Sunday, October 31, 2010

Murphy in Training for the Big Murphy-Krugman Debate

Economist Robert Murphy has challenged Paul Krugman to debate on the topic of Austrian economics. Krugman has said many nasty things about Austrians. On behalf of all Austrian economists and students, Murphy is challenging Krugman to a debate, to shut Krugman up once and for all. Read here for the clever way Murphy plans to shame Krugman into debating.

Below is a clip of Murphy in training for the debate.

Bozo Broder: Attack Iran to Boost Economy and Obama

If you don't think mainstream media is unhinged, you have to read today's column by Washington Post columnist David Broder.

Broder is a Pulitzer Prize-winning journalist and writes a twice-a-week column for WaPo. Depauw University has called him:
one of the nation's most distinguished writers and television commentators. An American University survey of the Washington press corps concluded “David Broder's integrity and hard work have led him to be anointed the unofficial ‘chairman of the board' by national political writers.” US News & World Report called Broder "the unchallenged 'dean' of what many political reporters like to think is their 'priesthood.'
According to Jamisom Foser, Broder:
has been named "Best Newspaper Political Reporter" by the Washington Journalism Review, and ranked as "Washington's most highly regarded columnist" by editorial page editors and by members of Congress in a Washingtonian magazine survey.
So what is this high priest of DC journalists up to these days? Here he is his latest thinking in his own words:
With strong Republican support in Congress for challenging Iran's ambition to become a nuclear power, [Obama] can spend much of 2011 and 2012 orchestrating a showdown with the mullahs. This will help him politically because the opposition party will be urging him on. And as tensions rise and we accelerate preparations for war, the economy will improve.
How does he reach this conclusion? By a serious comments that indicate he is totally clueless about economics and history.

He writes:
Can Obama harness the forces that might spur new growth? This is the key question for the next two years.

What are those forces? Essentially, there are two. One is the power of the business cycle, the tidal force that throughout history has dictated when the economy expands and when it contracts.

Economists struggle to analyze this, but they almost inevitably conclude that it cannot be rushed and almost resists political command. As the saying goes, the market will go where it is going to go.

In this regard, Obama has no advantage over any other pol. Even in analyzing the tidal force correctly, he cannot control it.
Broder is simply clueless here about the business cycle. The BC is not some recurring "historical" force that can not be tamed. The BC is about central banks manipulating the money supply, which causes the boom bust cycle. (See Rothbard: The Mystery of Banking)

Far from a pol not being able to do anything about the BC, a pol, such as the president, can stop the damn thing by stopping Fed money printing.

Broder goes on:
What else might affect the economy? The answer is obvious, but its implications are frightening. War and peace influence the economy.

Look back at FDR and the Great Depression. What finally resolved that economic crisis? World War II.
Economists Robert Murphy and Robert Higgs have taken turns demolishing  this myth. Listen to Higgs important discussion of the matter, here.  During the recent Murphy-Wenzel Seminars in Boston, Murphy broke more ground about the truth behind supposed boom during World War 2. Murphy pointed out that the GDP numbers for the World War 2 period are useless because they weren't properly adjusted for inflation because of  price controls. Murphy stated that measured price inflation was much lower than it really should have been because of price controls, and this distorted GDP.

And, of course, as economist Joseph Stiglitz has pointed out, GDP doesn't measure "happiness."

It's impossible to quantitatively measure happiness the way Stiglitz would like to, but one can guess for many who get killed, or seriously injured,in a war that it is probably not their happiest moment.

Thus, GDP, during a war, may measure some bizarre positive for government statisticians and bozos like Broder, who buy into the BS, but war periods are not very happy times for those who die, are injured, and neither is it for the wives, parents, children and friends of those whose life has been twisted or ended by a bullet or some other material of death that curiously does get recorded into GDP as a positive.

If Broder thinks the stats that measure the value of a bullet as a positive, but fail to subtract the loss of life is the type of stat to be waved around as justification to start a war, what can one say other than the man is a total ass.

HOT: Iran has Switched 15% of Its FX Reserves Into Gold

Iran has switched some 15 percent of its foreign exchange reserves into gold and will not need to import the metal for the next ten years, Mehr, the state-run news agency said reported, citing Central Bank Governor Mahmoud Bahmani.

Iran’s gold reserves have “multiplied several times” in the past two years, Gov. Bahmani said in a report published late yesterday by Mehr and reported by Bloomberg.
Bahmani gave no specific figures, only saying the country consumes 30 tons of gold a year and that the central bank will have “ample supplies for the next 10 years” even if it doesn’t increase its gold holdings further.

Iranian President Mahmoud Ahmadinejad said yesterday his country’s foreign exchange reserves exceed $100 billion.

Top Ten

Below are the Top Ten most viewed EPJ posts for the week ending Saturday October 30, 2010.

#1 The Naked Body Scanners and the Military Industrial Complex

#2 Cato: Bernanke is Not Printing Enough Money

#3 The Government Pulls a Bernie Madoff on Social Security and Lays Out the Sad Truth
#4 Bernanke Tells the Truth: The United States is on the Brink of Financial Disaster (3rd week on list)

#5  Inside a SubPrime Mortgage Boiler Room

#6 Volcker Disses Hayek (and The Road to Serfdom)

#7 What Would Ludwig von Mises Do?

#8 Why California is About to Fall Off Into an Ocean of Unpayable Debt (2nd week on list)

#9 Nightmare Government Bookeeping Rules Coming for Even the Tiniest of Businesses  (2nd week on list)

#10 Stunning Chart: The Real State of Inflation

Now They Tell Us (The Truth about Greenspan)


“For a long time, Alan Greenspan’s pronouncements were viewed in Congress and elsewhere as if orchestrated on Mount Sinai, and there seems a consensus now is that this was a mistake,” said Bernard Shull of Hunter College in New York.

Of course, anyone reading Murray Rothbard, would have known this more than 20 years ago. Rothbard wrote in 1987:

The press is resounding with acclaim for the accession to Power of Alan Greenspan as chairman of the Fed; economists from right, left, and center weigh in with hosannas for Alan's greatness, acumen, and unparalleled insights into the "numbers."...The astute observer might feel that anyone accorded such unanimous applause from the Establishment couldn't be all good, and in this case he would be right on the mark...

I found particularly remarkable the recent statements in the press that Greenspan's economic consulting firm of Townsend- Greenspan might go under, because it turns out that what the firm really sells is not its econometric forecasting models, or its famous numbers, but Greenspan himself, and his gift for saying absolutely nothing at great length and in rococo syntax with no clearcut position of any kind.

Kentucky Students Pick Rand Paul

Kentucky elementary, middle and high school students have picked Republican Rand Paul for U.S. Senate, according to the results of mock elections conducted in schools across the state during the past two months.

Paul defeated Democrat Jack Conway by 4.4 points, 52.2 to 47.8 percent. More than 37,000 students cast ballots in more than 100 schools.

This was the seventh year for the mock elections; the students have a track record of picking the eventual winner 83 percent of the time.

Meanwhile, former president Bill Clinton will be in Louisville on Monday to stump for Conway, who is trailing in polls by 5 points plus.

US Mint Sales: Bullion Gold Coins Climb

To date, one-ounce bullion Gold Eagle coins sales at the U.S. Mint have climbed by 21,500 for the month of October versus September.

October sales month-to-date (ending 10-27)  are at 86,500 which is already higher than totals from each of the last two months.

Saturday, October 30, 2010

The Truth about Inflation, Government Debt and Keynesianism

Scott Grannis writes:
The GDP deflator is the broadest measure of inflation, and with the release today of Q3 GDP statistics, we see that the deflator has been rising at just over a 2% annualized rate for the past two quarters. The deflator dipped into deflationary territory in Q4/08 (-1.2%) and again in Q4/09 (just barely, -0.3%), but it's been positive for the past three quarters. If we take recent Fed pronouncements at face value (i.e., inflation is unacceptable if it's less than 2%), then a 2% pace for the GDP deflator is close enough to perfection for government work. The time for stimulus has come and gone.
The deflator is a very sophisticated indication of inflation. Many economists, including Bernanke, watch the number very closely.

