Friday, July 31, 2009

Spying on the Antiwar Movement

Justin Raimondo explains.

I wonder if LRC has a mole.

Bill Kristol as a Fraud, Part 2

I blogged earlier this week on neo-conservative Bill Kristol's apparent lack of understanding of basic economics, which was exposed during his appearance with Jon Stewart.

His only refuge was some babbling about the superior quality of health care received by the military. USA Today has a column which points to the current poor quality of healthcare in the Army, which blows up Kristol 's only counterpoint against Stewart:

The number of Army medical centers and clinics that provide timely access to routine medical care has hit a five-year low, Army records show, often forcing soldiers and their families to seek treatment off base.

About 16% of Army patients, particularly family members, can't get appointments with their primary physicians and are sent to doctors off the installation, according to the results of a nine-month Army review finished late last year. Some of those patients end up in emergency rooms or urgent care centers, says the study, which the Army provided to USA TODAY.

Bottom line, Kristol is an intellectual fraud.

The Big Question About Money Supply and the Stock Market

Nick emails and asks this very important question:

You keep on writing that because Bernanke has slowed the growth of the money supply, there will be a market decline. But what about the previous money that he has printed? Are you positive that ALL of that money has made its way through the system. Because if it hasn't, he can stop the growth of the money supply for a while and then resume without any trouble.
This is absolutely true. There is no method to know exactly how much of previously printed money is still working its way through the system---though knowing how to read the market helps a bit

This is why I usually wait some time to warn about a change in Fed policy. The current slowdown started in March, so we are now at month five. One would, thus, think any money Bernanke printed in January, February and earlier has pretty much worked its way through the system by now.

There is, however, another factor that may prop up the stock market for a bit longer. The recession caused a severe demand to hold cash, as we continue to get reports of a turning in the economy (because of Bernanke's earlier easing) the desire to hold cash has likely declined, which means investors are likely to be willing to spend more money to buy stocks, now, than say late last year.

The firepower won't be there to take it much, much higher if the Fed isn't printing, but the decline in the demand to hold cash can short-term be a countervailing factor that can push against an early decline.

The stock market and the economy are, as any good Hayekian would agree, very complex phenomena. To get the major trends correct is a pretty impressive task all by itself, to attempt to catch every wiggle is impossible. I think once read that someone figured out that if you correctly caught every uptick and down tick in the Treasury market over a year, and started with a thousand dollars trading the Treasury futures market, you would own the entire world three times over by the end of the year. Which is another way of saying that can't be done.

The economy is very complex there are no magic formulas or magic equations. At best, we can get general trends, which obviously, in and of themselves, can be very helpful, but they are not the complete charted course that informs of every wave and gust of wind.

Your Forearm, Please


"They" will also decide when healthcare is mandatory. A surgeon writes to Lew Rockwell:

I am a surgeon in the Baltimore area. My main hospital decided to run a “Swine Flu Drill” for the employees and doctors over the last 2 days. Apparently, the general public was excluded because only hospital workers get swine flu. I am sure that the ability to coerce employees had nothing to do with it.

All entrances were blocked by security and tables were set up with 3 nurses. People lined up and answered embarassing private questions regarding bowel habits and the like. They then had their temperatures taken. All of the information was recorded on data sheets along with the employee ID number. Once “cleared”, they had their forearms marked with indelible ink! I kid you not: a red mark yesterday and a blue mark for today.

Not unsurprisingly, people with fevers and who had signs of the flu were allowed in without further comment.

As for me, I avoided the hospital yesterday, but had no choice today. I knew the nurse leader at the table and simply told her that I did not consent to any medical exam. Of course, she said, “I am just going to take your temperature. I responded, “I just don’t consent to any medical exams.” One of the other nurses literally barked, “What is your employee ID number?” To their bewilderment, I simply asked if I were free to go into the hospital, which they allowed me to do (this time).

I thought that there would be outrage among the staff. Of course, blue and red indelible ink are not tattooed IBM unique identifiers. However, one would think that coercive medical exams, a complete lack of privacy, rampant HIPAA violations, recorded answers with identifiers, ignored symptoms, body marking, all without any chance of preventing one case of flu, would raise someone’s eyebrows in disdain and horror. I was told that this was “just a training exercise”. The question is: who is being trained and for what purpose?

Yellen Becomes Inflation Denier

In her latest outspokenness, as she continues to position herself as the dark horse candidate to replace Ben Bernanke as Fed Chairman, Janet Yellen in a speech today has attempted to cut the cord between inflation and large deficits.

At the Oregon Bankers Association Annual Convention with the Idaho Bankers Association in Coeur d’Alene, Idaho, Yellen said large budget deficits do not cause high inflation automatically and said expansion of credit and bank reserves will not create high inflation. Yellen said since World War II, large deficits have been associated with high inflation only in developing countries. Yellen said the connection between large budget deficits and inflation isn't found in countries such as ours with advanced financial systems and independent central banks.

Yellen may be technically correct in that there is no requirement that central banks support deficits by buying some or all of new debt issued, but how she gets from this to her seeming non-concern about deficits and inflation is quite a step. She knows the government deficit is going to be huge:

The gap in the federal budget for the current and the next fiscal years are projected to exceed $1 trillion, far larger than anything we’ve ever seen before.
But, apparently, Yellen somehow thinks the Fed will not be involved in propping up the debt markets by buying Treasury paper when the Treasury issues debt that will create this deficit. This would certainly be a remarkable feat and Yellen would certainly deserve recognition if this bold statement of Fed non-involvement comes to pass.

Yellen then goes totally over the edge and says that expansion of credit and bank reserves will not create inflation. She couldn't have been more clear, given the current economy, she says:

Now we come to the crux of the issue: Will this expansion of credit and bank reserves create high inflation? My answer is no.
Clearly with this answer, Yellen see inflation as simply price inflation and doesn't recognize the distortion caused by monetary inflation, i.e., credit expansion.

Remarkably, she doesn't mention the only non-inflationary news that is indeed out there, specifically, that the Fed hasn't been printing any money for the last few months.

Death Threats Competition (Financial Division): Meredith Whitney 1 - Jim Rogers 0

Janet Tavakoli has penned an article where she takes on Meredith Whitney, Nassim Nicholas Taleb and Charles Gasaprino, which would make an appearance of Tavakoli, Whitney, Taleb and Gasaparino, all in the same room, at the same time, a bookable event.

In her article, Tavkoli takes on Whitney's claims of death threats:


According to Reuters, Whitney said she got “several death threats” as a result of her Citi call. The rumored death threats were widely reported. But who told the press about death threats? Security consultants advise the target of death threats not to discuss it, particularly not with the press. The threats were downgraded faster than Whitney downgraded Citigroup—a Fortune interview said she received “one death threat.”

Jim Rogers then enters the frey by posting a comment to the article:

Jim Rogers said:
July 31, 2009 at 2:17 am Gosh, I have never received a death threat ever for saying I was short a stock or that a company would be going bankrupt. What have I been doing wrong!?
He then in a second comment, jumps on Taleb:

Jim Rogers said:
July 31, 2009 at 2:22 am“$20 billion” referred to a “notional” amount of derivatives that produced between $250 to $500 million in gains, it raises further strategy questions.
Strategy questions? It raises more questions than that. A “$250 to $500 million” gain on $20 billion is peanuts — 1 or 2%??
Note: For those who may question whether the posted comments were actually written by Rogers, he confirmed to me by email that he indeed did make the comments, but assures me he was joking about being disappointed in not getting any death threats, and is not looking to get any.

The Truth About Value at Risk...

It's another phony mathematical number based on an equations that do not necessarily reflect reality. (Though the government is using it as a regulatory tool to measure risk.)

Pablo Triana explains:

Is Goldman Sachs (GS) the biggest risk-taker on Wall Street? Besides
headlining the record profits the bank just posted (months after getting taxpayer support), the media have reported extensively on the firm's all-time-high risk exposure—measured, of course, by that widely embraced financial metric: VaR, or Value at Risk.

VaR, used for decades on the Street, supposedly reveals the maximum amount an investment house could lose (to a statistical degree of confidence) on its trading portfolios in a specified period. And the peak in Goldman's average daily VaR—$245 million in the second quarter, almost double that of a year earlier—prompted accusations that the well-connected firm had dangerously ratcheted up risk-taking in the midst of a crisis.

There's no reason to think this is true. Whatever your opinion of Goldman's fortunes and market forays in this recession, the fact is that a VaR-based analysis of any firm's riskiness is useless. VaR lies. Big time. As a predictor of risk, it's an impostor. It should be consigned to the dustbin. Firms should stop reporting it. Analysts and regulators should stop using it.

Some, including regulators who base capital reserve requirements on this metric, may call VaR a "measure of market risk" and "predictor of future losses." But it is neither of those things. Its forecast of how much an investor can lose from a trading position is entirely calculated from historical data. It's a mathematical tool that simply reflects what happened to a portfolio of assets during a certain past period. (The person supplying the data to the model can essentially select any dates.)

The VaR metric has little to do with how a portfolio will fare in the future—and that includes tomorrow. When it comes to the market, the past is definitely not prologue. A current calm may not yield future placidity. Turbulence is not inevitably followed by further chaos.

