Kyle Bass practically cracks up when an interviewer asks him about Germany "resolving the problems within Europe."

Bass responds, putting emphasis on each reference to "resolution":

"The only way to quote resolve any problems in Europe is to have massive debt restructuring...

One of the things we've said in our office recently is you know how screwed up Europe is when you have a German pope and an Italian central banker. We have a scenario today in which debt has grown globally in the last nine years from $80 trillion to $210 trillion. Global credit market debt has grown at 12% a year for the last nine years, while global GDP has grown at 4. We're in a scenario where the PIIGS have sailed into a zone of insolvency. When you sail into the zone of insolvency there is no quote solution for you. The bill is due and you have to pay the pill. What has to happen is it is of our opinion that these debts have to be written down, it's that simple.

Basically you're saying if Germany goes joint and severally liable with the profligate idiots of southern Europe will that quote solve the scenario? Think about this. Let's assume Germany goes to doing a eurobond and Germany takes on these... first of all German constitutional court has already ruled that that's illegal in Germany, but let's assume that they get over that and they go ahead and issue this bond. What would that do for the profligate members including Greece when Greece says, "OK we're all in, we're good, you're lending us more money, we have a big debt problem and you're lending us some more and now we can borrow a little cheaper," and then Greece keeps spending, and they go back to Germany and say, "OK Germany I need some more money." Germany says, "No, we're going to impose this real austerity on you now." Greece says, "Fine, we'll default." Every single time from now on Germany is in the exact situation it's in today. We call it in Texas a Mexican Standoff, meaning there's no winner. The profligate members will always have Germany by the short hairs every time this scenario comes up. So I disagree. I don't think that Germany will end up going all in. It would not be to the benefit of Germany to do so in the long run. Let me ask you this question: How many of your relatives would you go joint and severally liable with?

Read more: http://articles.businessinsider.com/2011-1...

Here is the entire interview:

http://www.zerohedge.com/news/kyle-bass-un...

John Jazwiec's blog:

Why I am writing about this is in such a straight forward way? First, because, even though I know what I have to do for a living, it does not mean it sits well with me. Second, there are a lot of people like me, that have been killing jobs, for the last two decades.

The latter point is relevant here. We have high systemic employment. The most optimistic projections, don't point to full employment, until 2020. I think that is generous and unrealistic.

You see, any job that can be eliminated though technology or cheaper labor is by definition not coming back. The worker can come back. They most often come back by being underemployed. Others upgrade their skills and return to previous levels of compensation. But as a whole, the productivity gains over the last twenty years, have changed the landscape of what is a sustainable job.

What is a sustainable job? The best way I can articulate, what is a sustainable job, is to tell you, as a job killer, jobs I can't kill. I can't kill creative people. There is no productivity solution or outsourcing that I can sell, to eliminate a creative person. I can't kill unique value creators. A unique value creator is, well, unique. They might be someone with a relationship with a client. They might be someone who is a great salesmen. They might be someone who has spent so much time mastering a market, that they are subject matter experts, and I know technology or outsourcing can't be built profitably to eliminate a single unique job.

http://www.johnjazwiecblog.com/2011/06/spe...

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.

“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”

http://www.bloomberg.com/news/2011-10-18/b...

First, the present slump is a balance-sheet Lesser Depression or Great Recession of nearly unprecedented magnitude, occasioned by our worst credit-fueled asset-price bubble and burst since the late 1920s.4  Hence, like the crisis that unfolded throughout the 1930s, the one we are now living through wreaks all the destruction typically wrought by a Fisher-style debt-deflation.  In this case, that means that millions of Americans who took out mortgages over the past 10 to 15 years, or who borrowed against the inflated values of their homes, are now left with a massive debt overhang that will weigh down on consumption for many years to come.  And this in turn means that the banks and financial institutions that hold this debt are exposed to indefinitely protracted concerns about capitalization in the face of rising default rates and falling asset values.

But there is more.  Our present crisis is more formidable even than would be a debt-deflation alone, hard as the latter would be.  For the second key characteristic of our present plight is that it is the culmination of troubling trends that have been in the making for more than two decades.  In effect, it is the upshot of two profoundly important but seemingly unnoticed structural developments in the world economy.  