So what is going on? Why is Bernanke saying he needs to fight deflation? I think the deflation concern is cover. He is really concerned about the outstanding debt (and more on the way) at federal, state and local governments. His October 4 speech lays it all out:
Today I have highlighted our nation's fiscal challenges. In the past few years, the recession and the financial crisis, along with the policy actions taken to buffer their effects, have eroded our fiscal situation. An improving economy should reduce near-term deficits, but our public finances are nevertheless on an unsustainable path in the longer term, reflecting in large part our aging population and the continual rise in health-care costs. We should not underestimate these fiscal challenges; failing to respond to them would endanger our economic future.
By printing money he is decreasing the value of the dollar and making it easier for governments at all levels to pay off their debt in cheap dollars.

Grannis also notes that any honest Keynesian must admit that Keynesianism is once again destroyed because of reality contradicting Keynesian theory:

It's also very important to note that inflation has turned positive despite the fact that the economy remains far below it's "full employment" level, with tons of "idle capacity." According to Phillips Curve dogma, which permeates Fed thinking, this is not supposed to happen. With the economy suffering from so much "slack," inflation pressures should be virtually nonexistent or most likely negative. This is the thinking that has propelled the Fed to the cusp of QE2: they feel they have to pump up demand or face some serious deflation. Well, so far it's not working out that way. That's one more reason why QE2 is unnecessary—the Phillips Curve theory does not adequately explain how inflation works.

Books Received

In publishers never ending attempt to get EPJ readers to buy the books they have published, in the mail recently I have received:

The New Job Security (Revised) by Pam Lassiter-I only quickly glanced at this book, but it looks like a decent analysis on how to find a job. And the book appears to be very creative in suggesting job finding methods that go way beyond simply mailing out a resume.

The paperback edition of The Dollar Meltdown was actually sent to me by its author, Charles Goyette. The book was an NYT bestseller. I haven't read the book, but the idea of the book is to explain the current crisis and give advice on how to protect your investments. A quick glance gives me the impression that it's on the right track. Both Ludwig von Mises and Murray Rothbard are quoted. Further the book is endorsed by Jim Rogers, Ron Paul and Lew Rockwell. Those are just about the three best endorsements you can get on an investment/economics book.

Another Sign that Inflation at the Retail Level is About to Hit

NyPo reports:
A new worry has emerged for cash-strapped shoppers: higher clothing prices.

That's right, on top of a shaky job market, high unemployment and little wage growth, consumers may soon be forced to dig deeper when clothes shopping.

The bad news bombshell was dropped yesterday by Jones Group -- the New York-based apparel company that makes department-store staples like Nine West and Anne Klein -- which warned that the rising cost of manufacturing, shipping and raw materials, like cotton, is squeezing margins, and that retailers will likely be forced to raise prices to shore up profits.
Cotton prices are up more than 64%, this year---before Bernanke starts QE2!

Geithner in Japan This Coming Week

The Treasury Department today announced that Treasury Secretary Tim Geithner will travel to Asia and the Middle East from November 4 – November 12, 2010. The Secretary will attend the Asia-Pacific Economic Cooperation (APEC) Meeting of Finance Ministers November 5-6, 2010 in Kyoto, Japan.

From there, he will travel to India to join President Obama in Delhi. Secretary Geithner will also visit Abu Dhabi in the United Arab Emirates and Singapore before joining the President in Seoul, Korea for the G-20 Summit.

Friday, October 29, 2010

Knives Coming Out Against Elizabeth Warren

Alternet reports:
After several weeks of officially pleasant interactions, signs are emerging that the Treasury Department’s knives may be coming out against Elizabeth Warren. In recent weeks, Treasury officials have leaked details about Warren to Politico as part of what appears to be an effort to paint her as some kind of prima donna.
After several weeks of officially pleasant interactions, signs are emerging that the Treasury Department’s knives may be coming out against Elizabeth Warren. In recent weeks, Treasury officials have leaked details about Warren to Politico as part of what appears to be an effort to paint her as some kind of prima donna. These relatively silly stories raise troubling questions, however, about what Treasury officials may be leaking with fewer fingerprints and greater ramifications.

The Politico pieces have been petty, but there’s no doubt they both came from Treasury. On Oct. 12, Politico ran a piece featuring this anonymous nugget (among others):

Some at Treasury grumble that Warren, in her early memos, spent much time detailing what press she was going to do . . . rather than the nuts and bolts of setting up an agency.
Then yesterday, in Politico’s Morning Money column:

NEW PAINT JOB – We also hear that while Warren is out west, her Treasury office is getting a makeover (Warren will have digs both at Treasury and the CFPB’s L Street headquarters). That’s something of a rarity for Treasury officials, who usually leave their offices as-is. There is much internal debate as to exactly what color it is that is going up on Warren’s walls. One person called it “Arizona sunset,” another “terra cotta.”
Both of these represent the kind of meaningless, issue-free pseudo-news that serves as Politico’s bread-and-butter

Why Robert Reich Fears the Tea Party

The Tea Party, one must say, is a mixed (tea) bag.

Parts of the group have been co-opted by the neo-cons, others, like Rand Paul, get it and will agitate for less government day in and day out.

Robert Reich knows that it is the Rand Paul flavor of  tea that needs to be feared. In an op-ed in today's WSJ, he writes that business should fear the Tea Party. What he really means is that the parts of big business, which are in bed with government, need to fear the Rand Paul led part of the Tea Party:

Even if it's now on the fringe, the tea party won't be for long. By fueling the Republican surge in the midterm elections, the tea party has become the single most powerful force in the GOP...

Beyond fiscal rectitude and less spending, tea party candidates are targeting the central institutions of American government. The GOP Senate candidate from Kentucky, Rand Paul, is among several who want to abolish the Federal Reserve. They blame the Fed for creating the Great Recession and believe that the economy would be better off without a single institution in Washington setting monetary policy. Even Maine's stolid Republican Party, now under tea party sway, has called for eliminating the Fed. In a Bloomberg poll a few weeks ago, 60% of tea party adherents wanted to overhaul or abolish the Fed (compared with 45% of all likely voters).

Another tea party target is the Internal Revenue Service. South Carolina Sen. Jim DeMint, who has emerged as the Senate's leading tea party incumbent, says that his "main goal in the Senate will not only be to cut taxes, but to get rid of the IRS." Mr. DeMint's goal is echoed by many tea party candidates, including Arkansas Rep. John Boozman, now running for Senate.
Here's a real hoot from Reich, where he gives it away that what big business really needs to fear is they might lose some of their handouts:

At the least, business leaders who complain about uncertainties caused by Mr. Obama's policies might be concerned. John Castellani, the former head of the Business Roundtable who is now running the Pharmaceutical Research and Manufacturers of America, told Bloomberg Businessweek this month, with remarkable understatement, "This kind of extremism makes it much harder to plan from a business perspective."

GE's Mr. Immelt may be unhappy with President Obama, but he'll be far unhappier if the tea party takes over the GOP. Tom Borelli, director of the Free Enterprise Project of the National Center for Public Policy Research, a conservative think tank and vocal supporter of the tea party movement, has demanded Mr. Immelt's resignation, calling GE an "opportunistic parasite feeding on the expansion of government." Among Mr. Immelt's alleged sins: taking federal subsidies for clean energy. In a press release last week, the National Center for Public Policy Research stated clearly: "Liberal CEOs are the next target for tea party activism."

Tea partiers aren't just against R&D subsidies. Almost two-thirds of tea partiers in the Bloomberg poll said they'd be willing to reduce research funds for Alzheimer's and other diseases to narrow the deficit; a similar proportion would consider cutting spending on roads and bridges.

Wall Street may be furious with the Obama administration but at least Mr. Obama (and his predecessor) bailed it out. By contrast, tea party activists consider the Troubled Asset Relief Program a betrayal of America. In the Bloomberg poll, nearly 70% of tea partiers said that they're less likely to support a candidate who voted for the bank rescue.

