Monday, February 28, 2011

An NYT Reporter Discovers the Investment Value of Nickels (Sort of)

NYT economics reporter Catherine Rampell thumbs:
a nickel is actually worth 7 cents, based on metal content so they're a good investment?
Although she appears a bit unsure of the entire thing, by adding a question mark, maybe she is just waiting for Paul Krugman to endorse the investment.

Not surprisingly, EPJ was ahead of NYT on this. See here and here. At the EPJ Daily Alert, I discussed the idea last year.

BTW, the investment is not only, as Rampell's link implies, for the poor. One hedge fund manager ordered 20 million nickels from his bank.

Nickels will probably disappear from circulation before NYT takes the question mark away from the investment. Do yourself a favor and tuck away a few, before they go the way of the silver pre-1965 dime (Now worth over $2.45) and the silver pre-1965 quarter (Now worth over $6.10)

Jim Rogers: "Saudi Arabia Is Lying About Being Able To Increase Its Oil Production"

Jim Rogers tells Bloomberg:

"Saudi Arabia has been lying about the reserves for decades. Saudi Arabia the last two times said they are going to increase production and they couldn't increase production. Don't fall for that. The reason oil is going up is the world is running out of known reserves of oil."

Rogers is very bullish on all commodities. Long-term he is going to be correct. In the short-term, the Fed QE2 has been a bust for the Fed, since the money they are pumping in is headed into excess reserves, and not into the economy.

There has been enough new money that was pumped in last year by the Fed to keep an inflation scare in the economy, which will push consumer prices higher this year. But because of the slowdown in money growth since the first of the year, there is likely to be a break downward in commodities and the stock market. This will eventually force Bernanke to junk his new tools and get serious about serious money printing, which will be very inflationary, but it looks like there will be a break first.

Here's the entire Rogers interview:

Eric Margolis Reports on the Berlusconi Horrors, Horrors!

Eric thumbs:
Mama Mia! #Italy's poor #Berlusconi accused of financing breast, hip, lip jobs for young tarts in his bunga-bunga room.

One of Berlusconi's Girls
MSM and the courts are always allowed to keep their eyes on the T&A, even enhanced T&A, while the real criminals continue to advance their global schemes

The real focus should be on the head of the Italian central bank, and former Goldman man, Mario Draghi, who is considered the top candidate to head the European Central Bank, when Jean-Claude Trichet reign ends, later this year.

A Goldman man at the head of the ECB would mean that Goldman has key people placed at arguably the two most important central banks. The New York Fed president is former Goldman man William Dudley.

More Geithner Plotting with Business "Leaders"

This evening, Treasury Secretary Geithner will host business leaders at Treasury for a discussion, accordong to the Treasury, "on efforts by the Administration and the private sector to advance financial capability, literacy and access."

An Edge to Religious Rule in Egypt and Libya

I just had a conversation with a keen observer of Middle East politics. He suggested I study the overthrow of U.S. puppet, the Shah of Iran, Mohammad Reza Shah Pahlavi, to understand what nay follow the revolutions in Egypt and Libym.

The overthrow of the Shah, he reminded me, came as a surprise to almost all observers. The fact that the revolution resulted in an Islamic republic under Ayatollah Ruhollah Khomein, though surprising some, should not have done so.

He said the Shah, like all Middle East dictators, including the recently overthrown Mubabrek in Egypt, and the hanging on by his finger tips Gadaffi in Libya, never allowed opposition parties to form. Once the regime was overthrown, the only group with an organization in the country, the religious, filled the power vacuum.

He says its the same in Egypt and Libya. There are no political parties, the religious groups have the organizations. Thus giving them a very strong edge in filling power vacuums.

Is the Chinese Government the Biggest Sucker of All Time?

Not only have they loaned over a trillion to the U.S., but the are the major creditor of Venezuela. Economist magazine explains that situation:
The chief cause of Venezuela’s travails has been Mr Chávez’s pillaging of PDVSA, the state oil firm. He has packed it with loyalists, starved it of investment and used it for social spending, cutting its output from 3.3m barrels per day (b/d) in 1998 to around 2.25m b/d, according to industry estimates. Of that, some 1m b/d is sold at subsidised prices at home or to regional allies, leaving just 1.25m b/d for full-price exports.

Meanwhile, the president’s hostility to business has devastated the rest of the economy. He has nationalised hundreds of companies and trumped up charges against their owners, causing much of Venezuela’s private sector to shut up shop and flee. As a result, the country has seen vast capital flight, and must import many goods that it used to produce. Non-oil exports have ground to a halt: petroleum now accounts for 92% of its dollar intake.
Would you loan money to a country in this shape? Yet, Economist tells us:
Mr Chávez’s main short-term solution has been borrowing. Since 2008 China has lent Venezuela $12 billion and is being repaid in oil shipments, cutting PDVSA’s annual revenues by a further 20%. The government’s opaque accounting makes it impossible to know how it has used the money. Net public debt rose from 14% of GDP in 2008 to 29% last year, and the Economist Intelligence Unit, our sister company, expects it to reach 35% in 2011. The country cannot continue borrowing at today’s rates: PDVSA’s latest dollar-denominated bonds pay a 12.75% coupon.
Even if China is making very short-term loans, the situation is clear Venezuela is headed toward bankruptcy (or hyper inflation)and China will get stuck at the end. Not to the tune they will get stuck with U.S. debt, but still stuck.

Why I Know Government Teachers Aren't Getting Underpaid

Because if they were, they would be working in  private education---for the theoretical higher pay,

The Power of Ron Paul

One of the great things about the internet is that it has taken power away from mainstream media. People can read what they want to read without MSM censors.

Those who would like to see the old censorship back in place so the elite can decide what you should read, just hate that the internet shows there is a huge following for Ron Paul.

Check out wanabe elitist David Shedlock in this spoof just hating the fact that people want to read stories about Ron Paul.

I mean, this guy just hates the traffic stories about Ron Paul get:
Ron Paul, a libertarian who wants to be President, and his supporters, have discovered the pathway to the GOP nomination and the presidency. It is to overwhelm the system. If they remain faithful and read every blogpost and newstory about him, they will increase traffic to those websites. Those websites will in return do more articles about Ron Paul, eventually pushing out all news stories about any other Republican candidates. Even New York Times stories about Ronald Reagan, Sarah Palin, Justin Bieber and Glenn Beck will become passé and nobody will publish them.

How to Profit if a Huge Asteroid is About to Crash into the Earth

James Altucher and Douglas R. Sease are out with a great new book, The Wall Street Journal Guide to Investing in the Apocalypse.

In the book, they claim that a lot of doomsday threats are over-hyped, from pandemics to terrorist nuclear threats. I agree. Their basic thesis is that you should ignore the emotional hype, analyze the situation for what it is and make some money from it. They call it "event based investing".

I am partial to this type of investing and I think it provides great opportunities for profit. The book is a great introduction on how to become such an "event based" investor. Beyond this becoming an event based investor, the book can be of value to the person simply holding a mutual fund  portfolio. By understanding how things are hyped, it may prevent an investor from selling out of mutual funds in panic, at just the wrong time.

But, most of all, the book is a well researched handbook on the major potential panics of our time and the reality of what really is likely to happen and what is not. For example, with regard to terrorist attacks in the U.S., Attucher and Sease tell us that it is easy to underestimate the difficulty of building a nuclear weapon, and that it is inconceivable that a group of terrorists hiding in caves could even begin to understand where to start to build a nuclear weapon.

Even a "dirty bomb" would be difficult to assemble, they tell us.

As for cyber-terror, they say hacking is one thing, but that it would take an extremely powerful computer with very detailed knowledge to take down a major institution.

Bottom line, they write: "While terrorist attacks aren't likely to be either pervasive or persistent, our fear of terrorism is both pervasive and persistent. In that disconnect lies opportunity."

In addition to pooh poohing, threats that aren't likely to develop, Altucher and Sease teach us how to keep real disasters into perspective and not always view them as world ending events. From fear over flu viruses to asteroids flying towards the earth, they teach us how to "fade the fear", how to invest through the front door and back door.

My only quarrel with the book is the clear lack of understanding by Altucher and Sease of the business cycle and what causes it. In their short bursts of discussing economic downturns, it's clear they hold a  pedestrian Keynesian view of what causes the cycle. At one point, they write: "Inflation is not necessarily a bad thing." Like I said, the book is well researched, but I do wish the authors had spent time in research at to polish up their understanding of the business cycle, so that it would have been on a par with the rest of the book.

That said, the book should be read by every investor. It will help in keeping investors from panicking and it will help those with independent minds to lean how to event trade. The book generally discusses the major panics that could occur but the authors also briefly refer to "mini-asteroids", which are panic situations that are not global in nature, such as the recent events in Libya, but are of enough of a concern that investment opportunities exist.

Thus, for the wannabe event trader,  the book should be read, to get the general sense of how to trade full blown panics and "mini-asteroids". It also should be kept near all investors desks to be pulled out whenever one of the biggie panics hits the market, since the relevant panic-related chapter will help calm the nerves and will also provide specific stock trades that may make sense to implement.