VaR models also tend to plug in weird assumptions that typically deliver unrealistically low risk numbers: the assumption, for instance, that markets follow a normal probability distribution, thus ruling out extreme events. Or that diversification in the portfolio will offset risk exposure (because a group of assets happened to move in different directions previously).

Read Triana's full article here.

Potential Liabilities of Mysterious Insurance Company May Result in New Maneuvers to Protect Goldman and JP Morgan Chase

Customer Asset Protection Company, a little-known insurer whose members include Morgan Stanley, Goldman Sachs,, JPMorgan Chase and Wells Fargo, is becoming the focus of swirling questions as Lehman Brothers' bankruptcy filing puts it to the test.

The concern is that Capco, created to protect big-money investors in the event of a catastrophic failure of a major brokerage firm, has no chance to coping with the Lehman bankruptcy, NYT's Zachery Kouwe writes.

By some industry estimates reviewed by the insurance department, Capco could face nearly $11 billion in claims as a result of the Lehman bankruptcy but has only about $150 million with which to meet them, NYT writes.

How do you say Ponzi, in insuranceeze?

Capco was created in 2003 by Lehman and 13 other banks and brokerage companies as a kind of marketing tool. The pitch was that while Capco would not insure customers against investment losses, it would compensate them if the firms failed. Capco promises to provide virtually unlimited coverage above the $500,000 offered by the Securities Investors Protection Corporation.

How risky was this insurance? Even AIG refused to write it.

Capco was initially registered in New York but later moved to Vermont, where state law enables it to operate without disclosing much about its finances.

It’s unclear who actually serves as the current president of Capco, and the company’s main phone number connects to a recording that tells callers they’ve reached a “nonworking number at Morgan Stanley,” reports NYT.

To Charles Schwabs' credit they did not participate in the scam. Writes NYT:

Schwab requested the company’s financial statements from the insurance
department through a Freedom of Information Act request in 2004, but was told the books were confidential.

“Right away, the whole Capco thing just did not pass the smell test,” said Robert Meave, an outside consultant for Schwab at the time, who evaluated the insurance company. “Schwab was not about to go to their clients and tell them we’re providing account protection and, oh by the way, they were owners of the insurance company."

Bottom line, it doesn't appear the members were ever serious about providing coverage. It appears in many ways to be a sham insurance company used by the members so that they could tell clients their investments had unlimited coverage. When a client checked out Capco to see what kind of assets it had to back up such a claim and saw minimum assets, the members moved Capco to Vermont where it would be impossible for any other clients to discover the miniscule assets.

Prediction:

This sounds like check writing time, again, for Tim Geithner. The money exposure to Goldman, JPMorgan Chase et al. and the question about the legitimacy of Capco to insure such risk in the first place, means this will be nipped in the bud long before a claim reaches Capco.

Indeed, Senate Finance Committee, Robert Menendez, has already written Geithner and we can rest assured that Geithner's wonks are feverishly working to find just the right angle and dollar amount to protect Goldman and JPMorgan Chase from any blowback, monetary or otherwise.

US Economy Shrinks by Only 1%, But...

According to my least favorite indicator, GDP, the US economy continued to shrink in the second quarter making this recession the longest on record. However, the moderate decline of just 1% is bringing hope to trend followers that the worst may be over.

Little do they realize that it was a Bernanke tight money policy in the Summer of 2008 that caused this recession in the first place, and that Bernanke in recent months has tightened money supply, again, to Summer of 2008 levels.

Over the last nine months money supply growth has been as high as 15.0% plus on a three month annualized basis. Thus, because of the 15% growth, the current strengthening is not a surprise. However, over recent months Bernanke has virtually stopped money printing. The latest numbers, out yesterday, show the 3 month M2 nsa money supply measure growing on an annualized basis of just 1.3%. There's no way this meager money growth can support the current Fed manipulated structute of the economy. Once the early monewy thrust works its way through the economy, down we go, again.

Bottom line, trend followers, who don't understand business cycle theory and the Fed's dominant role in causing the ups and downs in the economy, are getting sucked into an up move that will eventually crash real hard into a mean double-dip recession.

Thursday, July 30, 2009

The Health Care Fix Is In: Blue Dogs Turn Out to Be Skunks

Senior Democrats have offered their conservative members enough concessions to secure the support of four Blue Dogs on the House Energy and Commerce Committee, paving the way for committee passage this week, Fox News is reporting.

The compromise bill will still feature a public insurance plan, "the public option", which is at the heart of government takeover of the healthcare industry.

However, the full House will not vote on health care until at least September,

China's Central Bank: We Will Continue to Inflate

China's central bank pledged to maintain loose monetary policy in a mistaken belief that it will support true economic recovery and ensure sustainable credit growth without resorting to heavy-handed quotas to rein in a surge in lending.

In a statement the People's Bank of China Vice Governor Su Ning said the central bank "will unswervingly continue to apply appropriately loose monetary policy and consolidate the economic recovery momentum."

It make take years, but the ultimate result of this money printing will be a dramatic downturn that will test China's move towards free markets.

The Difference Between a Bad Economist an a Good Economist

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen. Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.-Frederic Bastiat

ViaMarkPerry

Does Paul Krugman Really Believe the Things He Writes?

Paul Krugman: There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work.

Don Boudreaux: I can list lots of examples of successful health care based on the principles of the free market: the regular, smooth, widespread, and affordable supply of aspirin, bandages, decongestants, toothpaste, dental floss, toothbrushes, contact lenses, running shoes, and gyms. I could go on.

Mark Perry: And how about Lasik eye surgery (costs a third today of what it did 10 years ago), low-cost convenient retail health clinics (1,200 in the U.S. and growing), cosmetic surgery (stable prices despite a 6X increase in demand since early 1990s), medical tourism around the world, $10 prescription drugs at Wal-Mart for a 90-day supply of 300 different generic prescriptions, the No Insurance Club, medical savings accounts, etc.

The Beer Fest Is ON

President Obama meets with Harvard professor Henry Louis Gates Jr. and Cambridge, Massachusetts, police Sergeant James Crowley, today.

John Carney reports the President has chosen Bud Light as his beer for the event. But the man can't even have a beer in peace. Bud Light is made by Anheuser-Busch InBev NV, the Belgium-based international beer manufacturer. This has U.S. based beer makers bitching. Micro-brewers are saying the president should have chosen a small business beer.

For the record, Crowley is said to be Blue Moon drinker. Gates downs Red Stripe and Beck's.

More On the Gates Arrest

It's good to see constitutional scholar Harvey Silverglate pen an analysis, of the Harvey Louis Gates Jr's arrest in Canmbridge, that dovetails nicely with my more pedestrian legal analysis that this is about the individual versus the state, not race.
Check Spelling
Silvergate elegantly writes:

And so, before the dreaded thought-reform charlatans start coming out of the woodwork in order to prescribe yet more "sensitivity training" for Cambridge's finest, everyone should take a step back and ask why so many citizens--including Professor Gates, who, it is conceded, did not assault Officer Crowley--end up being arrested for uttering mere words. Because, whether the words were as perfunctory and non-objectionable as Gates' claim that he asked for Crowley's name and badge number, or as heated as Crowley's claim that Gates let loose a stream of loud and offensive insults, they were, well, just words. Put more simply, why do we as a society so often ignore traditional notions of First Amendment freedom to speak one's own notion of truth to power when one party to the confrontation is wearing a uniform, a badge and a gun?
Two other points.

It appears that Officer Crowley has been caught in another, ahem, contradiction with the facts. In his report about the woman who called in the 911 call, he writes that when he spoke to her she stated "two black males with backpacks on the front porch’’ of the house may have been attempting to breal in. The 911 call clearly shows that as she has been stating, she did not know the race of the men enetering the house.

Point two, There has been a major move on campus to stifle politically incorrect speech. As Silvergate points out that Gates, quite correctly, has objected to this move toward hindering free speech. Silvergate writes:

There is a certain irony, however, that Professor Gates should be caught up in a controversy that, at bottom, is about the limits of free speech in confronting official power. The irony grows out of the fact that two of the major ways in which an American can run into big trouble for mouthing off without adequate self-censorship are: (1) let a police officer know that you're not happy with being, or feeling, hassled, or (2) say something politically incorrect on a college campus. In this regard, both Cambridge and Harvard are more typical than special. University censorship in the name of not "offending" others, including (perhaps especially) members of "historically disadvantaged groups" is now an old story...

Professor Gates, to his enormous credit, has parted ways with the ubiquitous speech police on his own and other campuses. In September 1993, Gates wrote for The New Republic a powerful critique of campus "harassment codes" that outlaw unpleasant speech. Gates was dealing with a typical university speech code, such as the one in force at the time (and still in force on campuses all around the country) at the University of Connecticut, that banned "treating people differently solely because they
are in some way different from the majority, … imitating stereotypes in speech
or mannerisms, … [or] attributing objections to any of the above actions to
'hypersensitivity' of the targeted individual or group."

Light Bulb Socialism and a Call for Civil Disobedience

In Europe, fighting the state has reached the level of light bulb ownership.