The first of those developments has been the steady entry into the world economy of successive waves of new export-oriented economies, beginning with Japan and the Asian tigers in the 1980s and peaking with China in the early 2000s, with more than two billion newly employable workers.  The integration of these high-savings, lower wage economies into the global economy, occurring as it did against the backdrop of dramatic productivity gains rooted in new information technologies and the globalization of corporate supply chains, decisively shifted the balance of global supply and demand.  In consequence, the world economy now is beset by excess supplies of labor, capital, and productive capacity relative to global demand.  This not only profoundly dims the prospects for business investment and greater net exports in the developed world — the only other two drivers of recovery when debt-deflation slackens domestic consumer demand.  It also puts the entire global economy at risk, owing to the central role that the U.S. economy still is relied on to play as the world’s consumer and borrower of last resort.  

The second long term development that renders the current debt-deflation, already worse than a mere cyclical downturn, worse even than other debt-deflations is this: The same integration of new rising economies with ever more competitive workforces into the world economy also further shifted the balance of power between labor and capital in the developed world.  That has resulted not only in stagnant wages in the United States, but also in levels of income and wealth inequality not seen since the immediate pre-Great-Depression1920s.  

http://newamerica.net/publications/policy/...

About 25 percent of millionaires in the U.S. pay federal taxes at lower effective rates than a significant portion of middle-income taxpayers, according to a legislative analysis.

Preferential treatment of investment income and the reduced impact of payroll taxes on high earners lets about 94,500 millionaires pay taxes at a lower rate than 10.4 million “moderate-income taxpayers,” representing about 10 percent of those making less than $100,000 a year, according to the report by the non-partisan Congressional Research Service dated Oct. 7.



The Congressional Research Service report found that, on average, millionaires paid federal tax at a 30 percent rate, while moderate-income taxpayers, defined as those earning less than $100,000, were taxed at 19 percent.

The overall average, though, “obscures a great deal of variation,” including the finding that 25 percent of millionaires pay lower rates than 10 percent of moderate earners, the report found.

http://www.bloomberg.com/news/2011-10-12/o...

(KEVIN LAMARQUE - REUTERS) Christina Romer had traveled to Chicago to perform an unpleasant task: she needed to scare her new boss. David Axelrod, Barack Obama’s top political adviser, had been very clear about that. He thought the president-elect needed to know exactly what he would be walking into when he took the oath of office in January. But it fell to Romer to deliver the bad news.

So Romer, a preternaturally cheerful economist whose expertise on the Great Depression made her an obvious choice to head the Council of Economic Advisers, gathered her tables and her charts and, on a snowy day in mid-December, sat down to explain to the next President of the United States of America exactly what sort of mess he was inheriting.

Axelrod had warned her against pulling her punches, and so she didn’t. It was not a pleasant presentation to sit through. Afterward, Austan Goolsbee, Obama’s friend from Chicago and Romer’s successor, remarked that “that must be the worst briefing any president-elect has ever had.”

But Romer wasn’t trying to be alarmist. Her numbers were based, at least in part, on everybody else’s numbers: There were models from forecasting firms such as Macroeconomic Advisers and Moody’s Analytics. There were preliminary data pouring in from the Bureau of Labor Statistics, the Bureau of Economic Analysis and the Federal Reserve. Romer’s predictions were more pessimistic than the consensus, but not by much.

http://www.washingtonpost.com/blogs/ezra-k...

Best piece I've seen summing up what happened, why it happened, and what could have been done differently.

Submitted by Charles Hugh Smith from Of Two Minds

To understand why the euro is failing and the Swiss Franc peg is a sand castle that will dissolve in a rising tide, we must start with a historical context and the crisis of global Capitalism.

The recent 40th anniversary of President Nixon withdrawing the U.S. from the gold standard triggered an avalanche of commentary mourning this introduction of the "fiat" (unbacked) dollar. But as most financial commentators have a conventional-economics perspective, they missed the key point: Nixon had no choice.

To really make sense of the past 40 years, and the current crisis of advanced global Capitalism, we must turn to everyone's favorite misunderstood economic framework, Marxism. I recently addressed several aspects of Marx's view of the inevitability of advanced Capitalism's crises in Marx, Labor's Dwindling Share of the Economy and the Crisis of Advanced Capitalism (August 31, 2011).

More

http://www.zerohedge.com/news/guest-post-c...

