Thursday, March 31, 2011

Global Elitist Pushing for World Currency Wants $390 Billion SDRs Issued Every Year

Former-World Bank chief economist Joseph Stiglitz is out with a commentary at FT. He's calling for more use of SDRs, which elitists have been trying to push on the world since 1969.

Writes Stiglitz:

The international monetary system needs fundamental reform. It is not the cause of the recent imbalances and current instability in the global economy, but it certainly has been ineffective in addressing them. So a broad set of reforms is required, beginning with an immediate expansion of the current system of special drawing rights or money that can be issued by the International Monetary Fund. And here the Group of 20 leading nations must take the lead...

In the late 1960s a more limited global currency was created: the SDRs, issued by the IMF when enough member countries agree. The largest such issue – equivalent to $250bn, and suggested by the G20 in April 2009 – was an enlightened response to the dramatic collapse in international private lending after the global financial crisis. It helped soften the negative impact of the crisis on growth.

Now, in the same way, the global role of SDRs should be increased, both through new issues and a bigger role for SDRs in IMF lending. New SDR issues could be introduced in times of declines in private capital flows or large falls of global commodity prices. These would increase the ability of current account deficit countries, such as Pakistan or Egypt, if they were hit by an external shock.
Despite what Stiglitz says, this is a push towards a new world currency and unlike his claim that it is not inflationary, it has the potential to be very inflationary. Here are Stiglitz claims:
Given its relatively small scale, more SDRs would also help to sustain and accelerate recovery of the world economy, without leading to inflationary pressures.New measures to increase the effectiveness of SDRs themselves are also needed. One way would be for the IMF to use these SDRS to finance lending to countries that need short-term financing, due to balance of payments constraints, as happened recently in Greece and Ireland. Eventually SDRs could become the main, or even the only, mechanism for IMF financing.

Further, when crises occur in many countries simultaneously, as happened, for instance, during the 1998 east Asian crisis, IMF lending could be totally financed by new SDR issues in unlimited amounts. If and when the world economy recovered or boomed, SDR issues could then cease, or even be reabsorbed. Thus the IMF would have a greater role in creating official liquidity, in a way that curbed both recessionary and inflationary trends at different times.

All of this would make a contribution to enhancing global stability, without altering in any fundamental way existing monetary arrangements. And the dollar would continue as the main currency for private transactions, making this change more acceptable to the US.

In practical terms the G20 should encourage the IMF to issue a significant amount of new SDRs during the next three years, up to a value of $390bn a year
Here's what the SDR is really all about. According to the IMF, which issues them:
...[the SDR] is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR, serves as the unit of account of the IMF and some other international organizations
In other words, any party receiving SDRs can convert them for currencies of other IMF designated countries. This means those designated countries that buy the SDRs are in fact financing whatever funding is being conducted by the IMF. Whether this becomes inflationary or not depends on how the governments of the designated countries finance the SDR purchases. They can squeeze their own taxpayers or they can print more of their own currency to buy the SDRs.

It's a means by which countries like the PIIGS could be bailed out by financially strong countries with the sleepy public not knowing what hit them. Step one is this proposed new enhanced financing role for the IMF will be conducted at the government central bank level, but can one really believe that it will stop there? How long before some pink paper is designed to represent a physical SDR, and in the same fashion the euro absorbed currencies like the German mark and the French franc, the SDR will absorb the dollar and the euro?    
But aside from the SDR eventually being forced upon us all, Stiglitz clearly wants to make the SDR the money of  central bankers, now. Stiglitz, Geithner, Bernanke and  the rest of crew know the days are limited for the dollar as the reserve currency. They are deathly afraid that either gold or the Chinese yuan will emerge as the new global reserve currency. At such point, they will lose total control.

The new push to increase the role of the SDR is an attempt to prempt a move towards gold or  yuan options. It is also designed as a method to coordinate global inflation. Should some country actually run a fiscally conservative government, bang, that country will be designated by the IMF as a buyer of SDRs. The country will more than likely pay for the SDRs it buys by printing up more of its own currency. Viola, global coordinated inflation, the dream of every economic technocrat that is afraid somewhere, for some reason, a central banker may not buy into the call for Keynesian government spending, and may actually attempt to run a responsible, non-inflationary policy. Well, global coordinated inflation, i.e. an expanded role for the SDR, will take care of that!

Rick Santelli Isn't the Only Dancer in His Family

CNBC's Rick Santelli, who gets pushed and shoved as he dances and reports from the floor of the Chicago Board of Trade, isn't the only dancer in his family.

According to Jane Wells, Santelli's daughter is the dark-haired one in the black mesh top.

