who's more pro-gay

Yet you don't see them racing to prove who's more pro- religious right.

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Congress gives itself a $4700 pay raise!

Congratulations! It must be very hard to live on $169,300 a year, so I'm glad that our representatives will now get a nearly $5,000 raise, upping their annual income to $174,000 (the way it works, they automatically get a pay raise every year unless they themselves vote it down, and they have voted it down before - but no plans to do so this year!).

Now, sure, those same members of Congress (Democrats, actually) think that if you make $95,000 a year, you're rich, and don't deserve to partake in the stimulus bill's $7500 first-time homebuyer tax credit. And sure, those same members of Congress think that you don't deserve to benefit from the stimulus plan's $500 a person tax cut if you make over $100,000 a year - again, because they think you're just too rich.

But those same members of Congress make almost $170,000 a year, and they are suffering so much that they permit themselves a nearly $5,000 raise while millions of Americans are being thrown out of work. This, even though those Democrats live in the same town, facing the same cost of living, as people they're cutting off at only $100,000 a year.

If the Democrats thinks that a private citizen making $100,000 a year is rich, that people making $100,000 a year don't deserve federal help, and that those people need to suck it up and take one for the team, then Democratic members of Congress shouldn't be pigging out at the federal trough with a $5000 pay raise when they make a hell of a lot more. Fair is fair. If you're going to play the "screw the rich" game, then screw yourselves too. Or are some pigs more equal than others? Read More......

AIG to pay $450M in bonuses to retain 400 people who lost $34 billion

Everyone would be a heck of a lot better off if these people were shown the door rather than hugged and handed $1 million plus. Even now they continue to suggest that if they don't pay millions to retain these valuable people, they will leave. Excuse me, but who the hell lost the $34 billion? Let. Them. Go. Now. (h/t Carlton)

American International Group Inc., the insurer saved from collapse by government money after losses on credit-default swaps, offered about $450 million in retention pay to employees of the unit that sold the derivatives, according to two people familiar with the situation.

About 400 workers at the financial products unit may get the money in two installments, said the people, who declined to be named because details of the payments were confidential. The business was responsible for about $34 billion in writedowns since 2007 as the market value of swaps AIG sold to banks plunged amid the subprime mortgage market collapse.

The payments bring to more than $1 billion the amount AIG has committed to keep its employees from leaving. The New York- based insurer in September took a federal bailout to avoid bankruptcy and is selling subsidiaries to repay the government. AIG said the program was disclosed before the government rescue, which is now valued at $150 billion.

This is another tired excuse, much like the Citi jet for $50 million. I don't think anyone really cares whether or not this decision was made before, during or after the government bailout. The fact is the bailout changed everything so all bets are off. Had the government not stepped in, every one of these people would have nothing, so I don't even want to hear about this excuse. Read More......

House stimulus package makes $7500 first-time home buyer tax credit a real tax credit... for some people

The good news: The House stimulus bill changed the federal first-time homebuyer $7500 tax credit from something you had to pay back (which means it was never really a credit) to something you get to keep forever. It's $7500 in free money when you buy your first home.

The bad news: The House bill starts phasing out the tax credit if you make $75,000 a year, and phases it out completely if you make $95,000 a year.

As I've said before. If you live in NYC - or even Washington, DC - and you make $75,000 a year, you're not rich. A one bedroom condo in DC could easily cost you $350,000 (and to rent, a 500 sq ft studio apartment in my building costs around $1600 a month - and I don't live in the Taj Mahal). Then there are student loan payments (which yuppies often have to make, as they tend to be well educated) - they often total a second rent payment. Add in the cost of the groceries, and the cost of living is significantly higher in cities like NY and DC (and probably SF and many more). But the Democrats think you're rich, so no stimulus for you. Yet again, another provision of the stimulus bill that won't apply to lots of people living in big cities because on paper they're "rich," when in reality they're not. Read More......

NY Times promotes Bush Oval Office rules which are false

I'm calling BS on this. Besides the fact that the "no jacket, no Oval Office" story has been proven to be false, so is the old story of Bush running a tight schedule. Who could forget all of the media hype during the early Bush years about Bush being the first CEO President? All we heard about was that he ran a tight ship, with strict adherence to the schedule.