And don't miss the chapter on asteroids. I'm tempted to say the chapter is earth shattering, but in the chapter, the authors tell us that a biggie asteroid is heading toward earth, which astronomers are tracking and they expect it to pass very near earth on  Friday April 13, 2029. But cool cats that Altucher and Sease are, they tells us why you should not panic, how to fade any asteroid fear that may develop, and list specific front door and back door stocks to invest in should panic develop.

Sunday, February 27, 2011

FBI: Ted Kennedy Rented an Entire Chilean Brothel

Eliot Spitzer eat your hear out.

The transparency advocates at Judicial Watch, reports Gawker, have obtained some new documents from the late Sen. Ted Kennedy's massive, heavily-redacted FBI file.

According to the FBO docs, during a trip to South America in 1961, then-Assistant District Attorney Kennedy had a party at a brothel: "while Kennedy was in Santiago made arrangements to 'rent' a brothel for an entire night. Kennedy allegedly invited one of the Embassy chauffeurs to participate in the night's activities." Kennedy was in South America to meet various "left-wingers," and Communists, according to the memo.

All Hail the Revolution: Egypt Bans Export of Gold

The Egypt (government?), presumably the military of Egypt, has banned the export of gold in any form.

It is unclear the motives behind the ban, but it is sure not a positive for any Egyptian minding his own business, who wants to send some gold outside the country to protect himself, given the uncertain future for Egypt.

Like I have said, the problem with these popular uprisings is that the masses have little understanding of the benefits of private property, the rule of law and free markets, and are likely to replace one tyrant with another tyrant with a different name and pose.

Obama Wants to Charge Canadians Flying into Entry Fee

The Canadian Air Council reports that the proposed inspection fee of $5.50 per person is outlined in the draft of the 2012 U.S. federal budget.

The only break Canadians will have is that they will only have to pay in U.S. dollars, instead of Canadian dollars. The U.S. dollar is likely to continue to decline against the looney.

Roger Ailes to be Indicted?

Barry Ritholz is reporting that Ailes may be indicted this coming week.

Recent court documents indicate that Ailes told then-News Corp employee, Judith Regan, to lie to Federal investigators about her affair with NYC police chief Bernie Kerik to protect Rudy Giuliani, who was then running for the Republican presidential nomination and also a close personal friend of Kerik's.

Here's what Ritholz has:
Someone I spoke with claimed that Ailes was scheduled to speak at their event in March, but canceled. It appears that Roger’s people, ostensibly using a clause in his contract, said he “cannot appear for legal reasons.”

I asked “What, precisely, does that mean?”

The response: “Roger Ailes will be indicted — probably this week, maybe even Monday.”

People Having Unconventional Thoughts

Tom Woods, author of Nullification, discusses views beyond the Mitt Romney-Joe Biden spectrum.

Geithner with the Governors

On Sunday evening, Treasury Secretary Geithner will attend the 2011 Governors’ Dinner at the White House.

The Revolution of Ideas

Spotted on a Canary Wharf, London billboard. Dell puts Hayek in the number one spot when it promotes its new "Convertible". Can Mises and Rothbard be far behind? This my friends is the real revolution.


Walter Block: Why We Must Support the Union Thugs

This is not likely to make it into the union's PR packet of economist professors supporting the union, but Block has it correct, this is a battle of two thugs:
More than a few people have asked me where I stand on the controversy between Wisconsin Gov. Scott Walker and the public employee unions against which he is contending.

I favor the union thugs, not the government thugs. For me, it’s like Stalin versus Hitler: a pox on both of them. But, I like to root for the underdog, the weaker of the two bad guys, and that’s the union in this case. I do so because I want the fight to long continue, so that both are weakened as much as possible. The state has more guns, better public relations (they have bought off more journalists, intellectuals, clergy, and others of Hayek’s “second hand dealers in ideas”) than the unions.

So, if we want the battle to weaken the both of them, we must support, ugh (no, double ugh!) organized labor. Also, it is my judgment that the government is a worse violator of human and economic liberties than are the unions, bad as are the latter.
The essence of Block's argument is that this is not a battle of less government versus more government, but a battle over who controls the loot. There is a strong anti-public employee union stance by advocates of freedom, which is great, but somehow this anti-union attitude is being transferred into support of Wisconsin Governor Scott Walker. Despite heavy propaganda otherwise, Walker is not a free market guy.

During Walker's tenure as Milwaukee county executive, according to AP, "overall county spending ... increased 35 percent".

With regard to the agriculture industry, Walker has stated:
My administration will build on this history by strengthening public/private partnerships that will incorporate 21st century innovations into best practices standards to ensure that the next generation of farmers can produce even more than we do now.
You know what that means. Crony deals between the Wisconsin government and government favored ag corporations.

He also wants to direct infrastructure money to "help the farmers":
We must also continue to invest in our state’s infrastructure to ensure farmers can move their products to market for years to come. In the last eight years, Gov. Doyle raided $1.3 billion from Wisconsin’s Transportation Fund. This is money that could have gone to fixing our state’s rural roads, highways and bridges. I will protect the Transportation Fund by ending the raids and supporting a constitutional amendment to protect it from raids by future governors.
Huh, Block may also have something to say about the Transportation Fund.

Back to Walker.

He is certainly not against public education and appears to have no clue that innovation comes about via the private sector and not via a bureaucracy. He says:
We will also create a new class of highly qualified, well-paid teachers who will be given the opportunity to advance in their career. These highly qualified teachers will be called on to mentor other teachers, while still devoting most of their time to classroom teaching.
Bottom line, as Block makes clear, there is no strong reason to cheer the activities of either of these groups. Let's hope they destroy each other in this battle.

Saturday, February 26, 2011

When Muammar Gadaffi Led Me by the Hand

By Eric Margolis

Events in Libya are moving very fast, and their outcome is uncertain. “Leader” Muammar Gadaffi is hunkered down in Tripoli, defended by army units from his tribe and mercenaries from black Africa.
Watching Col. Muammar Gadaffi deliver a bombastic, defiant speech last week from the ruins of Tripoli’s Bab al-Azizia barracks brought me back to 1987 when Libya’s leader led me by the hand through the wreckage of his former residence.
On 14 April, 1986, US aircraft attacked Libya after a Berlin disco frequented by US soldiers was bombed. US President Ronald Reagan blamed Libya and denounced Gadaffi as the “mad dog of the Middle East.” 
But a defector from Israel’s Mossad later claimed the US had been duped by a false flag operation into believing Libya was behind the attack.
A 2,000 lb US bomb crashed through the ceiling of Gadaffi’s private quarters. He was outside in his trademark tent. But his 2-year old adopted daughter was killed.  Some 87 other civilians and a few French diplomats were also killed. Americans thought this raid was dandy.
“Why, Mr Eric,” a clearly confused Gadaffi plaintively asked me, “why are the Americans trying to kill me?”
“Because they think you are funding every kind of anti-western group,” I replied. “And they will never forgive you for provoking the rise in Arab oil prices.”
In those long ago days, Gadaffi, who considered himself a passionate revolutionary, supported every militant group that asked for Libyan help, including Nelson Mandela’s African National Congress, various Palestinian groups fighting Israeli occupation, Basque separatists battling Madrid, and the Irish Republican Army.   To Washington, Gadaffi was the world’s arch “terrorist.”     
After we spent the evening in his colorful Bedouin tent, I had some fun with Gadaffi. “We may bomb you, Leader, but we also think you are the best-dressed Arab leader.”   Gadaffi, dressed in a custom made, silk Italian jump suit and zippered boots, beamed with pleasure. He asked me where he could get the Ralph Lauren safari jacket I was wearing, adding,   “you look very militant, Mr Eric.”

Further Signals of Unease in Saudi Arabia

I don't read Arabic but Blake Hounshell thumbs that this says Saudi liberals want a constitutional monarchy.

Things have been quiet in Saudi Arabia, relative to what has been going in in other parts of  the greater Middle East, but there is clearly unease under the surface. Saudi Arabia’s King Abdullah recent announcement that the government would increase benefits by more than $36 billion is a clue that the King is aware that tensions need to be defused.

If the unease turns to outrage and riots, with a threat to Saudi oil production, then things get real serious, globally. Libya is responsible  for less than 5% of OPEC production, but Saudi Arabia produces over 30%. Iran produces roughly 12%.

If Saudi Arabia or Iran blows (and Iran looks very close) then world stock markets get really smacked.

Latest Warren Buffett Letter is Out

Warren Buffett remains one of the shrewdest investors of all time. His annual letter is always worth reading for its investment discussions and discussions on  management style---despite the fact that Buffett, himself, has to be considered at this time a full-fledged member of the ruling oligarchy. Unquestionably, the Berkshire portfolio performance was aided and abetted by Federal Reserve bailouts of firms such as Goldman Sachs which received government money just days after Buffett invested in the firms.