An EU ban, adopted in March, calls for the gradual replacement of traditional light bulbs with supposedly more energy-efficient compact fluorescent bulbs (CFL). The first to go, on Sept. 1, will be 100-watt bulbs. Bulbs of other wattages will then gradually fall under the ban, which is expected to cover all such bulbs by Sept. 1, 2012.

The EU's ban was originally meant to help it reach its economically illiterate targets on energy "efficiency" and climate "protection". Though much cheaper to buy, incandescent bulbs have long been seen as wasteful by those who think supply and demand curves only work when bent by the state.

Not surprisingly, in creating the legislation, the EU failed to address consumer preferences. For example, many have complained that the light emitted by a CFL bulb is colder and weaker and that its high-frequency flickering can cause headaches.

Many complain that the lights are just not bright enough and that they falsify colors.

Germans are attempting to fight the ban by stockpiling the soon to be banned bulbs.

Spiegel Online reports:

,,,many have mocked the light bulb legislation as just another example of an EU bureaucracy gone wild. Holger Krahmer, for example, a Member of the European Parliament (MEP) from Germany's business-friendly FDP party has accused the EU of imposing 'light bulb socialism."

Hardware stores and home-improvement chains in Germany are seeing massive increases in the sales of the traditional bulbs. Obi reports a 27 percent growth in sales over the same period a year ago. Hornbach has seen its frosted-glass light bulb sales increase by 40-112 percent. When it comes to 100-watt bulbs, Max Bahr has seen an 80 percent jump in sales, while the figure has been 150 percent for its competitor Praktiker.

"It's unbelievable what is happening," says Werner Wiesner, the head of Megaman, a manufacturer of energy-saving bulbs. Wiesner recounts a story of how one of his field representatives recently saw a man in a hardware store with a shopping cart full of light bulbs of all types worth more than €200 ($285). "That's enough for the next 20 years."

.... The EU law only forbids producing and importing incandescent bulbs but does not outlaw their sale

The aesthetic issue is a powerful one. For Munich-based lighting designer Ingo Maurer, the CFL bulbs are ushering in a decrease in the quality of life. "We recommend protests against the ban, civil disobedience and the timely hoarding of lighting implements," Maurer told SPIEGEL. He also adds that he believes the ban might drive more people to use more candles, which are about as bad as you can get in terms of energy efficiency
.

ViaNick

Wednesday, July 29, 2009

Second Weak Treasury Auction in a Row

With the Fed and China not aggressive buyers, things aren't printing

The U.S. Treasury sold $39 billion in five-year debt Wednesday in an auction that drew poor demand. Demand for the five-year notes was below average, measured by the bid-to-cover ratio of 1.92, the lowest in almost a year.

It was the second lackluster auction in a row.

A $28 billion seven-year offering is up next on Thursday.

Poll Shows Obama's Clout on Health Care Is Eroding

President Obama's ability to shape the debate on health care appears to be eroding , according to the latest New York Times/CBS News poll, NYT is reporting.

As the truth comes out on the 1,000 page bill, Americans are correctly concerned that overhauling the health care system would reduce the quality of their care, increase their out-of-pocket health costs and tax bills and limit their options in choosing doctors, treatment and tests, the poll found.

"I, Myself, Lived Under a National Health Program"

Linda Schrock Taylor experienced England's national health program, first hand . Her report is must reading.

Her conclusion may be all too accurate:

The fear was awful, even when we were young and healthy. Now we are in our 60s and 70s. When Obama says that 20 percent of the population is responsible for a huge percent of medical costs in America…it is time for our age group to realize that HE MEANS US: the older; the elder; the retired. I cringe and revisit those old fears that my friend would be snatched by the health authorities; be lost in a black hole of care. In Lois Lowry’s book, The Giver, any person unable to contribute to the society is “released”--i.e. killed, snuffed out, put to sleep…EUTHANIZED. I do not consider it farfetched to wonder if Obama, with his reassurances to save money, may not be thinking of the cost cutting solutions offered in The Giver, or in This Perfect Day by Ira Levin, or in….socialist and communist organization.

When such awfulness comes to pass, it will not be only the elderly that are “released,” but also the feeble, the retarded, the crippled, the handicapped, THE USELESS. The thought certainly gives one pause. Keep in mind that it is we who are costing the government more than we are contributing. Then it will be our children’s generations. Then it will be our grandchildren’s generation. And then it will be….

Think about it. Think about it long and hard. Are you willing to be ousted; released; murdered---for the supposed benefit of the rest of society? I, for one, am not.

ViaLRC

U.S. Looking at "Small Private" Swiss Bank

Federal prosecutors have widened their investigation into Swiss banks suspected of selling offshore tax evasion services to wealthy Americans to include a small private bank in Zurich, according to court papers filed on Tuesday and a senior official briefed on the matter, NYT is reporting. The bank was not identified.

Good luck to the IRS in trying to get info out of a boutique Swiss bank that doesn't have visible assets in the U.S. that the government can grab for leverage.

Insiders Get Caught Being Insiders

The Pension Benefit Guaranty Corporation recently revoked contracts with BlackRock, Goldman Sachs and JPMorgan Chase based on questions surrounding how the formal bidding process was run.

How bad did Wall Street insiders suck up to Charles Millard after he arrived in Washington in May 2007, to run PBGC, the federal agency that oversees $50 billion in retirement funds?

One Blackrock insider even gave him postive reviews on his church attendance. David Mullane wrote in an emal to him:
Great job at Mass again this week.
Here's NYT with more gory details:

BlackRock, one of the world’s largest money-management firms, assigned a high school classmate of Mr. Millard’s to stay in close contact with him, and it made sure to place him next to its legendary founder, Laurence D. Fink, at a charity dinner at Chelsea Piers. A top executive at Goldman Sachs frequently called and sent e-mail messages, inviting Mr. Millard out to the Mandarin Oriental and the Ritz-Carlton in Washington, even helping him hunt for his next Wall Street job.

Both firms were hoping to win contracts to manage a chunk of that $50 billion. The extensive wooing paid off when a selection committee of three, including Mr. Millard, picked BlackRock and Goldman from among 16 bidders to manage nearly $1.6 billion and to advise the agency, which Mr. Millard ran until January...


An examination of thousands of pages of e-mail messages and other internal documents obtained by The New York Times shows the other side of the story: the two firms aggressively courted Mr. Millard, so extensively that they may have compromised federal contracting rules or at least violated the spirit of the law, contracting experts said. The records also illustrate the clash between Washington’s by-the-letter rules on contracting and the culture of Wall Street, where deals are often struck over expensive meals...

“This is a very big fish on the line,” one BlackRock executive wrote to another, discussing the government official.

Mr. Millard had at least seven meetings with Goldman executives in the year before the bidding started, and 163 phone contacts, the documents show. BlackRock had less frequent contact — 39 phone calls in that 12-month period. But one BlackRock executive told another that Mr. Millard had assured him in April, four months before the bidding, that he wanted to hire the company to help manage some of the money, company documents show.

“It sounds like we may have a tiger by the tail here,” one BlackRock executive wrote in an e-mail message...

Mr. Millard consulted with other industry experts during this period, but none so much as Goldman. George Koklanaris, Mr. Millard’s chief of staff, said in retrospect that the detailed analytical work Goldman did for Mr. Millard, and the repeated contacts, might have created an appearance that Goldman had a competitive advantage. Even so, he says he believes Mr. Millard did nothing improper...

In his conversations and e-mail messages with the agency head, Mr. Mullane often mixed family and business...

“Hope to see you at the Beefsteak Dinner tomorrow,” he wrote to Mr. Millard, referring to a Friday night gathering at Church of the Resurrection in Rye. “If you’re going perhaps we can catch up business for a few minutes before I thrash you in ping pong again.”

After a February meeting, months before the contract competition began, Mr. Mullane wrote his bosses: “Money in motion by February.” ..

As he prepared to open the competition, Mr. Millard, working with Mr. Mullane, sought to restrict the bidders to the biggest players by stipulating that the winner must have thousands of employees and a global operation, e-mail messages show. That decision cut out many boutique firms hoping to compete and gave BlackRock, Goldman and other large firms an advantage...

While the competition was getting started, Mr. Millard began his job hunt.

He started by contacting Mr. Weinberg of Goldman Sachs, sending him his résumé after meeting with him in New York last June.

Mr. Millard’s e-mail messages show that, while the bidding was under way last fall, he also spoke with Rick Lazio, a former House Republican who is now a senior executive at JPMorgan Chase, to discuss career options [JPMorgan Chase also had its contracts cancelled].

China Inflation May Rebound in Second Half, PBOC Says

China’s rate of inflation may rebound in the second half of this year, the People’s Bank of China said today.

Make that very likely, since Premier Wen Jiabao and the ruling Communist Party’s Politburo last week pledged to maintain a “moderately loose” monetary policy.

