Last Friday the market reacted favorably (or less negatively) to the latest report from the Labor Department's unemployment figures of 9.7 percent in August, as employers cut 216,000 jobs last month. The percentage is up but the raw numbers are trending down allowing for a sigh of relief on Wall Street with the major indices all up over 1%.

Many would argue that when it comes to the truth, the government is prone to favor aesthetic figures instead of the straight data. I tend to agree with this view as the numbers appear sculpted to be the least offensive.

Early this morning, Rio Tinto (NYSE: RTP) found itself facing new allegations in the arrest of some of its employees in China. RTP is accused of overcharging Chinese steel mills by $100 million during the past six years, and the latest accusations cover the sale of iron ore.

To catch you up on the situation between RTP and the Chinese government, back in early July, RTP was accused of bribing officials and four of its employees were detained by authorities in Shanghai on suspicion of stealing state secrets. The allegations contended that the four employees bribed executives from 16 of China's major steel mills in order to obtain industry information.

We live in amazing times. Consumers are earning more; at least the ones with jobs. They are also saving more than they have in the last 15 years. The savings rate, which was hovering near zero in early 2008, surged to 6.9 percent, the highest level since December 1993. I think that is fantastic!

Ben Franklin said, "A penny saved is a penny earned". If that is true, then people are improving their economic condition day by day. Strange as it might seem, the government is troubled by this.

The government and many economists are worried that without greater spending by consumers any economic recovery will be stalled that much further. During our recent manic economy, over the past decade, consumer spending was responsible for about 70% of the GDP.

I say to all my readers, let others spend -- YOU KEEP SAVING -- and reducing debt. You will be glad you did. The consumer led economy was a false economy. The world is mourning the sudden death of Michael Jackson who passed away yesterday from yet to be determined causes leading to cardiac arrest, reportedly $400 million in debt. You think he was under any stress?!

The Energy Department is set to lend money to Ford (NYSE: F), Tesla, and Nissan (NASDAQ: NSANY), according to the Associated Press. The report cites anonymous sources, with the official announcement set for today in Dearborn, Michigan.

Reportedly, Ford has asked to receive $5 billion in loans by 2011, although the sources were not certain on how much money the automaker would receive. Nissan's requested amount was undisclosed and Tesla has reportedly asked for $450 million. The loan program the automakers are trying to tap into was approved by Congress last year in order to help car companies and suppliers develop green vehicles and components (such as the advanced battery) and help automakers meet the new fuel-efficiency standards of 35 miles per gallon by 2020.

Bank of America (NYSE: BA) CEO Ken Lewis threatened to use a "material adverse change" (MAC) clause to kill the agreement to buy Merrill Lynch because he wanted to get a lower price, according to the Financial Times. New e-mails reveal how he was then pressured to proceed with the deal.

A House committee on oversight and government reform is investigating whether or not undue pressure was put on Lewis in order to complete the deal to purchase Merrill Lynch. Reportedly, the Federal Reserve would not comply with the committee's request for documentation and e-mails regarding the accusations, but the committee issued a subpoena to the central bank on Tuesday. Lewis is set to testify about the matter today at a congressional hearing.

This morning, Citigroup (NYSE: C) began its $58-billion stock swap, a move that could leave the government with a 34% stake in the bank. The country's third-largest bank plans to swap common stock for (up to) $33 billion in preferred shares and convert as much as $25 billion of preferred shares held by the U.S. Treasury into common stock.

The bank believes that the swap could (emphasis on could here) make Citigroup one of the world's best-capitalized banks. The action could add up to $61 billion of tangible common equity and $64 billion of Tier-1 common equity. Citigroup had planned to take this action back in April.

Last night it was reported by Reuters, following up on an interview in the Financial Times (subscription required) that James Hackett, chairman and chief executive of independent oil and gas company Anadarko Petroleum (NYSE: APC) said, "Washington's energy and environmental policy risks plunging the United States into an economic tailspin that could make it the world's cleanest third world country."