In this letter, he curiously calls, one of his investment decisions, Berkshire's "social obligation" and a couple of paragraphs later refers to another investment as a "social compact."

Of course, profitable investments do help society by increasing the standard of living, but the use of terns such as "social obligation" and "social compact" severely distorts what investing is all about. It is about investing for personal gain. The gain to society is simply a byproduct of the investment, what Hayek would call, an unintended consequence. (BTW: A much more sophisticated and insightful use of the term "unitended consequence", then is used today by MSM, who laughably think they are demonstrating knowledge of Hayek's thinking, when they use the term in a much less insightful, pedestrian manner.).

Buffett's use of "social obligation" and "social compact" distorts the fact that these two concepts should never be considered when making an investment decision. Ane investment should be considered on its own profit and loss merits, that is all that is needed to keep a society's standard of living growing. To encourage investors to consider "social obligations" and "social compacts" will only cause them to move beyond their area of knowledge and make the the economy less efficient.

I should add that Buffett, although using these "social" terms, appears to have made his investment judgements based solely on the profit and loss merits and appears to have thrown out the "social" stuff for some kind of window dressing. Bizarre.

The man speaks more and more social babble the older he gets.  He even quotes, although in a harmless way, John Kenneth Galbraith, who was probaly one of the most confused economists/socialists to ever appear on American television.

Back to the investment world, Buffett is back on track in his letter with his discussion of the failures of the Black-Scholes model for valuing long-term options or similar long-term investment vehicles. Interestingly, in the EPJ Daily Alert, awhile back, I discussed in detail the view of hedge fund manager Derek Pilecki of Gator Capital Management, who holds a similar view about the failures of  the Black-Scholes valuation model,and  about the investment opportunities available, in Pilecki's view because of this incorrect valuation. Given Buffett's similar discussion, I am going to re-run my coverage of Pilecki's views in Monday's EPJ Daily Alert, so if you have been thinking about subscribing to the Alert now may be the time.

Buffett's full letter is here.

Potential Market Mover: Bernanke to Testify Tuesday

On Tuesday March, 1, Fed Chairman Ben Bernanke will testify before the Senate Banking Committee.  At the  hearing Bernanke will deliver his semi-annual monetary policy report to Congress.

Although Bernanke will attempt to be cautious and not rock markets, given the uncertainty of whether the Fed will continue with QE2 and whether it will launch a QE3, the market is likely to show some response to his comments.

Joe Weisenthal as a Pinball Wizard

Joe Weisenthal comments on my post Is Goldman Sachs Providing Pitchforks to the Democrats?  Specifically, Weisenthal writes:
Robert Wenzel goes further, saying that the[Goldman] report may have been deliberately timed to help the Democrats in the current budget battle, and that Goldman was "providing pitchforks" for the Democrats.

But sorry, ff [sic] you think there's pro-Democratic propaganda in the paragraphs above, you've got better eyes than we do. It specifically says that by the end of the year, the spending cuts would have a negligible effect, though it goes onto say that a government shutdown would have a more serious impact on growth.
Uh, let's get Weisenthal some eyeglasses. He may think his eyes are fine, but last I looked Chuck Schumer was a Democratic Senator, from Weisenthal's home state to top it off. I quoted him in my post this way: FT story...quotes New York Democratic Senator Chuck Schumer:
Chuck Schumer, the Democratic senator from New York, said: “This nonpartisan study proves that the House Republicans’ proposal is a recipe for a double-dip recession. Just as the economy is beginning to pick up a little steam, the Republican budget would snuff out any chance of recovery. This analysis puts a dagger through the heart of their ‘cut-and-grow’ fantasy”.
Weisenthal may not see that Schumer is using the Goldman report as a propaganda piece, but maybe only because Schumer is using it as a sledge hammer. Go ahead, re-read it again. Is Schumer using the report in a mild mannered fashion?

Further, a bit of political nuance may have not caught Weisenthal's ear (Bad eyes and bad ears, maybe Weisenthal is a pinball wizard.)when I pointed out that the Schumer quote meant Schumer was taking a role. The implication was that Schumer would be much more effective than Senate majority leader Reid at stopping the budget bill.

It's not the quality of the report, or who else may be putting out such a report, it's the fact that this report found its way into my hands, Schumer's, FT's and ABC News.

That doesn't happen by accident.

Weisenthal is correct that there are many reports out saying all kinds of things about the economy, but the Goldman one is the one that found its way into news accounts and that Schumer is using to declare that the budget cuts would mean another dip in the economy. Indeed, my source told me that it didn't even matter what the full report said, or how it might have qualified things. He correctly said that most reading Schumer's reaction, would see the Schumer quote and never come close  to seeing the full report. The juicy quote was what Schumer needed, and that's what the report had in it (or from which Schumer could at least extrapolate a warning of a double dip).

Weisenthal just doesn't get how cynically politicians and Goldman's top players view the average schmuck on the street. Remember, we went to war against Iraq to fight terrorists and dismantle weapons of mass destruction, neither of which had anything to do with Iraq. Schumer doesn't care about the report beyond the sound bite he can pull out of it.

But, then again, Weisenthal may be right. It might all be coincidence that it was a Goldman report. Schumer, after carefully reading a few dozen reports from the likes of Merill Lynch, Morgan Stanley, JPMorgan Chase ans UBS, into the wee hours of the night, may have decided that Goldman's double dip warning made the most sense on its merits out of all the reports. Schumer may have drawn his own IS-LM curves, aggregate demand curves, running some regression analysis on Senate computers and  re-reading Chapter 10, The Marginal Propensity to Consume and the Multiplier, in Keynes' book The General Theory, and then, only then, Schumer decided to use the Goldman report. Yeah, that's how I think it happened. Weisenthal is right, everything else was just coincidence. There's no propaganda in the Goldman report, after all FT also reported that Lloyd Blankfein considers what he is doing as "God's work." I'll have to keep that in mind the next time a 30-year Capitol Hill veteran calls to give me his thinking on how D.C. machinations go. There really aren't any, D.C. is a very moral up-standing place, perhaps only superseded by Goldman Sachs.

Friday, February 25, 2011

Robert Reich Discusses the Koch Brothers

Robert Reich is terrible when it comes to economic reasoning, but as I have said before, he understands political power manuvering. This is what I wrote last April, before there even was a battle in Wisconsin:
As per usual, Robert Reich is great at understanding a problem (The cozy relationship between parts of Wall Street  and government), but terrible with his solution.
Here  is Reich today on what is going on with establishment Republicans:
The final truth is as income and wealth have risen to the top, so has political power. The reason all of this is proving so difficult to get across is the super-rich, such as the Koch brothers, have been using their billions to corrupt politics, hoodwink the public, and enlarge and entrench their outsized fortunes. They’re bankrolling Republicans who are mounting showdowns and threatening shutdowns...

They are behind the Republican shakedown.

The Clueless Fed Branch Presidents, on QE2

The most important thing you need to know about QE2 right now is that most of the money the Fed is printing is not ending up in the economy, but as excess reserves back at the Fed.

Yet, Fed branch presidents, of all people, babble on as though they aren't even aware of this fact.

WSJ reports on Fed prez Bullard:
St. Louis Federal Reserve President James Bullard said Thursday that he supports adjusting the Fed’s current bond-buying program, dubbed as QE2, depending on developments in the U.S. economy.

Bullard said the Fed could send small signals that the economy is doing better by adjusting the program. He said there are many ways to adjust QE2, including stretching out purchases to the third quarter by buying at a slower pace. He was responding to questions from reporters after speaking at an event in Bowling Green, Ky.
WSJ reports on Fed prez Hoening:
Federal Reserve Bank of Kansas City President Thomas Hoenig on Wednesday said the U.S. central bank was risking a new financial crisis with its easy-money policies...

Hoenig, one of the Fed’s most outspoken internal critics, warned monetary policy should be tailored “so you don’t overshoot and cause the next crisis.”
WSJ reports on Fed prez Plosser:
One of the Federal Reserve‘s leading hawks warned Wednesday of the risks of maintaining easy monetary policy in the face of rising commodity prices and said if the recovery continues to pick up speed, he’d support curtailing the bond-buying program widely known as QE2.

“Should economic prospects continue to strengthen, I would not rule out changing the policy stance to bring QE2 to an early close,” Federal Reserve Bank of Philadelphia President Charles Plosser said. “If the growth rates of employment and output begin to accelerate or if inflation or inflation expectations begin to rise, then it may be time to begin taking our foot off the accelerator,” he said.

The central banker was referring to the Fed’s effort to buy $600 billion in longer-dated Treasury bonds by the summer in a bid to stimulate growth, bring down unemployment and push inflation away from deflationary levels
Remarkably, all the Fed branch presidents quoted above discuss the current situation as though Fed Treasury bond buying is actually putting money in the system. The money was going into the system before the New Year, but it has stopped since then. Excess reserves since the first of the year have climbed by $117 billion, while money supply growth (M2) has dropped to an annualized rate of 4.1% ,versus earlier growth of 7.0%.

