Lew Rockwell has linked to a fascinating article that claims the moon landing was faked.
My knowledge of physics and astrophysics ranks with most people's understanding of economics, but to a layperson the argument in the article appears strong. Here's the full article. If anyone can debunk any part of it, please do so in the comments.
UPDATE: Well so much for debunking the theory. If you are still intrigued, be sure to read the story that an anonymous commenter links to in the first comment to this post.
UPDATE 2: Be sure to read the article via the link in the comments from EPJ reader Earth That Was, which provides a pretty good explanation for all the questions raised in the original article.
Saturday, October 31, 2009
What's Up with Neal Wolin in Africa?
Deputy Treasury Secretary Neal Wolin is in the middle of a trip to Africa (from October 28 - November 5, 2009).
I hear certain people at another government department are real curious about this trip. As in what's this trip really all about, and who is Neal Wolin?
The Deputy Secretary has met, or will meet, with senior government officials in Kigali, Rwanda; Dar Es Salaam, Tanzania; and Pretoria and Johannesburg, South Africa.
The U.S. provides substantial development assistance in these areas through the work of the Millennium Challenge Corporation, the U.S. Agency for International Development, and through funding for the World Bank and African Development Bank.
The visit marks the first trip to Africa by a senior Treasury official during the Obama Administration.
Wolin did have a problem with an erased bio, which an enterprising EPJ reader was able to rectify:)
I hear certain people at another government department are real curious about this trip. As in what's this trip really all about, and who is Neal Wolin?
The Deputy Secretary has met, or will meet, with senior government officials in Kigali, Rwanda; Dar Es Salaam, Tanzania; and Pretoria and Johannesburg, South Africa.
The U.S. provides substantial development assistance in these areas through the work of the Millennium Challenge Corporation, the U.S. Agency for International Development, and through funding for the World Bank and African Development Bank.
The visit marks the first trip to Africa by a senior Treasury official during the Obama Administration.
Wolin did have a problem with an erased bio, which an enterprising EPJ reader was able to rectify:)
Jim Rogers and Marc Faber Join the Up Dollar Crowd
Business Intelligence writes:
(VIaLRC)
Investment gurus Jim Rogers and Marc Faber agree to various degrees on many issues but the one thing uniting them this week is the future direction of the US dollar. They see a correction looming in the US currency.Welcome to the club guys, but it is a bit more than a technical correction. Bennie hasn't used his jets to print money since February, so what we have will be stronger than a countertrend technical correction. It will have a no growth dollar supply issues involved.
Both Faber and Rogers have been warning about the effects of monetary and fiscal policies on the US economy, since the current rally has been mostly based on printed money, a kind of 'reverse Robin Hood policy' of governments, to steal from the peasants to give to the rich...
Marc Faber the Swiss fund manager and Gloom Boom & Doom editor said in a video interview Thursday at Barron's Art of Successful Investing conference that the US dollar is probably at a low point and could have “some kind of rebound”, but it remains in a “structural long term bear market” in terms of purchasing power...
Legendary global investor and chairman of Singapore- based Rogers Holdings, Jim Rogers said a rally in the dollar may last for “a while” as equity and commodities markets decline.
Speaking in an interview with Bloomberg television in Singapore, Rogers said: “Everybody is pessimistic on the dollar. Whenever you have everybody on the same side of the boat, you know what you have to do. We may have a rally in the dollar, a decline in commodity prices or stock prices for a while.”
Rogers reiterated a long-held belief that printing money to help revive the economy would weaken the greenback and Treasuries. So any rally in the dollar won’t be sustainable, he says...
“The dollar is overdue for a rally,” Rogers said.
(VIaLRC)
Bennie and the Babes
No wonder, Bernanke isn't flying his helicopter or his jets, he has discovered luxury and babes. Is this what happens to all Fed chairman? I remind you dead fish personality Alan Greenspan (Ayn Rand gave him the nickname "The Undertaker") landed Andrea Mitchell. Not bad for a dead fish.
WaPo's Alan Kamen reports:
It's not clear how much time Bernanke had to spend in the pool area to contemplate booms and busts, and what to do about them, since intrepid reporter Kamen discovered that Bernanke had to move on:
WaPo's Alan Kamen reports:
...when Fed Chairman Ben Bernanke, who's been worried about the federal deficit, went to speak Oct. 19 at the San Francisco Fed conference on Asia and the global financial mess, he was obliged to travel to the spectacular Bacara Resort and Spa near Santa Barbara, where suites in high season can run up to $2,000 a night. (We're told the resort discounted the rooms -- it's off-season -- to a mere $300 a night, though it's unclear whether that included the primo suites.)...Now you would think that most reporters would stop at this point busting Bernanke and his central bank cronies in ultra-luxury, but no. Kamen dug deeper:
Where better for conferees to worry about saving more than at the uber-swanky Bacara? A Fed spokesman told the Santa Barbara News-Press that The resort is a good venue for those flying from Asia to Los Angeles. It's a bit more than 90 miles away -- but the town cars make it seem oh-so-closer. And all that opulence offers a soothing distraction from spending the mornings fretting about the economic crisis.
"Like an intimate Mediterranean village," says the resort's Web site,"Bacara sprawls over 78 beachfront acres, nestled between the Pacific Ocean and the Santa Ynez mountains." What's more, "every one of our 311 rooms and 49 specialty suites is like the rest of the resort: luxurious, understated, intimate and relaxed. Every room features a private patio or balcony."
The beautiful pool area might even have a topless section -- at least judging from the photo on the site of a woman lounging on a beach chair with a martini.Ah yes, this is reporting.
It's not clear how much time Bernanke had to spend in the pool area to contemplate booms and busts, and what to do about them, since intrepid reporter Kamen discovered that Bernanke had to move on:
...on Friday he was off to speak to 100 more academics, policymakers and bank folks at the Boston Fed's annual economic conference. It wasn't exactly in Boston, which may not have had facilities to handle such an enormous crowd, but rather at the stunning Wequassett Inn on Cape Cod, only 90 miles from Logan Airport, where the best suite, in-season, lists for just $2,800. (This time of year it's only $1,860, while the really cheap rooms run $320 and nicer ones up to about a grand. Get the one with the fireplace on the deck.) We trust the Fed got a real deal here, too.
The resort's Web site begins with a "virtual tour" that modestly announces: "You have arrived." Pause. Pause. "We could tell you we are quite simply the finest resort on Cape Cod, but we wouldn't want to be guilty of understatement." It sits on 22 acres overlooking a splendid bay and marshes and calls itself a "secluded paradise for the discerning traveler."
What better place for Bernanke to hold forth against corporate "compensation plans that encourage, even inadvertently, excessive risk-taking can pose a threat to safety and soundness." The restaurant -- the menu, of course, doesn't list prices -- features "hand-blown glass chandeliers, nautical etchings, Limoges china and Riedel stemware" to provide an "atmosphere of eclectic style and quiet luxury."
Peter Schiff on Face the State
On Sunday, Peter Schiff, candidate for the US Senate Connecticut Republican nomination, will be on CT's WFSB's pre-recorded television show, Face the State.
Here's a preview.
Here's a preview.
For Once You Will Be in the Majority
According to a new Rasmussen Reports national telephone survey, 84% of Americans say they'll be moving their clocks back an hour before they go to bed tonight. That means at least 84% know daylight savings time ends tonight.
And now you do also.
Welcome to the overwheming majority.
And now you do also.
Welcome to the overwheming majority.
Further Notes on the Federal Reserve Release Re Commercial Real Estate Loans
I have received a few emails commenting on my interpretation of the Fed release regarding workouts of commercial real estate loans. The emails for the most part argue that this will allow banks to prop up their balance sheet with bad loans. Their argument tends to fall in line with the report from WSJ on the news:
Now what gets tricky here, and where I think the Fed will do its normal selective enforcement is when it comes to classifying an asset as a performing loan just because there are workout discussions. If a bank has a CRE loan outstanding that couldn't be paid at any price because there is no market for the building, the bank owning the loan has every incentive to claim it is trying to workout the loan and it should therefore be listed as performing. The Fed when it chooses can tell a bank to knock off the BS, or the Fed can turn the other eye when it chooses.
That's why these words in the release are scary (My emphasis):
When they want to take out a bank, it will be because the bank wasn't able to conduct "prudent","reasonable" and "balanced" workouts. The knock will come and the messenger will say, "Bang you are dead."
Favored banks will of course all be conducting "prudent","reasonable" and "balanced" workouts.
Federal bank regulators issued guidelines allowing banks to keep loans on their books as "performing" even if the value of the underlying properties have fallen below the loan amount.This is certainly a surface way to look at what the Fed is doing, and I did say there would be various interpretations. But the deeper news I am reading into the release is that the Fed is not going to be buying this junk, the way they bought who knows what kind of junk in Leg I of the crisis. Remember in Leg I, the Fed's balance sheet increased by a near trillion. There will be no such increase this time. They are going to force action on the loans, specifically workouts. And here's a point where vI completely differ with WSJ. If there is a workout, I think this means the loans will be written down to their present value when the workout is reached. The Fed will just continue classification of loans during the workout process, and once the workout is complete, as "performing loans".
The volume of troubled commercial real-estate loans is skyrocketing. Regulators said that the rules were designed to encourage banks to restructure problem commercial mortgages with borrowers rather than foreclose on them. But the move has prompted criticism that regulators are simply prolonging the financial crisis by not forcing borrowers and lenders to confront, rather than delay, inevitable problems.
Now what gets tricky here, and where I think the Fed will do its normal selective enforcement is when it comes to classifying an asset as a performing loan just because there are workout discussions. If a bank has a CRE loan outstanding that couldn't be paid at any price because there is no market for the building, the bank owning the loan has every incentive to claim it is trying to workout the loan and it should therefore be listed as performing. The Fed when it chooses can tell a bank to knock off the BS, or the Fed can turn the other eye when it chooses.
That's why these words in the release are scary (My emphasis):
Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers' financial conditions will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications. In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy borrowers, will not be subject to adverse classification solely because the value of the underlying collateral declined....The policy statement reiterates existing guidance that examiners are expected to take a balanced approach in assessing institutions’ risk-management practices for loan workout activities.Bottom line: It's the Fed's game. Any bank that has, or develops serious CRE loan problems, will have its fate completely in the hands of the Fed. It is the Fed that ultimately determine what is "prudent","reasonable" and "balanced".
When they want to take out a bank, it will be because the bank wasn't able to conduct "prudent","reasonable" and "balanced" workouts. The knock will come and the messenger will say, "Bang you are dead."
Favored banks will of course all be conducting "prudent","reasonable" and "balanced" workouts.
Wasting Away Reading FOMC Meeting Minutes
Reading Fed minutes with intensity is way overdone, since any action the Fed is going to take with regard to easing or tightening of the money supply is not going to have a serious impact on the overall economy for generally three months or more after the change in policy starts.
The Fed has been tight with money, for example, since March and we are only now starting to see the impact in the markets. So if you only checked money supply once a month, you would still have plenty of time to get out of the way of the train wreck that is starting to happen. Yet, if you only read Fed minutes, you wouldn't even know that tightening was going on.
I still regularly see Fed watchers who talk about the Fed's "quantitative easing," when the Fed hasn't added 10 cents to the money supply since February, some quantitative easing.
Nevertheless, the tea leaf readers will be out next week as the FOMC minutes are released. And, you might get a knee jerk reaction to what is in the minutes. The reaction may last anywhere from an hour to 24 but not much more. A signal of a change in interest rate policy would get you a bit more of a market reaction.
But, in general, the interpretation of the minutes is like a damn Sunday NFL pre-game show. You have Howie, Terry and Jimmy talking nonsense to fill the time until the game actually begins.
In other words, there may be nothing else to do at the time, so lets see what they have to say--but don't take it to serious
The Fed has been tight with money, for example, since March and we are only now starting to see the impact in the markets. So if you only checked money supply once a month, you would still have plenty of time to get out of the way of the train wreck that is starting to happen. Yet, if you only read Fed minutes, you wouldn't even know that tightening was going on.
I still regularly see Fed watchers who talk about the Fed's "quantitative easing," when the Fed hasn't added 10 cents to the money supply since February, some quantitative easing.
Nevertheless, the tea leaf readers will be out next week as the FOMC minutes are released. And, you might get a knee jerk reaction to what is in the minutes. The reaction may last anywhere from an hour to 24 but not much more. A signal of a change in interest rate policy would get you a bit more of a market reaction.
But, in general, the interpretation of the minutes is like a damn Sunday NFL pre-game show. You have Howie, Terry and Jimmy talking nonsense to fill the time until the game actually begins.
In other words, there may be nothing else to do at the time, so lets see what they have to say--but don't take it to serious
Madoff ‘Amazed’ He Wasn't Caught in 2006
US regulators failed to catch Bernard Madoff’s huge fraud in 2006 because they asked the wrong questions and did not perform “accounting 101”, the financier told the authorities earlier this year, according to documents released on Friday, FT is reporting.
In an interview in June – days before he was sentenced to 150 years in prison the biggest “Ponzi” scheme in history – Madoff told SEC it was “amazing” he had not been caught earlier.