By DAMIAN PALETTA

POLITICS JULY 22, 2011, 9:30 P.M. ET
Small-Scale Deficit Deal Increases Risk of U.S. Downgrade


WASHINGTON—The breakdown in deficit-reduction talks between the White House and Speaker of the House John Boehner (R., Ohio) could immediately increase the risk that Standard & Poor's takes the unprecedented step of lowering its top-notch rating of U.S. government debt.

The credit-rating firm has warned repeatedly that it could move to downgrade U.S. debt if it believes any deficit-reduction deal isn't robust enough to change the country's trajectory of future debt growth. A downgrade could come even if officials agree to raise the federal debt ceiling by Aug. 2. Treasury Department officials have set that as the deadline because after that date, without more borrowing authority, the government could run out of cash to pay all its bills.

Messrs. Obama and Boehner had been trying to package a deal that would reduce future federal deficits by $4 trillion over 10 years, a level S&P officials had suggested would be sufficient to avoid a downgrade. A lower credit rating would raise borrowing costs not just for the government, but also for consumers and businesses, which could slow U.S. economic growth. It also could lower the value of Treasury securities held as assets by banks, pension funds, mutual funds, hedge funds, and other investors around the world, potentially shaking financial markets.

Now that the large-scale talks have broken down, policy makers will likely pursue a smaller-scale deal that falls short of S&P's targets. Mr. Obama alluded to this possibility Friday evening.

"If we can't come up with a serious plan for actual deficit and debt reduction, and all we're doing is extending the debt ceiling for another six, seven, eight months, then the probabilities of downgrading U.S. credit are increased, and that will be an additional cloud over the economy and make it more difficult for us and more difficult for businesses to create jobs that the American people so desperately need," Mr. Obama said Friday evening.

http://online.wsj.com/article/SB1000142405...

NEW YORK (Reuters) - Standard & Poor's threatened Monday to downgrade the United States' prized AAA credit rating unless the Obama administration and Congress find a way to slash the yawning federal budget deficit within two years.

S&P, which assigns ratings to guide investors on the risks involved in buying debt instruments, slapped a negative outlook on the country's top-notch credit rating and said there's at least a one-in-three chance that it could eventually cut it.

A downgrade, which would leave Germany and France with a higher rating, would erode the status of the United States as the world's most powerful economy and the dollar's role as the dominant global currency.

If investors start demanding higher returns for holding riskier U.S. debt, the rise in bond yields would crank up borrowing costs for consumers and businesses. That would threaten to hurt the economy as it recovers from the worst recession since World War II.

"This new warning highlights the need for the U.S. to take better control of its fiscal destiny if it is to avoid higher borrowing costs and maintain its central role at the core of the global economy," said Mohamed El-Erian, chief executive at PIMCO, which oversees $1.2 trillion in assets and has a short position on U.S. government debt.

http://mobile.reuters.com/article/idUSTRE7...

A key senator Friday advocated cuts in the Social Security payroll tax that would save 130 million workers and employers a total of $62 billion during the next two years.

The proposal by Sen. Daniel Patrick Moynihan (Y.) would cancel a 0.14% increase in the levy scheduled to take effect on Jan. 1 and would lower the rate by an additional 0.96% for workers and employers in 1991.

"We can no longer tolerate the use of Social Security surpluses to finance, say, B-2 bombers or a capital gains tax cut," he added.

Snip

Moynihan contends that it is unfair tax policy to rely so heavily on a payroll tax that allows no deductions and takes the same percentage from everyone regardless of their ability to pay.

"The United States almost certainly now has the most regressive tax structure of any Western nation," he said. "This is so because the Social Security payroll tax--which is decidely regressive--has come to make up an increasingly larger share of total federal tax levies."

About three-fourths of all wage-earners, he said, will pay more in Social Security taxes in 1990 than they will pay in federal income taxes, which are more geared to the ability to pay.

http://articles.latimes.com/1989-12-30/new...

By RICHARD L. BERKE, Special to The New York Times
Published: October 11, 1990

The Senate today killed a proposal for a Social Security tax cut that Senator Daniel Patrick Moynihan had made something of a personal cause for nearly a year.



The circumstances that led to Mr. Moynihan's tax-cutting campaign stem from 1983. That year, Congress overhauled the Social Security system, seeking to build a vast pool of money that would insure the existence of pension benefits for members of the baby-boom generation, large numbers of whom will begin retiring early in the next century.