The Fed shouldn't be manipulating the money supply at all, but these bronco rides will end up crashing the stock market and economy all over again. Think stagflation.

Daddy Bloomberg: Give Kids the Option to Shoot, Kill and Die

Mayor Michael "Daddy" Bloomberg called on Columbia University to reinstate its ROTC program after a 42-year absence on campus, reports DNAinfo.

"I think Columbia should — my personal opinion, I can't tell Columbia what to do — but they should open an ROTC program and give the kids the alternative," the Daddy mayor told WOR's John Gambling during his weekly radio sit-down, according to DNA.

"ROTC is a good thing for a lot of students," Bloomberg said.

Rand Paul On David Letterman

I give Rand a B-. He'll improve with time, as he does more of these. It's not as though he does not know all the correct answers (Which he does try to get across), but he also has to be careful how he words things in dealing with a hostile interviewer (on national television) who is ready to jump on anything Rand says that will appear absurd to an uneducated public.

In time, Rand will be able to spin Letterman  around the way Tom Woods handled Dennis Miller.

Zero Hedge Endorses the EPJ Daily Alert....

...says EPJ Daily Alert subscriber, Frank P. 

Emails Frank:
Zero Hedge endorses EPJ Alert!

By confirming what you've been telling your subscribers for several weeks already!
Isn't it time you checked out what is going on at the EPJ Daily Alert?

The Conant Problem

When Taylor Conant debates statists on why he doesn't want to participate in coercive government activities, they often tell him, "If you don't like it here, leave."

His problem: In order to leave, he would have to subject himself to a coerced search of his body by the government (TSA).

Will the Government Issue an Arrest Warrant for Tom Woods?

NYT reports:

Julian P. Heicklen sat silent and unresponsive as his bail hearing began last week in federal court in Manhattan; his eyes were closed, his head slumped forward.

“Mr. Heicklen?” the magistrate judge, Ronald L. Ellis, asked. “Mr. Heicklen? Is Mr. Heicklen awake?”

“I believe he is, your honor,” a prosecutor, Rebecca Mermelstein, said. “I think he’s choosing not to respond but is certainly capable of doing so.”

There was, in fact, nothing wrong with Mr. Heicklen, 78, who eventually opened his eyes and told the judge, “I’m exercising my Fifth Amendment right to remain silent.”

Indeed, it was not his silence that landed Mr. Heicklen, a retired Penn State University chemistry professor, in court; it was what he had been doing outside the federal courthouse at 500 Pearl Street.

Since 2009, Mr. Heicklen has stood there and at courthouse entrances elsewhere and handed out pamphlets encouraging jurors to ignore the law if they disagree with it, and to render verdicts based on conscience.

That concept, called jury nullification, is highly controversial, and courts are hostile to it. But federal prosecutors have now taken the unusual step of having Mr. Heicklen indicted on a charge that his distributing of such pamphlets at the courthouse entrance violates the law against jury tampering. He is to appear in court on Friday for a conference in his case.
Woods is the author of the important book, Nullification: How to Resist Federal Tyranny in the 21st Century. Don't think, for a minute, that it is not a courageous act for Woods to write the types of books he does. In his latest book, Rollback, Woods shows that courage again by detailing how and why he would take a knife to the military budget.

John Carney Not Impressed with Jay Carney

John thumbs:
Wow. Check out how Jay Carney awkwardly tries to defend secret meetings between Obama admin and lobbyists
View the video here.

Gaddafi’s 2008 Reading List: George Soros, Barack Obama…

From a WikiLeaks cable:

C O N F I D E N T I A L TRIPOLI 000833


E.O. 12958: DECL: 10/20/2018

CLASSIFIED BY: Chris Stevens, CDA, Embassy Tripoli, Department
of State.
CLASSIFIED BY: Chris Stevens, CDA, Embassy Tripoli, Department of State. REASON: 1.4 (b), (d) 1. (C) During a recent meeting at the office of MFA Secretary for the Americas (A/S-equivalent), Dr. Ahmed Fituri, P/E Chief commented on a stack of English-language books on current affairs on Fituri’s desk. Fituri offered that he had been personally tasked by the Leader, Muammar al-Qadhafi, to read and summarize in four- to seven-page Arabic-language reports “significant” English-language books dealing with American politics and policy, current affairs and history.

. . . . Fituri estimated that he has summarized six to eight books per year, as well as miscellaneous articles from key journals and magazines. He was currently summarizing Fareed Zakaria’s latest book, “The Post-American World” and was about to begin work on Thomas Friedman’s “The World is Flat 3.0″. He had recently translated in full the Secretary’s article in the Foreign Affairs journal. Other books Fituri had summarized in the past year included Zakaria’s “The Future of Freedom: Illiberal Democracy at Home and Abroad” (which al-Qadhafi liked), Barack Obama’s “The Audacity of Hope” and George Soros’ “The Age of Fallibility: Consequences of the War on Terror”.
Maybe this is Gaddafi's problem. He should have been reading Hoppe, Woods, Rockwell, Murphy and DiLorenzo---he would have learned that he needed to free up the country to bring stability and the result would have been no need for uprisings.

Thursday, February 24, 2011

The First Review of Atlas Shrugged, Part 1

By Angela Keaton

Imagine if the producers of As the World Turns and Dirty Sexy Money got together and rewrote your favorite novel for the Facebook generation.

It’s not as bad as you think. It’s not bad at all. Dare say, giving the timing, it’s actually important. This isn’t about pleasing Rothbardians, the moldy oldies at Cato or Dr. Peikoff. The good news of Ayn Rand has finally and gratefully been liberated from the professional Objectivists.

A few hours ago I had the honor of viewing the first LA screening of Atlas Shrugged, Part 1. On April 15th, Every Ron Paul fan under 30 should get a seat for the opening.

The YAL kids can get the Objectivist rap elsewhere. What young libertarians need are life lessons wrapped in an easy to watch package. Here they are without spoilers.

•If you do anything with your life, there is no shortage of parasitic in-laws, lawyers, and phony do gooders who will suck the blood from you then beat your lifeless body. Metaphorically speaking, if you are lucky. Grant Bowler manages to capture the put upon Hank Rearden without ever eliciting pathos.

•Bullies yammer a lot about the poor. Play upon the decent and hard working man’s sense of justice. Always know more than you do about oppression, especially when they are well heeled white, older men who work for “councils” in Washington, D.C.

•Women who aren’t slaves to whims, “hormones” or learned helplessness will always be written off as “cold.”

102 minutes. No profanity, physical violence, or nudity.


Is Goldman Sachs Providing Pitchforks to the Democrats?

My post this morning, Goldman Sachs Goes Totally Keynesian, brought in several emails and one phone call. The phone call came from a three decade Washington D.C. insider.

He tells me that the Goldman Sachs report that I highlighted was unlikely to be released at this time by accident. Specifically, the report, written by Goldman Sachs economist Alec Phillips, says that the minuscule spending cuts of $61 billion in 2011, which were just approved by Republican controlled House, could reduce US economic growth by 1.5 to 2 percentage points in the second and third quarters of the year.

Naturally, I called such an idea preposterous.

My D.C source called Goldman, "the master of the inside game." He said they are "savvy, shrewd and cynical." The report was likely timed, my source says, to provide Democrats with pitchforks to battle even the minuscule cuts the budget proposal calls for. As my source said, "it's like 61 grains of sand on the California coastline. It's absurd to think it is going to have any meaningful impact on the economy."

He pointed me to an FT story that quotes New York Democratic Senator Chuck Schumer:

Chuck Schumer, the Democratic senator from New York, said: “This nonpartisan study proves that the House Republicans’ proposal is a recipe for a double-dip recession. Just as the economy is beginning to pick up a little steam, the Republican budget would snuff out any chance of recovery. This analysis puts a dagger through the heart of their ‘cut-and-grow’ fantasy”.
According to my source, it is unlikely that Senate Majority leader Harry Reid could stop the bill, but with Schumer taking a role, as this quote suggests, it could be blocked. Translation: The A Team has decided to stop this early stage budget battle. Says my source, Goldman people are as nefarious as they can get. They like things just the way they are: a high spending government and if necessary crazed Keynesian theories to back it up.

Soros Grabs Obama Official

This is beyond revolving door. I wonder if she will even have to move her office.

Cadie Thompson at John Craney's NetNet reports:
Cathy Zoi, the Secretary for Energy and Assistant Secretary for Energy Efficiency and Renewable Energy, is going to work for a new cleantech private equity fund sponsored by George Soros and a prominent Silicon Valley venture capital firm.

The new fund will invest in...wait for it..."the energy and resource sectors."...Zoi, who joined the Obama Administration in 2009, became controversial during early 2010, after it was realized she had a financial interest in two companies that were poised to profit from government spending that promoted energy efficiency.
You can read even more ugly details here.

Condition (Blood) Red: TSA Incident with a Reporter

Lauren Tara LaCapra of thumbs:

Just had worst experience ever at Denver Airport w/ nasty TSA woman & Continental/United.