The SEC is a joke. It is a very political organization that tends to go after unconnected high profile people, i.e., Martha Stewart and (currently) Mark Cuban-types. Even if they have to create theories out of thin air as to what laws may have been broken.
Yet, they rarely catch real fraud, and they stay miles away from big time connected signs of major insider trading.
They really should close down the SEC, and turn the SEC hedaquarters building in Washington DC over to the homeless that sleep just a block away in and around Union Station.
In an interview in June – days before he was sentenced to 150 years in prison the biggest “Ponzi” scheme in history – Madoff told SEC it was “amazing” he had not been caught earlier.
The SEC is a joke. It is a very political organization that tends to go after unconnected high profile people, i.e., Martha Stewart and (currently) Mark Cuban-types. Even if they have to create theories out of thin air as to what laws may have been broken.
Yet, they rarely catch real fraud, and they stay miles away from big time connected signs of major insider trading.
They really should close down the SEC, and turn the SEC hedaquarters building in Washington DC over to the homeless that sleep just a block away in and around Union Station.
Friday, October 30, 2009
This Sure Looks Like the Start of a Second Bear Down Leg
The Dow Jones Industrial Average dropped today more than 250 points, or 2.5 percent, closing near 9,710. The Nasdaq was down 2.5 percent and the S&P 500 lost 2.6 percent.
Financials, materials and energy sectors were all down more than 3 percent.
All 30 Dow components were lower, led by Bank of America -1.15 (-7.31%), JPMorgan -2.58 (-5.82%) and Alcoa -0.58 (-4.46%).
On an anecdotal basis, what really signals to me that this may be the start of a second down leg in the Bear Market is the failure of the market to follow through to on yesterday's rally. Thursday's action certainly looks like the "One Day Wonders" that I wrote about yesterday morning before the markets opened. I had no idea that yesterday was going to be that day, but the down action of earlier days certainly caused me to expect a "One Day Wonder" at some point. There will be others.
The financial news cheerleaders, dressed for Halloween as serious reporters and analysts, are out reporting that the market is essentially flat for the month of October, but there is no magic to the October 1 date. The key is that the long term factors surrounding the money supply and the overall economy are negative, at the same time, from a more technical stock market posture, the stock market looks like Roman Polanski did after Swiss authorities told him that there would be a slight delay in his picking up the film award he was there to get.
I should note that the dollar is continuing strong. Sharp commentators are picking up that we are in a period of down stock market and up dollar action. They don't really know why, but they know it is happening. For the record, the up dollar, down stock market (and yes down gold) is because of the lack of Fed money printing which is causing increasing demand for dollars in terms of foreign exchange, stocks and hard assets. It's about basic supply and demand.
The one trend that I believe will show a reversal is the current relatively strong bond market. I see it as a knee jerk reaction to the down market. At some point, though, the continuing Treasury supply of new debt will overwhelm the new debt. It's very dangerous to be long bonds right now.
Financials, materials and energy sectors were all down more than 3 percent.
All 30 Dow components were lower, led by Bank of America -1.15 (-7.31%), JPMorgan -2.58 (-5.82%) and Alcoa -0.58 (-4.46%).
On an anecdotal basis, what really signals to me that this may be the start of a second down leg in the Bear Market is the failure of the market to follow through to on yesterday's rally. Thursday's action certainly looks like the "One Day Wonders" that I wrote about yesterday morning before the markets opened. I had no idea that yesterday was going to be that day, but the down action of earlier days certainly caused me to expect a "One Day Wonder" at some point. There will be others.
The financial news cheerleaders, dressed for Halloween as serious reporters and analysts, are out reporting that the market is essentially flat for the month of October, but there is no magic to the October 1 date. The key is that the long term factors surrounding the money supply and the overall economy are negative, at the same time, from a more technical stock market posture, the stock market looks like Roman Polanski did after Swiss authorities told him that there would be a slight delay in his picking up the film award he was there to get.
I should note that the dollar is continuing strong. Sharp commentators are picking up that we are in a period of down stock market and up dollar action. They don't really know why, but they know it is happening. For the record, the up dollar, down stock market (and yes down gold) is because of the lack of Fed money printing which is causing increasing demand for dollars in terms of foreign exchange, stocks and hard assets. It's about basic supply and demand.
The one trend that I believe will show a reversal is the current relatively strong bond market. I see it as a knee jerk reaction to the down market. At some point, though, the continuing Treasury supply of new debt will overwhelm the new debt. It's very dangerous to be long bonds right now.
Congress, Fox, NYT and EPJ
The Huffington Post provides these links for the latest on healthcare:
Around the Web:
House Democrats prepare to unveil health bill - Yahoo! News
Senate health care bill to include public option - Yahoo! News
- H.R.3200: America's Affordable Health Choices Act of 2009 - U.S. ...
Text of H.R.3200 as Reported in House: America's Affordable Health ...
Health Care Bill Page 425 - The Truth
H. R. 3200
House Health Care Bill Exceeds $1 Trillion - Political News ...
Senate Committee Approves Health Care Bill - The Caucus Blog ...
H. R. ll
EconomicPolicyJournal.com: Shock: Inside the Healthcare Bill
Fed to Banks With Major Commercial Real Estate Loan Exposure: Bang You Are Dead
The Fed has just released a statement on commercial loan workouts. There can be more than one interpretation to what the Fed is up to here, but the confusion will spook markets even more so than they are now. Here's the full statement:
1. The Fed clearly anticipates serious problems in the Commercial Real Estate market.
2. Problems so big that they are going to be changing policy.
3. They are encouraging banks to workout the loans and there won't be negative feedback from the Fed.
But here's what could be real major spooky to the markets. The Fed is probably also signalling that it is not going to do wholesale bailouts of the commercial real estate loan market, the way it did to parts of the mortgage securitized sector.
This is a total reversal of the attempt to prop up the residential market. The Fed wants the commercial market down and fast.
BOTTOM LINE: This means major, major hits ahead for bank earnings and not all banks will survive.
So what is going on here?
Release Date: October 30, 2009
For immediate release
The Federal Reserve on Friday adopted a policy statement supporting prudent commercial real estate (CRE) loan workouts. This policy statement, adopted by each of the financial regulators,1 provides guidance for examiners, and for financial institutions that are working with CRE borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. The financial regulators recognize that prudent loan workouts are often in the best interest of both financial institutions and borrowers, particularly during difficult economic conditions. This policy statement details risk-management practices for loan workouts that support prudent and pragmatic credit and business decision making within the framework of financial accuracy, transparency, and timely loss recognition.
Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers' financial conditions will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications. In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy borrowers, will not be subject to adverse classification solely because the value of the underlying collateral declined.
The policy statement includes examples of CRE loan workouts. The examples, provided for illustrative purposes only, reflect examiners' analytical processes for credit classifications and assessments of institutions' accounting and reporting treatments for restructured loans. The policy statement reiterates existing guidance that examiners are expected to take a balanced approach in assessing institutions’ risk-management practices for loan workout activities.
Attachment (147 KB PDF)
--------------------------------------------------------------------------------
Footnotes
1.The financial regulators consist of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the FFIEC State Liaison Committee. Return to text
2009 Banking and Consumer Regulatory Policy
1. The Fed clearly anticipates serious problems in the Commercial Real Estate market.
2. Problems so big that they are going to be changing policy.
3. They are encouraging banks to workout the loans and there won't be negative feedback from the Fed.
But here's what could be real major spooky to the markets. The Fed is probably also signalling that it is not going to do wholesale bailouts of the commercial real estate loan market, the way it did to parts of the mortgage securitized sector.
This is a total reversal of the attempt to prop up the residential market. The Fed wants the commercial market down and fast.
BOTTOM LINE: This means major, major hits ahead for bank earnings and not all banks will survive.
Friday: Fear Index Jumps 22%
The CBOE's Volatility Index, often used to gauge fear among stock investors, surged Friday as stocks sold off sharply.
The VIX climbed 22% to more than 30, its highest level since July.
The VIX climbed 22% to more than 30, its highest level since July.
Rand Paul Has a Stalker
An opponent to Rand Paul's bid for the Republican nomination for US Senate from Kentucky has hired a cameraman to follow Dr. Rand around. The second half of the clip is pretty funny.
(ViaWaxLips)
(ViaWaxLips)
John Stuart Mill and the Dangers to Liberty
Richard Ebeling emails:
This is a core piece for anyone that is trying to understand the importance of liberty. The link to the piece is here
This year marks the 150th anniversary of the publication of John Stuart Mill's famous essay "On Liberty."Ebeling is very careful and thorough observer. It is all here, the nature of truth, the nature of tyranny, and then Ebeling goes beyond Mill to discuss the importance of private property.
With the growth of Big Government over even more of our life, I thought it would be useful to remember and reflect on Mill's warnings of the various types of tyranny that can threaten our freedom, and to emphasize more than Mill did the importance of the recognition and protection of private property rights if liberty is to be preserved.
My article, "John Stuart Mill and the Dangers to Liberty," may be accessed on a new blog hosted by Northwood University called the "defense of capitalism." .
This is a core piece for anyone that is trying to understand the importance of liberty. The link to the piece is here
Bank of Japan Begins Reversing Emergency Credit Measures
This is big, or maybe not.
The Bank of Japan on Friday began withdrawing emergency measures intended to liquefy credit markets during the crisis, NYT reports.
But, it did extend one major loan program. And, the key is whether, or not, BOJ attempts to sterilize its withdrawals. A sterilization at this point would mean that they add funds equal to what they withdraw. A non-sterilized withdrawal would of course mean draining funds from the system.
One hint that a sterilization may occur is the NYT reports that BOJ "emphasized that despite its withdrawal from credit markets, it would keep interest rates very low for as long as necessary."
In other words, they are taking money out of one pocket and putting it in another
Folks its time to start watching the Japanese money supply. It may take a month or more before we can get a true sense as to what the BOJ is up to, but it will obviously have repercussions, at a minimum, for the yen/dollar relationship and any remnants of the old yen related carry trade positions that may be lurking in the markets, if some,or all, of the withdrawals are not sterilized.
.
The Bank of Japan on Friday began withdrawing emergency measures intended to liquefy credit markets during the crisis, NYT reports.
But, it did extend one major loan program. And, the key is whether, or not, BOJ attempts to sterilize its withdrawals. A sterilization at this point would mean that they add funds equal to what they withdraw. A non-sterilized withdrawal would of course mean draining funds from the system.
One hint that a sterilization may occur is the NYT reports that BOJ "emphasized that despite its withdrawal from credit markets, it would keep interest rates very low for as long as necessary."
In other words, they are taking money out of one pocket and putting it in another
Folks its time to start watching the Japanese money supply. It may take a month or more before we can get a true sense as to what the BOJ is up to, but it will obviously have repercussions, at a minimum, for the yen/dollar relationship and any remnants of the old yen related carry trade positions that may be lurking in the markets, if some,or all, of the withdrawals are not sterilized.
.
Bob Murphy Saves My Career
Yes, there I was after a near death experience shaken and confused.
Perhaps, I had chosen wrong.
I had recently posted on the lives of some great economists and the fact they all lived into their 90's, but I also noted that the great comedians, such as Hope and Burns, made it to three digits before punching the clock.
Perhaps comedy should be my direction. Sure, nobody has ever laughed at my jokes, except for an Ethiopian girl, once, at Hollywood's Skybar, but, if there was one, there are probably more.
In this confused state I turned to the one place I knew would give me direction. The blog of Bob Murphy. Yes, the Bob Murphy who has written so many books, that a mere mortal, such as I, could never hope to list them all title by title, never mind read and comprehend them all. It would be he that could set me straight. And so with nervousness and anticipation, I turned to the words of the one named Murphy.
And then, yes, as if by Divine intervention he had directed a post directly at me and wrote of me as an economist, "...the lad has promise."
Not since the day I sat in Brandy Ho's restaurant in the middle of San Francisco's Chinatown, and, having finished a meal of mu shu pork, I sipped tea while reading from my fortune cookie that said "You are handsome, charming and have a unique ability to understand the world. Go forth and spread the word," have I been so moved and motivated.
But, alas, the Great Murphy does not deliver his great and powerful words without a bit of a bitch slap. He chides me for the section of a quote I had chosen to use from an earlier post.
The point of using the quote was to reinforce the fact that you needed to watch money flows, and at the time that I originally wrote the quoted words, Bernanke was pumping money at 15%. And it was also quite obvious that the money was going to investment banks and the auto industry. Now, I could have included the part where I wrote:
But I didn't address it mostly because I, again, wasn't dealing with the unemployment situation, but more so GDP, given I was discussing this in the context of the positive GDP numbers that had just come out. Which I had correctly expected, though I quote again, I also said, "The real economy will be a mess." I actually now have some unique reasons on why I think unemployment remains high and plan on putting them in a separate post, which is another reason I did want to deal with it in that post.
I do admit that my selected quote does put Bob in his most unflattering pose, but that really wasn't the intention. I actually noticed it after I copied and posted the quote. But I left it anyway.
For those of you that aren't wordsmsiths, writing is a lot like putting up a Christamas tree, you trim a branch here and add an ornament there. I thought about trimming Bob's name out, but no words came quickly to mind that would fill the hole left by Bob's trimmed name, so I went with the tried and true, better to be selectively quoted (with link), than to not be quoted at all.