Too bad I know someone who had a 15 minute visit to the Oval Office that turned into 45 minutes. Bush invited a group to the White House to (in theory) congratulate them for an amazing historical event though of course, he never once recognized the event and instead monologued about his furniture and art work brought from Texas. After 30 minutes someone asked about photos so it then dragged out for another 15 minutes. As they left the Oval Office they passed by generals with stars across their shoulders who had been left waiting for an additional 30 minutes. Maybe the Times can quit spreading lies about what a tight ship Bush ran, because he didn't. Even if he did, none of his supposed regulations for staff did much positive for the country. They trashed it for eight years.

Anyway, as I've said before, who really cares if Obama wears a jacket or not? Even a tie for regular meetings seems like a waste to me. If Obama wants to wear a wet suit to work I don't give a damn. Just get the job done and let the GOP worry about the silly issues. Read More......

AT&T; is celebrating Data Privacy Day, after allegedly handing every single one of us over to the NSA

Gee, thanks AT&T.; Though isn't this a bit like Jeffrey Dahmer celebrating the Year of the Child?

You'll recall that the good Germans over at AT&T; allegedly let the National Security Agency set up shop in their own basement, without a court order, simply because a Bush administation official told them it was okay. Nice. What law school did you guys go to? I don't recall reading the "court order required unless some guy says it's okay" rule.

The following notice was reportedly posted on AT&T;'s intranet. Apparently, their employees needed a good laugh:

We're recognizing Data Privacy Day with new privacy initiatives
January 27, 2009

We announced today our continued commitment to protect consumer online privacy by recognizing Data Privacy Day. In an effort to increase consumer awareness of privacy issues on the Internet, AT&T; Services announced the launch of The Privacy and Online Reputation Project, a new pilot program with iKeepSafe in Florida where school counselors will receive handbooks on how to educate students on privacy issues.

AT&T; Services will work with iKeepSafe and the Florida School Guidance Counselor Association to provide a handbook to school counselors that gives an overview of what students are posting on the Internet and bring school counselors up to date on existing cyber ethics tools for social networking. The handbook will inform students how to protect themselves and includes a Parent's Primer with information about how to connect with industry for assistance when needed.

In line with Data Privacy Day, AT&T; Services will also host the American School Counselors Association's 10 finalists for Counselor of the Year in Washington, D.C. for a discussion on the challenges these school leaders are facing when it comes to protecting students' online safety and privacy.

"Data Privacy Day is an especially important time to take a look at the issues we are facing with online privacy, particularly when it comes to the students in our schools who are on social networks," said Dorothy Attwood, chief privacy officer, AT&T; Services. "We look forward to working with school counselors and iKeepSafe to give these important educators the materials they need to protect students' identities online."

"Students, parents, and educators need to understand the importance of privacy and reputation in today's rapidly changing digital world. Guidance counselors especially need to understand that the rules applied to the offline world also apply to the online world when it comes to future academic and employment opportunities," said Marsali Hancock, president of iKeepSafe. "AT&T; has played an integral role in helping to provide school counselors and parents with insightful information and necessary tools to keep them up to speed on what kids are doing online. We are thrilled to work with AT&T; on this initiative."

Data Privacy Day was created in 2008 to promote privacy awareness and education among teens in the United States and now provides the opportunity to further international collaboration and cooperation on privacy issues. In addition to working with school counselors, and educating its employees and customers, AT&T; Services is also supporting the Data Privacy Day Symposium held on Capitol Hill organized by the Information Technology Association of America featuring remarks by Congressman David Price and Member of European Parliament, Alexander Alvaro.

To help consumers have a safer online experience, AT&T; operating companies offer a full library of supportive Internet safety and security tips and interactive safety games for kids, all available at http://www.att.com/safety. Information on privacy can be found on http://www.att.com/privacy. In addition, consumers can go to http://OnGuardOnline.gov to review practical tips from the federal government and the technology industry to help them be on guard against Internet fraud, secure their computer and protect their personal information.

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Obama signed first bill into law: Lily Ledbetter Fair Pay Restoration Act

In the first of what will be many, many progressive pieces of legislation passed by the Democratic Congress on the Hill, the President, with Lily Ledbetter at his side, just signed the Lily Ledbetter Fair Pay Restoration Act into law:

Here's an excerpt from the President's remarks:

Because while this bill bears her name, Lilly knows this story isn’t just about her. It’s the story of women across this country still earning just 78 cents for every dollar men earn – women of color even less – which means that today, in the year 2009, countless women are still losing thousands of dollars in salary, income and retirement savings over the course of a lifetime.