Underlying all of this is a deep tea party suspicion that big government is in cahoots with big business and Wall Street, against the rest of America. This has been the conventional view among leftist conspiracy theorists for years but it's now emerging full-throttle on the right.
If you follow Reich closely, as I do, you realize that he is clueless as far as economics, but he is a very savvy political observer.

He suspects the Tea Party will be trouble for big government types, and he's scared. However, it remains to be seen how co-opted various Tea Party "members" will become. Let's hope Reich's instincts on this are correct and that they do cause major problems for the big government-big business alliance.

EU Inflation at 23 Month High

Annual consumer price inflation in the Eurozone  hit 1.9% in October, its highest level in 23 months, Eurostat reported today, citing preliminary estimates.

A more detailed breakdown will not be available until November 16.

This climb is despite the fact that the eoro has gained over 17% against the dollar since July.

Clearly, we are experiencing global inflation, partially the result of increasing demand from China. This should be another warning to Bernanke that he will be driving his inflation ship, the QE2, into very deep and global price inflationary activity.

Volcker Disses Hayek (and The Road to Serfdom)

During an interview with SmartMoney at WSJ, former Fed chairman Paul Volcker swatted away the warnings of Friedrich Hayek about the dangers of expanding regulation, like the warnings were just an annoying fly. Here's the exchange:
SM: And right now government agencies are expanding. The economist Friedrich Hayek warns of tyranny when the government controls economic decision making.

PV: Obviously, government should get more involved in the regulatory side than we have been in the last two decades. The government has a role in health care—we just had a big political fight about it. I don’t think people are ready to give up Social Security, Medicare or defense.

SM: Weigh in on the debate.

PV: I’m not in favor of big government by and large. I picked up Hayek’s The Road to Serfdom the other day, and it seemed less relevant than in 1945 [when it was published]. He wrote at a time when communism was a prime threat and socialism an existential ideal. We still have too much government interference, but we don’t have the communist bear looming down on us.
Like Alan Greenspan, Volcker seems to be one of those who is "theoretically" anti-big government, but when the marching orders come from his controls (Hint: His office is in the very high rent Rockefeller Center in NYC), he stays in hop-skip with the rest of them.

It is stunning that he doesn't get the general principles that Hayek discussed in The Road to Serfdom and that he doesn't understand their importance relative to today's growing government.

He also established his Keynesian credentials during the interview:

SmartMoney: You aren’t overly concerned by deflation.

Paul Volcker: No, I am not. It’s a difficult balancing question now. We are way below full employment. The immediate outlook is for extremely sluggish growth. It’s not the time to take strongly restrictive measures. But we do have to do so over time, or eventually we will be up to our necks in red ink. That’s the lesson, not just for the federal government but for state governments as well.
Again in "theory" he is against "red ink", but not right now.

Vicious Anti-Rand Paul Ad

Rand Paul is way ahead in the race for U.S. Senate in Kentucky, so the Democrats are in severe panic mode. As any one who has looked at the issues, and the views of the candidates, knows, Rand is a very strong libertarian. When elected he will be the most libertarian member of the Senate.

Yet, the Democrats are trying to portray him as stomping on people's rights and use a clip of a crowd member that has nothing to do with Paul's thinking. (Gawker calls the ad "vicious" ) Actually in real life, I would take this foot stomping once a year, if it meant lower taxes, a less intrusive TSA, SEC, FAA, FDA, FCC etc.

 Actually in real life, I would take this foot stomping once a year, if it meant lower taxes, a less intrusive TSA, SEC, FAA, FDA,  FCC etc.

UPDATE: Posted in the comments. What really caused the "stomping" incident:

Sickening new lows they've sunk down to! She tried to assault Rand with her sign just before this happened too!

Heavy Global Plotting for Geithner Today

On Friday morning, Treasury Secretary Geithner will meet at Treasury with European Commissioner Michel Barnier to discuss their continued efforts to "cooperate closely in strengthening the global financial system" and in putting in place the G-20 financial reform agenda.

Thursday, October 28, 2010

The Spies of Wall Street: Carney and Kelly

John Carney tweets:

carney Yesterday I spied on a UBS client presentation on economics and politics. Steve Schwarzman was there.

Joe Weisenthal writes up spy Kate Kelly:

Bravo To CNBC's Kate Kelly!

The Clueless BLS

The Bureau of Labor Statistics keeps a lot of data, but according to the Huffington Post, they don't know how many people still can't find work after running out of unemployment benefits:

How many people can't find work after nearly two years of searching? How many 99ers are there?

Nobody even knows.
The Department of Labor told HuffPost that it does not have the micro-level or individual claimant data to make an accurate estimate. With federally-funded extended benefits broken into four "tiers," the different number of weeks available in different states, and individual workers' potential stops and starts -- not to mention the congressional lapses in federal benefits -- nobody has figured out a reliable way to track the people who've used 99 weeks of benefits and still haven't found work.

What Would Ludwig von Mises Do?

Earlier this week, we had the Cato Institute calling for more inflation based on the arguments of Milton Friedman. Today, WSJ asks, What Would Milton Friedman Do?  Their conclusion:
Friedman would have scoffed at the notion that the Fed is out of ammunition. He believed in the potency of "quantitative easing," or QE—printing money to buy bonds.

"The Bank of Japan can buy government bonds on the open market…" he wrote in 1998. "Most of the proceeds will end up in commercial banks, adding to their reserves and enabling them to expand…loans and open-market purchases. But whether they do so or not, the money supply will increase…. Higher money supply growth would have the same effect as always. After a year or so, the economy will expand more rapidly; output will grow, and after another delay, inflation will increase moderately."...The Friedman logic...makes the case for QE2.
This is all true, the public generally doesn't understand that Friedman was an inflationist.

So have there ever been any true inflation fighters? Not many, but a few. Murray Rothbard comes to mind and his great teacher, Ludwig von Mises.

Let's take a look at how Mises might view the current situation.

First, Mises, unlike Friedman and current Fed chairman Ben Bernanke, understood that the printing of money distorts the structure of the economy, In his magnum opus Human Action (first published in 1949 by Yale University Press), he writes:

The notion of "normal" credit expansion is absurd. Issuance of additional fiduciary media, no matter what its quantity may be, always sets in motion those changes in the price structure the description of which is the task of the theory of the trade cycle...banks and the monetary authorities are guided by the idea that the height of interest rates as the free loan market determines it is an evil, that it is the objective of a good economic policy to lower it, and that credit expansion is an appropriate means of achieving this end without harm to anybody but parasitic moneylenders. It is this infatuation that causes them to embark upon ventures which must finally bring about the slump...The objective of credit expansion is to favor the interests of some groups of the population at the expense of others.

Ludwig von Mises

Mises taught us that it was the money manipulated boom that plants the seeds of the downturn, and he understood the damage it does to a society. The real estate boom and bust and the current chaos would not have surprised him:
The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration.
Yet, he wouldn't be surprised that under these conditions, which show the damage that inflation does, organizations like Cato and WSJ would call for more inflation:
Many governments, universities, and institutes of economic research lavishly subsidize publications whose main purpose is to praise the blessings of unbridled credit expansion and to slander all opponents as ill intentioned advocates of the selfish interests of usurers.
So what would Mises do, under current circumstances? This clear writer left us a full blueprint (in 1949!) of what he would do, and also warned us about the inflation advocates such as Cato, Friedman, Berrnanke, Krugman, Mankiw and WSJ:
Out of the collapse of the boom there is only one way back to a state of affairs in which progressive accumulation of capital safeguards a steady improvement of material well-being: new saving must accumulate the capital goods needed for a harmonious equipment of all branches of production with the capital required. One must provide the capital goods lacking in those branches which were unduly neglected in the boom. Wage rates must drop; people must restrict their consumption temporarily until the capital wasted by malinvestment is restored. Those who dislike these hardships of the readjustment period must abstain in time from credit expansion.

There is no use in interfering by means of a new credit expansion with the process of readjustment. This would at best only interrupt, disturb, and prolong the curative process of the depression, if not bring about a new boom with all its inevitable consequences.