All of which means that I see Bob is still playing with his GI Joe set when he really needs a James Bond action figure, which I guess I will now have to buy him for Christmas.
Perhaps, I had chosen wrong.
I had recently posted on the lives of some great economists and the fact they all lived into their 90's, but I also noted that the great comedians, such as Hope and Burns, made it to three digits before punching the clock.
Perhaps comedy should be my direction. Sure, nobody has ever laughed at my jokes, except for an Ethiopian girl, once, at Hollywood's Skybar, but, if there was one, there are probably more.
In this confused state I turned to the one place I knew would give me direction. The blog of Bob Murphy. Yes, the Bob Murphy who has written so many books, that a mere mortal, such as I, could never hope to list them all title by title, never mind read and comprehend them all. It would be he that could set me straight. And so with nervousness and anticipation, I turned to the words of the one named Murphy.
And then, yes, as if by Divine intervention he had directed a post directly at me and wrote of me as an economist, "...the lad has promise."
Not since the day I sat in Brandy Ho's restaurant in the middle of San Francisco's Chinatown, and, having finished a meal of mu shu pork, I sipped tea while reading from my fortune cookie that said "You are handsome, charming and have a unique ability to understand the world. Go forth and spread the word," have I been so moved and motivated.
But, alas, the Great Murphy does not deliver his great and powerful words without a bit of a bitch slap. He chides me for the section of a quote I had chosen to use from an earlier post.
The point of using the quote was to reinforce the fact that you needed to watch money flows, and at the time that I originally wrote the quoted words, Bernanke was pumping money at 15%. And it was also quite obvious that the money was going to investment banks and the auto industry. Now, I could have included the part where I wrote:
I continue to believe that Bernanke's huge money drops will impact the economy to the degree that the official unemployment rate in 12 months will be lower than it is right now. Murphy expects the exact opposite.But that would have then required my explaining the change in Bernanke's money printing stance and made the post much longer and complex than I usually try to make them, especially becasue I would have to go into heavy detail about unemployment.
But I didn't address it mostly because I, again, wasn't dealing with the unemployment situation, but more so GDP, given I was discussing this in the context of the positive GDP numbers that had just come out. Which I had correctly expected, though I quote again, I also said, "The real economy will be a mess." I actually now have some unique reasons on why I think unemployment remains high and plan on putting them in a separate post, which is another reason I did want to deal with it in that post.
I do admit that my selected quote does put Bob in his most unflattering pose, but that really wasn't the intention. I actually noticed it after I copied and posted the quote. But I left it anyway.
For those of you that aren't wordsmsiths, writing is a lot like putting up a Christamas tree, you trim a branch here and add an ornament there. I thought about trimming Bob's name out, but no words came quickly to mind that would fill the hole left by Bob's trimmed name, so I went with the tried and true, better to be selectively quoted (with link), than to not be quoted at all.
All of which means that I see Bob is still playing with his GI Joe set when he really needs a James Bond action figure, which I guess I will now have to buy him for Christmas.
Bank of Japan's Half-Yearly Economic Report
Even Japan's central bank admits it is a propped up "recovery". From the Bank of Japan's half-yearly economic and price outlook report:
The global economy has been gradually emerging from a grave situation of panicked contraction of economic and financial activity induced by the financial crisis that broke out in the autumn of 2008. Global financial markets have been improving, and the global economy has picked up.
However, the stabilization of global financial markets and the global economy to date has largely been achieved through the effects of large-scale policy measures by public authorities around the world as well as progress in various adjustment processes in the private sector.
The outlook for the global economy will hinge, among other things, on the possible consequences of balance-sheet adjustments in the United States and Europe and developments in emerging economies, which have been contributing significantly to the current recovery in the global economy. The uncertainty involved in these factors remains high, although it has decreased somewhat. Against this backdrop, in considering the outlook for economic activity and prices, the baseline scenario and various risk factors should be carefully examined.
GDP: Gross Domestic Prop-Up
NyPo has a nice take on the recent uptick in GDP numbers via a quote from Christopher Murphy:
"We're just taking it from one taxpayer's pocket and putting it into the pocket of another one. That's not exactly robust growth," said Christopher Murphy, managing partner of Goliath Partners LP.
"The 3 percent part is all government spending, not business activity," he said
Thursday, October 29, 2009
Breaking: House Ethics Committee Investigating Nearly Half of Defense Related Subcommittee, Among Others
House ethics investigators have scrutinized the activities of more than 30 lawmakers and several aides in inquiries about issues including defense lobbying and corporate influence peddling, according to a confidential House ethics committee report prepared in July.
The report appears to have been inadvertently placed on a publicly accessible computer network, and was provided to WaPo by a source not connected to the congressional investigations.
According to WaPo, the ethics committee is one of the most secretive panels in Congress, and its members and staff members sign oaths not to disclose any activities related to its past or present investigations.
Shortly after 6 p.m. Thursday, the committee chairman, Zoe Lofgren (D-Calif.), interrupted a series of House votes to alert lawmakers about the breach. She cautioned that some of the panel's activities are preliminary and not a conclusive sign of inappropriate behavior.
"No inference should be made as to any member," she said.
House ethics investigators have scrutinized the activities of more than 30 lawmakers and several aides in inquiries about issues including defense lobbying and corporate influence peddling, according to a confidential House ethics committee report prepared in July, reports WaPo.
Will Congress really, really thoroughly investigate itself and act against the unethical? In this Congrees that would mean you would have to find some that are ethical in the first place. Hmmm. This is going to be interesting.
The report appears to have been inadvertently placed on a publicly accessible computer network, and was provided to WaPo by a source not connected to the congressional investigations.
According to WaPo, the ethics committee is one of the most secretive panels in Congress, and its members and staff members sign oaths not to disclose any activities related to its past or present investigations.
Shortly after 6 p.m. Thursday, the committee chairman, Zoe Lofgren (D-Calif.), interrupted a series of House votes to alert lawmakers about the breach. She cautioned that some of the panel's activities are preliminary and not a conclusive sign of inappropriate behavior.
"No inference should be made as to any member," she said.
House ethics investigators have scrutinized the activities of more than 30 lawmakers and several aides in inquiries about issues including defense lobbying and corporate influence peddling, according to a confidential House ethics committee report prepared in July, reports WaPo.
Will Congress really, really thoroughly investigate itself and act against the unethical? In this Congrees that would mean you would have to find some that are ethical in the first place. Hmmm. This is going to be interesting.
Talking to Serious Nuke Players
Atomic Obsession: Nuclear Alarmism from Hiroshima to Al Qaeda was the topic of the book forum today at the Cato Institute.
The title of the forum is the name of John Mueller's new book.
The forum featured the author, John Mueller, Woody Hayes Chair of National Security Studies, Ohio State University; Michael Krepon, Co-Founder, Henry L. Stimson Center; and Jeffrey G. Lewis, Director, Nuclear Strategy and Nonproliferation Initiative, New America Foundation. Moderated by Justin Logan, Associate Director of Foreign Policy Studies, Cato Institute.
In the book, Mueller argues that the nuclear threat is overblown. He says, for example, that a terrorist suitcase attack on New York City, if possible at all, would destroy no more than 1% of the city. The fear that a nuclear attack means total devastation of the planet doesn't hold at all, he points out, and the odds are slim that terrorists could launch any type of nuclear attack, or that most nations would want to, for that matter.
The discussion among the panelists was fascinating and I'm sure Cato will soon post the forum video, here.
At the luncheon following the forum, I found myself next to an Air Force Lt Col and a State Department woman. I looked at the uniform of the Air Force Lt Col and said, "It looks like you know something about nukes. How much damage would a suitcase nuke do in New York City?"
He didn't seem to have an exact answer. In his defense, the State Dept. gal said they were more involved with long term. I wondered how long-term had anything to do with the impact of a suitcase nuke. Was something coming down the road that would change things? Then she made things clear. For nuke people, long-term is not about time, but about time and space. "We deal more with ICBMs," she said.
I then asked the Air Force Lt Col what he thought of Mueller's view. He said he was a centrist, not leaning at either extreme, but that they all hold some good points.
With this remark, I immediately categorized him as belonging to the economist Greg Mankiw school of holding views. Never say or hold any kind of public view that will piss off anybody (with the exception of Paul Krugman).
I realized, I would have to go more direct with my questions to crank up this conversation. I asked him and the State Department gal, if they had thought there were WMD's in Iraq before the start of the second invasion. They both said, "Yes".
The State Dept. gal spoke in kind of State Deapertmentese that made it hard to understand what the hell she was saying. Her speech had an odd cadence to it and she used an unusual vocabulary.
She said something about working in some kind of department that monitors, 24/7, nuclear agreements. I took her at her word. I wanted to crank up the conversation.
I then said to the two of them that Ron Suskind, in his book about Treasury Secretary Paul O'Neill, reported that O'Neill told him that during cabinet meetings, before the invasion, they would look at satellite photos of supposed Iraq nuclear facilities and that when he headed Alcoa he had looked at many satellite photos, knew how to read them, and it was obvious those weren't nuclear facilities.
The State Department gal gave me a very cold scare and responded,"There have been many Monday morning quarterbacks." And then went on to defend, in that strange State Deapartmetese cadence, the belief that there were weapons of mass destruction.
At this point,the Air Force Lt Col handed me his business card. It read, Office of the Assiatant Secretary for Global Strategic Affairs. Then in bold, Nuclear Posture Review Staff. "Wow," I said, "I have never gotten a business card from anyone at the Nuclear Posture Review Staff, before."
This prompted the State Dept. gal to rush into her purse and grab a card for me. I now read it for the first time. It reads, "U.S. State Department, Senior Operations Officer, U.S. Nuclear Risk Reduction Center".
It was getting late. The Air Force guy politely excused himself from the lunch, and the the State Dept. gal soon followed.
But there was something about the State Dept. gal that bothered me. Part was her manner of talk. The slow paced talk that you hear State Dept. officials use in the middle of a crisis. She had used it, but there was no crisis. We were eating sandwiches in the comfortable environment of the Cato Institute.
I wondered if she was some kind of fanatic, addicted to her job, imitating the voice of State Dept. officials during a crisis, or do lots of State Dept. officials talk to each other in this manner?
Then there was that cold stare from her when I brought up what had been reported former Treasury Secretary Paul O'Neill said about the Iraqi satellite photos. This gal could push a nuke button in a minute, I thought.
I have no idea what most other State Dept. officials are like, maybe she is an outlier. Or, maybe, they are all so separated from the real world that they all act like her, which is a very, very scary thought.
The title of the forum is the name of John Mueller's new book.
The forum featured the author, John Mueller, Woody Hayes Chair of National Security Studies, Ohio State University; Michael Krepon, Co-Founder, Henry L. Stimson Center; and Jeffrey G. Lewis, Director, Nuclear Strategy and Nonproliferation Initiative, New America Foundation. Moderated by Justin Logan, Associate Director of Foreign Policy Studies, Cato Institute.
In the book, Mueller argues that the nuclear threat is overblown. He says, for example, that a terrorist suitcase attack on New York City, if possible at all, would destroy no more than 1% of the city. The fear that a nuclear attack means total devastation of the planet doesn't hold at all, he points out, and the odds are slim that terrorists could launch any type of nuclear attack, or that most nations would want to, for that matter.
The discussion among the panelists was fascinating and I'm sure Cato will soon post the forum video, here.
At the luncheon following the forum, I found myself next to an Air Force Lt Col and a State Department woman. I looked at the uniform of the Air Force Lt Col and said, "It looks like you know something about nukes. How much damage would a suitcase nuke do in New York City?"
He didn't seem to have an exact answer. In his defense, the State Dept. gal said they were more involved with long term. I wondered how long-term had anything to do with the impact of a suitcase nuke. Was something coming down the road that would change things? Then she made things clear. For nuke people, long-term is not about time, but about time and space. "We deal more with ICBMs," she said.
I then asked the Air Force Lt Col what he thought of Mueller's view. He said he was a centrist, not leaning at either extreme, but that they all hold some good points.
With this remark, I immediately categorized him as belonging to the economist Greg Mankiw school of holding views. Never say or hold any kind of public view that will piss off anybody (with the exception of Paul Krugman).
I realized, I would have to go more direct with my questions to crank up this conversation. I asked him and the State Department gal, if they had thought there were WMD's in Iraq before the start of the second invasion. They both said, "Yes".
The State Dept. gal spoke in kind of State Deapertmentese that made it hard to understand what the hell she was saying. Her speech had an odd cadence to it and she used an unusual vocabulary.
She said something about working in some kind of department that monitors, 24/7, nuclear agreements. I took her at her word. I wanted to crank up the conversation.
I then said to the two of them that Ron Suskind, in his book about Treasury Secretary Paul O'Neill, reported that O'Neill told him that during cabinet meetings, before the invasion, they would look at satellite photos of supposed Iraq nuclear facilities and that when he headed Alcoa he had looked at many satellite photos, knew how to read them, and it was obvious those weren't nuclear facilities.
The State Department gal gave me a very cold scare and responded,"There have been many Monday morning quarterbacks." And then went on to defend, in that strange State Deapartmetese cadence, the belief that there were weapons of mass destruction.