My Favorite Mainstream Economist Weighs In On Health Care

Marty Feldstein, for an insider, is usually great at understanding what is going on, and is not afraid to state what he understands. Here he is on Obama's curious call for the "public option":

Obama has said that he would favor a British-style "single payer" system in which the government owns the hospitals and the doctors are salaried but that he recognizes that such a shift would be too disruptive to the health-care industry. The Obama plan to have a government insurance provider that can undercut the premiums charged by private insurers would undoubtedly speed the arrival of such a single-payer plan. It is hard to think of any other reason for the administration to want a government insurer when there is already a very competitive private insurance market that could be made more so by removing government restrictions on interstate competition.

They are trying to "nudge" us into a total national government healthcare plan, and Marty knows it.

Here is his entire op-ed, which appeared in WaPo.

Bill Kristol Exposes Himself as a Total Fraud

Neo-conservative big thinker Bill Kristol has exposed himself as a clueless con-man.

The video clip linked to below has been circulating the internet. It shows Kristol being boxed in on healthcare by Jon Stewart. The clip is usually accompanied by a comment that this proves that a national healthcare plan is a good idea, since Stewart clearly has caught Kristol flummoxed with his pants over his head.

In actuality, the video doesn't prove that a national healthcare plan is a good idea. It proves that Kristol is a total fraud who doesn't even know how to use basic tools of economics to defend himself in intellectual debate.

At no point does Kristol raise the problems of limiting pay and other payments to the medical profession that will result in the suffocation of invention, creativity and advancements in the medical sector. At no point does Kristol point out that the rationing plan of government seems to be aimed at limiting care for the elderly and those with serious ailments. Kristol, if he had any clue, could have knocked Stewart so far into a hole that Stewart would have had to go back to doing stand-up in some honky-tonk on Hollywood Boulevard. That the intellectual voice of the neo-conservative movement couldn't lay a hand on Stewart, and was himself knocked to the ground many times by Stewart is nothing more than a clear sign of how intellectually bankrupt the neo-cons are.

Kristol ends up babbling something about the great healthcare in the armed services. He doesn't even get this right. Last I read, military medical care for wounded soldiers even at top hospitals can be a wreck.


The video is here.

Tuesday, July 28, 2009

Obama Was Right

Now that more facts are in, it is becoming much clearer that President Obama was right in stating that it was stupid for Officer James Crowley to arrest Harvard Professor Henry Louis Gates Jr. at his home. More than stupid, I think it was outrageous. That said, I think Obama, Gates and Crowley, don't really understand what went down.

Any right thinking American should feel the same way as Obama that it was stupid for Gates to get arrested. But I don't think the arrest was about race, it was about power and control. It was about the individual versus the state.

It is very difficult on many occasions to know completely why men act the way they do. Are either Gates or Crowley racists? Who really knows? Gates is married to a white woman and therefore his children are half white. It is reported that Crowley performed mouth to mouth resuscitation on the black Boston Celtics star Reggie Lewis, when Lewis collapsed and then died because of a faulty heart. Race issues, from a distance, aren't easy to determine about Crowley and Gates. The power and control issues are much easier to understand.

Unfortunately, if President Obama brings Crowley and Gates together, we will have never ending television talk about racism in America. The talk should be about the individual versus the state.

Here's what I think went down.

Gates was in his home, when he found Crowley on his porch. He had to have been shocked. I know I would be shocked if I found a police officer on my porch. I don't think I would have reacted the way Gates did, but he clearly has a sensitivity to people on his property. Note that in all accounts, he was clearly attempting to call some police station, whether it was the Harvard University police or Cambridge police is not clear. That suggests to me that he wasn't sure who was on his porch or why, and he was trying to get the matter resolved.

By all accounts, Gates asked to see Crowley's ID. Gates said Crowley did not give it to him. Crowley says he did.[It should be noted that everything else Gates has stated about the incident, though not always flattering to him, appears factual. This is not the case, as you will see, with Crowley] Maybe Gates misunderstands the purpose of Crowley being on the porch, or just doesn't like being told what to do, when asked to step outside by Crowley. Remember, Gates is a big shot prof at Harvard and he built an internet site that he sold to Time-Warner for $10 million plus. I promise you in his daily routine, no one is ordering Gates around.

In Crowley's daily routine, he is always ordering people around. "Step out of the car." "Put your hands up against the wall." Most people comply because they know the cuffs are coming out next, if they don't. Instinctively, they no their command and control situation relative to a cop.

When Crowley asked Gates for ID, Gates complied by giving Crowley his Harvard ID, thus signalling to Crowley that he is a man of solid standing in the community and not a robber. So Gates, though apparently outraged by the cop being on his porch has done two things. He has attempted to reach a police department, and provides ID that not only shows his name but should begin to establish that he is far from a robber.

When Crowley continues to order Gates out of the house, Gates continues his ranting. As Crowley is leaving, Gates continues his rant. This is the equivalent of a farmer finding two poachers on his property. He goes in the house for his shotgun. When the poachers see the farmer and the gun, they run. The farmer, just to let the poachers know who is in control on his property, fires a shot into the air. Gates' continued ranting at Crowley is the equivalent of that gun shot in the air. "Stay the hell away," it means. "Don't ever order me out of my house."

Thus, Crowley was not in control. He did the only thing that police officers are used to doing in such situations, gain control. Arresting Gates was Crowley's attempt at gaining control. LOL, little did Crowley realize that Gates had bigger control cards than him, i.e. Barack Obama as a personal friend.

This forced Crowley to go into damage control mode, where he has been caught in contradictions. Here is Crowley during a radio interview, sometime after the 20 minute mark of the interview, he tells the interviewers, in a very convincing manner, that he told dispatch to slow the other cars down. But, on the actual recorded call to dispatch, he does the opposite, he says, "Keep the cars coming."

After Gates checked out as the resident of the house, if this wasn't about control, Crowley would have left, leaving Gates to yell and scream like a lunatic if he so chose. Since it was borderline loony, but not criminal.

Obama got this one right, it was wrong to arrest Gates. Command and control by government of private individuals going about their affairs is always wrong, whatever the situation, including healthcare. Thus, Obama gets it when his buddy is abused, but doesn't get it when he, himself, abuses the masses with his attempt at a command and control of the healthcare system, financial system etc.. A typical reaction for a command and control leader way out of control.

Dollar Falls to 2009 Low; Prepare for Roller Coaster Action

Today the dollar fell to the lowest level this year against the currencies of six major U.S. trading partners.

The Dollar Index fell as much as 0.4 percent to 78.315, the lowest level since Dec. 18. The euro advanced 0.2 percent to $1.4256 per euro, from $1.4232. The Australian dollar advanced to the highest level since September.

Activity in the dollar will be very tricky to forecast for some time, since there are huge stockpiles of dollars through out the world that could come flying at us at anytime, while Bernanke at the moment is not printing any new dollars. These two countervailing forces are apt to make it a roller coaster ride for the dollar, for the time being. Buckle your seat belt.

The Truth About Healthcare in Canada

More from Thomas DiLorenzo. In the same column, he smokes out the truth about healthcare in Canada:

All countries that have adopted socialized healthcare have suffered from the disease of price-control-induced shortages. If a Canadian, for instance, suffers third-degree burns in an automobile crash and is in need of reconstructive plastic surgery, the average waiting time for treatment is more than 19 weeks, or nearly five months. The waiting time for orthopaedic surgery is also almost five months; for neurosurgery it's three full months; and it is even more than a month for heart surgery (see The Fraser Institute publication, Waiting Your Turn: Hospital Waiting Lists in Canada). Think about that one: if your doctor discovers that your arteries are clogged, you must wait in line for more than a month, with death by heart attack an imminent possibility. That's why so many Canadians travel to the United States for healthcare.

All the major American newspapers seem to have become nothing more than cheerleaders for the Obama administration, so it is difficult to find much in the way of current stories about the debacle of nationalized healthcare in Canada. But if one goes back a few years, the information is much more plentiful. A January 16, 2000, New York Times article entitled "Full Hospitals Make Canadians Wait and Look South," by James Brooke, provided some good examples of how Canadian price controls have created serious shortage problems.

A 58-year-old grandmother awaited open-heart surgery in a Montreal hospital hallway with 66 other patients as electric doors opened and closed all night
long, bringing in drafts from sub-zero weather. She was on a five-year waiting list for her heart surgery.

In Toronto, 23 of the city's 25 hospitals turned away ambulances in a single day because of a shortage of doctors.

In Vancouver, ambulances have been "stacked up" for hours while heart
attack victims wait in them before being properly taken care of.

At least 1,000 Canadian doctors and many thousands of Canadian nurses have migrated to the United States to avoid price controls on their salaries.

Wrote Mr. Brooke, "Few Canadians would recommend their system as a model for export."

Canadian price-control-induced shortages also manifest themselves in scarce access to medical technology. Per capita, the United States has eight times more MRI machines, seven times more radiation therapy units for cancer treatment, six times more lithotripsy units, and three times more open-heart surgery units. There are more MRI scanners in Washington state, population five million, than in all of Canada, with a population of more than 30 million (See John Goodman and Gerald Musgrave, Patient Power).

In the UK as well — thanks to nationalization, price controls, and government rationing of healthcare — thousands of people die needlessly every year because of shortages of kidney dialysis machines, pediatric intensive care units, pacemakers, and even x-ray machines. This is America's future, if "ObamaCare" becomes a reality.