Seems he is not partial to the global warming crowd as indicated by his statement that "The histrionic and maniacal focus on carbon dioxide is intellectually repugnant to me," but how does he really feel?

Yesterday, there was outrage about American International Group (NYSE: AIG) and the bonus payments the firm said it is legally bound to make. Today, it is Citigroup (NYSE: C) and Morgan Stanley (NYSE: MS) that are looking for new ways to anger the rest of America.

The Wall Street Journal is reporting that officials at both troubled banks are looking into ways to circumvent federal caps on bonuses. Reportedly, Citigroup and Morgan Stanley, along with "other financial institutions that got government aid," are negotiating to raise base salaries for some executives and "other top-producing employees." Remember, the bonus caps were part of the recent stimulus package that President Obama okayed last month.

Yes, Uncle Sam is going to continue buying stuff and stimulizing (a new word for the new economy) with money it prints. And -- getting back to pure Yogisms -- it ain't gonna work.

The net decline in wealth -- including the stock market, housing, private equity, etc. -- plus the withdrawal of credit now totals $415 trillion or more. You think $700 billion for concrete and a fat guy holding a "Go Slow" sign is going to help?

Roosevelt calmed people by spending a fortune in and on the Works Progress Administration (WPA) -- great buildings and better murals, but not a lot of long-term economic impact.

We are a bit too advanced for that kind of naïve reaction. Not to mention the government is going to need many more trillions to fix the financial system.

And that's the rub -- even Uncle Sam cannot help too much, long term, as the world kicks its addiction to excess credit. And with that goes a big drop in fundamental demand, from the United States to China.

Be sure to read all 7 reasons the stock market isn't going up any time soon.

Michael Shulman is a contributor to OptionsZone.com.

"Many big businesses aren't interested in getting the economy back on track by creating jobs. They've shown during the past 30 years that they're more interested in rewarding shareholders by cutting jobs."

The above quote comes from James P. Hoffa. These words, and other of Hoffa's rhetorical quips, appeared Friday, November 14, 2008, in The Detroit News. In his blog post there, Hoffa raises the banner of change, though perhaps not the typical organized labor banner that we're used to seeing. For the most part, Hoffa's words show me just how out of touch with the rank and file he really is. They also show how tightly tied to liberal fiscal politics he is.

On the one hand, James P. Hoffa claims that big businesses reward shareholders by cutting jobs. However, he neglects to acknowledge that in today's economic climate, cutting jobs is sometimes an essential ingredient in a business's very survival. He also seems to overlook the fact that those shareholders he's talking about are the exact same people he is talking to. I'd think that the president of the Teamsters would understand where pension funds and retirement portfolios tend to keep their money invested. The fiscal health of American retirement strategy is directly reflected in the fiscal health of Wall Street. You can tell J.P. Hoffa, that I said so.

Now, Hoffa is calling for the government to step in to save the auto makers. The implication here is that a government bailout will help to save auto industry jobs. What I believe he's really saying is that he'd like the reins of our auto industry handed over to the government. How convenient that would be for Hoffa and his organization. It would be especially convenient, when given how cozy Hoffa has become with the incoming administration.

The shares of American International Group (NYSE: AIG) soared nearly 23% Monday and are rising fast again today on news that shareholders may band together to prevent the Federal Reserve from snapping up an 80% stake in the insurance firm. Apparently, major investors (which could include Bill Miller of Legg Mason) are hoping that the quick sale of assets will raise enough capital to pay off the Fed's $85 billion loan. However, AIG chief Edward Liddy seemed to put the kibosh on this speculation last night in a CNBC interview.

Liddy told the cable news channel he thinks the government's bailout plan is an "excellent idea," and added that he doesn't consider the Fed's intervention as a step toward nationalization. While the CEO believes that the government's loan will be fully repaid, he noted that a shareholder rescue isn't the most likely outcome. Instead, Liddy plans to prepare a list of assets for sale within seven to ten days, in hopes that the divestments will generate enough cash to stave off the feds at the door.