At this point,the Air Force Lt Col handed me his business card. It read, Office of the Assiatant Secretary for Global Strategic Affairs. Then in bold, Nuclear Posture Review Staff. "Wow," I said, "I have never gotten a business card from anyone at the Nuclear Posture Review Staff, before."
This prompted the State Dept. gal to rush into her purse and grab a card for me. I now read it for the first time. It reads, "U.S. State Department, Senior Operations Officer, U.S. Nuclear Risk Reduction Center".
It was getting late. The Air Force guy politely excused himself from the lunch, and the the State Dept. gal soon followed.
But there was something about the State Dept. gal that bothered me. Part was her manner of talk. The slow paced talk that you hear State Dept. officials use in the middle of a crisis. She had used it, but there was no crisis. We were eating sandwiches in the comfortable environment of the Cato Institute.
I wondered if she was some kind of fanatic, addicted to her job, imitating the voice of State Dept. officials during a crisis, or do lots of State Dept. officials talk to each other in this manner?
Then there was that cold stare from her when I brought up what had been reported former Treasury Secretary Paul O'Neill said about the Iraqi satellite photos. This gal could push a nuke button in a minute, I thought.
I have no idea what most other State Dept. officials are like, maybe she is an outlier. Or, maybe, they are all so separated from the real world that they all act like her, which is a very, very scary thought.
More and More Are Figuring Out the Money Supply Is Not Growing
This from Washington's Blog:
Former officials are often more honest than current ones, since they aren't under pressure to spread happy talk.
Former European Central Bank chief economist Otmar Issing recently said what current officials aren't addressing:
The picture is even starker in America where M3 has shrunk at an annual rate of 6.5pc over the last three months, a pace of contraction not seen since the 1930s. US bank loans have plummeted since MayWhat's going on is that the Fed has started to pay interest on balances left at the Fed, which explains why the multiplier isn't working in the states, but further the real interest rate must be real low both in the US and in the ECB sector, since if real rates were significantly higher in either area, banks would be making loans (adjusted for risk, of course) versus keeping the balances sitting at the central banks.
Former officials are often more honest than current ones, since they aren't under pressure to spread happy talk.
Former European Central Bank chief economist Otmar Issing recently said what current officials aren't addressing:
Nobody can be sure that we have a self-sustaining recovery. The challenges facing the ECB are tremendous. "Money multipliers have collapsed everywhere. What M3 is telling us is that confidence is missing. I don't see any way to stabilise M3 in such circumstances.As Ambrose Evans-Pritchard notes:
Data from the European Central Bank shows that the M3 broad money supply has contracted over the last six months, confounding expectations that ultra-low interest rates would soon boost monetary growth. Loans to the private sector fell 0.3pc from a year earlier, the first such decline since the data started in 1983.
The M3 figures include a wide range of bank accounts...
The picture is even starker in America where M3 has shrunk at an annual rate of 6.5pc over the last three months, a pace of contraction not seen since the 1930s. US bank loans have plummeted since MayWhat's going on is that the Fed has started to pay interest on balances left at the Fed, which explains why the multiplier isn't working in the states, but further the real interest rate must be real low both in the US and in the ECB sector, since if real rates were significantly higher in either area, banks would be making loans (adjusted for risk, of course) versus keeping the balances sitting at the central banks.
Wall Street Journal Closes Its Boston Bureau
Nine reporters affected.
Wow, first news that Forbes is cutting back, now this out of WSJ.
A friend sends along WSJ Editor Robert Thomson's email to staff.
From: Thomson, Robert
Sent: Thursday, October 29, 2009 11:26 AM
Subject: Boston
Colleagues,
Today we told our team in Boston that we are closing the bureau in its present form. The economic background to the closure is painfully obvious to us all. An investigative function will remain in Boston, but the core reporting team will be disbanded, though all nine reporters affected will certainly be able to apply for openings elsewhere on the paper. Coverage of the Boston mutual fund industry will switch to the Money and Investing team and we are creating an enhanced New York-based education team. Any such decision inevitably stirs apprehension and uncertainty, but there are no plans, nascent or otherwise, to close any other U.S. or international bureau. Meanwhile, the Newswires bureau and the MarketWatch team in Boston will remain at their present staffing levels.
That there has been truly great reporting under the generalship of Gary Putka out of Boston over many, many years is not in doubt. But we remain in the midst of a profound downturn in advertising revenue and thus must think the unthinkable.
Robert
This is particularily shocking, as Thomson notes in the email, in Boston there is a major mutual fund industry to cover.
Will the Forbes and WSJ cuts now give cover for cuts at CNBC?
Further note, both Forbes and WSJ are considered the savvy players in the print industry. I can only imagine the kind of bleeding must be going on at other print outlets.
Wow, first news that Forbes is cutting back, now this out of WSJ.
A friend sends along WSJ Editor Robert Thomson's email to staff.
From: Thomson, Robert
Sent: Thursday, October 29, 2009 11:26 AM
Subject: Boston
Colleagues,
Today we told our team in Boston that we are closing the bureau in its present form. The economic background to the closure is painfully obvious to us all. An investigative function will remain in Boston, but the core reporting team will be disbanded, though all nine reporters affected will certainly be able to apply for openings elsewhere on the paper. Coverage of the Boston mutual fund industry will switch to the Money and Investing team and we are creating an enhanced New York-based education team. Any such decision inevitably stirs apprehension and uncertainty, but there are no plans, nascent or otherwise, to close any other U.S. or international bureau. Meanwhile, the Newswires bureau and the MarketWatch team in Boston will remain at their present staffing levels.
That there has been truly great reporting under the generalship of Gary Putka out of Boston over many, many years is not in doubt. But we remain in the midst of a profound downturn in advertising revenue and thus must think the unthinkable.
Robert
This is particularily shocking, as Thomson notes in the email, in Boston there is a major mutual fund industry to cover.
Will the Forbes and WSJ cuts now give cover for cuts at CNBC?
Further note, both Forbes and WSJ are considered the savvy players in the print industry. I can only imagine the kind of bleeding must be going on at other print outlets.
What I Did Before Breakfast Today
I maintain a storage locker here in Washington DC. This morning before breakfast I went to get a document out of one of the boxes in the locker.
My locker is on the upper level, somewhere between 10 to 12 feet from the ground. You climb up to the second level via a steel ladder with full steps. You lock the ladder in place, before you climb. While I am in my locker sitting down and going through a box of documents, I must have started to lean my back against the ladder for support. Suddenly it gives. I end up dangling outside my locker. I just had enough time to grab onto the sides of the locker with my hands and the cuff to my right pant leg was caught on the outside metal edge of the locker. The rest of my body is outside the locker dangling--horizontal-- below the cement floor 10 feet. It was early. There was no one else in the building. I really didn't know how long I was going to be able to hang on. I did not want to force the pant cuff to harshly because I feared if I jerked too hard, I might lose my grip. But I am dangling, basically contemplating will I land on my back from 10 feet, or my head? Or will the pant leg hold and some kind of wishbone action will take place? Or will the pant leg rip at the last minute and my other leg will start to go vertical, absorb the impact at an angle, and break in two places.
The ladder had slid off to the right, which is the same side as where my pant leg is caught, so I can't swing my right leg over to get it. I am dangling scared as hell. Finally, after a couple of attempts, I am able to work my left leg far enough under my right leg to pull the ladder back under me with my left foot. But, it was still tricky landing on the ladder. After I reached ground level I looked up, and my leg that was caught must have had a rough time getting on to the ladder. I was in too much panic to really know what finally happened, but there are skid marks from my right shoe on the outside of the side of the locker. It must have been a rough landing.
My locker is on the upper level, somewhere between 10 to 12 feet from the ground. You climb up to the second level via a steel ladder with full steps. You lock the ladder in place, before you climb. While I am in my locker sitting down and going through a box of documents, I must have started to lean my back against the ladder for support. Suddenly it gives. I end up dangling outside my locker. I just had enough time to grab onto the sides of the locker with my hands and the cuff to my right pant leg was caught on the outside metal edge of the locker. The rest of my body is outside the locker dangling--horizontal-- below the cement floor 10 feet. It was early. There was no one else in the building. I really didn't know how long I was going to be able to hang on. I did not want to force the pant cuff to harshly because I feared if I jerked too hard, I might lose my grip. But I am dangling, basically contemplating will I land on my back from 10 feet, or my head? Or will the pant leg hold and some kind of wishbone action will take place? Or will the pant leg rip at the last minute and my other leg will start to go vertical, absorb the impact at an angle, and break in two places.
The ladder had slid off to the right, which is the same side as where my pant leg is caught, so I can't swing my right leg over to get it. I am dangling scared as hell. Finally, after a couple of attempts, I am able to work my left leg far enough under my right leg to pull the ladder back under me with my left foot. But, it was still tricky landing on the ladder. After I reached ground level I looked up, and my leg that was caught must have had a rough time getting on to the ladder. I was in too much panic to really know what finally happened, but there are skid marks from my right shoe on the outside of the side of the locker. It must have been a rough landing.
Austrian Mint Thinks Gold Coin Demand Will Decline
The Austrian's appear to be still producing solid independent thinkers, and I think they are correct, again (Given lack of Bernanke money growth).
The Austrian mint, the world’s largest marketer of pure gold coins, plans to slash output by 32 percent next year from a record, forecasting the end of the financial crisis will weaken investor demand.
Muenze Oesterreich AG aims to cut production of Philharmonic gold coins to 650,000 ounces in 2010 from an estimated 950,000 ounces this year, mint President Kurt Meyer said in Tokyo in an interview with Bloomberg. Output in 2009 is set to reach an all-time high for a second year after financial turmoil triggered by the collapse of Lehman Brothers Holdings Inc. spurred demand, he said.
The Austrian mint became the top marketer of pure gold coins, taking a 30 percent share in the global market in the three months ended Dec. 31, as producers in other countries failed to catch up with growing demand on a lack of available metal, Meyer said.
The Austrian mint, the world’s largest marketer of pure gold coins, plans to slash output by 32 percent next year from a record, forecasting the end of the financial crisis will weaken investor demand.
Muenze Oesterreich AG aims to cut production of Philharmonic gold coins to 650,000 ounces in 2010 from an estimated 950,000 ounces this year, mint President Kurt Meyer said in Tokyo in an interview with Bloomberg. Output in 2009 is set to reach an all-time high for a second year after financial turmoil triggered by the collapse of Lehman Brothers Holdings Inc. spurred demand, he said.
The Austrian mint became the top marketer of pure gold coins, taking a 30 percent share in the global market in the three months ended Dec. 31, as producers in other countries failed to catch up with growing demand on a lack of available metal, Meyer said.
Taking Apart 3Q GDP and the Coming Double-Dip Recession
Gross domestic product grew at a 3.5 percent annual rate in 3Q.
This does not surprise me. In fact, I have a bet with Bob Murphy, made in January, that it would. This is what I wrote in January when most economists were saying that the GDP wouldn't turn positive until 2010:
Most of these guys are trend followers, they forecast whatever they have seen in front of them for the last 80 minutes or so. One number can be off and they'll switch their forecast faster than Jamie McCourt switched from Frank McCourt to the Pillsbury doughboy.
How did I figure it? Because I forecast based on a theory. The theory being that where money goes, so goes the economy. Where the money doesn't go the economy doesn't go. I have been attacked for this theory from commenter's here at EPJ and buy some pretty impressive scientists. The charge is usually, "Your theory is very simple." No one attacks the theory itself. My response to this charge is that I have other simple theories. If you don't have gasoline in your tank, your car will not run. If you don't breathe oxygen, you will die. Simple, yet, effective theories by which forecasts can be made. Simplicity has nothing to do with the accuracy or non-accuracy of a theory. How reality based a theory is the key. If you want complex, follow the economist with their complex equations. As a Google programmer once said to me, their equations are very elaborate and clever in their attempt to try and get around the realty that you can't have such equations because there are no constants in the world of human action.
Yes, the complex does exist. Long Term Capital Management employed it, so did buyers of subprime syndicated mortgages. But if you want to make money, quit deluding yourself with the hocus pocus equations and focus on what you really can know, and money flows is one of the most important.
Back to the current GDP numbers, a huge chunk, and I am talking a huge chunk, occurred because of cash for clunkers. Excluding motor vehicles, third-quarter GDP advanced at only 1.9 percent pace.
On top of this, residential housing soared as a result of fist-time buyer programs, i.e., residential fixed investment surged by 23.4%, the largest rise since 1986. More directly, federal government spending increased 7.9%, after rising 11.4% in the second quarter.
What about the non-government economy?
Business spending reduced GDP by 0.24 percentage points. It fell by 2.5% in 3Q.
There you have it, a government manipulated GDP, with the rest of the economy a mess. What's worse is that when I made my forecast in January, Bernanke was printing billions of dollars that was finding its way into the stock market and these government programs. Bernanke, for all practical purposes, hasn't printed a dollar since February. This tells me the stock market spike is over and the overall economy is headed much lower. The positive GDP number here (and you could have one in 4Q) will mark the middle point of a W double-dip recession.