...the chief objective of present-day government interference is to intensify further credit expansion. This policy is doomed to failure. Sooner or later it must result in a catastrophe... Continued inflation must finally end in the crack-up boom, the complete breakdown of the currency system.

Tomorrow is the Big Day....

for the Murphy Wenzel Seminars in Boston. This is your last chance to buy tickets online at a discount. Regular prices will apply for anyone buying at the door.
The seminars will take place at the famous Omni Boston Parker House Hotel
In Boston: The Murphy-Wenzel Seminars

Good news! We now have finalized the location for the Murphy-Wenzel Seminars.

The seminars will be held in dowtown Boston at the historic Omni Boston Parker House Hotel. It's located at 60 School St (at the corner of Tremont). Although meals are not included in the price of the seminars, you will be able to order from the full menu of the famous Parker's Restaurant.

If you don't live in Boston, consider coming in for the weekend. Boston is beautiful this time of year and the hotel is in the middle of everything. It is near Beacon Hill, the Freedom Trail and not far from Paul Revere's House and Harvard Square. The hotel offers a number of special packages. You can call them at (617) 227-8600.


Fate is pushing both Robert Murphy and Robert Wenzel into Boston on Friday, October 29.

They have decided to take advantage of this alignment of the stars and heavens to hold two seminars on the date at the Omni Boston Parker House:

A lunch seminar from noon to 2:00 PM

and an

Evening seminar from 7:00 to 9:00 PM

Robert Wenzel during the lunch seminar will discuss the Austrian Business Cycle Theory, with particular emphasis on how it should be used by investors and businessmen.

During the lunch seminar, Robert Murphy will provide you with five reasons why investors should study the Austrian economists, not the Keynesians

At the evening seminar, Robert Wenzel will discuss how to talk code like the elites, so that you can get what you want, get around regulations, and at the same time stay out of trouble with the authorities. He will use real life examples of techniques he and acquaintances have used to achieve remarkable goals while others have been suffocated by regulations. This speech should be heard by all, from students, to businessmen, to investors. It will most assuredly help you lead a more enjoyable, less stressful life, while staying out of trouble.

Robert Murphy will discuss the the Great Depression and it's relation to today's economy

The fee for the Lunch Seminar is $30.00, but if you order now the price is reduced by 20% to $24.00.

The fee for the Evening Seminar is the same, $30.00, but if you order now the price is reduced by 20% to $24.00.

Attend both seminars for the further reduced price of $32.00.

To order the Lunch Seminar click here.

To order the Evening Seminar click here.

To order the combination package and attend both seminars click here.

Murphy adds:

In addition to the above public seminars, Wenzel is available for reduced rate private consultations (Must be booked in advance). Contact him for details.

And on Friday night, Murphy is available for karaoke requests. 2-drink minimum.

Gold vs. the Fed: The Record Is Clear

By Charles W. Kadlec

When it meets next week, the Federal Open Market Committee (FOMC) is widely expected to signal its desire to increase the rate of inflation by providing additional monetary stimulus. This policy is based on a false—and dangerous—premise: that manipulating the dollar's buying power will lead to higher employment and economic growth. But the experience of the past 40 years points to the opposite conclusion: that guaranteeing a stable value for the dollar by restoring dollar-gold convertibility would be the surest way for the Federal Reserve to achieve its dual mandate of maximum employment and price stability.

From 1947 through 1967, the year before the U.S. began to weasel out of its commitment to dollar-gold convertibility, unemployment averaged only 4.7% and never rose above 7%. Real growth averaged 4% a year. Low unemployment and high growth coincided with low inflation. During the 21 years ending in 1967, consumer-price inflation averaged just 1.9% a year. Interest rates, too, were low and stable—the yield on triple-A corporate bonds averaged less than 4% and never rose above 6%.

What's happened since 1971, when President Nixon formally broke the link between the dollar and gold? Higher average unemployment, slower growth, greater instability and a decline in the economy's resilience. For the period 1971 through 2009, unemployment averaged 6.2%, a full 1.5 percentage points above the 1947-67 average, and real growth rates averaged less than 3%. We have since experienced the three worst recessions since the end of World War II, with the unemployment rate averaging 8.5% in 1975, 9.7% in 1982, and above 9.5% for the past 14 months. During these 39 years in which the Fed was free to manipulate the value of the dollar, the consumer-price index rose, on average, 4.4% a year. That means that a dollar today buys only about one-sixth of the consumer goods it purchased in 1971.

Interest rates, too, have been high and highly volatile, with the yield on triple-A corporate bonds averaging more than 8% and, until 2003, never falling below 6%. High and highly volatile interest rates are symptomatic of the monetary uncertainty that has reduced the economy's ability to recover from external shocks and led directly to one financial crisis after another. During these four decades of discretionary monetary policies, the world suffered no fewer than 10 major financial crises, beginning with the oil crisis of 1973 and culminating in the financial crisis of 2008-09, and now the sovereign debt crisis and potential currency war of 2010. There were no world-wide financial crises of similar magnitude between 1947 and 1971.

Read the rest here.

It Definitely Was Comedy

President Obama taping an appearance on Jon Stewart's Daily Show told Stewart that Larry Summers,  the outgoing director of the White House National Economic Council, did “a heckuva job".

German Unemployment and Its Ramifications for the EU

In Germany, October unemployment will come in under the 3 million mark, according to Germany’s labor minister,Ursula von der Leyen .

It will mean the jobless rate was unchanged at 7.5%. This will be the first time in 18 years that German unemployment will be under 3 million.
With unemployment somewhat under control, there will be few calls out of Germany for an expansionary ECB monetary policy. In other words, Germany will not be in favor of debasing the euro, which is the only chance the PIIGS would have to pay off their outsized debt cheaply.

It may take sometime, but most of the PIIGS will likely default. Greece most likely will be first.

Wednesday, October 27, 2010

Another Meeting for Geithner with "Business Leaders"

On Thursday afternoon, Treasury Secretary Geithner will attend the President’s Economic Daily Briefing at the White House.

In the evening, the Secretary will host business leaders for a discussion on "the state of the economy, jobs, trade, U.S. competitiveness and the Administration’s proposal for infrastructure investment."

Animated Charlie Sheen

Charlie Sheen, the co-star in the original Wall Street movie had a tough night last night. Here's an animated play-by-play.

According to NyPo:
The mystery woman who locked herself naked in a Plaza hotel bathroom during bad-boy actor Charlie Sheen’s coke-fueled frenzy was identified as a smokin’ hot porn star from New York City...,Erotic actress Capri Anderson ..

The 22-year-old Anderson...angrily denied the assertion by law-enforcement sources that she’s a hooker.

Anderson "is adamant she’s NOT a working girl," reported TMZ.
People who know these things tell me that Sheen's monthly American Express bill is regularly one of the largest the company processes. We're talking six figures--every month.

His modus operandi with women when he is in Beverly Hills is to invite more than one to his place, after the first one shows up he locks his gate and door, and the others end up locked out.

Harry Reid Behind with Likely Voters

CNN-Time Magazine is reporting the results of their latest poll. Senate Majority Leader Harry Reid is trailing Sharron Angle 49% to 45% among likely voters in Nevada.


 Rand Paul at 50% in Kentucky versus Jack Conway at 43%.

Barbara Boxer at 50% versus Carli Fiorina at 45% in California.

Jerry Brown at 51% versus Meg Whitman at 44% for governor of California. (Whitman losing Latino vote after firing her illegal maid)

Stunning Chart: The Real State of Inflation

SHTFplan explains:
The CPI, or Consumer Price Index, is the official measure of inflation in the United States. The government utilizes the CPI as a way to make adjustments to interest rates for things like TIPS (Treasury Inflation Protected Securities) bonds and entitlement payouts like Social Security. According to the Bureau of Labor and Statistics, the CPI for the month of August was 1.1%, which means that prices were up just 1.1% over the previous year. According to Federal Reserve chairman Ben Bernanke, this is proof positive that there is no inflation to be had, and that we are, in fact, in a deflationary spiral...

On its face, viewing the government’s official numbers, the uninformed observer would assume that inflation really is under control, and that the immediate threat, as touted by mainstream economist is deflation. This has been used to justify what has been referred to Quantitative Easing 2, or QE2, leading to ever more money printing by The Fed.

