iUSA

By J. Thomas Duffy 

Well, if we see President Obama sporting a black turtleneck over the weekend, perhaps that will signal that Apple has purchased the U.S. Government.

 

U.S. balance now less than Apple cash 

Steve Jobs is now more liquid than Uncle Sam...

As Republicans and Democrats continue to work towards a compromise to the country’s debt ceiling crisis, the U.S. Treasury Department said on Thursday that Washington now has a total operating balance of only US$73.768-billion.

Meanwhile, Apple currently boasts a cash reserve of US$75.876-billion, as of its most recent quarterly earnings report at the end of June.

 

If that happens, I suppose, we'll all be mandated to purchase iPhones (which will help streamline the iLocater program), and changes will include download apps for things like Social Security and Food Stamps.

And Jobs can scratch the plans for building his new spaceship office, as, no doubt, he'll move straight into the White House, incorporating the Apple logo into the presidential seal. 

Welcome, to the good ol' iUSA!

(Cross-posted at The Garlic.)

This day in history - July 11, 1804: Former Secretary of the Treasury Alexander Hamilton is mortally wounded in a duel

By Richard K. Barry

The duel in question was between Hamilton and Vice President Aaron Burr. It took place on July 11, 1804, and Hamilton, having been shot in the lower abdomen above the right hip, died the next day.

The cause of the duel was, of course, some sort of affront to Burr's honor, which required that he receive what I think they called in the day "satisfaction." All in all, it ended badly for Hamilton.

I thought the item interesting this week in particular because Hamilton was the first United States Secretary of the Treasury.

I note that he was involved in 1790 in writing something called the First Report on the Public Credit, which analyzed the financial standing of the United States of America and made recommendations for the retirement of the national debt.

Hmmm. What advice would Hamilton offer our national leaders today on the debt ceiling as one who worked so hard to ensure that the debt and honor of his fledging country would be secured following the American Revolution and the debt incurred to conduct it?

I'll bet Glenn Beck could tell me.

(Cross-posted to Lippmann's Ghost.)

The Group of Twenty

By Carol Gee

The G-20 is hosted by the United Kingdom in 2009, and it consists of Finance Ministers and Central Bank Governors. They met Saturday in Horsham in southern England. Membership includes:

The G20 is made up of the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States of America and The European Union who is represented by the rotating Council presidency and the European Central Bank. To ensure global economic fora and institutions work together, the Managing Director of the International Monetary Fund (IMF) and the President of the World Bank, plus the chairs of the International Monetary and Financial Committee and Development Committee of the IMF and World Bank, also participate in G-20 meetings on an ex-officio basis.

Working groups -- the UK . . . has established four working groups to advance this work for the next Leaders Summit on 2 April in London. German Chancellor Angela Merkel said she was optimistic world leaders would reach an agreement at next month's G20 summit in London, despite signs of rifts between Europe and the United States. The workings groups focus on:

1. Enhancing sound regulation and strengthening transparency


2. Reinforcing international co-operation and promoting integrity in financial markets


3. Reforming the IMF


4. The World Bank and other multilateral development banks (MDBs)

U.S. Secretary of the Treasury Timothy Geithner issued a statement and a G-20 Fact sheet (pdf-4). Secretary Geithner's demand for larger stimulus packages from other countries was dropped in favor of language emphasizing the good cooperation among the countries. There was not yet a commitment to put more money into the International Monetary Fund. The meeting's news, according to the Saturday The New York Times, is generally neutral to positive. To quote:

Finance officials from rich and developing countries pledged to boost the role of the International Monetary Fund and make a ''sustained effort'' to restore global growth after a key conference that sought to bridge deep divisions on how to tackle the financial crisis.

The key priority must be restoring frozen bank lending through cash infusions and dealing with the shaky assets souring bank's balance sheets, the gathered finance ministers and central bankers from the Group of 20 countries said in a statement at the end of talks in southern England.

The statement did not back a U.S. push for concrete, coordinated efforts for governments to spend more money to boost their economies. It acknowledged the importance of the stimulus efforts already in place, and called for stronger financial regulation.