But equal pay is by no means just a women’s issue – it’s a family issue. It’s about parents who find themselves with less money for tuition or child care; couples who wind up with less to retire on; households where, when one breadwinner is paid less than she deserves, that’s the difference between affording the mortgage – or not; between keeping the heat on, or paying the doctor’s bills – or not. And in this economy, when so many folks are already working harder for less and struggling to get by, the last thing they can afford is losing part of each month’s paycheck to simple discrimination.

So in signing this bill today, I intend to send a clear message: That making our economy work means making sure it works for everyone. That there are no second class citizens in our workplaces, and that it’s not just unfair and illegal – but bad for business – to pay someone less because of their gender, age, race, ethnicity, religion or disability. And that justice isn’t about some abstract legal theory, or footnote in a casebook – it’s about how our laws affect the daily realities of people’s lives: their ability to make a living and care for their families and achieve their goals.

Ultimately, though, equal pay isn’t just an economic issue for millions of Americans and their families, it’s a question of who we are – and whether we’re truly living up to our fundamental ideals. Whether we’ll do our part, as generations before us, to ensure those words put to paper more than 200 years ago really mean something – to breathe new life into them with the more enlightened understandings of our time.

That is what Lilly Ledbetter challenged us to do. And today, I sign this bill not just in her honor, but in honor of those who came before her. Women like my grandmother who worked in a bank all her life, and even after she hit that glass ceiling, kept getting up and giving her best every day, without complaint, because she wanted something better for me and my sister.

And I sign this bill for my daughters, and all those who will come after us, because I want them to grow up in a nation that values their contributions, where there are no limits to their dreams and they have opportunities their mothers and grandmothers never could have imagined.

In the end, that’s why Lilly stayed the course. She knew it was too late for her – that this bill wouldn’t undo the years of injustice she faced or restore the earnings she was denied. But this grandmother from Alabama kept on fighting, because she was thinking about the next generation. It’s what we’ve always done in America – set our sights high for ourselves, but even higher for our children and grandchildren.

Now it’s up to us to continue this work. This bill is an important step – a simple fix to ensure fundamental fairness to American workers – and I want to thank this remarkable and bi-partisan group of legislators who worked so hard to get it passed. And this is only the beginning. I know that if we stay focused, as Lilly did – and keep standing for what’s right, as Lilly did – we will close that pay gap and ensure that our daughters have the same rights, the same chances, and the same freedom to pursue their dreams as our sons.

Obama is right, "This is only the beginning." And, it's a very good start.

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GOP won't support economic recovery even as Americans gettting unemployment hit highest level recorded

Yesterday, zero Republican in the House voted for the economic stimulus package. Zero. While the Republicans were being petulant and partisan, the number of Americans without jobs continued to climb. The economic downturn is having real consequences for people. That's what the President is trying to address. But while this is all a game for the Republicans, it's a harsh reality across the country:

The number of jobless American workers receiving unemployment checks rose to the highest level since the government began keeping records in 1967.

A Labor Department spokesman said the number of Americans drawing jobless benefits for a week or longer rose to 4,776,000 in the week ended Jan. 17, the latest data available.

The number eclipses the prior mark set in November 1982, when 4,713,000 million Americans drew benefits.

Americans who moved to collect their first unemployment checks rose for the third consecutive week, to 588,000, according to a government report released Thursday.

The number of Americans filing for unemployment claims has surged by 61% from this time a year ago.

More GOP members of Congress and their staff need to be jobless. That's the best solution for the economy. Read More......

The man who created the disastrous Bush White House thinks Obama's White House is too political and disorganized

This is almost funny.

Karl Rove is pontificating about the Obama White House. He seems particularly concerned that four people now share his old office. The guy who directed George Bush's strategies -- the very strategies that have us on the brink of economic depression and entangled in two wars -- that guy is worried about who gets what office in the Obama White House.

What's worse, of course, is that the pundits will eat this up. Rove's words will ricochet across cable news today. None of those who quote Rove will wonder why he's got any authority to talk about an effective White House. Rove still plays the press corps -- and they still let him.

One thing Rove doesn't understand is that it's going to take a Herculean effort with all the best minds working extremely long hours to bring this nation back to where it was before Bush and Rove ruined it. Read More......

Thursday Morning Open Thread

Good morning.

So, as predicted, zero votes from the zeroes in the House for the stimulus. Zero.

The traditional media and pundits need to remember that the primary goal here is saving the economy, not bipartisanship. It shouldn't surprise anyone that the same Republicans who played politics with the Iraq war are willing to play the same games with our teetering economy. That's what they do. Hopefully, the Obama team has learned something, too. If the other side isn't really negotiating in good faith, you're just negotiating with yourselves. Paul Krugman captured it best:

Aren’t you glad that Obama watered it down and added ineffective tax cuts, so as to win bipartisan support?