As with all things “official,” however, the CPI lacks appropriate weighting for critical goods - essential goods - like food and energy.

The following chart from Casey Research shows just how skewed the “official” CPI figures are.

What's Hot in Private Equity

Dow Jones, in a promo piece touting their publication, Private Equity Analyst, provides the scoop on what's going on in PE:

• Hiring at private equity firms is on the upswing.

• China is hot as an investment destination. For the first time, we examine the potential conflicts of interest for firms running dollar and yuan funds.
• European PE firms are about to embark on a EUR50 billion fund-raising effort.

The Gold Hater: Don't Worry, Be Happy

As more and more money managers begin to realize the serious ramifications of the Fed's planned $500 billion money printing escapade, Joe "The Gold Hater" Weisenthal has figured out what all the warnings really are:

In the last few weeks, big-name have begun screeching about the evils of the Federal Reserve like never before.

Today, Bill Gross, who is frequently accused of talking his book and being too in bed with the government actually busts out the word "ponzi," a favorite word of Fed critics.

Yesterday Jeremy Grantham depicted Ben Bernanke as a bubble-inflating, economy-destroying zombie.

Last week, the famed currency trader John Taylor compared Bernanke to Adolph Hitler.

John Hussman has been calling the economy a Ponzi in some manner or another for some time.

There are surely the countless more examples of over-the-top rhetoric among big investors than what we came up with in 45 seconds worth of searching.

So what's going on? Does all this caterwauling actually signal impeding doom?

You'd be forgiven for being terrified, but no, the end of the word won't be preceded by a bunch of multi-millionaires whining about the end of the world.

Remember this: All these investor letters are MARKETING.
Yup, Joe says everything is fine. These top money managers are just making things up. Sell your gold coins and chill, and when the inflation comes and you can't buy a damn thing, just remember,  Joe's news group now has a sports page that you can stay at home and cruise for free.

Why Your Tax Witholding Is Likely to Go Up in 2011 (Even if you earn less than $250,000)

Your pay check is likely to shrink in 2011, thanks to the dithering idiots in Congress.

Congress has still not voted on an extension of the Bush-era tax cuts--for anyone. The rich, the poor, you.

Congress hasn't even started debating whether to extend the cuts, which expire Dec. 31. Because it takes weeks to prepare withholding schedules, this means the Internal Revenue Service will likely assume the cuts will expire and direct employers to increase payroll deductions starting Jan. 1.

Got that? Even if an  extension is eventually voted by Congress, if it is not done quickly (Huh, Congress acting quickly) the IRS is likely to send out 2011 withholding schedules assuming no Bush tax extension.

“I’ve been doing payroll for probably close to 30 years now, and never have we seen something like this where it gets that down to the wire,” Dennis Danilewicz, who manages payroll services for about 14,000 employees at New York University’s Langone Medical Center told Bloomberg. “That’s what’s got a lot of people nervous. All we can do is start preparing communications with a couple of different scenarios.”
More from Bloomberg:
If Congress fails to act, income tax rates will revert to higher levels dating from June 2001.

For a married couple with an income of $80,000, that would drain an extra $221.48 in withholding from a semi-monthly paycheck, according to calculations by the Tax Institute at H&R Block. Married individuals earning $240,000 a year would lose an additional $557.78 to withholding in a single semi-monthly paycheck. The Tax Institute at H&R Block calculated federal tax rates for single-income earners and married taxpayers without children.

Paychecks could shrink in January and into February, depending on how long it takes Congress to act.

January could well be a time of “sticker shock” for salaried employees and their employers, said Kathy Pickering, executive director of the Tax Institute, an independent research division at Kansas City, Missouri-based H&R Block Inc.

“If the laws get passed late in December, it’s just necessarily going to take one to three weeks to get those payroll tables updated and implemented into the system,” Pickering said...

Making a withholding-rate change could take longer for small businesses that don’t outsource payroll services, experts said. If a business can’t react fast enough, employees could recoup any over-withholding by filing a new W-4 tax form to temporarily lower their federal withholding rate.

Another option is to wait until 2012 when workers file their tax returns for the previous year.

Taxpayer Strategy

Taxpayers could use the same strategies if Congress reinstates the tax cuts next year and they need to recoup the extra withholding.

Jodi Parsons, manager of payroll and accounts payable at IFMC, a health care management company based in West Des Moines, Iowa, said if the IRS issues two sets of withholding tables, her two-person office could be overwhelmed with processing changes to W-4 forms.

“We’d have to basically go back and hand calculate checks for all 800-900 employees to determine whether or not we need to deduct additional taxes from them or refund taxes,” Parsons said. “We’d like to see changes in mid-November just to make sure we have time.”

There are now six federal tax brackets, ranging from 10 percent to 35 percent. If Congress doesn’t act, there will be five rates with the top bracket reaching 39.6 percent.

Nov. 20 notice

Last year, the IRS alerted payroll departments on Nov. 20 about the 2010 tax tables, said Scott Mezistrano, senior manager of government relations at the American Payroll Association in Washington. He said a delay in guidance from the IRS could increase costs for some small businesses.

The Treasury Department last week issued a statement that it was “maintaining flexibility” with regards to the release of the withholding tables for 2011. If the IRS issues tables in mid-November and then again later, businesses will double their programming costs, Mezistrano said. A related concern, he said, is if Congress makes a last-minute decision to extend the cuts and companies aren’t able to implement the change before January.
Business owners may face “tons of angry employees pounding at my office door saying, ‘What have you done to my paycheck?’” Mezistrano said.

WSJ Thinks $500 Billion in QE2 is Bernanke Using a Water Gun

WSJ's Kelly Evans tweets:

Hilsenrath kills markets. Fed using water gun, not bazooka. - Fed Gears Up for Stimulus
For those keeping track at home, I repeat, a $500 billion creation of supermoney by the Fed over six months, results in an 11.6% M2 money growth (if the funds don't end up as excess reserves). Further money supply is already growing at 5%. That's total money growth over the next six months of 16.6%!
And that doesn't include any potential money multiplier effect, which could easily boost M2 growth over 25% on an annualized rate. Some water gun.

Evans and Bernanke must pray at the same Hounfour.

Google Clicks on $2 Billion NYC Building

NyPo has the details:

Google appears close to buying the trophy 111 Eighth Ave. building, one of the largest buildings in Manhattan, The Post has learned.

The price is rumored to be tantalizingly close to $2 billion.

The 18-story Chelsea giant carries 2.9 million square feet of space and covers an entire city block -- between Eighth and Ninth avenues from 15th and 16th streets...

Google has made no secret of its growth plans for the Big Apple and already rents over 550,000 square feet in the building -- considered the premier tech, entertainment, fashion, and media center in the city with tenants ranging from Nike to WebMD...

The deal could still change or fall apart. It could not be determined if a contract has been signed or if there is just a handshake.

As a former Port Authority of New York and New Jersey industrial property, 111 Eighth Ave. has numerous back-up generators, lots of electrical power, antennas, fiber optics and high-tech facilities available to tenants.

The owners modernized the building with 10-foot tall windows and a modern lobby with glowing glass disks, along with 24/7 security and a concierge. It is 98.7 percent leased and parking is available in the building, according to CoStar, a real-estate information firm.

Several sources said Google was only one of many interested bidders, including local families, real-estate investment trusts, overseas entities from Beijing, Singapore, Chile, Argentina and Israel, along with sovereign wealth funds from the Middle East and Asia.

Roubini: The Fed May Have to Pump and Pump

In Nouriel Roubini's Wednesday Note, he writes:
We also ponder the possibility that the Fed will have to extend the program and announce QE3 (and eventually even QE4).
Uh, I think I am putting Roubini in the "Let's inflate" camp.

I really like the data put out by Roubini Global Economics, but I shudder at the inflationary consequences of a QE3 and QE4, that Roubini seems to take so casually.

Who the Hell is Going to Explore for Oil in Brazil?