My finger is sliced open due to TSA's carelessness. I hope she gets fired.

Comngressional Budget Office Deploys Keynesian Voodoo

Using Keynesian logic, the director of the CBO tells us that:
Under the American Recovery and Reinvestment Act of 2009 [a/k/a the Stimulus Package]...Lowered the unemployment rate by between 0.7 percentage points and 1.9 percentage points...Increased the number of people employed by between 1.3 million and 3.5 million, and
How the CBO can say the stimulus package lowered the unemployment rate, without taking into consideration the jobs lost in the private sector as a result of stimulus money that was diverted away from the private sector via government taxation and borrowing, is truly baffling. I suspect it can only be done after heavy doses of watching the President's motorcade fly through D.C., while the police hold back the unwashed masses. Who wouldn't want to get a chance at getting close to public transportation like that, considering the alternative?

China Growth Indication

China plans to build at least 45 new airports, spending $230 billion on expanding air travel.

But the question that needs to be asked is: Is this an attempt to meet market demand  or is this about local government officials who need an airport to raise their status at regional and national conferences? Life would be so much easier if all these decisions were made via free markets.

2011: The Year of the iPad Clones

By David Pogue

It’s an old pattern by now. Phase 1: Apple introduces some new gadget. The bloggers and the industry tell us why it’ll fail. Phase 2: It goes on sale. The public goes nuts for it. Phase 3: Every company and its brother gets to work on a copycat.

The Motorola Xoom tablet screen has a slightly higher resolution than the iPad screen, and a different shape.

It happened with the iMac and the iPhone. Now the iPad is entering Phase 3. Apple sold 15 million iPads in nine months, so you can bet that 2011 will be the Year of the iPad Clone.

Starting Thursday, you’ll be able to buy one of the most eagerly awaited iPad rivals: the Motorola Xoom. Like most iPad aspirants, this one runs Google’s Android software — but the Xoom is the first that runs Android 3.0 (code-named Honeycomb), which Google designed for tablets instead of phones.

The Xoom continues Motorola’s recent streak of attractive, compact and well-built gadgets. Unless you inspect the back panel (rubberized plastic instead of silver aluminum), you might not be able to tell this touch-screen slab from the iPad.

There are some differences, though. One is the price: the Xoom costs a stunning $800, $70 more than the equivalent 32-gigabyte iPad (WiFi and 3G cellular). You can get the Xoom for $600 if you’re willing to commit to a two-year Verizon contract. That means paying $20 a month to get online using Verizon’s cellular network (if you can get by on only 1 gigabyte of data), instead of just Wi-Fi hot spots.

The Xoom also has a dual-core processor, which, according to Motorola, means smoother game animation. And it has cameras. On the back, there’s a 5-megapixel still camera that can also record high-definition video. On the front, there’s a low-resolution video camera for video chatting. The new Android software includes a beefed-up Camera module, which gives weird prominence to gimmicky effects you’ll never use, like Solarize, Sepia and Polarize.

Clearly, a camera is useful on a tablet, and will remain a gigantic competitive advantage for the Xoom — at least until the iPad 2 comes out next month (if Apple sticks to its usual annual update pattern, that is). If the new iPad doesn’t have a camera or two, I’ll eat a tablet.

The Xoom’s screen has slightly higher resolution than the iPad’s, and it gives the tablet a slightly different shape — more like a business envelope than a greeting-card envelope. The screen shape is a better match for hi-definition videos, but worse for photos and maps.

The Xoom has stereo speakers instead of mono, a battery good for 10 hours of video playback and a power button on the back panel. Motorola says that later this year, a software upgrade will let the Xoom take advantage of Verizon’s 4G cellular networks, which means better downloading speed in a few lucky cities.

One very cool feature: The Xoom has an HDMI jack, meaning that a single cable can send both audio and hi-def video to a TV. That’s a perfect proposition for the peripatetic PowerPoint presenter.

Motorola’s dock doctor has been working overtime, too. You can buy either a speaker dock or a charging dock that automatically activates the Xoom’s slide show or alarm-clock mode. If the Xoom’s hardware were the whole story, it wouldn’t be much more than an anecdote. Those hardware improvements alone won’t knock the iPad —especially the iPad 2 — off its pedestal, especially considering the 25 percent price premium.

No, the more important story here is Honeycomb, the Google tablet software. This is the real iPad competitor; Honeycomb tablets in every size, shape and price range will soon be arriving in stores.

So how is Honeycomb? Four words: more powerful, more complicated.

Read the rest here.

Top Lawyers Now Earn Over $1,000 per Hour

While companies have cut legal budgets and continue to push for hourly discounts and capped-fee deals with their law firms, many of them have shown they won't skimp on some kinds of legal advice, especially in high-stakes situations or when they think a star attorney might resolve their problem faster and more efficiently than a lesser-known talent, reports WSJ.

In other words, when you need a code talker, you need a code talker---and nothing but a code talker.

Nearly 2.9% of partners at a group of 24 large U.S. and British law firms asked for $1,000 an hour or more in U.S. cases last year, up from 1.5% in 2009, says WSJ.

Army Deploys Psy-Ops on U.S. Senators (and the Head of the Joint Chiefs of Staff)


The U.S. Army illegally ordered a team of soldiers specializing in "psychological operations" to manipulate visiting American senators into providing more troops and funding for the war, reports Rolling Stone.

RS reports:

The orders came from the command of Lt. Gen. William Caldwell, a three-star general in charge of training Afghan troops – the linchpin of U.S. strategy in the war. Over a four-month period last year, a military cell devoted to what is known as "information operations" at Camp Eggers in Kabul was repeatedly pressured to target visiting senators and other VIPs who met with Caldwell. When the unit resisted the order, arguing that it violated U.S. laws prohibiting the use of propaganda against American citizens, it was subjected to a campaign of retaliation.

"My job in psy-ops is to play with people’s heads, to get the enemy to behave the way we want them to behave," says Lt. Colonel Michael Holmes, the leader of the IO unit, who received an official reprimand after bucking orders. "I’m prohibited from doing that to our own people. When you ask me to try to use these skills on senators and congressman, you’re crossing a line."
Those singled out in the campaign, according to RS, included senators John McCain, Joe Lieberman, Jack Reed, Al Franken and Carl Levin; Rep. Steve Israel of the House Appropriations Committee; Adm. Mike Mullen of the Joint Chiefs of Staff; the Czech ambassador to Afghanistan; the German interior minister, and a host of influential think-tank analysts.

Police and Protesters Clash in Greece

Police, who are still getting paid by the Greek government, clashed with protesters who are not, in a battle over the fight for plunder taken from what must be a dramatically shrinking private sector in Greece. Another confused uprising in a world sorely lacking in understanding of basic economic principles.

MyWay reports via AP:
Young demonstrators hurled rocks and fire bombs at riot police as clashes broke out Wednesday in Athens during a mass rally against austerity measures, part of a general strike that crippled services and public transportation around the country.

Police fired tear gas and flash grenades at protesters, blanketing parts of the city center in choking smoke. Thousands of peaceful demonstrators ran to side streets to take cover. A police officer was attacked and his uniform caught fire in the city's main Syntagma Square, and his motorcycle was burned.
At least two people were injured and another three arrested. One group of rioting youths smashed paving stones in front of the central Bank of Greece, but there were no immediate reports of any serious damage.
More than 30,000 protesters attended the Athens rally, which had been calm before the clashes. Protesters chanting "Don't obey the rich - Fight back!" marched to parliament as the city center was heavily policed. A brass band, tractors and cyclists joined the rally...

Unions are angry at the ongoing austerity measures put in place by the Socialist government in exchange for a euro110 billion ($150 billion) bailout loan package from European countries and the IMF.
Stathis Anestis, deputy leader of Greece's largest union, the GSEE, said workers should not be asked to make more sacrifices during a third straight year of recession.
"The measures forced on us by the agreement with our lenders are harsh and unfair. ... We are facing long-term austerity with high unemployment and destabilizing our social structure," Anestis told The Associated Press. "What is increasing is the level of anger and desperation ... If these harsh policies continue, so will we."

Goldman Sachs Goes Totally Keynesian

It probably shouldn't come as a complete surprise. The investment bank that ends up placing operatives in government positions across the globe, Goldman Sachs, is out with a report calling for more government spending.

They argue for this spending based on the Keynesian theory that spending is good for the economy. This ignores the fact that it is production not consumption that increases the standard of living of a society and that government spending by definition means money is drained from other sectors to conduct the government spending binge. In other words, the spending, itself, is a wash, directed at government's favorite bureaucratic projects instead of being left in the private sector---where growth really occurs.

Specifically, Goldman Sachs economist Alec Phillips, based in Washington D.C., has issued a report that says the miniscule spending cuts of $61 billion in 2011 just approved by Republican controlled House could reduce US economic growth by 1.5 to 2 percentage points in the second and third quarters of the year. What nonsense! A Keynesian style look at one side of the equation if there ever was such a case. When you really think about it, Enron style bookkeeping and Keynesian economic analysis are not that much different, just pick and choose what you want to feature and keep everything else off the books.