Gold Ends Quarter at Record High

The June gold futures contract on Thursday ended up $13.00 to close at $1,438, a record high. Silver ended the quarter with at a 31-year high of $37.89 an ounce.

Miami Beach Kid Pothead Arms Dealers Used by the Penatgon as a Major Supply Source

By Guy Lawson

The e-mail confirmed it: everything was finally back on schedule after weeks of maddening, inexplicable delay. A 747 cargo plane had just lifted off from an airport in Hungary and was banking over the Black Sea toward Kyrgyzstan, some 3,000 miles to the east. After stopping to refuel there, the flight would carry on to Kabul, the capital of Afghanistan. Aboard the plane were 80 pallets loaded with nearly 5 million rounds of ammunition for AK-47s, the Soviet-era assault rifle favored by the Afghan National Army.

Reading the e-mail back in Miami Beach, David Packouz breathed a sigh of relief. The shipment was part of a $300 million contract that Packouz and his partner, Efraim Diveroli, had won from the Pentagon to arm America's allies in Afghanistan. It was May 2007, and the war was going badly. After six years of fighting, Al Qaeda remained a menace, the Taliban were resurgent, and NATO casualties were rising sharply. For the Bush administration, the ammunition was part of a desperate, last-ditch push to turn the war around before the U.S. presidential election the following year. To Packouz and Diveroli, the shipment was part of a major arms deal that promised to make them seriously rich.

Reassured by the e-mail, Packouz got into his brand-new blue Audi A4 and headed home for the evening, windows open, the stereo blasting. At 25, he wasn't exactly used to the pressures of being an international arms dealer. Only months earlier, he had been making his living as a massage therapist; his studies at the Educating Hands School of Massage had not included classes in military contracting or geopolitical brinkmanship. But Packouz hadn't been able to resist the temptation when Diveroli, his 21-year-old friend from high school, had offered to cut him in on his burgeoning arms business. Working with nothing but an Internet connection, a couple of cellphones and a steady supply of weed, the two friends — one with a few college credits, the other a high school dropout — had beaten out Fortune 500 giants like General Dynamics to score the huge arms contract. With a single deal, two stoners from Miami Beach had turned themselves into the least likely merchants of death in history.

Read the rest here.

The U.S. Real Estate Market for Oligarchs is Just Fine

A Russian oligarch has paid $100 million for a French chateau-style mansion in Silicon Valley, making it the highest known price paid for a single-family home in the U.S.

Yuri Milner, who studied theoretical physics in Moscow and attended the University of Pennsylvania's Wharton School of Business, began his business career in Moscow in the rough and tumble 1990s, when if you were shrewd and developed the right connections, you could grab a huge chunk of Russian natural resources for yourself. It was called privatisation, but in reality it was the birth of the 20th century oligarchs, who now control Russia with a nod here and a wave of the hand there.

The oligarchs continue to make moves in the United States. Oligarch Mikhail Prokohorov now owns the New Jersey Nets. Milner has investments in Facebook Inc., Groupon Inc. and Zynga Inc, according to WSJ. I once provided some consulting work for a Russian group that was looking at acquiring some Nevada gold properties.

Milner lives with his family in Moscow, so the $100 million dollar mansion should be considered a second home.

There's more about the house at WSJ.

(Thanks2 Nick and Lew Rockwell)

What’s the Worst Thing the Koch Brothers Have Done?

The Regressives are out with a poll on the worst thing the Koch Brothers have done (See here).

A friend emails:
I voted other and wrote in the worst thing the Kochs did was kicking Murray [Rothbard] off the board of CATO and trying to silence Lew Rockwell and Ron Paul!

VIDEO: Full David Sokol Interview with CNBC

Here's the full CNBC interview with David Sokol, who resigned yesterday from Berkshire Hathaway.

How Dumb is David Sokol?

David Sokol, the Berkshire Hathaway exec who resigned following questionable trading in Lubrizol stock, Berkshire ultimately took over Lubrizol, appeared on CNBC this morning to defend his trading.

Since it is likely that the trade is under investigation by at least the SEC (if not the DOJ), the last thing Sokol should be doing is spending 30 minutes on CNBC defending his position. As any lawyer will tell you, keep your mouth shut in such cases, you don't know what you say will come back to be used against you.

A very imprudent move by Sokol, as the Lubrizol trade itself appears to be.

Further, during the interview with CNBC, Sokol said other Berkshire executives held positions in stocks that they later identified as acquisitions. He singled out the example of Berkshire vice chairman Charlie Munger owning a stake in Chinese car maker BYD before suggesting it for an investment.