This does not surprise me. In fact, I have a bet with Bob Murphy, made in January, that it would. This is what I wrote in January when most economists were saying that the GDP wouldn't turn positive until 2010:
...my whole point right along has been that the government will maneuver to make the official data look good. The real economy will be a mess.So there you have it, GDP is up and the economy is a mess. Again, I issue the challenge to find me any other economist that said the economy would be up AND a mess.
Murphy predicts that there will be no net growth in real GDP during 2009. Again, expect the real economy to be a mess, but real GDP will turn positive no later than sometime during the second half of 2009
Most of these guys are trend followers, they forecast whatever they have seen in front of them for the last 80 minutes or so. One number can be off and they'll switch their forecast faster than Jamie McCourt switched from Frank McCourt to the Pillsbury doughboy.
How did I figure it? Because I forecast based on a theory. The theory being that where money goes, so goes the economy. Where the money doesn't go the economy doesn't go. I have been attacked for this theory from commenter's here at EPJ and buy some pretty impressive scientists. The charge is usually, "Your theory is very simple." No one attacks the theory itself. My response to this charge is that I have other simple theories. If you don't have gasoline in your tank, your car will not run. If you don't breathe oxygen, you will die. Simple, yet, effective theories by which forecasts can be made. Simplicity has nothing to do with the accuracy or non-accuracy of a theory. How reality based a theory is the key. If you want complex, follow the economist with their complex equations. As a Google programmer once said to me, their equations are very elaborate and clever in their attempt to try and get around the realty that you can't have such equations because there are no constants in the world of human action.
Yes, the complex does exist. Long Term Capital Management employed it, so did buyers of subprime syndicated mortgages. But if you want to make money, quit deluding yourself with the hocus pocus equations and focus on what you really can know, and money flows is one of the most important.
Back to the current GDP numbers, a huge chunk, and I am talking a huge chunk, occurred because of cash for clunkers. Excluding motor vehicles, third-quarter GDP advanced at only 1.9 percent pace.
On top of this, residential housing soared as a result of fist-time buyer programs, i.e., residential fixed investment surged by 23.4%, the largest rise since 1986. More directly, federal government spending increased 7.9%, after rising 11.4% in the second quarter.
What about the non-government economy?
Business spending reduced GDP by 0.24 percentage points. It fell by 2.5% in 3Q.
There you have it, a government manipulated GDP, with the rest of the economy a mess. What's worse is that when I made my forecast in January, Bernanke was printing billions of dollars that was finding its way into the stock market and these government programs. Bernanke, for all practical purposes, hasn't printed a dollar since February. This tells me the stock market spike is over and the overall economy is headed much lower. The positive GDP number here (and you could have one in 4Q) will mark the middle point of a W double-dip recession.
Forbes Cuts 30; Others Told to Work from Home; Bono Screwed
Forbes axed at least 30 editorial people, yesterday -- but the bloodletting isn't over, according to insiders, NyPo is reporting.
Today's layoffs mark the third round of editorial cuts in a year. In January, the dot-com and print were merged and 50 people were let go.
In the latest round, the magazine's bureaus were particularly hard hit. Many of Forbes' offices will be closed around the country and overseas, and those who worked in bureaus and survived the cuts will become correspondents working out of their homes, sources said.
"We -- and the entire media world -- have been hard hit by both the severe recession and the seismic shifts wrought by the web. Given these dramatic events, further layoffs, unfortunately, are necessary across the entire organization," Forbes Chairman Steve Forbes told staffers on Monday in a memo.
All this means that rock star, wannabe businessman, flako save the world type, Bono, has had his butt handed to him compliments of The Capitalist Tool's founding family.
Three years ago (hee, hee, hee),the Forbes family sold an estimated 40 percent of the company to Elevation Partners, a venture-capital firm run by Silicon Valley investor Roger McNamee and U2 frontman Bono.
Notice the significanse of 40%. A very big percentage, which means Elevation paid out elevated amounts of $$$$. However, what is also interesting about 40% is that it is less than 50%, which means all Bono can do is sit and watch from the sidelines as the value of his investment declines. Oh well, maybe he can write a song about the experience.
Today's layoffs mark the third round of editorial cuts in a year. In January, the dot-com and print were merged and 50 people were let go.
In the latest round, the magazine's bureaus were particularly hard hit. Many of Forbes' offices will be closed around the country and overseas, and those who worked in bureaus and survived the cuts will become correspondents working out of their homes, sources said.
"We -- and the entire media world -- have been hard hit by both the severe recession and the seismic shifts wrought by the web. Given these dramatic events, further layoffs, unfortunately, are necessary across the entire organization," Forbes Chairman Steve Forbes told staffers on Monday in a memo.
All this means that rock star, wannabe businessman, flako save the world type, Bono, has had his butt handed to him compliments of The Capitalist Tool's founding family.
Three years ago (hee, hee, hee),the Forbes family sold an estimated 40 percent of the company to Elevation Partners, a venture-capital firm run by Silicon Valley investor Roger McNamee and U2 frontman Bono.
Notice the significanse of 40%. A very big percentage, which means Elevation paid out elevated amounts of $$$$. However, what is also interesting about 40% is that it is less than 50%, which means all Bono can do is sit and watch from the sidelines as the value of his investment declines. Oh well, maybe he can write a song about the experience.
The One Day Wonders Ahead
With market declines of recent days, we may be at the start of the second down leg in the stock market and economy that I have been forecasting.
Please note these market down legs come with what I call "One Day Wonders", after a series of down days, the market will stage a strong advance for generally not more than one day, before returning to the downtrend.
These "One Day Wonders" are nothing more than rebounds from technical overbought situations, i.e., when you have a series of down days some of the selling is by short term traders, rather than liquidators. A liquidator to me is someone pulling money out of the market completely, a short term trader may be out and on the sidelines waiting for the downturn to be over and planning on jumping back in. Not realizing the downturn may be extended, they jump in at some light weight signals, all the short term traders see the same signals to get in at what they think is the start of a new bull market. Thus, these "One Day Wonder" days. Unfortunately for them, they are buying from liquidators who are draining cash from the market and then the downturn resumes.
Please note these market down legs come with what I call "One Day Wonders", after a series of down days, the market will stage a strong advance for generally not more than one day, before returning to the downtrend.
These "One Day Wonders" are nothing more than rebounds from technical overbought situations, i.e., when you have a series of down days some of the selling is by short term traders, rather than liquidators. A liquidator to me is someone pulling money out of the market completely, a short term trader may be out and on the sidelines waiting for the downturn to be over and planning on jumping back in. Not realizing the downturn may be extended, they jump in at some light weight signals, all the short term traders see the same signals to get in at what they think is the start of a new bull market. Thus, these "One Day Wonder" days. Unfortunately for them, they are buying from liquidators who are draining cash from the market and then the downturn resumes.
Did Galleon Pay Goldman Sachs and Morgan Stanley for Front Running Info?
Sounds like it to me.
Interesting info out of FT:
Interesting info out of FT:
The Galleon hedge fund at the centre of an insider trading scandal paid hundreds of millions of dollars a year to its Wall Street banks and in return regularly received market information that would not have been disclosed to most investors, executives familiar with the matter say.The immediate question that comes to mind is: Were Morgan Stanley and Goldman Sachs providing "color" to Galleon on trades their other clients were making? Definitely sleazeball and unethical. OR are their computers somehow rigged with the exchanges so they see trades before other traders do? Definitely sleazeball and unethical.
A person familiar with Galleon, whose founder, Raj Rajaratnam, was charged with insider trading this month, said it paid about $250m to its banks last year. Executives who dealt with the fund said it paid more in fees and other charges during the boom years of this decade.
Morgan Stanley, which counted Galleon as one of its top-five hedge fund clients, and Goldman Sachs were Galleon’s top providers of hedge-fund services – or prime brokerage.
Galleon, which had about $7bn in assets at its peak, paid large amounts to banks because it specialised in short-term trading strategies, which put its officials in close contact with Wall Street traders and salespeople. As it grew, the hedge fund became known for pushing its contacts at banks for hints about market developments such as big buy and sell orders.
Although bank policies often prohibit employees from divulging specific information about orders, executives who dealt with Galleon said it regularly received “colour” on market developments, frequently delivered in Wall Street slang. One example would be traders discussing a “page one seller” of shares – a reference to the first page of the Bloomberg list of top holders of listed companies...
However, market participants say the Galleon case could have a chilling effect on the distribution of market “colour” – possibly affecting other hedge funds that trade frequently to make quick returns. “High-velocity hedge funds aren’t really about investing,” said one hedge fund founder. “It is a cat and mouse kind of thing, a game.”
Goldman, Morgan Stanley and a Galleon representative declined to comment.
Geithner Does Chicago
This evening 7:40 PM CT (approx.)
Secretary Geithner
Questions and Answers
at the Economic Club of Chicago’s
327th Dinner Meeting
Hyatt Regency Chicago Hotel
151 East Wacker Drive Grand Ballroom East Tower,
Gold Level
Chicago, IL
-------
Friday, October 30, 2009 10:30 AM CT
Secretary Geithner and CDFI Director Donna Gambrell
Announcement of New Markets Tax Credit Program awards
Greater West Town Community Development Project
2045 West Fulton Street Chicago, IL
Secretary Geithner
Questions and Answers
at the Economic Club of Chicago’s
327th Dinner Meeting
Hyatt Regency Chicago Hotel
151 East Wacker Drive Grand Ballroom East Tower,
Gold Level
Chicago, IL
-------
Friday, October 30, 2009 10:30 AM CT
Secretary Geithner and CDFI Director Donna Gambrell
Announcement of New Markets Tax Credit Program awards
Greater West Town Community Development Project
2045 West Fulton Street Chicago, IL
Geithner Testimony Today
9:30 AM ET
Secretary Tim Geithner Testifies
before the House Financial Services Committee
on "Systemic Regulation, Prudential Matters, Resolution Authority and Securitization"
Secretary Tim Geithner Testifies
before the House Financial Services Committee
on "Systemic Regulation, Prudential Matters, Resolution Authority and Securitization"
Wednesday, October 28, 2009
High Foreclosure Rates Spread into New Metro Areas
High foreclosure rates are now moving into metro areas that previously avoided the problem, according to a new report from RealtyTrac.
Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation’s foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave,” said James J. Saccacio the chief executive officer of RealtyTrac.
Among those new hot spots were Boise City-Nampa, Idaho which saw a 142 percent increase in foreclosures in the third quarter compared with the same period a year ago. Other new foreclosure hot spots include Provo-Orem (120 percent increase) and Salt Lake City (105 percent increase) metro areas, both of which are in Utah.
And in California, the Chico metro area saw a 98 percent increase in its foreclosure rate during the third quarter, the largest year-over-year increase in the state.
Leading the nation was the Las Vegas-Paradise, Nev. metro area, where one in every 20 households received a foreclosure notice in the third quarter.
Following Las Vegas-Paradise in the top five were Merced, Calif., Cape Coral-Fort Myers, Fla., Stockton, Calif., and Modesto, Calif.
The metro area with the lowest foreclosure rate in the country was Utica-Rome, N.Y., where one in every 5,441 households received a foreclosure notice.
Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation’s foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave,” said James J. Saccacio the chief executive officer of RealtyTrac.
Among those new hot spots were Boise City-Nampa, Idaho which saw a 142 percent increase in foreclosures in the third quarter compared with the same period a year ago. Other new foreclosure hot spots include Provo-Orem (120 percent increase) and Salt Lake City (105 percent increase) metro areas, both of which are in Utah.
And in California, the Chico metro area saw a 98 percent increase in its foreclosure rate during the third quarter, the largest year-over-year increase in the state.
Leading the nation was the Las Vegas-Paradise, Nev. metro area, where one in every 20 households received a foreclosure notice in the third quarter.
Following Las Vegas-Paradise in the top five were Merced, Calif., Cape Coral-Fort Myers, Fla., Stockton, Calif., and Modesto, Calif.
The metro area with the lowest foreclosure rate in the country was Utica-Rome, N.Y., where one in every 5,441 households received a foreclosure notice.
September New Home Sales Decline
U.S. new home sales came in very negative for September. The sales fell 3.6% versus August sales and down 7.8% versus September 2008 , the Commerce Department is reporting.
The decline in new-home sales to a seasonally adjusted annual rate of 402,000 contrasts with Sept. 2008 annual sales rate of 436,000. Further, new-home sales in August were revised to a 417,000 compared with the previous estimate of 429,000.
This is the first decline in new home sales after five consecutive monthly gains. The supply of homes on the market fell to 251,000 in September, which is the lowest level since November 1982. Median sales prices have fallen 9.1% in the past year to $204,800.
With the tax credit for first time buyers likely to be wound down, and the Fed not printing any money, the picture does not look positive for home sales. However, on a longer term basis the continued drop in inventory is a positive, but by no means a signal to rush out and buy a home.
The decline in new-home sales to a seasonally adjusted annual rate of 402,000 contrasts with Sept. 2008 annual sales rate of 436,000. Further, new-home sales in August were revised to a 417,000 compared with the previous estimate of 429,000.
This is the first decline in new home sales after five consecutive monthly gains. The supply of homes on the market fell to 251,000 in September, which is the lowest level since November 1982. Median sales prices have fallen 9.1% in the past year to $204,800.