Other news and views --BBC News has good coverage of the "nuts and bolts" of the gathering, including a Communique and Key Agreements. The story from China's point of view can be found at the China Daily. For the best in depth analysis of the meeting's modest outcomes, turn to the Financial Times, my favorite newspaper.

(Cross-posted at South by Southwest.)

BREAKING NEWS: Senate confirms Geithner for Treasury

By Michael J.W. Stickings

Well, the vote was (relatively) close, 60-34, but the Senate confirmed Obama's Treasury secretary nominee, Tim Geithner, earlier this evening.

Some of his opponents cited his failure to pay some Social Security and Medicare taxes over several years earlier this decade, but it was just a stupid (and explainable) oversight on his part, hardly worthy of what it provoked.

There were several good reasons to oppose Geithner, as I suggested both here and here, including his enthusiasm for the ever-larger Wall Street bailout and the fact that he was very much part of the problem to begin with.

But it's done, and, putting aside my reservations, I continue to trust that Obama knows what he's doing.

**********

UPDATE: It wasn't just Republicans who voted against him. Democratic Senators Harkin, Byrd, and Feingold, as well as independent Senator Sanders, voted against confirmation.

BREAKING NEWS: Senate committee approves Geithner

By Michael J.W. Stickings

NYT:

Timothy F. Geithner was strongly endorsed by the Senate Finance Committee as secretary of the Treasury on Thursday, virtually guaranteeing his quick confirmation by the full Senate and assuring the new president that he will have the leader he wants for his economic team.

The 18-to-5 vote came a day after Mr. Geithner endured hours of grilling over his failure to pay thousands of dollars in back taxes. That lapse caused considerable embarrassment for Mr. Geithner, even as some members of the panel said they were willing to accept his word that the failure was an honest mistake.

To put it mildly, I'm iffy on Geithner (in part because I'm iffy on the financial bailout, of which he is one of the loudest cheerleaders, in part because he was part of the problem to begin with), but I do think Obama should be able to have the Cabinet he wants and, as was the case throughout much of the transition, given some of his more questionable nominations, I'm willing to put aside my reservations and trust that he knows what he's doing.

Besides, it's not like I want the Republicans to be successful in blocking any of his nominees, especially as high-profile a nominee as Geithner.

Geithner, the Tax Man, and the Treasury

By Michael J.W. Stickings

Oh, how the right is salivating over Treasury nominee Tim Geithner and his tax problems, specifically, his failure to pay almost $43,000 in Social Security and Medicare taxes over several years earlier this decade.

Appearing before the Senate Finance Committee on Tuesday, Geithner explained, according to the Post, that the "mistakes on his tax returns early this decade were unintentional and that he has since paid back the $42,702 he owed, including interest... [H]e mistakenly believed that his employer at the time, the International Monetary Fund, was deducting those taxes from his paycheck." Democratic committee chairman Max Baucus called his mistake "serious," Minority Leader Mitch McConnell is withholding judgement, and two other Republicans, Jim Bunning and Jon Kyl, are temporarily delaying his confirmation, but, of all people, Orrin Hatch, one of the most conservative and most partisan of Republicans, came to his defence: "I still support him. I have no problem. He's a very, very competent guy."

But then there are those who are making much ado, such as the Politico's Roger Simon, a noted conservative, who asks today, "What if I didn't pay taxes?" Which isn't fair, of course, because Geithner still paid most of his taxes, he just neglected to pay certain taxes that he thought were already being deducted." It an incredibly and typically idiotic piece.

Then there's The Wall Street Journal, a right-wing rag (in editorial terms), which facetiously calls for "a Geithner tax amnesty." But Geithner didn't "forget" to pay his taxes, it was just an oversight on his part -- a serious one, to be sure, but it's not like he was engaging in tax fraud or otherwise simply refusing to pay his taxes.

And it isn't just the right. Even The New York Times (which is actually far more rightist than most people realize) editorialized that "the disclosures cannot be dismissed so easily, or papered over," that "Geithner must be questioned forcefully about these matters at the hearing next week, and his explanations must be credible."

As the Times reports elsewhere, though, "several tax experts" say that "it is an easy mistake for an employee of an international organization to make." Even the Politico admits this: "Should the U.S. treasury secretary know how to do his own taxes? Maybe not, say payroll lawyers, accountants and tax professors, who consider Timothy Geithner’s failure to pay four years of Social Security and Medicare payroll taxes to be a fairly common mistake — even for a top economist chosen to run the Treasury Department, including the Internal Revenue Service."