Gadhafi's Forces Attack Libyan City

A Libyan army unit loyal to dictator Col. Moammar Gadhafi attacked antigovernment protesters holed up in a mosque in a key city west of the capital, blasting a minaret with anti-aircraft missiles and automatic weapons, a witness said, according to WSJ.

The witness, who spoke on condition of anonymity for fear of reprisals, said the 9 a.m. attack came a day after an aide to Col. Gadhafi, identified as Abdullah Megrahi, came to the city and warned the protesters to "leave or you will see a massacre."

"We told him we are not leaving, either death or victory," the witness said.

Meanwhile, one of Col. Gadhafi's closest aides, Ahmed Gadhaf al-Dam, said he has defected to Cairo in protest of the regime's fierce crackdown on demonstrators. When you have defectors like al-Dam, it is hard to see how Gadhafi can hold on to power much longer. A guy like al-Dam knows how to read the tea leaves and is only about staying on the side that will prevail.

The type of government that will replace Gadhafi is unkown.

Assange Extradition Approved

A U.K. court has ordered WikiLeaks founder Julian Assange be extradited to Sweden to face questioning about sexual assault allegations.

A Swede trial would, of course, just be a warm up act, until the U.S. gets its hands on Assange. One courageous dude.

"Quality Time" for Geithner with the President, Thursday Afternoon

On Thursday morning, Treasury Secretary Geithner will meet at Treasury with Brazilian Foreign Minister Antonio Patriota.

In the afternoon, Secretary Geithner will attend a meeting of the President’s Council on Jobs and Competitiveness at the White House.

Later in the afternoon, the Secretary will meet with the President at the White House.

Wednesday, February 23, 2011

Visual Analogy to Obama’s $100 Million Budget Cuts

President Obama's budget cut proposal in perspective, or why I don't pay much attention to the great budget cut battles/


The Day I Stood Next to Steve Jobs (and 10 Things You Probably Don't Know About Him)

By James Altucher

I was standing right next to Steve Jobs in 1989 and it was the closest thing I ever felt to being gay. The guy was incredibly wealthy, good looking enough to get any girl, a nerd super-rockstar who had just convinced my school to buy a bunch of NeXT machines (which, btw, were in fact the best machines to program on at the time) and I just wanted to be him. I wanted to be him ever since I had the Apple II+ as a kid. Ever since I shoplifted Ultima II, Castle Wolfenstein, and half a dozen other games that my friends and I would then rip from each other and pretend to be sick so we could stay home and play all day.

I don’t care about Apple stock. (Well, I do think it will be the first trillion dollar company). Or about his business successes. That’s boring. The only thing that matters to me is how Steve Jobs became the greatest artist that ever lived. You only get to be an artist like that by turning everything in your life upside down, by making horrible, ugly, mistakes, by doing things so differently that people will never be able to figure you out. By failing, cheating, lying, having everyone hate you, and coming out the other side with a little bit more wisdom than the rest

So, 10 Unusual things I didn’t know about Steve Jobs.

1) Nature versus Nurture. His sister is Mona Simpson but he didn’t know it until he was an adult. Mona Simpson was one of my favorite novelists from the late 80s. Her first novel, Anywhere but Here , was about her relationship with her parents. Which, ironically, was Steve Jobs parents. But since Steve Jobs was adopted (see below) they didn’t know they were brother-sister until the 90s when he tracked her down. It’s proof (to an extent) of the nature versus nurture argument. Two kids, without knowing they were brother and sister, both having a unique sensibility of life on this planet to become among the best artists in the world in completely different endeavors. And, to me it was great that I was a fan of both without realizing (even before they realized) that they were related.

2) His father’s name is Abdulfattah Jandali. If you had to ask me what Steve Job’s father’s name was I never in one zillion years would’ve guessed that and that Steve Jobs biologically was half Syrian Muslim. For some reason I thought he was Jewish. Maybe its because I wanted to be him so I projected my own background onto him. His parents were two graduate students who I guess weren’t sure if they were ready for a kid so put him up for adoption and then a few years later had another kid (see above). So I didn’t know he was adopted. The one requirement his biological parents had was that he be adopted by two college educated people. But the couple that adopted him lied at first and turned out not to be college educated (the mom was not a high school graduate) so the deal almost fell through until they promised to send Steve to college. A promise they couldn’t keep (see below). So despite many layers of lies and promises broken, it all worked out in the end. People can save a lot of hassle by not having such high expectations and overly ambitious worries in the first place.

Read the rest here.

Gov. Scott Walker Gives Fake David Koch an Update

This is hilarious. An alternative newspaper in Buffalo, NY calls Wisconsin Governor Scott Walker as "David Koch". Clearly the Governor spends more time with Koch lieutenants than he does with the head honcho. He doesn't recognize the voice as not being Koch's, but gives the Fake David Koch a full rundown of what is going on in Wisconsin.

At one point, the governor warns Fake Koch that Wisconsin House Rep. Tim Cullen, a Democrat who's voted with Republicans on numerous issues, is "not one of us."

Overall, Walker comes off as a pretty straight guy (who has probably taken Eliot Spitzer's advice to never talk when you can nod). He comes across as simply a guy who can be hoodwinked by a Fake Koch. I hate to imagine what a real Koch can do to him.

Keep in mind the Koch's are likely very good at using code talkers, see my The Importance of Using Code Talkers, so that's why there sounds like only a distant familiarity between the two. The seven lobbyists the Koch brothers have in Wisconsin are the code talkers, the Gloria Allred's of toilet paper factory lobbying, if you will.

Here's the call.

Should Mayor Bloomberg Be NYC's Daddy?

Smoking in parks, beaches, boardwalks, pedestrian plazas and other public spaces will be banned beginning May 23 in NYC. Mayor Michael Bloomberg signed the legislation on Tuesday. It's the latest move by NYC's Mayor, who appears to want to be NYC's Daddy.

This isn't about second hand smoke, it's about the harsh hand of government, pure and simple. It is about control. I seriously doubt anyone in NYC actually believes there is harm being done to anyone smoking a cigarette in Central Park other than to the person actually smoking the subsidized (then taxed) tobacco stick.

But to knock down this latest insanity is easy. Let's pick on something that many people actually believe  is a benefit that Daddy Bloomberg has forced upon NYC businesses. That is the requirement that food servers (with a few small exceptions) list the calories of the foods they sell.

Walk into a Starbucks and you will now not only be informed on the menu of the price of a grande mocha, but also the calories. Walk into a Dunkin Donuts in NYC and you will be informed on the menu the very exact number of calories in an eclair.

This was all done, according to Daddy Bloomberg, so that NYC could become more health conscious. Yet if you walk around the city, you can see it has had no impact. The skinny girls, who were skinny before the calorie signs went up, are still skinny, as they search for the city for men with fat wallets. The men with fat wallets, can be physically fat or skinny, their choice, since they have the fat wallets.

In short, the people that were fat before Daddy Bloomberg's demand that food providers list calories are still fat, and those that were skinny before Daddy's demand remain skinny. NyPo is not running any pics of people who can no longer wear their old clothes because they lost so much weight because of Daddy's demand that calories be listed on menus. The whole thing is a scam. It is unlikely that one ounce of fat has been lost in NYC because of Daddy Bloomberg's calorie listings.  There never was a demand for the calorie listings on food and it is not changing a thing

In a free market, when information is required, it is there, When buying clothes, there are labels that designate that a specific piece of clothing is small. medium or large, so people are informed of a fact they really need to know. When something is on sale, retailers have appropriate signage. Show times for movie shows are available at theatres, in newspapers and on the internet. Reviews for movies and plays are likewise readily available. When we want to eat out in an unfamiliar city, we have the option of choosing from national brands with consistent food servings and atmosphere, or we can read Zagat's for a guide on unique local dining spots.

That a Mayor can introduce labeling or signage that people really need, that the free market does not provide is absurd. But the NYC Mayor appears to be a one track thinker on this subject and actually thinks that he can somehow do better than free markets. It is a dangerous thought. To date his Daddy demands have been relatively harmless. I fully expect him to next ban kids from peeing in the ocean. But at some point, this self-appointed Daddy may get tired of these minor demonstrations of power and may crank up his Daddy-trip. He'll be clever about it and market it as helping the city, but it will be the start of real infringements.

In other words, NYC residents should tell this fake daddy to go to hell, before he decides NYC'ers have all been staying up past their bedtime.

Understanding Power and Influence Players

The reaction in the comment section to my column, Krugman Explains the Wisconsin Power Game (Then calls for the unions to grab the power) , does not surprise me. It is difficult to understand how power players think and use leverage. Their way of thinking is far different from the way you and I think. So let me address, in further detail, why I reached the conclusions I have.

But first, let me state that the charge in the comments that I have some kind of "sour grapes" dispute with the Koch brothers is simply off base. I don't know the brothers personally and have never interacted with them, or their organizations, other than by my attending a few of the events they have sponsored at their Cato Institute operation in Washington D.C.. I have listened to lectures at the Hayek Auditorium at the Institute and eaten the pretty decent sandwiches that are provided after the events.