As a result of the accelerated tax rates that the 1983 overhaul called for, the Social Security system now routinely shows an annual surplus. Next year, for example, workers and their employers will pay an estimated $341.7 billion into the system, which will provide benefits of some $270.8 billion, leaving a projected surplus of more than $70 billion.

But although these are surpluses of design, intended for a specific purpose, they are counted as general revenue when the Federal budget is written each year. This has led Mr. Moynihan and his supporters to complain that the surpluses are being used to mask the real size of budget deficits.

Snip

Several senators who supported Mr. Moynihan's bill echoed his complaint that Social Security surpluses were being improperly used to finance the Government's general operations.

''Because we are looting the Social Security Trust Fund and using it to fund the ongoing Government, we are asking the wage earners to pay more than they should,'' declared Senator Kent Conrad, Democrat of North Dakota. ''It's unfair to the working men and women of this country.''

http://www.nytimes.com/1990/10/11/us/budge...

The Bipartisan Policy Center studied Treasury Department receipts and expenditures for August 2009 and 2010 and determined that the government likely would not have enough revenue to pay the full $23 billion payment to Social Security recipients due on Aug. 3.

On that day, according to the analysis, the government would take in about $12 billion in taxes and other revenue but would owe $32 billion, creating a $20 billion shortfall. It happens to be the first Wednesday of the month — the day a majority of Social Security recipients get their checks.



http://thinkprogress.org/economy/2011/06/2... /

From Broadmoor to boardroom, they're everywhere, says Jon Ronson, in an exclusive extract from his new book

A man in his late 20s walked towards me. His arm was outstretched. He wasn't wearing sweatpants. He was wearing a pinstripe jacket and trousers. He looked like a young businessman trying to make his way in the world, someone who wanted to show everyone that he was very, very sane. We shook hands.

"I'm Tony," he said. He sat down.

"So I hear you faked your way in here," I said.

http://m.guardian.co.uk/books/2011/may/21/...

Not Medicare

That is what a real newspaper would have told readers when it quoted House Budget Committee Chairman Paul Ryan saying:

"There is nobody saying that Medicare can stay in its current path."

However the Rupert Murdoch owned Wall Street Journal did not provide this information. The Center for Medicare and Medicaid Services projects that health care costs will rise rapidly in coming decades. While health care is overwhelmingly provided by the private sector, the rise in costs is projected to lead to large budget deficits because more than half of health care is paid for through public sector programs like Medicare and Medicaid.

If these projections prove accurate then it will have a devastating impact on the economy regardless of what happens to the public sector health care programs. On the other hand, if per person health care costs were brought in line with costs in other wealthy country, the government would be facing large surpluses, not deficits.

http://www.cepr.net/index.php/blogs/beat-t...

http://voices.washingtonpost.com/ezra-klei...

In my chat yesterday, someone asked if we could really eliminate the budget deficit by taxing the rich. The answer is no, but we could make it smaller by taxing the rich. The Wall Street Journal's David Wessel runs the numbers. Before we jump in, remember: The deficit over the next 10 years is projected to be $9 trillion.

Start with some rough arithmetic. The three million or so fortunate taxpayers whom Mr. Obama counts as rich are projected to earn about $27.5 trillion from 2010 through 2019, according to the Tax Policy Center, a Washington think tank, and about $23.9 trillion after deductions. They are projected to pay $7.4 trillion in taxes. That's 31.1% of every dollar of taxable income, on average.

To squeeze an additional $9 trillion out of these taxpayers would require boosting that to 68.9%. And that assumes these taxpayers wouldn't find tax shelters to hide their income or work less. There isn't enough money in the over-$250,000 crowd to stick them with the $9 trillion tab.

And this actually makes taxing the rich look better than it is. The deficit that people worry about isn't the $9 trillion short-term budget deficit. It's the mega-trillion long-term deficit. To put this in context, the 2009 deficit was 53 percent of GDP. The 2050 deficit is projected to be 350 percent of GDP.

What's driving this, as you've heard at length, is health-care costs and demographic changes. The CBPP has a nice primer if you want to dig into it. But health-care costs and demographic changes are happening way faster than wage increases. There's no tax regime in the world that can keep up indefinitely.