Read DiLorenzo's full healthcare article here.

The Destruction of Private Sector Healthcare

Thomas DiLorenzo details the suffocation:

The government's initial step in attempting to create a government-run healthcare monopoly has been to propose a law that would eventually drive the private health insurance industry out of existence. Additional taxes and mandated costs are to be imposed on health insurance companies, while a government-run "health insurance" bureaucracy will be created, ostensibly to "compete" with the private companies. The hoped-for end result is one big government monopoly which, like all government monopolies, will operate with all the efficiency of the post office and all the charm and compassion of the IRS.

Of course, it would be difficult to compete with a rival who has all of his capital and operating costs paid out of tax dollars. Whenever government "competes" with the private sector, it makes sure that the competition is grossly unfair, piling costly regulation after regulation, and tax after tax on the private companies while exempting itself from all of them. This is why the "government-sponsored enterprises" Fannie Mae and Freddie Mac were so profitable for so many years. It is also why so many abysmally performing "public" schools remain in existence for decades despite their utter failure at educating children.
America's Healthcare Future?

Some years ago, the Nobel-laureate economist Milton Friedman studied the history of healthcare supply in America. In a 1992 study published by the Hoover Institution, entitled "Input and Output in Health Care," Friedman noted that 56 percent of all hospitals in America were privately owned and for-profit in 1910. After 60 years of subsidies for government-run hospitals, the number had fallen to about 10 percent. It took decades, but by the early 1990s government had taken over almost the entire hospital industry. That small portion of the industry that remains for-profit is regulated in an extraordinarily heavy way by federal, state and local governments so that many (perhaps most) of the decisions made by hospital administrators have to do with regulatory compliance as opposed to patient/customer service in pursuit of profit. It is profit, of course, that is necessary for private-sector hospitals to have the wherewithal to pay for healthcare.

Friedman's key conclusion was that, as with all governmental bureaucratic systems, government-owned or -controlled healthcare created a situation whereby increased "inputs," such as expenditures on equipment, infrastructure, and the salaries of medical professionals, actually led to decreased "outputs" in terms of the quantity of medical care. For example, while medical expenditures rose by 224 percent from 1965–1989, the number of hospital beds per 1,000 population fell by 44 percent and the number of beds occupied declined by 15 percent. Also during this time of almost complete governmental domination of the hospital industry (1944–1989), costs per patient-day rose almost 24-fold after inflation is taken into account.

His full column is here.

More Signs Second Dip of Double Dip Recession Just Ahead

Leading US banks are not lending as much as they were at the start of the year, WSJ reports.

An analysis by WSJ showed the total loans held by 15 large US banks shrank by 2.8 percent in the second quarter, and that more than half of the loan volume in April and May came from refinancing mortgages and renewing credit to businesses and not fresh loans.

The banks surveyed include financial giants such as J.P. Morgan Chase, Bank of America and Citigroup as well as regional banks such as Fifth Third Bancorp, based in Cincinnati, and Regions Financial Corp. of Birmingham, Alabama.

This shouldn't come as a surprise, since Bernanke has cut off money printing in the second quarter. Get ready for the second dip, in what looks like a double dip recession.

Deutsche Bank Shares Down 7%

Shares in Deutsche Bank dropped over 7% Tuesday as strong growth in the bank's bottom line wasn't enough to offset worries over rising bad debt charges.

The banks provisions for credit losses soared to 1 billion euros from 135 million euros in the second quarter of 2008.

"We have witnessed stabilization of the world's banking industry and financial markets. Increased liquidity and lower volatility in financial markets are both supportive for our business," CEO Josef Ackermann said in a statement.

The stabilization won't be there long, if Bernanke continues his new tight money policy. We are at the edge and the clock is ticking. With these kinds of debt charges going into what will likely be a second dip downward, Deutsche is going to suffer major pain.

A Hayekian Joke from Bernanke?

Nobel Prize winning economist Friedrich Hayek, throughout his career, pointed out the differences in methodologies and capabilities of various sciences, warning, for example, of the danger in thinking that the methodolgy of physics could be applied to economics.

Thus, it is very interesting to see Bernanke throw out this joke during his "Love the Fed" World Tour:
Economic forecasting makes weather forecasting look like physics.
This could be shrugged off as just an off the cuff remark, but he has said something similar in more detail back in May:
Like weather forecasters, economic forecasters must deal with a system that is extraordinarily complex, that is subject to random shocks, and about which our data and understanding will always be imperfect. In some ways, predicting the economy is even more difficult than forecasting the weather, because an economy is not made up of molecules whose behavior is subject to the laws of physics, but rather of human beings who are themselves thinking about the future and whose behavior may be influenced by the forecasts that they or others make.
Bernanke talks about "random shocks" in this quote, so he may not get that the business cycle is caused by the misallocation of resources caused by Fed money printing, but, it appears, he is thinking about the problem of the methodology of economics and how it differs from other sciences, in a Hayekian kind of way.

Rockefeller Operative Named to New York Fed

The New York Federal Reserve will get an old school insider to replace a Goldman Sachs insider.

The chief executive of the nonprofit business organization Partnership for New York City, Kathryn Wylde, has been named a director on the New York Federal Reserve Bank’s Board.

The appointment fills the 18 months remaining on the three-year term of former Chairman Stephen Friedman, who resigned in early May amid accusations of conflict with his role at Goldman.

The Partnership for New York City was founded by David Rockefeller. The Partnership board includes Obama's "favorite banker" Jamie Dimon, former Goldman and Merrill man, John Thain and Rupert Murdoch.

Imagine If There Were Two R. Pauls in Congress...

Says WSJ:

...among the GOP candidates for the Bunning [U.S Senate seat]: Rand Paul, the son of Texas Rep. Ron Paul, whose anti-Fed sentiment is gaining traction among lawmakers. (Imagine what the father-and-son team could do from both sides of Capitol Hill.)

A Plastic Surgery Tax?

Face-lifts, tummy tucks and hair transplants could be hit with a new tax to help finance the trillion-dollar healthcare overhaul plan, according to sources familiar with the Senate talks, Congress Daily reports.

The Senate Finance Committee has discussed imposing a 10 percent excise tax on cosmetic surgery deemed unnecessary for medical purposes. The idea was broached in a meeting with OMB Director Orszag in mid-July, after which Senate Finance Chairman Max Baucus told reporters he had heard some "interesting," "creative," and "kind of fun" ideas.

And that's just the start, wait for Obama's power freaks to decide that plastic surgery is a low priority procedure and waiting lists start to form.

The country is, therefore, likely to get uglier under Obama.


htDrudge

China's Regulators Don't Get the Business Cycle

Chinese regulators on Monday ordered banks to ensure unprecedented volumes of new loans are channelled into the "real economy" and not diverted into equity or real estate markets where officials say fresh asset bubbles are forming.

What Chinese regulators don't get is that the bubble is wherever the money goes. The money printed by China's central bank is the problem. When they stop printing, areas of the economy where the money flowed will crash--even if all the money went to Mao posters.

Monday, July 27, 2009

The Forecasts of Insider David Rubenstein

Carlyle Group co-founder David Rubinstein attended the Aspen Ideas Festival that was held in late-June/ early-July. Rubenstein participated on a panel, Navigating the Global Economy: CEOs Discuss.

A video of the 60- minute panel discussion is now available online. It is a must see video for all investors and anyone else interested in future trends in the world economy.

I've seen Rubenstein up close a number of times and spoken to him a few. He is a very, very smart guy. This video provides a very good sense of how he comes across in person.

His current views on the economy come very close to what mine were earlier this year. He expects higher interest rates, higher inflation, the dollar losing its reserve status, and he says that GDP will uptick later this year or early next, but that it will be misleading as far as a true picture of the economy.

These were pretty much my views, until Bernanke started to tighten money supply again. Now, I think we are headed for a double dip recession, with the second dip being very severe.

Rubenstein sees inflation climbing to the 5% range. If the Fed starts printing again, I think it could go to double digit rates. Curiously, he thinks oil could go as high as $200 per barrel. This is much higher than his overall inflation forecast, so he must see some major supply and demand factors beyond inflation impacting the price.

At points in the video you will wince. He defends the government stimulus package and sounds totally Keynesian. He also believes that the healthcare industry will be a good area to invest in, where I think it will be one of the worst. It leads me to believe that he has already cut his deal with his tennis partner and Obama sidekick, Larry Summers, as to what part of the healthcare monstrosity he will get contracts on, from where he will collect mucho bucks and supply "services" to the masses.

I laughed when this American oligarch bitched that it was difficult to invest in Russia because the Russian oligarchs have the edge in Russia.

Despite all this, there are tremendous insights and observations made by Rubenstein during the discussion.

The video is here.

Robert Aponte Is Too Busy To Rake Me Through the Coals...

But he does send this email:

Subject Line: Your Stupid Remarks

Dear Mr. Wenzel,

Your article is about as offensive as anything the insurance industry is putting out –and just as dishonest. I wish I had the time to rake you through the coals –intellectually, of course—like you deserve, but that is impossible.