Roubini Global Economics reports:

Brazil's Senate is holding a bill that would increase state control over recent oil discoveries and ensure that the proceeds help bankroll state investments in areas like infrastructure, education and poverty-reduction programs. These measures would reduce competition in Brazil’s energy sector, boosting Petrobras’ role and limiting opportunities for foreign investors. If Dilma Rousseff wins the presidential election on October 31, this initiative is likely to be approved; if Jose Serra wins, it may be abandoned.

Tuesday, October 26, 2010

It's Looks Like It will Be Around $500 Billion in Federal Reserve QE

"The central bank is likely to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months, a measured approach in contrast to purchases of nearly $2 trillion it unveiled during the financial crisis. The announcement is expected to be made at the conclusion of a two-day meeting of its policy-making committee next Wednesday," writes WSJ's Jon Hilsenrath and Jonathan Cheng.

This report is likely the real thing. Hilsenrath and Cheng are as wired in as you get. Their report may very well be coming from Helicopter Ben, himself.

BTW, I do not consider $500 billion a measured approach. M2 money supply is currently at $8.654 trillion. Keep in mind that a trillion plus of the earlier money printing is sitting as excess reserves, not impacting the economy. What's coming out now, will hit the economy, it's not going directly to the elite bankers (which put the money in excess reserves). The bond sellers will be a mix of pension funds, individuals and, yes, some banks, and for the most part they will have plans for the money once they get it from the Fed. It ain't going into excess reserves. 

Another $500 billion is an increase of  5.8%. If it is done over six months (that is if "several months" means six months)  that will be an annualized money growth rate of 11.6%. On top of this, the money supply is already climbing at 5% annualized rate, as a result of the reinvestment of cash flow from MBS securities held by the Fed. Thus, you could have annualized money growth of approximately 17%.

That's serious money printing. It will boost the stock market and cause a phony boom, but the inflation is going to be huge. But there's more. What the Fed creates is supermoney. $500 billion pumped in could mean a multiple of that, when it is done impacting the economy. Thus, I would not be surprised at us hitting an annualized rate of 25%, at some point over the next six months. And that will mean serious inflation squared.


A Light Public Schedule for Geithner on Wednesday

On Wednesday morning, Treasury Secretary Geithner will attend the President’s Economic Daily Briefing at the White House.

Arianna Huffington on Who Her Friends are Sleeping With

"Many of my friends sleep with a copy of Ayn Rand under their pillows." -Arianna Huntington as quoted by The Economist

The IRS Gives Us a Break

By Larry M. Elkin, CPA, CFP®

Tax laws are seldom models of clarity. Sometimes they are more garbled than a software manual that has been computer-translated from Malay to English.

Occasionally, however, the law is pretty clear, but the interpretation gets twisted.

Every professional tax adviser runs across this situation. A client may find an article on the Internet that says he can avoid taxes by putting all his assets in a trust, establishing a new church headed by himself, and donating the trust assets to his new church. We have to explain that such strategies may result in prison time or psychiatric treatment, but will not reduce taxes.

Or the Internal Revenue Service may want a particular result so badly that it reads the law in a way nobody else could. Not long ago, an agent who was examining my tax return – and finding very little to question – asserted that I must have received undocumented income from myself. If you think this is impossible, you are correct. The agent backed down when a supervisor told him that this was not a position he ought to pursue. If the IRS does not back down from a silly position, a taxpayer can take matters to the Service’s generally fair and competent appeals office, or to the U.S. Tax Court.

Occasionally, however, it is the Tax Court itself that gets tangled in a twisted web of tax logic. So it caught my eye recently when my colleague, Eric Meermann, forwarded an IRS pronouncement stating that the Service will not follow a Tax Court ruling that improperly limits homeowners’ deductions for mortgage interest.

Treasury: These Narc Traffickers Are Also 'Specially Designated Global' Terrorists... not buy your drugs from these men!

The Treasury Department today designated two Afghan narcotics traffickers operating in Helmand and Kandahar Provinces as Specially Designated Global Terrorists for providing financial and logistical support to the Taliban. Haji Agha Jan Alizai, who has managed one of the largest drug trafficking networks in Helmand, and Saleh Mohammad Kakar, a narcotics trafficker who has run an organized smuggling network in Kandahar and Helmand Provinces, were both designated today pursuant to Executive Order 13224. This Order freezes any assets the designees have under U.S. jurisdiction and prohibits U.S. persons from engaging in any transactions with them.

“Both Haji Agha Jan Alizai and Saleh Mohammad Kakar are dangerous individuals whose operations pose a grave threat to efforts to stabilize Afghanistan,” said Under Secretary for Terrorism and Financial Intelligence Stuart Levey. “Today's action, building on the President's identification of Alizai as a Drug Kingpin in June, is aimed at further disrupting the financial networks of these individuals who are fueling the insurgency in Afghanistan.”

Current Contraction Surpasses "Great Recession" or Is It All Just 'The Big Scoop'?

Rick Davis at the Consumer Metrics Institute emails his latest. Here;s what you should take out of his report:

On October 20, 2010 the aggregate severity of the 2010 contraction in consumer demand surpassed the similar measure of economic pain experienced during the "Great Recession." And a glance at our "Contraction Watch" tells us that the pain is not about to end anytime soon:

In the above chart, the day-by-day courses of the 2008 and 2010 contractions are plotted in a superimposed manner, with the plots aligned on the left margin at the first day during each event that our Daily Growth Index went negative. The plots then progress day-by-day to the right, tracing out the changes in the daily rate of contraction in consumer demand for the two events.

The true severity of any contraction event is the area between the "zero" axis in the above chart and the line being traced out by the daily contraction values. By that measure the "Great Recession of 2008" had a total of 793 percentage-days of contraction over the course of 221 days, whereas the current 2010 contraction has reached 820 percentage-days over the course of 282 days -- without yet clearly forming a bottom. The damage to the economy is already 3% worse than in 2008, and the 2010 contraction has lasted 28% longer than the entire 2008 event without yet starting to recover...

From time to time we have been asked whether we consider the current contraction in consumer demand to be the second "dip" in a "double dip" recession. From a qualitative perspective, we believe that the "Great Recession" is not so much a "double-dip" as a single "big-scoop" that changed character somewhere in the middle. We understand that the NBER says that the recession ended in June 2009. However quantitatively/technically correct that may be by NBER standards, by "Main Street" gut-feeling standards the NBER assertion is somewhere between questionable and ludicrous, depending on the personal circumstances of the observer.
Note: The data from CMI is extremely valuable in detailing the intensity of any ups and downs, but its structure is designed to detect the here and now versus the future. Thus,there is nothing here to detect the turn upward in the manipulated economy that we fully expect, if Bernanke goes through with QE2. That will show up in CMI's data much quicker than the governments data, but not until it actually starts to occur.

Inside a SubPrime Mortgage Boiler Room

This is an excerpt from the book The Monster, by Michael W. Hudson. It is reprinted with permission of the publisher.

By Michael W. Hudson


Bait and Switch

A few weeks after he started working at Ameriquest Mortgage, Mark Glover looked up from his cubicle and saw a coworker do something odd. The guy stood at his desk on the twenty-third floor of downtown Los Angeles's Union Bank Building. He placed two sheets of paper against the window. Then he used the light streaming through the window to trace something from one piece of paper to another. Somebody's signature.

Glover was new to the mortgage business. He was twenty-nine and hadn't held a steady job in years. But he wasn't stupid. He knew about financial sleight of hand—at that time, he had a check-fraud charge hanging over his head in the L.A. courthouse a few blocks away. Watching his coworker, Glover's first thought was: How can I get away with that? As a loan officer at Ameriquest, Glover worked on commission. He knew the only way to earn the six-figure income Ameriquest had promised him was to come up with tricks for pushing deals through the mortgage-financing pipeline that began with Ameriquest and extended through Wall Street's most respected investment houses.