But, when someone tells me he is a big Boston Red Sox fan, yet I see him always wearing Derek Jeter shirts and I further learn he has box seats at Yankee Stadiuim and flies to NYC  at every opportunity to watch the Yankees play, a question like, "Where's your David Ortiz shirt?" or "Have you ever been to Fenway Park?" does not seem out of order.

The Koch brothers openly proclaim to be libertarians, yet, there seems to be little support from them of Ron Paul (although he may be getting too big and popular for them to ignore completely) and, like I said, I have been to the Koch-funded Cato Institute and they have a beautiful portrait of Friedrich von Hayek, but there is no obvious recognition of the work of Ludwig von Mises. Hayek has done some great work but he is no Mises.

And then when I see them move into the political arena with support for non-Paulian Republicans and take up a cause that has to be dear to the heart of establishment Republicans, i.e. breaking up public employee unions, I start looking at what else might be going on. Again, I repeat, there is nothing wrong with breaking up public employee unions, but it just appears to me to be an odd place for a libertarian organization to focus its energy, though it is a great place to focus if you seek to influence power, rather than eliminate it.

Power players just work differently than you and I. They see situations in terms of leverage and how it allows them to move pieces on their life's chess board. I am aware of one of the most powerful men in California. You will never see his name in the paper, but everyone, who needs to know who he is, knows him.

This gentlemen, although not officially having any control over the process, is really in charge of what movie stars gets their star on the Hollywood Walk of Fame, not only which stars, but where on the Walk of Fame the star is placed and when. All the Hollywood movie stars know this. Now, if you or I had this influence, we might think it is pretty cool. This power broker thinks differently. For him this is leverage he has on movie stars (along with some other leverage he has on movie stars who are already on the Walk of Fame). If you need a movie star, for whatever reason, he can deliver. Do you have a charity event that is not selling well? No problem, this operator will have two or three movie stars at the event and endorsing the event, pronto.

Jerry Buss, the owner of the Lakers, wanted a star on the Walk of Fame real bad. This man arranged it. Do you need courtside seats to game 7 of a Lakers NBA championship game? This operator can now get them from Buss.

Do you need a dead body moved when the government doesn't want it moved? My man can take care of that.  Way back when a plane crashed in Chicago on takeoff, the NTSB, as part of their investigation's standard operating procedure, refused to allow relatives to claim bodies immediately. One powerful family, because of religious reasons, wanted the body of a victim, so they could bury it immediately, the NTSB said "no". The family contacted this operator. He flew to Chicago, got the body released immediately, and personally escorted the body back by private plane to Los Angeles.

I suspect this operator also has squelched a Beverly Hills murder investigation or two. He probably knows more Cabinet officials on a first name basis than the President.  I know of one person who was commissioner of a very powerful federal agency. Although he didn't do much while he ran the agency (probably a good thing) the one thing he did do immediately was take calls if my man called.

I could go on and on about this operator, but the bottom line is he knows the leverage points which gain him the access points to create more leverage and more power. Once you see a guy like this operating, you begin to see how power players operate.They think in terms of leverage and influence in a way that an average person never comes close to thinking .

So when I noticed the Koch brothers funding, of all things, the breaking up of public unions (in Wisconsin!),  given all the areas that could be funded to slow the growth of government, I felt it needed a closer look.

When you think about it, the greatest beneficiary of the breakup of public unions is the establishment Republicans, since the Democratic party gains much support from these unions. My man in California would very quickly recognize the leverage play with establishment Republicans, if he could help smash public unions. But influence for what reason? If you poke around a bit, you do notice a reason. You notice that the governor's "budget repair bill" includes a provision for no-bid sales of assets. Mind you, these are not the types of sales that are conducted in the private sector, And then on top of this, there is the curious fact that Koch Industries has set up a lobbying office in Wisconsin with 7 lobbyists! In Wisconsin! At this point you have to realize that the Koch brothers clearly understand power and influence as well as, if not better than, my man in California.

There may be an occasional byproduct of some type of small advance in the promotion of some freedom concept, but this Wisconsin showdown looks to me like a power, influence and government control game that has little to do with free markets and the advance of liberty.

Reevaluati​ng ‘Chindia’: The Story of the Elephant and the Dragon

By Arpitha Bykere, Adam Wolfe and Arnab Das

The emerging market powerhouse known as “Chindia” is becoming a focal point of global attention as China and India show themselves to be growth dynamos of the coming Asian Century. But examining these countries’ intrinsic differences, as we do in “'Chindia': Putting the Emerging Market Giants Into Perspective,” is more illustrative than listing their similarities—and the two countries are likely to be on a divergent path over the next five years in the areas of growth, economic policy and politics.

China and India both entered the 20th century with large chunks of their populations in subsistence farming with medieval living conditions. Large numbers of people are leapfrogging generations of economic growth and development to join a modern services and manufacturing economy in the 21st century. Both societies are changing quickly, with different sectors and elites in the vanguard not just at home, but also in the international sphere. But the similarities between the two countries conceal underlying differences, such as India’s democratic, capitalist English common law vs. China’s authoritarian, state-led models of development. As fault lines in China’s export-led growth model emerge, bigger bets are being placed on India’s enormous potential.

India’s growth surge is occurring despite the government, China’s largely because of it. China’s economic miracle is a state-led, industrial revolution catch-up story, reflecting the efficiency of a strong, relatively centralized state in control. The main players are parastatals or foreign firms, which this communist country has protected from labor unrest. The ostensible results are superb: gleaming infrastructure, unprecedented for a country at China’s per capita income levels, with bullet trains, airports, roads, urban and increasingly extra-urban infrastructure, as well as productive capacity far exceeding current needs.

In contrast, India’s economic renaissance is led by a private sector struggling under the tethers of the “License Raj”—a mixed-economy hodgepodge of central planning and private capitalism with multiparty coalition governments that make U.S. gridlock politics look lightning fast. Businesses are thriving amid rising entrepreneurship, foreign investment, global competition and innovation but are facing bottlenecks of all kinds—whether overloaded transport infrastructure or petty corruption along transit routes that drives up transport costs. Much of the growth has come from entirely new sectors like information technology or internationally traded services that capitalize on India’s comparative advantages with a very large, cheap pool of English speakers, many with a very strong education and technical skills.

Looking ahead, China’s demographics are less than favorable for growth, but should support rebalancing. In 2011 China’s dependency ratio will bottom out, and its 15-29-year-old population will peak. The total working-age population will begin to decline in 2015, but labor supply constraints are already looking acute. In contrast, India is will see a demographic dividend, but structural factors will likely keep the country from fully capitalizing on it. India’s population and labor force will continue to expand through 2050, and the 25-39 cohort will not peak until 2030. The bulk of the increase in labor force will occur during this decade, with the median age rising to 28 by 2020. However, concerns about the poor quality of social services, low affordability of private sector services and a shortage of high- and low-end labor skills suggest that skill shortages will keep up the wage-price spiral.

China’s trend GDP growth will decline from about 10% in 2010 to 8% or so by 2015. Consumption will narrowly outpace GDP growth by 2012 or 2013, but structural factors will bring down the savings rate. Rising capital costs and nonperforming loans will constrain investment, which will begin to decrease as a share of GDP. By 2015, services’ share of GDP will rise while that of manufacturing and agriculture will decline slightly. India’s trend growth rate will rise above 9% in 2011-15 and will outpace Chinese growth starting in 2014. The rising services’ share of GDP will be offset by a declining agricultural share of GDP, while industry’s share is unlikely to increase. The saving-to-GDP ratio will exceed 40% by 2015, reducing consumption’s share of GDP and pushing investment’s share of GDP above 40% by 2014.

Nobody could accuse Chinese policy makers of being ignorant of their economy’s weaknesses, but they have not done much to address them either. The current Five-Year Plan looks much like the previous, and will sound the right notes for reform. The problem, as always, will be in the follow-through. The main constraint is China’s political economy, in which provincial leaders are rewarded for delivering strong growth and state-owned banks are hardwired to push out as many loans as hamstrung regulators will bear. The coming political transition in 2012-13 will make policy makers risk averse in the near term, but we are hopeful for change after 2013. On the political side, greater institutionalization within the Chinese Communist Party (CCP) and government should shift the country gently toward a rule-of-law system and away from the current rule-by-law model, where might makes right. There are signs that China is already heading down this path, with groups outside of the CCP having greater influence on policy making, but the process is likely to accelerate after the 18th Party Congress in late 2012.