The goal, once again, shouldn't be getting GOP votes. The goal is putting together a package that will save the economy, which was destroyed by GOP policies.

Thread the news...

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Roubini: stocks down another 20%, emerging markets to have hard landing

Uh oh, the Wall Street cheerleaders won't like hearing this. They hate when reality gets introduced and the "prosperity is just around the corner" meme is challenged because that doesn't help the love affair they have with Wall Street. Whoever brought Roubini on the show from Davos is probably in hot water today. Either that or they're scrambling to locate Jack Welch to talk about the good old days of the Republican economy and how the GOP really knew how to help business. As long as they don't mention Jack's own luxurious decorating habits and his platinum parachute, everything will be fine. Onto the crazy guy who obviously doesn't know anything about economics. (Video interview inside as well.)

US and global stocks are still likely to fall because the corporate and economic news will be worse than expected, Nouriel Roubini, RGE Monitor Chairman, told CNBC.

Investors will be hit by the realization that many banks are bankrupt, that companies will have to rein in debt and sell assets and that emerging markets may get into trouble, Roubini said.

"I think that there's a 20 percent downside risk to US and global equities," Roubini told "Squawk Box Europe."

The transmission mechanism oiling the wheels of the banking system is broken, he said, adding that "banks are getting the money and they are hoarding it, they're not lending it," because they expect higher losses.

There is no safe haven from the crisis as all countries are affected, and the collapse in aggregate demand may bring about prolonged deflation, Roubini added.

"We have to worry today about not ending up like Japan. That's the risk for the global economy," he said.

The rise in the price of gold is a signal of fear that countries and corporations may default on debt rather than of worries about future inflation, and the precious metal is used as a "safety valve."

Falling stock prices and very low bond yields are signaling depression, while credit spreads are still very wide, indicating fear of defaults, according to Roubini. And even the fast-growing Asian economies aren't spared.

"If you look at the data in emerging markets and around Asia, East Asia, there is a hard landing," he said. "All the numbers out of China suggest… the manufacturing sector is already in a recession."

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But they said they were experts

Not so much. If you look closely, I think that might be Phil Gramm and the GOP. Read More......

Starbucks to close 300 stores

Tough times for Seattle these days between Microsoft, Boeing and Starbucks. The first two can always bounce back (easily) but nothing can change the lousy taste of Starbucks coffee. At least the CEO has the common decency to have his own comp plan slashed during these tough times. I hope this doesn't mean he's going to pull the old trick of lowering one part and substantially raising another part of the plan but for now, it looks reasonable since he's firing more workers.

Thousands of baristas are to lose their jobs as Starbucks shuts stores to cope with dwindling sales of lattes, cappuccinos and frappuccinos as cash-strapped consumers lose their thirst for coffee.

The Seattle-based chain tonight revealed a 70% slump in quarterly profits to $64.3m and announced that it intends to shed 6,700 employees this year. It is closing 300 stores, two thirds of which will be in the US, on top of 660 shutdowns last year.

As the global economy turns sour, appetite for Starbucks' premium-priced drinks appears to be waning. Like-for-like sales fell by 10% at American stores and dropped by 3% elsewhere in the world - including a decline in the UK during the three months to December.

Starbucks' chief executive, Howard Schultz, is joining in the belt-tightening by asking the company's board to cut his basic salary from $1.2m to $10,000. Schultz, 55, dropped off Forbes' list of the world's billionaires last year as the value of his stake in Starbucks plunged.

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Roubini: "US banking system is insolvent"

Yeah, but what does he know anyway? Just because he saw the credit crisis years ago and predicted this recession, he probably doesn't understand economics. It was a lucky guess and we shouldn't listen to anything he has to say unless he cheers loudly in favor of Wall Street. Give me a "W"! Give me an "A"! Oh never mind.

That was the opinion of economist Nouriel Roubini, of RGE Monitor, who was one of the first people to predict the housing crisis, speaking to "Squawk Box Europe" this morning.

Expected losses of about $2 trillion exceed bank capital of about $1.5 trillion, Roubini said.

Roubini had earlier said that total financial system losses could hit $3.6 trillion.

And "schemes" to just buy so-called toxic assets may not work, because the "risk is it's going to take too much time to resolve the problem," he added.

Instead Sweden's plan of nationalizing all insolvent banks, cleaning them up and then selling off the good assets to the private sector could be a better option, he said.

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