Glover and the other twentysomethings who filled the sales force at the downtown L.A. branch worked the phones hour after hour, calling strangers and trying to talk them into refinancing their homes with high-priced "subprime" mortgages. It was 2003, subprime was on the rise, and Ameriquest was leading the way. The company's owner, Roland Arnall, had in many ways been the founding father of subprime, the business of lending money to home owners with modest incomes or blemished credit histories. He had pioneered this risky segment of the mortgage market amid the wreckage of the savings and loan disaster and helped transform his company's headquarters, Orange County, California, into the capital of the subprime industry. Now, with the housing market booming and Wall Street clamoring to invest in subprime, Ameriquest was growing with startling velocity.

Click below to read more.

Geithner Swears in New Social Security Ponzi Scheme Operators...

and pretty much acknowledges that it's a confidence scam.

Treasury Secretary Tim Geithner today swore in Charles Blahous and Robert Reischauer as the Public Trustees for the Social Security and Medicare Trust Funds. Blahous and Reischauer were nominated by President Obama in September 2009 to fill the positions, which had been vacant since December 2007.

“It is essential that the public has confidence that Social Security and Medicare will be available to help future generations retire with economic security,” said Treasury Secretary Geithner. “The public trustees play a vital role in instilling that confidence, and I am pleased that Bob Reischauer and Chuck Blahous will be taking on this important role.”

John Parker: Pentagon Reporters Give Up Watchdog Role for the Illusion of Being Part of Power

John Parker, Former military reporter and fellow of the University of Maryland Knight Center for Specialized Journalism-Military Reporting, writes:
The career trend of too many Pentagon journalists typically arrives at the same vanishing point: Over time they are co-opted by a combination of awe -- interacting so closely with the most powerfully romanticized force of violence in the history of humanity -- and the admirable and seductive allure of the sharp, amazingly focused demeanor of highly trained military minds. Top military officers have their s*** together and it's personally humbling for reporters who've never served to witness that kind of impeccable competence. These unspoken factors, not to mention the inner pull of reporters' innate patriotism, have lured otherwise smart journalists to abandon – justifiably in their minds – their professional obligation to treat all sources equally and skeptically.

Too many military reporters in the online/broadcast field have simply given up their watchdog role for the illusion of being a part of power...

Pentagon journalists and informed members of the public would benefit from watching "The Selling of the Pentagon," a 1971 documentary. It details how, in the height of the Vietnam War, the Pentagon sophisticatedly used taxpayer money against taxpayers in an effort to sway their opinions toward the Pentagon’s desires for unlimited war. Forty years later, the techniques of shaping public opinion via media has evolved exponentially. It has reached the point where flipping major journalists is a matter of painting in their personal numbers.

Fed Won't Join Bank Supreme Court Appeal on Loan Disclosures

Bloomberg's PR department just sent me this release:

New York, October 26 – The Federal Reserve won’t join a banking industry trade group in asking the U.S. Supreme Court to let the government continue to withhold details of emergency loans made to financial firms in 2008.

The Clearing House Association LLC, a group of the biggest commercial banks filed the appeal today. The Federal Reserve won’t file its own appeal, according to Kit Wheatley, an attorney for the central bank.

The banks are appealing a lower court order requiring the Federal Reserve to disclose lending records to Bloomberg LP, parent company of Bloomberg News. A federal judge ruled in August 2009 that the Fed had to disclose the names of banks that borrowed from its emergency lending programs.

“Greater transparency results in more accountability, and the banks’ fight continues to engender suspicion among taxpayers about the bailouts,” said Matthew Winkler, Bloomberg News editor-in-chief. “The banks’ move to appeal will deepen the public’s skepticism and defend a position that every other court has disagreed with. The public has the right to know.”

The Fed is facing unprecedented oversight by Congress. The Wall Street Reform and Consumer Protection Act, known as Dodd- Frank, mandates a one-time audit of the Fed as well as the release of details on borrowers from Fed emergency programs. The Discount Window, which provides short-term funding to financial institutions, would have to disclose loans made after July 21, 2010, following a two-year lag. The Bloomberg lawsuit asks for information on that facility.

Term Sheets

At issue are 231 “remaining term reports,” originally requested by the late Bloomberg News reporter Mark Pittman, documenting loans to financial firms in April and May 2008, including the borrowers’ names and the amounts borrowed. Pittman asked for details of four lending programs, the Discount Window, the Primary Dealer Credit Facility, the Term Securities Lending Facility and the Term Auction Facility.

After averaging $257 million a week in the five years before March 2008, Discount Window borrowing jumped to a peak of $111 billion on Oct. 29, 2008. It was $20 million last week. The other three programs accounted for more than $800 billion in lending at their peak, according to Fed data.

“The Discount Window is problematic because the Fed since the 1930s has used it to provide assistance to banks on the verge of failure,” said Joseph R. Mason, a finance professor at the Ourso College of Business at Louisiana State University in Baton Rouge. “Making loans means you add liabilities to the bank, so lending a bank money makes it more insolvent. This is a chance to show that the Fed did not lend to weak banks.”

The Conference Board Consumer Confidence Index Improves Slightly

The Conference Board Consumer Confidence Index, which had declined in September, increased slightly in October, but remains at historically low levels. The Index now stands at 50.2 (1985=100), up from 48.6 in September. The Present Situation Index increased to 23.9 from 23.3. The Expectations Index improved to 67.8 from 65.5.

Lynn Franco, Director of The Conference Board Consumer Research Center stated:
Consumers’ assessment of the current state of the economy is relatively unchanged, primarily because labor market conditions have yet to significantly improve. And, despite the uptick in Expectations, consumers continue to be quite concerned about the short-term outlook. Both present and future indicators point toward more of the same in the coming months.
Here's where the Index fails. It doesn't detect the QE2 that Bernanke is about to launch. That launch, though ultimately very inflationary, will boost the Index numbers.

A Rothschild Attacks Obama

Lady Lynn Forester de Rothschild (56), who is married to Evelyn Robert de Rothschild (79), appeared on the Neil Cavuto show on FOX, yesterday, and strongly criticized President Obama. Rothschild is a big time fundraiser and a personal friend of Hillary Clinton. Is this more softening of the ground for a Hillary run in 2012, against Obama?

Hillbuzz is reporting that Rothschild is going to be one of the commentators on FOX’s election night coverage.

Among many other interests, the Rothschild family controls The Economist magazine and holds a major stake in DeBeers.

Hey George Soros, Stay Out of the Marijuana Debate

Billionaire George Soros has an Op-Ed in today's WSJ in favor of California's Proposition 19, which would legalize marijuana. He makes a number of relevant points:

The racial inequities that are part and parcel of marijuana enforcement policies cannot be ignored. African-Americans are no more likely than other Americans to use marijuana but they are three, five or even 10 times more likely—depending on the city—to be arrested for possessing marijuana. I agree with Alice Huffman, president of the California NAACP, when she says that being caught up in the criminal justice system does more harm to young people than marijuana itself. Giving millions of young Americans a permanent drug arrest record that may follow them for life serves no one's interests.

Racial prejudice also helps explain the origins of marijuana prohibition. When California and other U.S. states first decided (between 1915 and 1933) to criminalize marijuana, the principal motivations were not grounded in science or public health but rather in prejudice and discrimination against immigrants from Mexico who reputedly smoked the "killer weed."

Who most benefits from keeping marijuana illegal? The greatest beneficiaries are the major criminal organizations in Mexico and elsewhere that earn billions of dollars annually from this illicit trade—and who would rapidly lose their competitive advantage if marijuana were a legal commodity. Some claim that they would only move into other illicit enterprises, but they are more likely to be weakened by being deprived of the easy profits they can earn with marijuana.
But, Soros is the ultimate meddler in society, so he can't sit still with letting freedom reign. He wants to tax users of the weed:
Regulating and taxing marijuana would simultaneously save taxpayers billions of dollars in enforcement and incarceration costs, while providing many billions of dollars in revenue annually.
Weed users really don't need Soros' manipulative help. With Soros around, through taxes, weed will eventually cost more legalized than it does now on the black market. Beware of billionaire manipulators bearing freedoms.Whether its Soros, Warren Buffett or the Koch brothers, there isn't a true freedom lover among them. There's always a price tag.