The thing that I find most amazing about you rightwing nuts and Obama-haters, is that even when you have good solid bases for criticizing policy initiatives (or expressed desires that haven’t, or won’t, become policy) of the current administration, you can never resist going off the deep end and voicing derogatory lies and otherwise making innuendos that are not only outright falsehoods or misleading, but maliciously so.

I will take just ONE passage in your offensive diatribe of (dated this morning) whenever.

You (apparently) wrote, to wit:

Who knows how far down the line Obama's thinking is in line with Springer? My guess a lot. Singer writes that Obama has told people not to use the word rationing. Is this because he is against rationing or because he knows the outward advocacy of rationing will justifiably alarm Americans? I think it is the latter. Obama thinks he knows what is good for all of us and will lie and mislead to force it upon us all.

The first five sentences are perfectly fine. While even I agree with part of it –that Obama is wise enough to know that advocating rationing is a death knell for reform—and you have every right to be critical of that (though it would also be misleading, as you well know, because the current system we have in place also rations –and quite extensively at that—a point that Springer made quite eloquently), you can’t seem to satisfy yourself with working that angle further, and have to go for the absurd kill “Obama thinks he knows what is good for us and will lie and mislead to force it upon us all.”

Now, let me tell you something, mister: either you’re God, or you’re a complete liar! How the hell do YOU know anything about how the President really feels? When did he call you to tell you his obviously inner-most secrets that, if they got out, would be worse for him than the rationing item I just discussed? Did you tap his
phones or wire his personal areas (where he might discuss such items with his
wife)? Or, are you just what I describe above?

Of course, you may wish to argue --like a cornered mouse—that “it was only my opinion,” but the fact is that YOU FAILED TO LABEL IT AS SUCH! Unlike the second sentence in the passage above, where you are clear about what is YOUR OPINION, and the third sentence, where you clearly state what is an assertion of
Springer’s, etc., there is no qualifier in the last sentence.

So, the likelihood that you merely “forgot” to label the offensive sentence as something “in your opinion” is nil.

Why do you do it? Here I can only guess, but what I think is that you pull that crap because (a) you know you can get away with it; and (b), you know it is going to be effective in stimulating extreme disdain for the President, and THAT, of course, is a key goal of right-wingers, wherever and whenever, they rear their … heads.

Good-bye sir, and good riddance.

Robert Aponte
When I first read this, I honestly thought this was some guy writing from a closet who couldn't find a day job. Then I noticed the email address. It turns out Aponte is a professor of sociology at Indiana University-Purdue University Indianapolis.

A student at Rate-My-Professor notes:

Dr. Aponte claims to be unbiased, but truth be told. He's not. If you go into his class, be forewarned. he's VERY liberal. VERY VERY LIBERAL... On the plus side. he's got the easiest class ever. Though I wonder if he's depressed by the way he acts! You've been warned.
Hey Prof, Aren't you saying the same thing I am, saying that Obama is lying or misleading when you write?

The first five sentences are perfectly fine. While even I agree with part of it –that Obama is wise enough to know that advocating rationing is a death knell for reform—and you have every right to be critical of that
Of course, I don't focus on his being "wise" when he recognizes the problem, I call it lying or being misleading when he is "wise" enough to recognize the problem but doesn't state what he knows.

How to Get a Job in the Obama Administration, If You Are Jewish

This morning between meetings, I sat myself, and my laptop, down at a Starbucks that is adjacent to the Edward Bennett Williams Building in downtown D.C. The building houses the offices of the very powerful inside the beltway law firm, Williams & Connolly.

As I am sipping on my grande mocha, who walks in? None other than Howard Gutman. He is with another man, younger by between 15 and 20 years. They sit down across from me.

Gutman is a partner at Williams & Connolly. According to WC's bio of him, Gutman is:

Identified as one of "Washington's Top Lawyers" by Washingtonian magazine (December 2004, December 2007)...While appreciating anonymity, Mr. Gutman's clients have included Fortune 500 companies, high tech companies, financial services firms, privately held enterprises, labor unions, pensions funds, law firms and accounting firms, government entities, real estate developers, sports teams, high-net-worth individuals, labor union officials, athletes, government officials, and political candidates. These clients have been located throughout the United States and abroad. He is also litigation counsel for Friedman, Billings & Ramsey ("FBR"), one of the top 10 investment banks in the nation...

He was an original member of the Obama National Finance Committee and a Trustee on the Presidential Inauguration Committee. He assisted the Gore campaign in Florida in 2000. Mr. Gutman appeared in several episodes of the HBO series "K Street," playing (not surprisingly) a Washington attorney and has made other movie and media appearances. Mr. Gutman has been an Editor of Litigation Magazine for over 23 years and an active participant in the ABA's Litigation Section. He is a former Special Assistant to F.B.I. Director William H. Webster and a member of the Board of Directors of the Washington Hebrew Home.
Obama has nominated him for the Ambassadorship to Belgium.

As they begin to talk, the younger guy, who I don't recognize, is clearly looking for help in finding a job in the Obama Administration.

Gutman gives him the name and telephone number, which I didn't catch, of someone at Treasury.

Every once and awhile Gutman's cell phone rings and he gets up to take the phone calls outside. The ring is very loud and Gutman has the ringer set to some kind of old fashioned telephone ring.

On one of his returns, he tells the younger guy. "It's the State Department so I have to take the calls."

He then gives the younger guy the name and phone number of Dan Shapiro. Shapiro is Head of the Middle East desk at the National Security Council.

The younger guy mentions that he wonders what happened to Dennis Ross who was Special Advisor for the Gulf and Southwest Asia at the State Departmen. The younger guy tells Gutman, "One day he was there the next he is gone. I don't know what happened to him."

This energizes Gutman and he tells the younger guy, "Shapiro is the guy to call. He is turning into the go to guy for Jews looking for a job in the Administration. Call him and tell him, Howard Gutman told you to call."

As they leave, Gutman turns to the younger guy once more and says, "Hey, if you find out what happened to Ross let me know. You know, kind of as payback for what I gave you here."

Town Hall Forums for Ben Bernanke?

Bernanke is in full panic.

The Remarkable Results of Free Markets, Free Trade and Free People

China's markets and its people are not completely free, but they have come a long way in 30 years. How far have they come? So far that even Secretary of State Hillary Clinton and Secretary of the Treasury Timothy Geithner recognize the progress. In a WSJ op-ed, they outline the progress, though not mentioning the advancements in free markets and free people that were responsible for the remarkable growth:

When the United States and China established diplomatic relations 30 years ago, it was far from clear what the future would hold. In 1979, China was still emerging from the ruins of the Cultural Revolution and its gross domestic product stood at a mere $176 billion, a fraction of the U.S. total of $2.5 trillion. Even travel and communication between our two great nations presented a challenge: a few unreliable telephone lines and no direct flights connected us. Today China’s GDP tops four trillion dollars, thousands of emails and cellphone calls cross the Pacific Ocean daily, and by next year there will be 249 direct flights per week between the U.S. and China.

Spitzer Spits Out an Endorsement of Ron Paul's Audit the Fed Bill

The below video is a hoot. Dale Ratigan tries to explain how the Fed ripped off taxpayers. He seems to think taxpayer money was used and doesn't realize the Fed can just print money.

Eliot Spitzer, at the core still a big government type, sees all kinds of roles for government in resolving the financial crisis.



Note that in this clip, Spitzer pretty much comes out and calls for the Fed audit that Ron Paul's bill would require, but Spitzer manages to avoid Paul's name as though it was the name of some $20 an hour hooker.

Spitzer, of course, would never get caught with such low scale action. No, he paid $5,000 for the services of Audrey "Kristen" Dupree.


Since he knows that it was Wall Street elements that busted his romps in the sack with Dupree, and her ilk, Spitzer will do anything he can to harass Wall Street. Because of his bust, he likely has plenty of time on his hands to do so, since he is not getting any more action from Dupree and it is unlikely he is getting any at home.

IRS Tailing UBS Banker Visits

US tax agents are tailing UBS bankers in an attempt to identify who their clients are to determine who may be evading taxes, a Swiss newspaper reported yesterday, says NyPo.

The Cause of Ted Kennedy's Life May Be the Cause of Your Death

William L. Anderson writes:

...in free markets, producers cut costs every day, as lower costs are essential to making profits. In modern medical care, however, the reality of malpractice lawsuits and other government requirements serve to drive up costs, and I don’t recall Kennedy offering to muzzle the American Trial Lawyers Association, which owns the Democratic Party. So, now we will see the government prohibiting tests, but doctors still being sued into oblivion for not having those tests performed.

Kennedy may be calling this the "cause of my life," but in reality, his cause is our doom. We know that socialist systems deteriorate over time, and Americans are no exception. We cannot make socialism work, and Ted Kennedy, who has lived at the public trough all of his life, cannot make it work...


Anderson also gets my point about treatment going offshore:

In fact, I will make a prediction; if KennedyCare is imposed, over time, more and more people will experience delays and outright denials of care.