With the tax credit for first time buyers likely to be wound down, and the Fed not printing any money, the picture does not look positive for home sales. However, on a longer term basis the continued drop in inventory is a positive, but by no means a signal to rush out and buy a home.
Ludwig von Mises Stars in Vegas
The long life of the great economist Ludwig von Mises became a small bit in a very funny Las Vegas comedy routine by Alan King. (Via Bob Murphy):
BTW, at a very early age I realized that economists and comedians live very long lives (Mises 92, F.A. Hayek 93, Milton Friedman 94) (George Burns 100, Bob Hope 100, Henny Youngman 92), since I'm not very funny, I became an economist.
BTW2, Murphy mentions that King mispronounces Mises name, but does not give you the correct pronunciation. Here at EPJ we complete the story, it's pronounced ˈluːtvɪç fɔn ˈmiːzəs.
BTW, at a very early age I realized that economists and comedians live very long lives (Mises 92, F.A. Hayek 93, Milton Friedman 94) (George Burns 100, Bob Hope 100, Henny Youngman 92), since I'm not very funny, I became an economist.
BTW2, Murphy mentions that King mispronounces Mises name, but does not give you the correct pronunciation. Here at EPJ we complete the story, it's pronounced ˈluːtvɪç fɔn ˈmiːzəs.
George Soros, Enemy of Free Markets
It has always been understood, sometimes whispered, that Geroge Soros, the great beneficiary of markets, hates them.
The truth is now out in the open.
John Stossel reports, via FT, that Soros will give $50 million to start a new think-tank to counter "the unwavering belief in unchecked free markets, which remains pervasive in universities."
Soros says: "The ideologists in the free markets are still in command and I think they'll be very difficult to remove because they have tenure."
If anything proves that one has to question Soros' analytical ability, it is this statement.
The leading economic textbook in American colleges is written by Greg Mankiw. Mankiw has among other insane suggestions, called for a negative interest rate, a global carbon tax, a higher gas tax, and before the economy plunged deep into a downturn he claimed , in December, 2007, that we should stay out of the way of the Fed as it continued its money manipulations. He wrote, of this group, who did not see the housing bubble:
Calling college teaching captured by free market advocates when a Mankiw text is the best seller is like stating that the Uzbek language is dominant in Mexico after having a few shots and overhearing six Uzbekistan tourists speaking Uzbek in Tijuana.
Soros as global thinker is a myth. Which supports the other rumor whispered about him, that the only serious money he ever made was with the help of Jim Rogers, or through insider tips on government currency moves.
The truth is now out in the open.
John Stossel reports, via FT, that Soros will give $50 million to start a new think-tank to counter "the unwavering belief in unchecked free markets, which remains pervasive in universities."
Soros says: "The ideologists in the free markets are still in command and I think they'll be very difficult to remove because they have tenure."
If anything proves that one has to question Soros' analytical ability, it is this statement.
The leading economic textbook in American colleges is written by Greg Mankiw. Mankiw has among other insane suggestions, called for a negative interest rate, a global carbon tax, a higher gas tax, and before the economy plunged deep into a downturn he claimed , in December, 2007, that we should stay out of the way of the Fed as it continued its money manipulations. He wrote, of this group, who did not see the housing bubble:
...the current Fed governors, together with their crack staff of Ph.D. economists and market analysts, are as close to an economic dream team as we are ever likely to see...The best Congress can do now is to let the Bernanke bunch do its job.Yes, this smiling monster, who calls for tax after tax, and hailed the Fed just hours before it drove the economy off a cliff, is producing the top selling college economic textbook in the country.
Calling college teaching captured by free market advocates when a Mankiw text is the best seller is like stating that the Uzbek language is dominant in Mexico after having a few shots and overhearing six Uzbekistan tourists speaking Uzbek in Tijuana.
Soros as global thinker is a myth. Which supports the other rumor whispered about him, that the only serious money he ever made was with the help of Jim Rogers, or through insider tips on government currency moves.
GMAC to Geithner: We Need More Green
Distortions of the economy continue, with huge government money going to the politically favored. Again, GMAC Financial Services Inc. and its sponsorship as a most favored firm, by unions, is front and center.
GMAC and the Treasury Department are in advanced talks to prop up the lender with its third helping of taxpayer money, according to WSJ.
The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital on top of the $12.5 billion that GMAC has received since December 2008.
In addition, WSJ reports that the FDIC told the company Tuesday the agency will guarantee an additional $2.9 billion in debt.The FDIC backed $4.5 billion in GMAC-issued debt earlier this year.
GMAC and the Treasury Department are in advanced talks to prop up the lender with its third helping of taxpayer money, according to WSJ.
The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital on top of the $12.5 billion that GMAC has received since December 2008.
In addition, WSJ reports that the FDIC told the company Tuesday the agency will guarantee an additional $2.9 billion in debt.The FDIC backed $4.5 billion in GMAC-issued debt earlier this year.
.
The Coming "Council of Regulators"
The Federal Reserve could order a financial institution to sell a risky division or stop dangerous trading activity if the central bank determined there was a threat to the US financial system, under a draft law released on Tuesday.
The bill drawn up by the Treasury and the House financial services committee sets up a "Council of Regulators" charged with snuffing out systemic risks and gives the government and the Fed sweeping powers over financial companies at home and overseas.
The bill does not address how this "Council of Regulators" will attain supreme wisdom to rule on markets. Nor does it mention that the Federal Reserve denied, in the middle of the housing bubble, that there was a housing bubble.
And it comes nowhere near identifying the Federal Reserve's money manipulations as at the core of the business cycle.
Thus, what we have in the proposed "Council of Regulators" is one further step in the direction of total political control of the financial system.
This is not your granfather's America.
The bill drawn up by the Treasury and the House financial services committee sets up a "Council of Regulators" charged with snuffing out systemic risks and gives the government and the Fed sweeping powers over financial companies at home and overseas.
The bill does not address how this "Council of Regulators" will attain supreme wisdom to rule on markets. Nor does it mention that the Federal Reserve denied, in the middle of the housing bubble, that there was a housing bubble.
And it comes nowhere near identifying the Federal Reserve's money manipulations as at the core of the business cycle.
Thus, what we have in the proposed "Council of Regulators" is one further step in the direction of total political control of the financial system.
This is not your granfather's America.
International Plotting This Morning for the Geit
Treasury Secretary Geithner will meet this morninbg with Chairman of the UK's Financial Services Authority, Lord Jonathan Adair Turner.
In the evening, Secretary Geithner will meet with the Financial Stability Oversight Board.
In the evening, Secretary Geithner will meet with the Financial Stability Oversight Board.
Tuesday, October 27, 2009
The Los Angeles Dodgers, The Pillsbury Doughboy and Money
For those of you who do not live in Southern California, or do not follow baseball closely, you may not be aware that a big time scandal is breaking bigger than the waves off Southern California's Dana Point.
It involves a young man, an older woman, an older man, and a billion dollars.
I'm sure there is some way to turn an economic angle on this, but forget that, just sit back and enjoy the tale. There's probably a moral or two in this story also, but I will let you work that out for yourself . This is just a story.
The story starts some years ago when a very wealthy couple residing in Boston, Massachusetts decided to buy the Los Angeles Dodgers. Of course, they headed west to manage the team. The couple, Frank and Jamie McCourt, as they headed west, had been married some twenty years plus.
They made a splash in Los Angeles, always in demand to give speeches. I heard Frank once give a speech to a group of investment bankers. In the close to his speech, his voice rising, he promised to make the Dodgers profitable. The IB's cheered loudly. Why I thought are these IB's cheering? The Dodgers are privately held, who the hell cares, other than Frank McCourt if they make money? And I guessed, he probably didn't close his speech like this around fans or sports writers.
I also once heard Jamie speak. I came away thinking the speech was written by a mediocre speech writer. I was not impressed with her delivery of the speech either, but I do remember that she did neg her husband a bit in the speech, something about him always worrying. She also did mention that she dropped her international law career to become a family (I think) lawyer at the insistence of that worrier Frank, who did not want her travelling unchaperoned to exotic locales. She did say that when they learned the Dodgers were available for purchase she blurted out, "We'll buy them," and then left it up to Frank, the worrier, to figure how exactly to raise the money to make the purchase.
Somewhere along the line Frank made Jamie CEO and Vice Chairperson of the Dodgers, and then, just recently, as the Dodgers struggled without success to make it to the Worlds Series, we have all learned that Frank has fired Jamie as as CEO and Vice Chairperson. Frank wrote.
Both with empty stares, as if wondering what had happened.
It turns out that what had happened was the Pillsbury Doughboy. Frank, the worrier, did have something to worry about after all.
Yes, Jamie appears to have found a new man, Jeff Fuller. But not just any Fuller, but the Jeff Fuller whose late mother was an heir to the Pillsbury fortune. In other words, Jeff has never ever had to worry about much.
Oh yes, he was also employed by the Dodgers and was fired, the week after Jamie, from his position as Dodger Director of Protocol.
Naturally, no drama like this can be complete without a 911 call, so there is one.
TMZ tells the story this way:
"Frank retaliated by firing me," she charged.
In her divorce filing she requests specifically:
- travel by private jet
- 5 star hotel accommodations
- travel expenses - Unlimited
- business dinners 5 nights per week
- business lunches 5 days per week
- parking spots at Dodger Stadium
- flowers in the office
- making Dodger Legends available for events without charge
- provision of Dodger autographed items as requested for use in business and charitable activities
- hair and makeup for Dodger events
- access to team doctors for McCourt family members
- access to the owner's suite for Dodger home games and non-baseball events at the stadium
- Tickets to All-Star games and playoff games -- even if the Dodgers aren't playing
- a pass to all National League games
Jamie lists her monthly living expenses at $488,928.
And there you have it, in the old days the bread winner would keep his company (wink wink) highly leveraged and the real money in Switzerland. The US gvt is slowly (no, rapidly) closing this route. And the Mafia, keeps it women out of the business loop. Frank obviously didn't take either of these routes.
Again, there's probably a moral or two to this story, but I will let each and everyone of you find your own, as will Frank and Jamie.
It involves a young man, an older woman, an older man, and a billion dollars.
I'm sure there is some way to turn an economic angle on this, but forget that, just sit back and enjoy the tale. There's probably a moral or two in this story also, but I will let you work that out for yourself . This is just a story.
The story starts some years ago when a very wealthy couple residing in Boston, Massachusetts decided to buy the Los Angeles Dodgers. Of course, they headed west to manage the team. The couple, Frank and Jamie McCourt, as they headed west, had been married some twenty years plus.
They made a splash in Los Angeles, always in demand to give speeches. I heard Frank once give a speech to a group of investment bankers. In the close to his speech, his voice rising, he promised to make the Dodgers profitable. The IB's cheered loudly. Why I thought are these IB's cheering? The Dodgers are privately held, who the hell cares, other than Frank McCourt if they make money? And I guessed, he probably didn't close his speech like this around fans or sports writers.
I also once heard Jamie speak. I came away thinking the speech was written by a mediocre speech writer. I was not impressed with her delivery of the speech either, but I do remember that she did neg her husband a bit in the speech, something about him always worrying. She also did mention that she dropped her international law career to become a family (I think) lawyer at the insistence of that worrier Frank, who did not want her travelling unchaperoned to exotic locales. She did say that when they learned the Dodgers were available for purchase she blurted out, "We'll buy them," and then left it up to Frank, the worrier, to figure how exactly to raise the money to make the purchase.
Somewhere along the line Frank made Jamie CEO and Vice Chairperson of the Dodgers, and then, just recently, as the Dodgers struggled without success to make it to the Worlds Series, we have all learned that Frank has fired Jamie as as CEO and Vice Chairperson. Frank wrote.
Although Frank had the locks changed at her office, they both attended Dodger playoff games within scent of each other.Dear Jamie -- This is to inform you that your employment with and positions as Chief Executive Officer and Vice Chairperson of Los Angeles Dodgers LLC, as well as any and all of the positions that you hold ... are hereby terminated effective immediately."...
Because your employment is held at-will, the Organization is not required to have cause to terminate your employment and may do so for any reason or no reason at all.
However, your actions, including, but not limited to, your insubordination, non-responsiveness, failure to follow procedures, and inappropriate behavior with regard to a direct subordinate, have made this decision necessary.
Both with empty stares, as if wondering what had happened.It turns out that what had happened was the Pillsbury Doughboy. Frank, the worrier, did have something to worry about after all.
Yes, Jamie appears to have found a new man, Jeff Fuller. But not just any Fuller, but the Jeff Fuller whose late mother was an heir to the Pillsbury fortune. In other words, Jeff has never ever had to worry about much.Oh yes, he was also employed by the Dodgers and was fired, the week after Jamie, from his position as Dodger Director of Protocol.
Naturally, no drama like this can be complete without a 911 call, so there is one.
TMZ tells the story this way:
Frank McCourt -- owner of the L.A. Dodgers -- scared his estranged wife Jamie so badly she called 911, this according to law enforcement sources.
It happened Sept. 5 2009, at 10:10 in the morning. We're told Jamie was swimming in the pool of her Holmby Hills home when Frank suddenly and unexpectedly appeared. Jamie called 911, explaining that she was frightened because of previous incidents in which Frank had allegedly lost his temper and scared her.