Update on Murphy's Challenge to Paul Krugman

Murphy writes:
* Zerohedge picked up the story over the weekend.

* Robert Wenzel just tipped me off that John Carney at CNBC ran this article. I now have my favorite news line ever: “Krugman did not immediately respond to an email requesting comment on the challenge.”

* The pledge total is now just shy of $29,000. If you haven’t contributed yet, I encourage you to do so. This is your Woodstock, but with bathrooms.

* A clarification to the press treatment: Strictly speaking, this isn’t a “$100,000 debate challenge” to Krugman. It’s whatever amount of money gets pledged. My idea is that the donations just keep piling in over the months, until he has no choice to debate me. That number may be $250,000; who knows.
And don't forget, you can meet Bob Murphy in person, along with yours truly, on Friday in Boston. Click here for details.

Designs Announced for 2011 Gold and Silver Coins Commemorating Medal of Honor Anniversary

In 2011, the United States Mint has been authorized by Public Law 111-91 to issue commemorative silver and gold coins to celebrate the 150th anniversary of the Medal of Honor.

The U.S. Mint has just unveiled the design for the 2011 Medal of Honor Commemorative coins. This program will feature two coins: a half-ounce gold coin with a face value of five dollars and a one-ounce silver coin with a face value of one dollar.

Mintage is limited to 100,000 gold and 500,000 silver coins. The sales price will include a $35 surcharge for each gold coin and a $10 surcharge for each silver coin sold.
The Medal of Honor, which should be considered a high ranking war propaganda item, was proposed by Iowa Senator James W. Grimes in 1861 and signed into law by President Abraham Lincoln on December 21, 1861.

Groundwork for an Assault on Individually Administered 401k's and IRA's

Here's the invitation going out, which is sure to be early stage plotting for more government control of private retirement accounts as a prelude to a bailout of bankrupt pension funds. 

Demos, the Economic Policy Institute, the Schwartz Center for Economic Policy Analysis at The New School and the Pension Rights Center invite you to:

The Failure of the 401(k):
Reinventing Retirement Savings Plans For a More Secure Future

November 10th, 2010
4:30 - 5:30 PM

Capitol Visitors Center, SVC 203-02
Washington, DC

Light snacks will be served.

RSVP is required by Monday, November 8th.
Join Demos, the Economic Policy Institute, the Schwartz Center for Economic Policy Analysis at The New School and the Pension Rights Center for a hill briefing to discuss how 401(k)-type retirement savings plans have failed our nation's workers and families, key principles that should guide sensible reforms to our nation's retirement system, and various proposals under consideration. This event coincides with the release of a new report by Demos on the failures of the 401(k) system and with and an expanded and updated EPI report on Guaranteed Retirement Accounts
Moderator :

Dr. Teresa Ghilarducci
Director, Schwartz Center for Economic Policy Analysis at The New School

Speakers :

Karen Friedman
Executive Vice President & Policy Director, Pension Rights Center

Robert Hiltonsmith
Policy Analyst, Economic Opportunity Program at Demos

Monique Morrissey
Economist, Economic Policy Institute

(Thanks to M. Siegel)

Geithner's Tuesday: He Brings in New Ponzi Operators

On Tuesday morning, Treasury Secretary Geithner will attend the President’s Economic Daily Briefing at the White House.

In the afternoon, the Secretary will hold a swearing-in ceremony for Charles Blahous and Robert Reischauer as the Public Trustees for the Social Security and Medicare Trust Funds.

Also on Tuesday, in the morning, Deputy Treasury Secretary Neel Wolin will participate in a panel on “Remaking Global Finance: The Rules of the Game” at The Economist’s Buttonwood Gathering in New York.

The Correct Economic Policy Towards China: Send Them Flowers and Chocolates

By John H. Cochrane

Economists are full of bad ideas. Terrible ideas seem to emerge when the gurus get together to talk about coordinating their bad ideas. Last week's public letter from Treasury Secretary Tim Geithner to the G-20 finance ministers is a great example.

Mr. Geithner starts with a dramatic proposal: "G-20 countries should commit to undertake policies consistent with reducing external imbalances below a specified share of GDP [later reported to be 4%] over the next few years."

Since when is every trade surplus or deficit an "external imbalance" in need of correction? It makes sense for a country that has good investment prospects to import a lot of goods, run trade deficits, and borrow money. Years later, the country puts the resulting products on boats to pay the lenders back. The U.S. borrowed abroad to finance our railroads in the 19th century and ran surpluses when Europe was rebuilding after World War II. Were these "imbalances"?

Or consider a country (say, China) with a lot of middle-aged workers who need to save for retirement. It makes perfect sense for them to put stuff on boats and send it to a second country (say, the United States) whose people want to consume the goods. The people in the first country invest their earnings, say, by buying the bonds issued by the second country. And as they retire, they cash in the bonds and buy goods flowing the other way.

Do these and similar stories exactly account for current trade patterns? I don't know. But nobody else does, either. In particular, the army of economists in the basements of the International Monetary Fund (IMF) has no clue exactly how much each country should be saving, or where the best untapped global investment opportunities are around the world—including whether trade patterns are "normal" or "imbalanced."

Read the rest here.

John Cochrane is a professor of finance at the University of Chicago Booth School of Business.

Monday, October 25, 2010

Buffett Picks a Total Insider to Handle Portfolios

It's official, Berkshire Hathaway, for all practical purposes, is under the control of the banking elite. Warren Buffett's Berkshire Hathaway has brought in a new executive, 39-year-old Todd Combs from Castle Point Capital, to help manage the company’s investment portfolio, opening up speculation that he could be a successor to Warren Buffett.

Get a load of this guy's associates:

According to Stone Point’s (Castle merged with Stone Point) website, former Goldman Sachs executive Stephen Friedman is the chairman of Stone Point. Friedman stepped down last year as chairman of the Federal Reserve Bank of New York amid controversy over his twin roles at the New York Fed and as a Goldman shareholder.

Officialy, Friedman is a retired Chairman of Goldman, Sachs & Co.  Friedman also previously served as Chairman of the Board of Directors of the Federal Reserve Bank of New York, Chairman of the President’s Intelligence Advisory Board and Intelligence Oversight Board and Assistant to President George W. Bush for Economic Policy and Director of the National Economic Council. Friedman joined Goldman Sachs in 1966 and became a Partner in 1973. He was Vice Chairman and co-Chief Operating Officer from 1987 to November 1990, and co-Chairman or Chairman from 1990 to 1994.

Stone Point CEO Charles Davis was with Goldman, Sachs & Co. for twenty-three years where he served as head of Investment Banking Services worldwide, co-head of the Americas Group, head of the Financial Services Industry Group, a member of the International Executive Committee and a General Partner.

Stone Point Chief Investment Officer Meryl D. Hartzband was a Managing Director at J.P. Morgan & Co., where, during a sixteen-year career, she specialized in managing private equity investments in the financial services industry.

Castle Point's  portfolio, according to WSJ, makes it look like a holding company for elite banks, and pretty little else:

Castle Point Capital Management, according to its latest SEC disclosure, has a scant two dozen or so investments, including more than 1.2 million shares in Western Union, more than 1 million shares in U.S. Bancorp, and investments in Blackrock, CIT Group, JP Morgan Chase and Progressive Corp
Stone Point recently was part of a group that invested in what appears to be an insider sweetheart deal by buying into IndyMac Bank, the failed California lender. Other investors in that deal included  investment firm J.C. Flowers & Co., hedge fund Paulson & Co., computer mogul Michael Dell’s investment vehicle MSD Capital, and a fund controlled by billionaire investor/speculator George Soros.

From what is public about Combs, he's no stock picker. He's a picker of insider companies and financial companies that the government will bailout at all costs.

It's a sad day for Berkshire Hathaway shareholders.

The Whale is the United States

Economist Magazine quotes former Plunge Protection Team member and ultimate insider, Phillipa Malmgren:
The whale is the United States, and the markets are circling. We are not immune from sovereign crisis.
More from Malmgren:
The American public has almost no sense of the magnitude of its debt.
She thinks we will see default of a sort, inflation being the chosen mechanism, reports EM.