Nothing has been done to fix the major problem, which is OTC derivatives. In fact they have grown in size if you understand the computer cartoon called value to maturity which assumes everything will mature.)

The Swaps That Swallowed Your Town
By GRETCHEN MORGENSON
Published: March 5, 2010

(Excerpt from article)

AS more details surface about how derivatives helped Greece and perhaps other countries mask their debt loads, let’s not forget that the wonders of these complex products aren’t on display only overseas. Across our very own country, municipalities, school districts, sewer systems and other tax-exempt debt issuers are ensnared in the derivatives mess.

http://www.nytimes.com/2010/03/07/business/07gret.html?ref=business

This is the mess created by all previous administrations and the banksters secure in the knowledge that they would get bailed out if they failed. This is what Brooksley Born tried to stop during the Clinton Administration as these “black boxes” grew to gargantuan proportions in the hundreds and trillions of dollars setting the stage for a global collapse. It was collusion between Wall Street and Washington (both political parties involved) that has so devasted Main Street.

So while Republicans and Democrats snipe at each other and we argue about government’s role in our lives, the system the nation has depended on for 3 generations is finally crumbling. It is the Fall of the American Empire and if we continue down the same path, it will take generations before any semblance of our former greatness will ever be regained.

Here is what is happening and will continue to happen all across the land:

Counties face more cutting as state income tax payments fall
By Larry Carson
March 9, 2010

The latest state income tax payments to local governments fell $61.8 million year over year, piling new fiscal woes atop budgets already reeling from state cuts, high snow removal costs and earlier revenue declines.

The declines in payments from the state to county governments at the end of February put an added $29.4 million burden on Montgomery County, which was already facing a projected $761.5 million shortfall by June 30, according to the Maryland comptroller’s office.

Prince George’s and Charles counties were alone among Maryland’s 24 jurisdictions to receive more in the fourth quarter of 2009 than in 2008.

Leaders of Anne Arundel and Carroll counties said they were prepared for the bad news and it won’t affect their budgets. Others said the declines will hurt.

“It’s very serious, but there’s been a lot of bad news this year,” said Jennifer Barrett, Montgomery County’s finance director. “It makes the gap worse.”
Baltimore City, facing a projected $120 million shortfall, dropped $4.6 million in income tax revenues, while Baltimore County, facing a projected shortfall of $138 million, got $16.1 million less from income taxes.

Baltimore County Executive James T. Smith Jr.’s spokesman, Don Mohler, said county officials had no comment.

Talbot County had the largest percentage drop, at 23.8 percent. Other Baltimore-area counties lost smaller amounts. Anne Arundel declined by $2.5 million; while Howard dropped $2.4 million; Harford, $1.3 million; and Carroll, $1.1 million.

Michael Sanderson, executive director of the Maryland Association of Counties, called the timing difficult: “We’re in month No. 9 in a fiscal year, so there’s not much that can be cut.”

George Freyman, assistant director of revenue administration in the state comptroller’s office, said the decline reflects the decreased collections and increased refunds produced by the drooping economy. Because the counties based current budgets on more normal years, the changes wrought by 2008’s problems are still showing up, forcing the state to hold back more revenues.

“Tax year 2008 stunk,” Freyman said - and the latest distribution includes money from taxpayers who got extensions and made payments in October.

While total revenue declined 0.9 percent, distributions to local governments dropped 6.2 percent. However, the relatively small net decline represents “the best performance in quarterly receipts since the third quarter of 2008,” and thus may be a sign that the worst of the recession is over, Freyman wrote to local officials in an e-mail.

Anne Arundel County Executive John R. Leopold said his administration expected the decline and is not facing a shortfall because of it.

“Our estimates have been very conservative,” he said.

But Howard County’s projected shortfall - the result of state cuts, snow removal costs that could near $6 million and reduced income tax revenues - has grown to $20 million, budget director Raymond S. Wacks told the County Council on Monday. County Executive Ken Ulman said finishing the year with a balanced budget “is not going to be easy,” but it will be done.

“I certainly understand the state is holding back more for refunds,” he said. “We’ll get through it.” Ulman has not used any of the county’s $48.5 million rainy-day fund.

Ted Zaleski, budget director for Carroll County, said the drop is “not any more of a problem than we expected.” He said the county is on course to finish the year in the black.

So is Talbot County, said County Council Chairman Levin F. “Buddy” Harrison IV. He said the county has spent some of its contingency fund to stay even.”

Does anyone here still believe in the State as the problem solver for “ALL THAT AILS HUMANITY.” MattF, are you willing to accept that MMGW, real or not, is being used as a vehicle to enrich and empower the few at the expense of the many? kash, do you still believe Obama and the Democrats seek real solutions to the problems that face us or are they, just like the Republicans controlled by Wall Street and its interests?

kash, you silence is deafening.

Diverting the blame for “inflation”*
Steve Saville
email: sas888_hk@yahoo.com
Mar 9, 2010

Below is an excerpt from a commentary originally posted at http://www.speculative-investor.com on 7th March, 2010.