To deal with that problem, Americans will fly to places like India and Latin America to receive medical care for a fee, just as Canadians today are coming over the U.S. border to receive care here. There will be a public outcry, the media will condemn it, and Congress will pass a law making it a criminal offense for Americans to go elsewhere for care and pay for it.
Making treatment overseas a criminal offense is likely down the road to be sure, but I don't think it will happen right away, and there will be loopholes for offshore treatment. There will be many rich who won't be very happy if there aren't loopholes. But for the masses, it will be difficult. In other words, it's time to get real rich, real smart or both.

The Honduran Coup and the Clinton Connection

Justin Raimondo puts it all together:

So what we have is this: a powerful group within the Democratic Party, clustered around Hillary Clinton, actively pushing for the legitimization of the Honduran .coup on behalf of their corporate clients – Chiquita, which has a long and dishonorable history in the region, and the Honduran association of big businessmen, who have long used the state as their personal instrument.
Raimondo has all the details here.

Via Nick.

Sunday, July 26, 2009

Dr. Eric Novak On Obama's Command and Control Health Care Plan

G. Gordon Liddy has a great interview with Senior Fellow at Americans for Prosperity, Dr. Eric Novak. It's on the Obama command and control health care program that is in front of Congress.

As I have emphasised, this is not just about raising taxes to pay for the health treatment of those not insured, this is about changing the complete landscape of medical care. The government will decide what treatments you will get, not you.

Quality healthcare will move offshore. If you are not rich enough to travel offshore, it is going to be a much more difficult process getting old in America.

The interview with Liddy is here.

Obama as Charity Scam Artist

One of the sneaky acts President Obama likes to pull when he is confronted on raising taxes to help the poor is to claim that what he is doing is the "community" thing to do. Sometimes he calls it the "neighborly" thing to do.

He pulled this off in an interview with Bill O'Reilly back in September 2008 and he just pulled it off last week with Meredith Vieira on NBC's Today Show. On the O'Reilly clip it is roughly 6:00 in, and he uses the word "neighborly". On the Vieira clip, it is roughly 6:30 in, and he uses the word "community." See for yourself.












Now if I was doing the interview, this how I would handle Obama if he tried to drop the neighborly/community bomb on me.
What you don't think I am doing enough for my community?

Do you know what I do for my community?

I would like an apology from you for even suggesting that I need to do this for my community.

Sir, I don't object to neighborliness or being a part of the community. I object to your charcterization that I have to fall in line with your thinking to be part of the community. I object to politicians playing God and who want to get in the middle of neighborliness and community.
What Obama is doing is using one of the ugliest tricks in a politicians book. They use the good hearted nature of most Americans who don't object when the words, neighborliness, community and charity are used. But, the slimy hidden implication is that if you don't agree with them, you are not neighborly, part of the community or charitable. Don't let them get away with it. It is an outrage for them to assume anything about your neighborliness, community or charitable activities. It's the trick of a scam operator, with an out of control ego. Tell them to go back to their own communities to do their good works (Which I am guessing would be the community of politicians) and leave you alone.

Specifically with regard to health care, I hasten to add that there is another technical argument against the Obama health care program that can be made based on the fact that it will remove incentives to be creative and innovative at the same time increasing demand for services. Anyway you look at it, this plan was not put together by deep, clear thinkers. It was put together by those who want to get in on a power driven egomania.

Understanding High Frequency Trading

Goldman Sachs and others have been using computer programs to do what they call "High Frequency Trading." It is pretty much front running. The Ticker Guy does an excellent job in the video below of explaining HFT and front running. I don't agree with him that the trades create longer term movements in the market-- maybe some trading from momentum traders, but this isn't about long term impact. It's much more similar to the guy who programs a computer at the bank where he works to take a penny out of each account at the end of the month. It is not something most will not notice, but those pennies add up for the penny grabber.


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What's the Problem With California?


California should be leading the nation -- indeed, the world -- in economic prosperity and enjoying all the benefits that such prosperity offers, like job opportunities, increasing incomes, and low unemployment, write Bob Murphy and Jason Clemens.

California has some unparalleled economic advantages, including an incredible array and supply of natural resources, a strategic trade location, a hospitable climate, a highly skilled workforce, and a world-renowned university system, Murphy and Clemens continue.

Yet, people are leaving the state as though it was the second coming of East Berlin before the wall came down.

Murphy and Clemens explain why the Golden State is turning into the IOU state, right here.

Roubini and Reality

Nouriel Roubini is out with an op-ed at NYT calling for the reappointment of Ben Bernanke as Fed chairman. Here's his pitch:
LAST week Ben Bernanke appeared before Congress, setting off a discussion over whether the president should reappoint him as chairman of the Federal Reserve when his term ends next January. Mr. Bernanke deserves to be reappointed. Both the conventional and unconventional decisions made by this scholar of the Great Depression prevented the Great Recession of 2008-2009 from turning into the Great Depression 2.0.

Mr. Bernanke understands that in the Great Depression, the collapse of the money supply and the lack of monetary stimulus during contractions worsened the country’s economic free fall. This lesson has paid off. Mr. Bernanke’s decision to keep interest rates low and encourage lending has, for now, averted the L-shaped near depression that seemed highly likely after the financial collapse last fall.

Say what?

First this week's testimony by Bernanke did not set off a discussion about his his reappointment. It been going on for months. See here and here.

Roubini then writes:
Mr. Bernanke understands that in the Great Depression, the collapse of the money supply and the lack of monetary stimulus during contractions worsened the country’s economic free fall. This lesson has paid off.

As things got worse in early 2008, Bernanke collapsed money growth that summer. See here, here, here, here, here, here, here and here. This is what intensified the downside in September 2008.

And Bernanke is doing the same thing this summer. See here.

Most bizarre, Roubini writes:

Mr. Bernanke’s decision to keep interest rates low and encourage lending has, for now, averted the L-shaped near depression that seemed highly likely after the financial collapse last fall.
Yet, just last week, Roubini stated we are likely headed down again in a double dip recession. Here's Bloomberg:

A “perfect storm” of fiscal deficits, rising bond yields, “soaring” oil prices, weak profits and a stagnant labor market could “blow the recovering world economy back into a double-dip recession,” he wrote in a research note today. “It is getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented.”

Saturday, July 25, 2009

This Week's Peek at a Government Organization: The CIA's Health Alteration Committee

David Wise explains:

Back in 1960, the CIA hatched a plan to kill Patrice Lumumba by infecting his toothbrush with a deadly disease. The Congolese leader would brush his teeth and, presto, in a few days or weeks he would be gone.

Around the same time, the CIA's Health Alteration Committee... sent a monogrammed, poisoned handkerchief to Gen. Abdul Karim Kassem, the leader of Iraq....

The CIA's involvement in planning assassinations goes back at least to 1954, when it prepared a manual for killings as part of a U.S.-run coup against the leftist government of Guatemala. The 19-page manual, which was declassified in 1997, makes chilling reading. "The essential point of assassination is the death of the subject," it declares, noting that while it "is possible to kill a man with the bare hands ... the simplest local tools are often much the most efficient means of assassination. A hammer, ax, wrench, screwdriver, fire poker, kitchen knife, lamp stand or anything hard, heavy and handy will suffice."

The agency's manual recommends "the contrived accident" as the best way to dispose of someone. "The most efficient accident ... is a fall of 75 feet or more onto a hard surface. Elevator shafts, stairwells, unscreened windows and bridges will serve." The manual suggests grabbing the victim by the ankles and "tipping the subject over the edge. ... Falls before trains or subway cars are usually effective, but require exact timing."

The manual goes on to discuss "blunt weapons," noting that "a hammer can be picked up almost anywhere in the world" and that baseball bats are also excellent. The manual explains the best place in the body to stab people or how to bash their skulls in and the pros and cons of rifles, pistols, submachine guns and other weapons.

During the Cold War years, the CIA plotted against eight foreign leaders, five of whom died violently. The agency's role varied in each case.After the plots were publicized by a Senate committee, President Ford issued an executive order in 1976 barring political assassination. President Reagan broadened the ban, dropping the word "political" and extending the prohibition to include contract killers as well as government employees.Although the ban remains in effect, it has largely been ignored on the premise that it does not apply in a military setting...
I know a man who has done hits for the U.S. government. In addition, to top leaders the gvt appears to be active with lower level assassinations.

My man tells me they go down something like this. "They" have you fly into a country, The "tools" will be there for you. They tell you where to pick them up. Then they tell you something like this, "Stand on the corner of xyz street, a cab will pull over to pick you up. Get in the car use your tools to take out the other rider that will be in the back of the car, then take out the driver. Leave your tools and walk away."

My man looks like a businessman. He dresses professional like, and also carries a professional demeanor. I wondered how he got into the business. I asked him. He told me something about his background that explains everything. Let's just say "they" have a very good profile of the kind of person they want. They must watch for people who fit certain very unique profiles, when they become aware of such a person they contact him, and put him to work.

Henry Louis Gates Jr as Big Time Entrepreneur

Henry Louis Gates Jr. the black Harvard professor caught up in the controversy surrounding police responding to a call at his house about a robbery in progress that ended up with his being arrested for disorderly conduct, is quite the entrepreneur.