Jamie then called the couple's private security for assistance.
By the time the LAPD responded, private security had already arrived to make sure Jamie was OK.
When cops arrived, the officers interviewed both Jamie and the couple's housekeeper -- who told police she had heard Jamie scream.
Soon after she spoke with cops, we're told Jamie left the house.
Frank has a very, very different story.
Given the differences in the stories, you really start to wonder who is on first base and who is doctoring the ball. Here's Frank's story (ViaTMZ):
[Frank's] lawyer just released the following statement on his behalf:
"The events described by TMZ occurred when the McCourts had already separated.
Mr. McCourt was living alone at the residence in West Los Angeles and his wife was residing in Malibu. That morning, Mr. McCourt left the house and went jogging. When he returned home to the West Los Angeles residence, he found his wife swimming in the pool and her personal "security assistant" Jeff Fuller, was also at the residence.
The news of a 911 call came as a surprise to Mr. McCourt. He had no knowledge of any 911 call at the time; or of any visit by any police officers and law enforcement has had no contact with him. As previously reported by TMZ, Mrs. McCourt and Mr. Fuller have been linked romantically.
Any 911 call makes no sense at all unless there was an ulterior motive which you can be assured will be fully explored."
It turns out that the Dodgers are in the name of Frank. This has caused Jamie to claim, in divorce papers that she has just filed, that they (Jamie and Frank) faced a "myriad of creditors" and for that reason certain assets were held solely by Frank -- notably the Dodgers.
Jamie says when she signed agreements giving away her rights to the Dodgers, she was not represented by legal counsel. Jamie demands that the court declare "that any purported capital Marital Property Agreements are null, void, and unenforceable."
Furthermore, Jamie says the homes she and Frank had were held by her solely -- not as community property.
In the docs, Jamie also adds, "Frank and I always considered the real estate to be our property -- just like the Dodgers."
One of Jamie McCourt's lawyers has issued a stern warning to her estranged husband Frank -- if the L.A. Dodgers owner doesn't play ball, "a lot will come out about the kind of person Frank McCourt is."
Frank's lawyers have not issued any statement as to what type of person Jamie might be.
In the divorce papers, Jamie cites the couple's net worth at $1.2 billion and estimates the value of the Dodgers, including the stadium and surrounding real estate, at $800 million. According to the filing, the couple separated just days after 4th of July fireworks, presumably after private fireworks, on July 6, just four months shy of what would have been their 30th anniversary.
One might say at this point to Jamie, welcome to the recession since she claims in her divorce papers that she is now unemployed.
But, rather than look to Presidnet Obama, a la Goldman Scahs, for a bailout, or apparently to the Pillsbury Doughboy, she will look to the courts and Frank.
She is asking the court to order Frank to pay her $320,967 per month in spousal support if she is reinstated as the Dodgers' chief executive and $487,634 per month if she is not.
She said she had been paid an annual salary of $2 million before her termination. She said she believed Frank received "in excess of $5 million to $6 million a year."
So Frank, indeed, as he promised to those investment bankers years back, had done it. He turned the Dodgers into his profitable enterprise.
But now Jamie is the worrier:
The McCourts purchased the club for $431 million in 2004, in a heavily leveraged deal that stirred concern among fans wondering whether the club could continue to afford to pay top dollar for top players.In the divorce papers, we also learn that on Sept. 18 Jamie filed a formal complaint with the Dodgers' general counsel about what she called "this workplace harassment." It is not stated whether she discussed this workplace harassment with the director of protocol.
In her filing, Jamie McCourt alleges Frank McCourt has not provided her with information about what she calls "efforts to obtain new financing for the Dodgers."
"I am concerned about his financial mismanagement of the Dodgers," she claims.
"Frank retaliated by firing me," she charged.
In her divorce filing she requests specifically:
- travel by private jet
- 5 star hotel accommodations
- travel expenses - Unlimited
- business dinners 5 nights per week
- business lunches 5 days per week
- parking spots at Dodger Stadium
- flowers in the office
- making Dodger Legends available for events without charge
- provision of Dodger autographed items as requested for use in business and charitable activities
- hair and makeup for Dodger events
- access to team doctors for McCourt family members
- access to the owner's suite for Dodger home games and non-baseball events at the stadium
- Tickets to All-Star games and playoff games -- even if the Dodgers aren't playing
- a pass to all National League games
Jamie lists her monthly living expenses at $488,928.
And there you have it, in the old days the bread winner would keep his company (wink wink) highly leveraged and the real money in Switzerland. The US gvt is slowly (no, rapidly) closing this route. And the Mafia, keeps it women out of the business loop. Frank obviously didn't take either of these routes.
Again, there's probably a moral or two to this story, but I will let each and everyone of you find your own, as will Frank and Jamie.
Bank of England Policymaker Warns of 'Double Dip' Recession
A key BOE policymaker believes the state of the banking system "bodes poorly for the sustainability of the coming economic recovery", and has cast doubt on whether the Bank's policy of quantitative easing has succeeded.
Adam Posen, the newest member of the Monetary Policy Committee, said yesterday: "The relative limits in the UK on availability of non-bank financing for smaller companies may constrain emergence of a sustainable private-sector led recovery."
Posen is correct the money that has been pumped into the system in the UK' just as in the US, has been directed very narrowly at the banking sector.
This is creating a distorted recovery that is about to end, for the US and UK.
Adam Posen, the newest member of the Monetary Policy Committee, said yesterday: "The relative limits in the UK on availability of non-bank financing for smaller companies may constrain emergence of a sustainable private-sector led recovery."
Posen is correct the money that has been pumped into the system in the UK' just as in the US, has been directed very narrowly at the banking sector.
This is creating a distorted recovery that is about to end, for the US and UK.
Shiller Warms About Up Housing Price Data
The gains in U.S. home prices in recent months may not be sustainable and increases in some areas of the country appear to be in "bubble territory," says Robert Shiller, creator of the Case-Shiller Home Price Index, which showed houses prices up rose by 1.2% in August.
Home prices in certain areas, such as Minneapolis and San Francisco, have risen by double-digits over a mere four months, and if viewed on an annualized basis, they look like they are in "bubble territory," Shiller said.
"It is a time of great uncertainty," he said.
I should add that Shiller isn't the only one to notice the spikes in San Francisco and Minneapolis housing prices. Brian Shelley emailed me this morning and said:
Home prices in certain areas, such as Minneapolis and San Francisco, have risen by double-digits over a mere four months, and if viewed on an annualized basis, they look like they are in "bubble territory," Shiller said.
"It is a time of great uncertainty," he said.
I should add that Shiller isn't the only one to notice the spikes in San Francisco and Minneapolis housing prices. Brian Shelley emailed me this morning and said:
What’s striking is the price rise in certain markets, namely San Francisco. In the non-seasonally adjusted numbers San Francisco has had a 12.5% increase in home prices over the last 5 months. Not annualized, actual rise. That’s a 33% annualized rate. You have to go back all the way to the tail end of the dot.com craze (2000) to find a 5 month period where the rise is faster. In Minneapolis it’s over 12% as well.
K Street Whore Trying to Teach Economics
That's what Congressman Alan Grayson (D-FL) says:
Update: Congressman Grayson was apparently referring to Linda Robertson who was hired by Fed Chairman Ben Bernanke this summer to help with congressional relations. Washington's K Street is known as the street from where lobbyists ply their trade.
According to the Huffington Post, In his radio remarks, Grayson never identified Robertson by name, saying he couldn't remember her name. But he made clear whom he was referring to from her background and job.
Update: Congressman Grayson was apparently referring to Linda Robertson who was hired by Fed Chairman Ben Bernanke this summer to help with congressional relations. Washington's K Street is known as the street from where lobbyists ply their trade.
According to the Huffington Post, In his radio remarks, Grayson never identified Robertson by name, saying he couldn't remember her name. But he made clear whom he was referring to from her background and job.
CNBC Viewership Plunges 50% In October
This ain't no Bull Market.
CNBC viewership goes up in Bull Markets.
Nielsen reported a 50% plunge in CNBC viewership in October year over year. The market uptick has been a dead cat bounce, and dead cats don't watch CNBC.
CNBC viewership goes up in Bull Markets.
Nielsen reported a 50% plunge in CNBC viewership in October year over year. The market uptick has been a dead cat bounce, and dead cats don't watch CNBC.
Fire Sale on Park Avenue
NYT explains:
Financial companies are trying to sublet space that they are no longer using in some of the most desirable office buildings in Midtown Manhattan, and the rents they are asking are heavily discounted compared with what landlords are seeking for similar space across the street — or even in the same buildings.There can be no signal as clear that commercial real estate is in trouble in NYC.
It started last fall, during the financial turmoil that was unleashed after Lehman Brothers collapsed. Many large financial companies dumped hundreds of thousands of square feet on the sublet market, with much of that space in prime Midtown locales near Grand Central Terminal, Rockefeller Center and the Plaza Hotel. Now, the sublet space that is still on the market is being offered at rents much lower than rents for space that can be leased directly from landlords in the same submarkets...
On average, the owners of Class A buildings in Midtown Manhattan are now asking $72.03 a square foot, compared with $55.68 for comparable sublet space, according to Cushman & Wakefield. So tenants willing to sublet can get a 22.7 percent discount in Midtown.
The discount was 12.6 percent a year ago. Last fall, landlords were asking $95.62 a square foot, on average, for Class A space in Midtown, while similar sublets went for $83.06.
The Resignation Letter of Foreign Service Officer Matthew Hoh...
is must reading.
According to WaPO, this is what they tried to do to stop his protest resignation against continued U.S. operations in Afghanistan:
(ViaKwiatkowski)
According to WaPO, this is what they tried to do to stop his protest resignation against continued U.S. operations in Afghanistan:
The reaction to Hoh's letter was immediate. Senior U.S. officials, concerned that they would lose an outstanding officer and perhaps gain a prominent critic, appealed to him to stay.
U.S. Ambassador Karl W. Eikenberry brought him to Kabul and offered him a job on his senior embassy staff. Hoh declined. From there, he was flown home for a face-to-face meeting with Richard C. Holbrooke, the administration's special representative for Afghanistan and Pakistan... While he did not share Hoh's view that the war "wasn't worth the fight," Holbrooke said, "I agreed with much of his analysis." He asked Hoh to join his team in Washington, saying that "if he really wanted to affect policy and help reduce the cost of the war on lives and treasure," why not be "inside the building, rather than outside, where you can get a lot of attention but you won't have the same political impact?"
Hoh accepted the argument and the job, but changed his mind a week later. "I recognize the career implications, but it wasn't the right thing to do," he said in an interview Friday, two days after his resignation became final.
(ViaKwiatkowski)
IRS Sets Up Special Unit to Traget Super-Rich
IRS Commissioner Doug Shulman told the American Institute of Certified Public Accountants Monday that the agency has set up a unit specifically to deal with rich Americans who are hiding assets.
"We will take a unified look at the entire web of business entities controlled by a high-wealth individual," Shulman said. "At least initially, we will be looking at individuals with tens of millions of dollars of assets or income."
"The high-wealth unit will focus on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals. While use of sophisticated legal structures are at times legal, there are other instances where they 'mask aggressive tax strategies,' he said."
This, of course, will mean going after Mark Cuban, Martha Stewart and the like. George Bush, Hank Paulson and Lloyd Blankfein will get a pass.
"We will take a unified look at the entire web of business entities controlled by a high-wealth individual," Shulman said. "At least initially, we will be looking at individuals with tens of millions of dollars of assets or income."
"The high-wealth unit will focus on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals. While use of sophisticated legal structures are at times legal, there are other instances where they 'mask aggressive tax strategies,' he said."
This, of course, will mean going after Mark Cuban, Martha Stewart and the like. George Bush, Hank Paulson and Lloyd Blankfein will get a pass.
Case-Shiller Shows House Price Advance
The market value of U.S. homes in 20 major cities rose by 1.2% in August compared with July, the fourth monthly increase in a row, according to the Case-Shiller home price index released today. Remember, this was done with temporary government support for the housing market through the Federal First-Time Buyer’s Tax Credit. It will be removed slowly or over-time
In August, prices rose in 17 of 20 cities. Only Charlotte, Cleveland and Las Vegas recorded month-to-month declines.
The figures are not seasonally adjusted. Prices typically rise in the summer months when demand is stronger.
Prices are down 29.3% from the peak.
In August, prices rose in 17 of 20 cities. Only Charlotte, Cleveland and Las Vegas recorded month-to-month declines.
The figures are not seasonally adjusted. Prices typically rise in the summer months when demand is stronger.
Prices are down 29.3% from the peak.
Consumer Confidence Skidded "Unexpectedly" During October
It was unexpected for mindless trend trackers, who have no theory behind their forecasts.
The Conference Board said its index of consumer attitudes slipped to 47.7 in October from a revised 53.4 in September, which was originally reported as 53.1.
Trend tracking analysts polled by Reuters had forecast a reading of 53.1. The index level is the weakest since July, when it stood at 47.4, according to the Conference Board.
The present situation component of the survey dipped to 20.7 in October from 23.0 the prior month — its lowest reading in 26 years.
The key to the economy continues to be money supply machinations by the Federal Reserve, and Bernanke hasn't printed any money since February. This means we are headed for a double dip recession.