It is said that the more things change, the more they stay the same. This is certainly true when it comes to identifying the causes of large increases in the cost of living. Although it can be logically established that a large and sustained increase in the general price level could not occur in the absence of a large increase in the supply of money, and although the historical record confirms that every great “inflation” was preceded by a large increase in the money supply, leading figures in economics and central banking have consistently come up with explanations for broad-based price rises that have nothing to do with the money supply.

A recent example of citing a non-monetary reason for a large decline in the purchasing power of money was the amusing claim by a senior Reserve Bank of Australia (RBA) representative that mining booms cause “inflation”. Australia has experienced rapid “price inflation” over the past several years, so the central bankers of that country naturally perceive the need to come up with reasons for price rises that have nothing to do with their own actions. A convenient explanation is the mining boom, because it can be shown that the large gains made by commodity prices are linked in some way to China’s rapidly-growing demand for commodities. The idea is that if the mining boom CAUSED Australia’s “inflation” problem then the finger of blame for the problem could legitimately be pointed at China!

It was a nice try by the RBA, but the reality is that China’s actions — regardless of what they happen to be — cannot possibly bring about a substantial decline in the purchasing power of the Australian Dollar. Prices within any economy are continually fluctuating and large localised price rises will sometimes occur in response to unanticipated shortages of, or increases in demand for, some goods and services, but in the absence of a higher money supply a price rise in one part of the economy will have to be offset by a price decline elsewhere.

Not surprisingly, the true explanation for Australia’s “inflation” problem can be found in the money supply statistics. During the 9-year period from January-2001 through to January-2010, Australia’s M3 money supply** rose 168%. This equates to a compound annual growth rate of around 11.5% and is the sort of money-supply growth that could bring about a doubling in the cost of living.

The true explanation can always be found in the money supply statistics, yet other factors will invariably be blamed. This was certainly the case with regard to the great “inflation” of the 1970s. According to many pundits, the troublesome broad-based rise in prices of the 1970s was set in motion by a series of supply shocks, the most important being the collapse of the Peruvian anchovy harvest in 1972 (anchovies from Peru were processed into fishmeal, a major source of feed for livestock and poultry throughout the world at that time) and OPEC’s restriction of oil supply in 1973. Other factors to be cited as causes of “inflation” during the 1970s were the increasingly aggressive demands of labour unions and the Iran Hostage Crisis.

There have always been supply shocks and other disruptions, but these supply shocks have only ever been accompanied by large and sustained losses in money purchasing power when there was also a large increase in money supply. In this respect, the 1970s was no different to any other period of high “inflation”. Those who believe in fallacious neo-Keynesian concepts such as “cost-push inflation” and “demand-pull inflation” should explain why the currency never recovers its purchasing power once ‘costs stop pushing’ or ‘demand stops pulling’. Why, for instance, did the US$ fail to recover ANY of the purchasing power it lost during the 1970s after that decade’s commodity shortages went away?

Interestingly, even the most spectacular inflationary episode of the past century was blamed on factors other than money-supply growth. We are referring to the Weimar inflation of the early 1920s, the cause of which was held — by the central bankers at the centre of it — to be a combination of Germany’s war reparations and the activities of foreign speculators. The central bank’s rampant monetisation of government debt was, apparently, not relevant.

In conclusion, it’s a fact of life in a free or semi-free economy that relative prices will be continually adjusting in response to changes in the supply of and the demand for different goods and services. Therefore, when an “inflation” problem occurs it will inevitably be accompanied by non-monetary events that cause prices to rise sharply in some parts of the economy. These localised price rises will, in turn, create an opening for the central bank and/or the government to point the finger of blame at things that are clearly outside the control of the monetary authorities; however, the propaganda can’t work if the populace understands that only an increase in the money supply can bring about a large economy-wide rise in prices.

*When we put quotation marks around inflation it indicates that we are giving the word its popular meaning (a rise in the general price level), as opposed to its correct meaning (a rise in the money supply)

**We don’t have TMS (True Money Supply) data for Australia, so we will have to make do with M3.

PS The new motorcycle is fast and fun.

I do agree with the statement “the world once so interconnected is now finding itself isolated.”

One of the benefits of an oil shortage would be that food would be locally grown. It would also encourage home based manufacturing since shipping goods across the globe would be prohibitively expensive. We would all depend more on our neighbors and probably get to know them better than we do now. Self contained communities would replace the suburbs.

The sad part of the coming oil crisis is that we are unprepared and therefore will suffer needlessly. We should have been working on this problem decades ago, instead we are ignoring it. Politicians will blame the oil companies for high prices and eventually for shortages. They will also blame oil producers and seek military solutions to gain the much needed oil.

I’m telling you it is going to be a mess for a while and all so needless. I wish our politicians would listen to men like Matt Simmons who have real solutions. Instead they concentrate on getting themselves re-elected. At some point politics will have to give way to solutions….the problems will demand it.

Nearly everything we use is connected to oil. Many of our medicines would vanish without this valuable resource. In my opinion, Peak Oil is a more clear and present danger than Global Warming. But as I have said, “Solve Peak oil and you automatically solve MMGW.”

BTW, when considering using food crops for energy one must consider the amount of energy it takes to produce 1 BTU from let’s say corn or soybeans. If it takes 1 BTU of energy to produce 1 BTU of energy, you are basically wasting your time.