And while media outlets like CNN are similarly making much ado and focusing on all the supposed opposition to Geithner, Republicans, with few exceptions, are pretty much on Geithner's side, dismissing the tax oversight and stressing his abilities and qualifications.

Now, this is not to say that I myself am fully behind Geithner. I have my reservations, but they have nothing to do with his taxes. Rather, they have to do with the fact that he once worked for Henry Kissinger (I'd like to know more about what he did for Kissinger & Associates), that he's another Rubin-Summers (who were both enablers of the banking crisis back when they were at the Treasury in the '90s under Clinton), that he has been very much part of the problem with respect to the financial meltdown, and that he's an enthusiastic cheerleader for the ever-growing financial bailout.

Still, I'm not against him -- I trust Obama on this -- and, despite these concerns, I do not necessarily oppose his confirmation. Indeed, as Robert Kuttner (via Benen) noted last September, Geithner is actually quite progressive with respect to regulatory policy. And Paul Krugman likes him, which is, for me, very much in his favour, even if Frank Rich makes a strong and persuasive case against him for being "no less tardy [than Rubin] in discovering the reckless, wholesale gambling that went on in Wall Street's big casinos, all of which cratered while at least nominally under his regulatory watch."

Regardless, it looks like he'll be confirmed. Thankfully, the stupid matter of his taxes won't be his undoing.

So how bad is it, really?

By Carl

This bad:

In the market equivalent of shoveling cash under the mattress, hordes of buyers were so eager on Tuesday to park money in the world’s safest investment, United States government debt, that they agreed to accept a zero percent rate of return.

The news sent a sobering signal: in these troubled economic times, when people have lost vast amounts on stocks, bonds and real estate, making an investment that offers security but no gain is tantamount to coming out ahead. This extremely cautious approach reflects concerns that a global recession could deepen next year, and continue to jeopardize all types of investments.

A quick finance lesson for those of you who didn't attend B-school. Interest is essentially the cost of borrowing money (there's a lot more and that's very simplistic, but I digress). If you borrow $100 from me, that's $100 I don't have. I charge you $2 interest, because I can make at least that much in another investment.

Let's assume inflation is a factor, for a second, and inflation would eat up $1 of the $100. I still come out ahead. Presumably, you being a rational person, use the $100 to make a quick $3 or more. You come out ahead.

If I lend you the money at zero interest, it means that I lose money over time. I don't recapture that $1 that inflation has eaten up. I effectively get $99 for lending you $100. Under what scenario does this arrangement work.

When inflation is a negative, or economic growth is contracting.

So in other words, the global financial markets have factored in the entire world economy. They've taken into account China and India and Russia. And they've decided that, for the next thirty days (which includes the last two weeks of Christmas shopping), the economy is going to go south like nobody's business. They're not worried about making money: they're worried about losing more money than they already have.

As well, some global investors are scared enough that the Treasury auctioned off some 3-month notes for zero percent, meaning those pessimists believe things won't get better before next spring.

Personally, I would have taken zero on 12-month notes.

It's a very weird world out there. The dollar, which had hit some recent historic lows against the euro and the pound, is suddenly the place to invest, primarily because oil prices, tied to the dollar, have collapsed, making dollars more freely available on the market. You'd think this would be good news to stock markets, but you'd be wrong.

The dollar being strong and the U.S. Treasury being able to float zero interest debt actually caused the market to drop. My guess is this is mopre pyschological than economic: I see this as the last stand of the American government. For too long, we've lived on borrowed money, buoyed only be the fact that we've been able to see the private sector, similarly buoyed, scratch out some economic growth in this decade.

Despite Bush's tax cuts, which have done nothing for the real economy and only helped speed up the shuffling of paper in the fantasy economy.

The bailouts of so many businesses in so many key economic sectors (wait until the airlines start lobbying) has Wall Street worried, and rightly so.

When does the spigot turn off? What companies will be left standing when the music stops and the chairs are full? What happens when Uncle Sam himself turns empty pockets inside out?

(Cross-posted at Simply Left Behind.)