In addition to teaching at Harvard, in 2000, Gates created Africana.com, a web site aimed at uniting blacks world-wide, and sold it to Time Warner Inc. for at least $10 million, according to WSJ. In 2007, Gates started a DNA-tracing company, African DNA LLC, after a commercial genealogy service traced his genetic heritage to Europe, discovering he had both Irish and Jewish ancestry. Since 2006, his "African-American Lives" television documentaries have explored African-American genealogy, including an examination of the backgrounds of such celebrities as Oprah Winfrey, Whoopi Goldberg and Chris Tucker.

According to the African DNA web site, Gates is most recently the author of Finding Oprah's Roots, Finding Your Own (Crown, 2007) and the host and executive producer of the2006 PBS series "African American Lives" and its follow-up, "Oprah's Roots."

Gates is Editor-in-Chief of the Oxford African American Studies Center, the first comprehensive scholarly online resource in the field of African American and Africana Studies. He is co-editor, with K. Anthony Appiah, of Africana: The Encyclopedia of the African and African American Experience. With Evelyn Brooks Higginbotham, he is the co-editor of the biographical encyclopedia African American Lives (Oxford, 2004), and the online African American National Biography database.

Gates is the author of several other books, including The Signifying Monkey: A Theory of Afro-American Literary Criticism (Oxford, 1988), winner of the 1989 American Book Award, and Colored People: A Memoir (Knopf, 1994).

Gates authenticated and published two landmark African American texts: Our Nig, or, Sketches from the Life of a Free Black (1859), by Harriet Wilson, the first novel published by an African American woman; and The Bondwoman's Narrative by Hannah Crafts, one of the first novels written by an African American woman. In 2006, he and Hollis Robbins co-edited The Annotated Uncle Tom's Cabin, edited with Hollis Robbins (W. W. Norton, 2006).


Gates has written has written for Time magazine, The New Yorker, and The New York Times. He is the editor of several anthologies, including The Norton Anthology of African American Literature (W.W. Norton, 1996). Gates also produced and hosted two previous series for PBS, 1999's "Wonders of the African World" and 2004's "America Beyond the Color Line."

Gates earned his M.A. and Ph.D. in English literature from Clare College at the University of Cambridge. He received a B.A. in history, summa cum laude, from Yale University in 1973. The recipient of 48 honorary degrees and a 1981 MacArthur Foundation "Genius Award," Professor Gates was also named one of Time magazine's "25 Most Influential Americans" in 1997, one of the "100 Most Influential Black Americans" by Ebony in 2005, received a National Humanities Medal in 1998, and in 1999 was elected to the American Academy of Arts and Letters.f

Upcoming Fedspeak

San Francisco Fed President Janet Yellen speaks Tuesday in Coeur D'Alene, Idaho. Ever since her name has started to be mentioned as a possible successor to Ben Bernanke as Fed chair, she has really turned up the rhetoric, and has become an aggressive dove in favor of Fed easing. Guranteed, on Tuesday she'll call for more easing.

New York Fed President William Dudley speaks Wednesday in New York. It always pays to listen to the NY Fed prez. His office is just across the street from JP Morgan's downtown headquarters and just blocks from the Goldman Sachs world headquarters.

In the pre-internet days, you had to go to the New York Fed building on Thursday afternoon's to get a copy of the H.6 money supply numbers. The room would be packed with assistants, runners and news people. Everybody watched the numbers back then and wanted them instantly---in New York anyway.

One week I happened to be in Boston, and stopped by the Boston Fed on Friday, a full probably 15 hours after H.6 was released for that week. No one in the Boston Fed, the press office or research, could find the then current H.6 report. I was totally dumbfounded. Boston was a totally Keynesian town, even back then.

Up Next:The U.S-China Economic Dialogue

Hosted by Treasury Secretary Timothy F. Geithner and Secretary of State Hillary Rodham Clinton, the first joint meeting of the U.S.-China Strategic and Economic Dialogue will be held in Washington, D.C. from July 27-28, 2009. Here's the agenda, i.e. public agenda. Of course, the real agenda for the U.S. is to keep the Chineese buying Treasury securities.

Monday, July 27, 2009

8:30 AM S&ED FAMILY PHOTO
Atrium Ronald Reagan Building and International Trade Center
1300 Pennsylvania Avenue, NW
Washington, D.C.

9:00 AM – 10:00 AM
OPENING CEREMONY PRESIDENT OBAMA, SECRETARY CLINTON, SECRETARY GEITHNER, VICE PREMIER WANG, STATE COUNCILOR DAI
Atrium Hall Ronald Reagan Building and International Trade Center
1300 Pennsylvania Avenue, NW
Washington, DC

1:30 PM ECONOMIC TRACK PRINCIPALS MEETING
Atrium Ballroom Ronald Reagan Building and International Trade Center
1300 Pennsylvania Avenue, NW
Washington, D.C.

9:00 AM ECONOMIC TRACK FAMILY PHOTO
Bell Entrance
U.S. Treasury Department
1500 Pennsylvania Avenue, NW
Washington, D.C.

9:15 AM ECONOMIC TRACK OPENING SESSION
Cash Room
U.S. Treasury Department
1500 Pennsylvania Avenue, NW
Washington, D.C

4:45 PM U.S.-CHINA CLOSING STATEMENTS
Room 450
Eisenhower Executive Office Building
17th St. and Pennsylvania Ave, NW
Washington, D. C.

5:20 PM U.S. PRESS CONFERENCE
Room 450
Eisenhower Executive Office Building
17th St. and Pennsylvania Ave, NW
Washington, D.C.

6:00 PM CHINA PRESS CONFERENCE
Room 450
Eisenhower Executive Office Building
17th St. and Pennsylvania Ave, NW
Washington, D.C

New York Fed Forms Advisory Group

The Federal Reserve Bank of New York today announced the establishment of the Investor Advisory Committee on Financial Markets (IACFM). The committee will serve as a forum for informal discussions on financial, economic and public policy issues and help inform New York Fed President William C. Dudley and senior management, according to the New York Fed.

The IACFM is currently comprised of 13 leaders in the investment community, and is solely an advisory group with no formal policymaking responsibilities. They are:

-Keith Anderson, CIO, Soros Fund Management LLC
-Nicole Arnaboldi, Vice Chairman of Alternative Investments, Credit Suisse Group
-Louis Bacon, Chairman, CEO and Founder, Moore Capital Management LLC
-William Clark, Director, New Jersey Department of the Treasury, Division of Investment
-Mohamed El-Erian, CEO and Co-CIO, Pacific Investment Management Company
-Garth Friesen, Principal, III Associates
-Gary Glynn, President and CIO, US Steel and Carnegie Pension Fund
-Joshua Harris, Managing Partner, Apollo Advisors LP
-Alan Howard, Director and Co-Founder, Brevan Howard Asset Management LLP
-Glenn Hutchins, Co-CEO and Co-Founder, Silver Lake-Sander Levy, Managing Director, Vestar Capital Partners
-Morgan Stark, Managing Member, Ramius LLC-Thomas Steyer, Senior Managing Member, Farallon Partners LLC

Soros, Pimco et al. just what kind of advice do you think this money focused group is going to give the Fed? Another insider group ready to steer policy to their personal benefit.

The Tight Money Summer of 2008 and Its Meaning for the Future

My contention has long been that the financial crisis intensified in September 2008 because that summer money supply growth was brought to a near halt by the Federal Reserve.

Bob Murphy emails to say:

....an academic paper saying fed was too tight in spring of 2008.
I'm glad someone is catching up with EPJ.

In a paper by Robert Hertzel, Monetary Policy in the 2008-2009 Recession, writes:

The recession that began with a cyclical peak in December 2007 originated in a combination of real shocks because of a fall in housing wealth and a fall in real income from an increase in energy prices. The most common explanation for the intensification of the recession that began in the late summer of 2008 is the propagation of these shocks through dysfunction in credit markets. The alternative explanation offered in this article emphasizes propagation through contractionary monetary policy. The first explanation stresses the importance of credit-market interventions (credit policy). The second emphasizes the importance of money creation (money-creation policy).
This Hetzel quote comes via Scott Sumner, who writes of the paper:

Hetzel’s paper contains so many nuggets of wisdom that I will return to it again and again in the next few weeks. It is one of finest monetary narratives that I have ever read, and certainly far and away the best published narrative of this crisis. In fact nothing else even comes close. Just to whet your appetite, he presents a wealth of evidence that Fed policy became effectively more contractionary over the summer of 2008. Some of this I was unaware of, but you can be sure I will have more to say in future posts.
With all due respect to Sumner (He seems to be a genuine seeker of truth), what the hell was he watching last summer? In bizarre fashion, economists have given up watching money supply. And Hetzel's paper may be a fine work, but you could have gotten a real time advisory of what was going on with slowing money supply by simply reading EPJ. We nailed the story as it was happening, see here, here, here, here, here, here, here and here.

As for the relevance of all this to today, Bernanke is back to slow money growth, indeed right now he is shrinking money supply. If Bernanke doesn't reverse engines real soon, we are going to get smashed big time with a brutal second dip to the recession.