The Conference Board said its index of consumer attitudes slipped to 47.7 in October from a revised 53.4 in September, which was originally reported as 53.1.
Trend tracking analysts polled by Reuters had forecast a reading of 53.1. The index level is the weakest since July, when it stood at 47.4, according to the Conference Board.
The present situation component of the survey dipped to 20.7 in October from 23.0 the prior month — its lowest reading in 26 years.
The key to the economy continues to be money supply machinations by the Federal Reserve, and Bernanke hasn't printed any money since February. This means we are headed for a double dip recession.
Tavakoli: Goldman's CFO Lied to the Public
Janet Tavakoli is the president of Tavakoli Structured Finance, a Chicago-based firm that provides consulting to financial institutions and institutional investors, among those who have sought her opinion on derivatives, Warren Buffett.
In an email to me, Janet writes:
UPDATE: Janet also notes that Stephen Friedman (board member of Goldman and former CEO), while Chairman of the Board of the NY Fed, purchased Goldman stock after the bailout was decided and before it was publicly announced
In an email to me, Janet writes:
It is a strong statement to say that a CFO lied to the public, and in my opinion, David Viniar, Goldman Sachs CFO, lied about Goldman’s exposure to AIG while the AIG bailout was in progress in September 2008. Viniar spoke about risk management, but that is a separate issue from whether or not Goldman Sachs would have money at risk due to its direct business with AIG. Goldman Sachs would have been out billions of dollars in collateral had a bankruptcy-like settlement been negotiated with AIG, and that is material.Which brings the following questions to the forefront: Why was former Goldman CEO Hank Paulson leading, or even involved in, the negotiations on the AIG bailout? Shouldn't he have recused himself? To make the outcome appear even more questionable, why was Lloyd Blanlfein, Goldman's chairman, at a key AIG government bailout meeting, when no other banking executives were atthe meeting? And, finally, why was Goldman paid in full on its derivatives exposure to AIG?
This is what David Viniar said during his Sept 16, 2008 investor conference call:
David Viniar - The Goldman Sachs Group, Inc. - EVP, CFO Sure. Without giving exact numbers, let me just tell you how we think about this. AIG and Lehman, big important financial institution counterparties to Goldman Sachs. We did and we do a lot of business with both of them, as we do with all other major financial institutions. The way we do business with financial institutions is by having appropriate daily margin terms. That is how we are able to do the volume of business with each other that we do. And that goes for AIG, Lehman, and also Morgan Stanley, and JPMorgan, and Citi, and UBS, and Credit Suisse. That is how we manage our risk. In addition to the margin terms, we augment our risk management with appropriate hedging strategies. You heard at the beginning of my remarks that we believe one of the biggest challenges we have is to avoid large concentrated exposures; and we took that very much into account in managing our credit exposures to Lehman and to AIG, as well as we do with any other financial institution. Given that, what I would tell you is given the outcome at Lehman and whatever the outcome at AIG, I would expect the direct impact of our credit exposure to both of them to be immaterial to our results.
UPDATE: Janet also notes that Stephen Friedman (board member of Goldman and former CEO), while Chairman of the Board of the NY Fed, purchased Goldman stock after the bailout was decided and before it was publicly announced
Fed Economist: "It Will Be Difficult for the Housing Market to Return to Normal"
The government, for all practical purposes, now controls the entire housing mortgage market.
A senior economist at the San Francisco Federal Reserve Bank, John Krainer, said in a report that that government sponsored enterprise intermediation of mortgage lending will make it difficult for the housing market to "return to normal."
Krainer said that GSEs such as Fannie Mae, Freddie Mac and Ginnie Mae now guarantee over 80% of originations, while non-agency mortgage securitization and loans have pretty much dried up.
A senior economist at the San Francisco Federal Reserve Bank, John Krainer, said in a report that that government sponsored enterprise intermediation of mortgage lending will make it difficult for the housing market to "return to normal."
Krainer said that GSEs such as Fannie Mae, Freddie Mac and Ginnie Mae now guarantee over 80% of originations, while non-agency mortgage securitization and loans have pretty much dried up.
Krainer wrote that the banking institution share of mortgage assets declined from 75 percent in the 1970s to 35 percent in 2008 due to the expansion of GSEs.
He added that the expansion of the GSEs has had a great impact on the type of borrowers receiving loans. Pointing to data in late 2006, at the end of the housing boom, Krainer said that about 20 percent of all mortgage originations were made up of subprime loans, and that by 2008, the subprime share was "effectively zero." This then yo-yo'd. The bankers moved out of this market, but the GSE's stepped in.
"Since then, increased FHA lending-identified here by Ginnie Mae's share-has revived this segment of the market," he added. "After plummeting in early 2008, the share of borrowers with FICO credit scores lower than 660 has returned to just higher than 20%, the same share as when subprime securitization peaked in 2006."
However, the collapse of nonconforming loan originations has had a particularly strong impact on the higher end of the market. The share of jumbo mortgages was nearly 9% at the peak in 2006. By the end of 2008, jumbo loans accounted for just 3% of new originations. Meanwhile, in another big shift, option ARMs made up about 6% of originations in the fourth quarter of 2006. By year-end 2008, option ARMs had vanished from the data set
Krainer concludes:
Mortgage originations have slowed considerably over the past two years. According to Federal Reserve flow of funds data, household net borrowing backed by home mortgages has fallen every quarter since the beginning of 2006, and is now negative for the first time since the 1970s. It is difficult to disentangle the role played by declining demand for mortgages from the declining supply of credit. Lender surveys, such as the Federal Reserve Senior Loan Officer Opinion Survey, have consistently reported that borrower demand has declined over the course of the recession. Credit supply problems, however, still appear to be a major problem affecting the housing market. With the vast majority of current mortgage lending now intermediated in some form by the GSEs, it will be difficult for the housing market to return to normal.Bottom line: I am not sure what Krainer considers as normal, but the Fed isn't printing money, which obviously cuts into the supply side of credit. Plus banks are too spooked to be lending what funds they do have, especially when the Fed is paying them interest to simply keep their reserves, risk-free, with the Fed. Further, with a continued high demand told hold cash, no one is rushing out to buy a home. Keep an eye on the household net borrowing backed by home mortgages, the overall housing market won't strengthen in earnest until that number does.
Fed: Ten Minus Seven Equals Negative Four
A former research economist at the Federal Reserve, William A. Barnett, is calling for an audit of the Fed and points to these, ahem, oddities, In NYT, he writes (ViaRM):
Then Barnett brings up the old problem of sweep accounts distorting money supply data:
Here's the chart:Consider the data the Fed presented last year on nonborrowed reserves. Nonborrowed reserves are total bank reserves minus money borrowed by banks and held as reserves. Clearly, the money borrowed cannot exceed the total reserves, so nonborrowed reserves should not be negative. Yet for a few months last year, the Fed reported banks’ nonborrowed reserves at billions of dollars below zero. In its calculations of nonborrowed reserves, the Fed included in borrowed reserves new forms of bank borrowing not being held as reserves. Such incompetent accounting would not survive an unconstrained, fully informed audit.
Then Barnett brings up the old problem of sweep accounts distorting money supply data:
The information the Fed releases on bank deposits is similarly biased and contaminates data on the money supply and thereby on the liquidity of the economy produced by Federal Reserve policy. In order to evade reserve requirements, which mandate that a certain fraction of deposits be held in reserve and not lent out, many banks sweep much of their checking account deposits into shadow money-market-deposit savings accounts before reporting those deposits to the Fed. Since such accounts have no reserve requirements, this allows the banks to decrease the amount of total reserves they’re required to have. But the liquidity provided to the economy from checking accounts is the pre-sweeps amount, not the reported post-sweeps amount.As Bob Murphy notes, during normal times, this second issue wouldn't be a major problem since what is important is growth rates and not absolute numbers. But, given the current financial crisis period, you need all the data to spot any quirky stuff that might be going.
Why does the Fed not require banks to go public with their real checking account deposit data? If the Fed doesn’t see it as a problem that banks evade reserve requirements on checking accounts, why doesn’t it just remove those requirements? Such evasion would be less likely to continue in the face of a comprehensive audit by the Government Accountability Office.
ClimaFearists Want to Cause Soaring Meat Prices
ClimaFearist Lord Nicholas Stern, a former chief economist of the World Bank and now I. G. Patel Professor of Economics at the London School of Economics, is to be feared. He is a ClimaFearist with clout.
He is leading a movemnet to, get this, ban meat to save the planet. Here's TimesOnline with details:
The UK Treasury, which commissioned the report, simultaneously published a document of favourable comments on the Review. Those quoted include, typical global interventionists, with no background in climatology:
Paul Wolfowitz, former President of the World Bank
Claude Mandil, Executive Director of the International Energy Agency
Kirit Parikh, Member, Planning Commission, Government of India
Adair Turner, Former Director of UK Confederation of British Industry and Economic Advisor to Sustainable Development Commission
Sir Rod Eddington, Adviser to the UK Government on the long term links between transport and economic growth, and former Chief Executive of British Airways
What's really behind it?
In an article in the Daily Telegraph, Ruth Lea, Director of the Centre for Policy Studies, questioned the scientific consensus that the Stern Review alleges. She says that "authorities on climate science say that the climate system is far too complex for modest reductions in one of the thousands of factors involved in climate change (i.e., carbon emissions) to have a predictable effect in magnitude, or even direction." Lea questions the long-term economic projections made in the Review, commenting that economic forecasts for just two or three years ahead are usually wrong. Lea goes on to describes the problem of drawing conclusions from combining scientific and economic models as "monumentally complex", and doubts whether the international cooperation on climate change, as argued for in the Review, is really possible. In conclusion, Lea says that the real motive behind the Review is to justify increased tax on fuels.
He is leading a movemnet to, get this, ban meat to save the planet. Here's TimesOnline with details:
People will need to consider turning vegetarian if the world is to conquerclimate change, according to a leading authority on global warming.The Stern Review on the Economics of Climate Change is a 700-page report released on October 30, 2006 by Stern for the British government.
Inan interview with The Times, Lord Stern of Brentford said: “Meat is a wasteful use of water and creates a lot of greenhouse gases. It puts enormous pressure on the world’s resources. A vegetarian diet is better.”
Direct emissions of methane from cows and pigs is a significant source of greenhouse
gases [Greenhouse gases, loaded term? RW]...
Lord Stern, the author of the influential 2006 Stern Review on the cost of tackling global warming, said that a successful deal at the Climate Change Conference in Copenhagen in December would lead to soaring costs for meat and other foods that generate large quantities of greenhouse gases.
The UK Treasury, which commissioned the report, simultaneously published a document of favourable comments on the Review. Those quoted include, typical global interventionists, with no background in climatology:
Paul Wolfowitz, former President of the World Bank
Claude Mandil, Executive Director of the International Energy Agency
Kirit Parikh, Member, Planning Commission, Government of India
Adair Turner, Former Director of UK Confederation of British Industry and Economic Advisor to Sustainable Development Commission
Sir Rod Eddington, Adviser to the UK Government on the long term links between transport and economic growth, and former Chief Executive of British Airways
What's really behind it?
In an article in the Daily Telegraph, Ruth Lea, Director of the Centre for Policy Studies, questioned the scientific consensus that the Stern Review alleges. She says that "authorities on climate science say that the climate system is far too complex for modest reductions in one of the thousands of factors involved in climate change (i.e., carbon emissions) to have a predictable effect in magnitude, or even direction." Lea questions the long-term economic projections made in the Review, commenting that economic forecasts for just two or three years ahead are usually wrong. Lea goes on to describes the problem of drawing conclusions from combining scientific and economic models as "monumentally complex", and doubts whether the international cooperation on climate change, as argued for in the Review, is really possible. In conclusion, Lea says that the real motive behind the Review is to justify increased tax on fuels.
Political Uncertainty Puts Freeze on Small Businesses...
says WSJ.
No kidding.
WSJ continues:
A significant part of the lingering Great Depression was government messing with wage laws. Messing with businesses will make things even worse. It will not only impact laborers, but damage the businesses themselves to a greater extent than possibly the Great Depression.
No kidding.
WSJ continues:
The real problem is that once the rules and regulations are outlined, it isn't going to help because it will simply make it a very hostile environment for businesses to operate.
The economy remains unsteady 22 months after the recession began, with banks restricting credit and consumers hunkering down. For these small businesses, and many others across the country, there's an additional dark cloud: uncertainty created by Washington's bid to reorganize a wide swath of the U.S. economy.
The economic contraction is of course the prime force driving companies to lay off workers. But a health-care overhaul grinding through Congress could bring unknown new obligations to insure employees. Bush-era tax cuts are set to end next year, and their fate is unclear. Legislation aimed at tackling climate change might raise businesses' energy costs...
Many companies say they have responded by freezing hiring, cutting benefits and delaying expansion plans. With at least 60% of job growth historically coming out of the small-business sector, according to the government's Small Business Administration, that kind of inertia could impede an economic recovery.
A significant part of the lingering Great Depression was government messing with wage laws. Messing with businesses will make things even worse. It will not only impact laborers, but damage the businesses themselves to a greater extent than possibly the Great Depression.
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