So, what's for sale at AIG? Well, Liddy made it clear that the firm's Asian operations are both "sacrosanct" and "unassailable." The chief executive also emphasized that he wants his company to emerge on the other side of this crisis as a leaner and more resilient version of itself. "It will look a lot like it did prior to 1998-1999, with less reliance on the financial services side," he told CNBC, noting that AIG will instead focus on its core business of property-casualty insurance.

Bailout mania continues! The latest news comes from MarketWatch, which reports that the Treasury will bail out any money market fund that breaks the buck. I posted on another fund that broke the buck yesterday. Since then, another fund from Putnam Investments was faced with massive withdrawals and shut down.

The Treasury's plan makes available as much as $50 billion to "insure any publicly offered money market fund, both retail and institutional, that pays a fee" will not trade at a per share price below $1. This announcement happened after Putnam liquidated its Prime Money Market Fund due to "significant redemption pressure."

Why did the Treasury decide to do this? It looks like the notion that money market funds are not safe has contributed to the freezing up of global credit markets -- that is, banks don't want to lend to each other or to anyone else. As the Treasury said, these fears "have exacerbated global financial market turmoil and caused severe liquidity strains in world markets." As a money market fund investor, this news provides some comfort, although I am not sure it will help unfreeze global credit markets.

Just last week I reported about the insolvency problems in New Jersey to Walletpop readers, see: The snowball starts in New Jersey. Now, that nasty old snowball has streaked across the country and landed in the California suburb of Vallejo, wreaking havoc on the local government there. CNBC reports that Vallejo Councilwoman Stephanie Gomes states "Our financial situation is getting worse every single day". Ask not for whom the bell tolls, it tolls for the heavy handed labor unions which have coerced sweet pay and benefit packages for the 30% of our workforce which is supported via tax dollars produced by the rest of us who actually make things.

The insolvency of Vallejo should come as no big surprise, and in fact Vallejo is just the leader of what will become a very large pack. Before the end of this year I envision the entire state government of California will be in tears due to a lack of spending cash. You've been warned, it's to become a nationwide trend.

We just can't expect that private sector declines will leave the government sector untouched. The toughest part is that there's nothing government agencies can do about it, except to cut spending or raise taxes. Local governments are in the business of taking constructive dollars from the people who created them and then throwing them into the bottomless pit of entitlements, waste and graft. Now, the chickens have come home to roost, and they're big, mean, ugly chickens at that.

As I fully expected, I've received a fair amount of comments on a recent blog post in which I proudly took a stance in favor of Exxon's court backed demand that the government of Hugo Chavez immediately ante up for the oil infrastructure which the country he leads has stolen from Exxon Mobil Corp. (NYSE: XOM). Most of the commentary was lucid and well thought out on both sides of the argument, but one particular commenter really piqued my sense of intrigue.

The comment I'm referring to was an assertion that what the Chavez government has done by seizing the Cerro-Negro oil development is legal. For the purpose of this rebuttal, and because I am near totally ignorant of international law, I'm going to assume that comment was correct. Now, here comes the Devil's Advocate:

Just in case you thought our public officials were doing a decent job, here's some more evidence that they're not: a Justice Department audit released today found that FBI wiretaps set up to eavesdrop on suspected criminals are sometimes cut off by the phone companies because the agency doesn't pay its phone bills on time.

This is our Federal Bureau of Investigation -- I can't even imagine what kind of gaffes happen at other agencies. According to the Associated Press: "In at least one case, a wiretap used in a Foreign Intelligence Surveillance Act investigation 'was halted due to untimely payment,' the audit found. FISA wiretaps are used in the government's most sensitive and secretive criminal investigations, and allow eavesdropping on suspected terrorists or spies."

Great -- the agency's failure to pay bills results in lost evidence, and sometimes prohibits us from learning about terrorist activities. There was even one FBI employee who stole money that was supposed to be used to pay for wiretaps.

This is indicative of some internal controls problems in Washington, and as politicians talk tough about keeping tabs on terrorist activities, remember -- it's all just talk if they don't pay the phone bills.