India’s reforms in the 1990s and early 2000s laid the groundwork for the economy’s stellar performance, but the second phase of structural reforms has moved at a snail’s pace. Spending on populist social programs doubled between 2003 and 2009, yet did not enhance rural sustainability or the quality of services due to corruption and cost and implementation inefficiencies. The share of health care and education spending in total government expenditure has barely increased, while spending on ill-targeted subsidies has risen. With the government failing to provide key services, private sector investment in health care, education, labor training, utilities, infrastructure, R&D, agriculture and rural credit—sectors considered critical to increasing trickle-down effects, reducing structural inflation and benefiting from demographics and migration—will rise. Political aspirations to sustain 9-10% GDP growth will keep the economy vulnerable to overheating and asset bubbles, which would force policy makers to suppress private demand via tight monetary policies until supply-side bottlenecks ease over time. This, along with an unfavorable current account deficit financing structure, poses the biggest risk to India’s growth story.

As for corruption, increasing participation in civil society, use of technology in government projects, freedom of press and expansion of an educated middle class will gradually increase transparency and bring about institutional changes in administration and the judiciary. But this will happen from a very low base and will be a drawn-out process, given India’s centralized system, the immense disparities between states and the government-elite class nexus.
Read the Roubini Global Economics full report on Chindia, here.

Uh, Oh: Saudia Arabia Heating Up

Hundreds of people have backed a Facebook campaign calling for a "day of rage" across Saudi Arabia next month to demand an elected ruler, greater freedom for women and release of political prisoners, reports Reuters.

The page called for a "revolution of yearning" on March 11 in the kingdom, the world's biggest oil exporter and which is ruled by an absolute monarchy.

More than 460 people had endorsed the page by Wednesday morning, but it was impossible to verify how many of them were inside Saudi Arabia or whether any protest would materialize, says Reutres.

Meanwhile, according to WSJ, Saudi Arabia's King Abdullah returned to the kingdom Wednesday after a three-month absence for medical treatment and introduced a number of nonpolitical reforms amid regional uprisings that have toppled regimes in Tunisia and Egypt and infected neighboring Bahrain.

The social and economic overhaul, estimated to cost around 145 billion Saudi riyals ($38.7 billion), include housing support, funding to offset inflation and guarantee of payment for students overseas, according to a series of royal decrees published on the official Saudi Press Agency, or SPA.

Top SEC Lawyer Inherited Madoff "Profits"

NyPo reports:
The top lawyer at the Securities and Exchange Commission and his two brothers inherited more than $1.5 million in phony profits from their mother's investment in Bernard Madoff's epic Ponzi scheme, according to a startling suit filed by bankruptcy trustee Irving Picard.

David Becker -- who was named SEC general counsel and senior policy director less than two months after Madoff's arrest in December 2008 -- was served with legal papers demanding return of the dirty money earlier this month, court records show.

"The . . . investigation has revealed that $1,544,494 of this amount was fictitious profit from the Ponzi scheme," the Manhattan Bankruptcy Court filing says.

The Beckers' mother, Dorothy, died in June 2004.

Picard's papers say $2.04 million was withdrawn from the estate's account in February 2005, and another $1,648 was taken out three months later.

The three brothers were sued as both executors and individuals.

Reached at his Bethesda, Md., home last night, David Becker said, "There's no allegations of wrongdoing on anyone's part other than by Madoff."...

Asked if he had told his bosses at the SEC -- which has been harshly criticized for failing to uncover Madoff's $65 billion scam -- he replied, "I don't discuss internal conversations with the SEC."

Becker served as SEC general counsel from 2000 to 2002 before returning in February 2009, with Chairwoman Mary Schapiro then praising his "wisdom and careful judgment."

In announcing the end of Becker's "two-year commitment" earlier this month, Schapiro said his "wise counsel" had "served the agency and the American people brilliantly."

Understanding Government Asset Sales

When people think about a government unloading of an asset, they think of the way it is sold in the private sector: Keys are given to the new owner, he is free to do what he wants and the old owner walks away. But this is not the way government assets are necessarily "sold", especially "utilities. There is an on going relationship with the government where the monopoly utility gets to set fees approved by the government. In other words these deals have as much to do with the private sector as does the rum distiller business run by Fidel Castro's brother, Raul.

With this in mind, here's Yves Smith of Naked Capitalism taking a shot at understanding why the Koch brothers may need seven lobbyists in Wisconsin:
Mike Konczal (thanks to ed at ginandtacos) reported earlier today on the latest release of a movie coming to states and cities all over the US, namely the sale of state and local government assets to alleviate pressures on strained budgets.

For those new to this concept, the term of art is the anodyne “infrastructure sales” and the company that more or less invented this lucrative business is Macquarie Bank of Australia (known down under as “the millionaires factory”), although US firms clearly intend to exploit the once in a lifetime opportunity presented by widespread state and municipal budget distress and downgrades.

The problem, of course, is that these deals put important public resources paid for by taxes (or even worse, financed by bonds and thus potentially not even yet fully paid for) in the hands of private investors. They then earn their returns by charging user fees of various sorts. The public must rely on the new owners for reinvestment and maintenance, and depending on how the deal is negotiated, may have ceded control as far as fee increases are concerned. This is tantamount to selling the family china only to have to rent it back in order to eat dinner.

Now defenders will argue that there is nothing wrong with this in practice, as long as the price is fair, no one is harmed. That’s spurious. This is worse than an intergenerational transfer. Those future fees not only must recoup maintenance costs (which any owner would presumably pay) and the time value of money, but also the investor’s target return in excess of that. In addition, the large transaction costs of these deals are ultimately borne by the seller.
And the list of shortcomings thus far are merely those that result if you have two sides that are equally sophisticated. That is hardly the case with municipalities versus bankers and investors. As the old saying goes, “If you sit down for a game of poker and you don’t know who the sucker at the table is, it’s you.”

But even that dim view presupposes that the government body will try to avoid being fleeced but will. Imagine what happens when government officials are in a position to lend a helping hand with a wholesale giveaway to their cronies.
Like I said earlier, this is the Russian oligarch play all over again. Smith has a decidedly "public good" view of these operations and probably would like to see the government maintain control of the operations, but she gets the problem of these asset sales to oligarchs.

The real answer is for the governments to get out of these businesses rather than continuing them as monopolies with oligarchs and their army of lobbyists controlling the game.

All this asset sale stuff and buying of revenue streams is likely to go far beyond Wisconsin. In a very controversial deal, the city of Chicago sold its parking meter revenue stream. Smith explains:
Look what happened in the notorious case (to those who follow this netherworld) of the 2008 lease of Chicago’s parking meters. Mayor Richard Daley ramrodded it through, informing the city council of the complex deal a mere two days before the vote. The city had projected revenues foregone over the 75 year life of the deal on present value basis of between $700 million and $1.1 billion for cashflows over the life of deal in the $4 billion to $5 billion range. Chicago got $1.15 billion for the arrangement. Sounds like a winner, right? Well, funny that. The selling memorandum for Morgan Stanley-led investors on the very same deal said revenues would not be $4 billion or $5 billion, but at least $11.6 billion, or more than double the top amount projected by the city. And since they’ve put through two rate increases totaling over a 40% increase already, looks they they are on the way to making that happen.
Bloomberg reports that:
Indianapolis, Las Vegas, Los Angeles, Pittsburgh and other cities may follow Chicago in selling future parking revenue for cash to help fill budget holes, according to the [Koch supported] Reason Foundation, a Los Angeles-based researcher that advocates public-private partnerships. Chicago may also lease Midway International Airport, a regional hub 10 miles from downtown.
Asset sales may also be what Mayor-elect Rahm Emnauel  has in store for Chicago. Here's Smith again:
Rahm insists that Chicago solve its financial crisis, yet observers have noticed the details so far don’t add up. From the Chicago Sun Times:

Emanuel’s plan to create jobs and solve the city’s financial crisis is one of three major addresses Emanuel has delivered during the mayoral campaign.

But the speech delivered at a Near West Side T-shirt company raised more questions than it answered.

Aside from an immediate spending freeze, following by giving city department heads 60 days to draft plans to cut spending, there was precious little new information.

Emanuel talked about creating so-called “charter” city departments that minimize “bureaucratic interference” and give commissioners “flexibility to achieve programmatic goals in innovative ways.” But, he never really explained what that means
Given how unpopular [Chicago's] parking meter sale has proven to be, and how Rahm is emphasizing “innovation” and “minimizing bureaucratic interference”, can the secret plan he is loath to voice be more infrastructure sales?

It’s not hard to see that these deals are going to be the sort of “heads I win, tails you lose” arrangements that bankers are so skilled at cutting with the great unwashed public. If they have no or few caps on fee hikes, the Morgan Stanley example shows that the public will be subjected to increases in charges that bear no relationship to inflation rates or maintenance costs. And if the sellers impose restrictions, the investors can skim on maintenance, or in a worst case scenario, dump the project back on the government body (think even a city like Chicago has a snowball’s chance in hell of getting recompense in that scenario from investors like Allianz or the Abu Dhabi Investment Authority, both of which were major participant in the parking meter deal?).
Bottom line, the state and local debt crisis appears to be shaping up to be a bonanza for the politically connected with deep pockets. Under the guise of shrinking government, "infrastructure assets," a/k/a local monopolies, will be sold to these oligarchs who will use the governments to keep out competitors, while they jack up rates.