For months I've been baking bread, or trying to. I went through quite a bit of trial and error and had a lot of problems getting it to rise correctly.

Finally, I've adopted a method that's been turning out consistently good. I use the bread machine to mix and knead the dough, then I transfer it to the oven to rise and bake.

I add the following ingredients to the bread machine (in this order):

1 cup + 2 or 3 tablespoons of hot tap water
1 1/3 teaspoon margarine (thinly sliced)
1 1/4 teaspoon of salt
1/4 cup brown sugar
2 cups bread flour
1 1/2 cup whole wheat flour
2 1/4 teaspoon of yeast

I manually mix up the dry ingredients (flour and yeast) on top of the water before I turn the machine on.

The bread machine mixes for 10 minutes, rests for 10 or 15 minutes, and then kneads for another 15 minutes. While it is running I frequently monitor it to make sure it is mixing/kneading the dough and not just spinning it around and around. I add a little extra flour while it is kneading until the dough reaches the proper consistency (just slightly sticky).

After it finishes kneading, I remove it from the machine, put it in a greased pan, and let it rise in the warmed oven for about an hour.

Finally, I bake for 30 minutes at 350F.

Posted by Brian at 3:07 PM | Permalink | Comments (1) | TrackBacks (0) |

It's not just an American phenomenon:

Royal Bank of Scotland (RBS) has announced losses for 2009 of £3.6bn, after struggling with billions of pounds of bad loans.

Despite the losses, the bank is set to announce it will pay bonuses of £1.3bn to its staff.

The bank's chief executive, Stephen Hester, however, has said he will not take his own bonus.

The UK taxpayer owns 84% of RBS after the government bailed out the bank at the end of 2008.

Mr Hester told BBC Radio 4's Today programme RBS had lost out by not paying bigger bonuses.

"We've had a small experiment in this respect... some of our best-performing people have been leaving in their thousands," he said.

Leaving in the thousands? Where are they going? Most employers are firing, rather than hiring. Just how many hedge funds are there?

Meanwhile, "Morgan Stanley's Mack Says Investment Banker Pay Still Too High":

Morgan Stanley Chairman John Mack said investment bankers are overpaid and Wall Street compensation won't decrease much because firms don't want to lose their best performers.

"I still don't think the industry gets it," Mack said yesterday during an appearance in Charlotte, North Carolina. "The issue is not structure, it is amount."

I certainly don't get it.

For a thorough, yet easy-to-understand piece on how Wall Street has used bailout funding to run its bonus racket, see Matt Taibbi, "Wall Street's Bailout Hustle."

Taibhi's piece highlights the financial shenanigans Goldman Sachs has pulled to game the system and take advantage of government bailout money. For example, reclassifying its status (virtually overnight) to take advantage of banking assistance programs or (as was widely reported, but little followed up on) receiving 100 cents on the dollar on its claims from AIG, when it likely would have received pennies without the AIG bailout.

One of the most unbelievable aspects of this whole fiasco is that Washington D.C. has done very little to reform the system to prevent it from happening again. It's like we've watched a pilot crash a 747 into a mountain (after ejecting) and have given him the keys to new plane without fixing what went wrong with the first one.

Posted by Brian at 2:04 PM | Permalink | Comments (0) | TrackBacks (0) |

A few days ago Warren Buffett interviewed Former Treasury Secretary Henry Paulson on his book, On the Brink. The interview, which you can watch here, offers a few interesting behind-the-scenes nuggets on what went down at the height of the financial scare during the Fall of 2008.

For example:

--During a very heated meeting with Congressional leaders, tensions got so high that Paulson apparently knelt down in front of Pelosi in an effort to restore a civil discussion.

--If you read between the lines of what he is saying, he implies that during campaign 2008 McCain was difficult to work with and frankly didn't "get" the magnitude of the financial crisis. Obama was receptive and engaging in their discussions.

For those who like to point out Obama's faults--and he's certainly not perfect--it's periodically a useful exercise to imagine how much more disastrous things would be today if McCain were in charge.

Paulson also discusses our present plight and near-term outlook. I find this quote interesting (at 38:25):

I have spent a lot of time outside of this country. And I've spent time in all of the major economies. And believe me, every other major economy, China included, has many more really significant challenges and problems than we do. They really do. And we're the richest, strongest economy in the world. But we have to deal with a relatively few, very important challenges.

I interpret this comment as more of an indictment on the sad state of everyone else's economy rather than an affirmation of our own.

That being said, is Paulson's assessment is correct? Or is this just an indirect way of patting himself on the back for having "saved" us? I still go back and forth on the health of the U.S. economy. Is it simply really bad? Or is it really, really, really bad.

This observation (at 39:15) is beyond dispute:

One of the things I've learn, and one of the things that I write about in this book, is that it's very difficult to get government to act--to get Congress to act--and do anything that's big and difficult and controversial unless there's an immediate crisis.

Indeed. We're almost 18 months after the U.S. government shelled out hundreds of billions of dollars to keep our financial system afloat, and we still haven't implemented a serious financial services industry regulatory overhaul. It's mind-boggling.

Posted by Brian at 3:26 PM | Permalink |

Whenever I see "Jaywalking" or some similar person-on-the-street interview segment, I ask myself, "Are Americans really this dumb?"

By and large, the answer appears to be "yes."

Bob Sullivan provides more evidence with a post on Americans' inability to do basic "real-world" math (note the clever "ameritards" in the URL--I think I'll start using that). For example:

• Only 42 percent were able to pick out two items on a menu, add them, and calculate a tip.
• Only 1 in 5 could reliably calculate mortgage interest.

Could things really be [I]that[/I] bad? It's one thing to need a calculator to figure a tip. But to not understand your basic mortgage terms? That's dreadful.

If Americans are as mathematically clueless as Sullivan suggests, we've got a real problem: people lack a fundamental survival skill. I'm not familiar with today's public high school curriculum, but perhaps we need to feature more checkbook balancing and less algebra.

Posted by Brian at 12:18 PM | Permalink | Comments (1) |

I keep feeling my way around in the darkness, trying to find hopeful signs that our economy will recover, but invariably I bang into something like this:

Our colleague Rob Arnott, who always does terrific research, wrote in his recent report that "at all levels, federal, state, local and GSEs, the total public debt is now at 141% of GDP. That puts the United States in some elite company--only Japan, Lebanon and Zimbabwe are higher. That's only the start. Add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP, not even counting off-balance-sheet swaps and derivatives) and our total debt is 557% of GDP. Less than three years ago our total indebtedness crossed 500% of GDP for the first time."

Add the unfunded portion of entitlement programs and we're at 840% of GDP.

The world has not seen such debt levels in modern history. This debt is not serviceable. Imagine that total debt is 557% of GDP, without considering entitlements. The interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt.

Karl Denninger posts a colorful graph which illustrates the dramatic expansion in all forms of debt (not just governmental) since 1980. The growth in just this decade is incredible.

Our debt addiction is worrying on two levels. First, high debt service will erode our economy's ability to grow. Second, we're getting a diminishing marginal return from what we still are borrowing.

Denninger notes:

During the same time period that we essentially doubled the debt of households, businesses, the federal government and financial institutions (2000-2009) we added just 40.8% to GDP ($10.129tn to $14.266tn)

If, during the past decade, we only grew our economy at 40%, despite doubling our debt, what is the outlook now, when our ability to borrow is approaching the breaking point? Indeed, some measures of credit have shrunk during the past year, as unemployment has surged.

With the mortgage refinance market dead, consumer credit tapped out, and business borrowing under stress, we've reached the boundary of debt-financed expansion. Our national credit card has reached its limit.

Now what will be the driver for growth? For industrial expansion? For new jobs?

It's quite worrisome.

Posted by Brian at 9:09 AM | Permalink |