I can't imagine this quote is going to endear him with Munger, or Buffett. The differences between the Munger situation and that of Sokol are major. Munger's position was certainly known to Buffett, if it was known to Sokol. Although Sokol claims he informed Buffett of his position in Lubrizol, he did not tell Buffett he had just bought the position the week before. Most important in the BYD situation, although Berkshire has an investment position in BYD, it is far from the same thing as Berkshire making a bid for a company, which it did in the case of Lubrizol. The Lubrizol acquisition by Berkshire resulted in an immediate $3.2 million in profit for Sokol.

The big question remains: What is David Sokol doing on television discussing his trade, which can do nothing but bury him deeper? Not bright.

Wal-Mart CEO Inflation Is Going to Be 'Serious'

During an interview with USA Today, Wal-Mart President Bill Simon warned that price inflation could be a "serious" problem later in the year and that the company was seeing strong prices across a broad spectrum of products. He singled out cotton, dairy and paper.

Did Sokol Do Anything Different Than Buffett?

Top  Berkshire Hatahway exec David Sokol resigned under a cloud of suspicion after it was learned that he bought stock in Lubrizol, just before advising Buffett to takeover the company.

It can be argued as to whether this specific type of insider trading is ethically questionable, but a Wall Street trader emails:
Sokol only did what Buffet did, as he invested in GE, GS, while advising U.S.
Actually, I believe the situation was worse in Buffett's case. As Buffett notes in a letter/press release, Sokol could not know for sure if Buffett would actually go along with the takeover deal. When Buffett bought into GE and GS, I suspect he knew that the U.S. Treasury was coming in right behind him.

Portugal's Debt Downgraded for the Second Time This Week

Political instability and a potential EU financial rescue package for Portugal that will increase interest rate burdens pushed rating agency S&P to downgrade the country’s debt status for the second time in a week to BBB-, only one notch above junk status.

Federal Reserve Court Ordered Release On Emergency Loans is Over 25,000 Pages

The Federal Reserve released over 25,000 pages of secret loan documents under court order, almost three years after the Bloomberg news agency first requested details.
The records reveal for the first time the names of financial institutions that borrowed directly from the central bank through the so-called discount window. The Fed provided the documents after the U.S. Supreme Court this month rejected a banking industry group’s attempt to shield them from public view.


Geithner in China

On Thursday morning in Nanjing, China, Treasury Secretary Geithner will meet with People’s Bank of China Governor Zhou Xiaochuan and will attend a breakfast hosted by French Finance Minister Christine Lagarde.

Later in the morning, the Secretary will attend the opening session of the “High-Level Seminar on the International Monetary System,”and will participate in a panel discussion on the current state of the international monetary system.

In the afternoon, Secretary Geithner will meet with Chinese Vice Premier Wang Qishan.

Later, the Secretary will meet with European Central Bank President Jean-Claude Trichet.

Wednesday, March 30, 2011

DEBATE: Why America Should Adopt a Gold Standard

Richard Ebeling emails:
Dear Bob,

On March 29th, I participated in a debate on "Whether America Should Adopt the Gold Standard," which was held at Northwood University in Midland, Michigan, and was co-sponsored by the Atlas Economic Research Foundation and the Forum for Citizenship and Enterprise.

Spoke on behalf of the "affirmative" position, of course. I have posted my talk on Northwood University's blog, "In Defense of Capitalism & Human Progress" under the title, "The Gold Standard and Monetary Freedom."

I thought that you and some of your readers might, perhaps, find it of some interest.

It may be accessed here.

Breakdown of How Much Fed Officials that Move the Markets

Macro Economic Advisers LLC has come out with a study of which Fed officials have the most impact on markets. Not surprisingly, Fed Chairman Ben Bernanke leads the pack.

Macro has awarded the I Moved Markets award to Bernanke, for having the largest effect among FOMC members on markets.

Macro also gives him the Power Player of the Year Award for largest impact per speech among FOMC members.

The Market Neutrality Award was given to Fed vice-chairman Janet Yellen. She moved interest rates bi zro basis points.

Below is a Macros chart which shows for each FOMC member, the sum of the absolute value of the impact of each of his or her communications with the public. Chairman Bernanke was the clear winner in this category: His speeches and interviews moved the two-year Treasury yield roughly 50 basis points last year. St. Louis Fed President Bullard was not far behind, with approximately 45 basis points, but note that the impact of the Chairman’s semiannual testimony on the Monetary Policy Report to the Congress is analyzed separately. If included, the monetary policy testimonies would further amplify the Chairman’s dominance.

Click on chart for clearer view

Time Warner Tells the SEC About Charlie Sheen

Is Charlie Sheen winning, again? Outside of Goldman Sachs trading as a Primary Dealer opposite the Fed, no one has had a winning streak like this. Charlie just got an 8-K filed with the Securities and Exchange Commission about him.

Time Warner has reported Charlie's lawsuit against the firm. But the timing is curious. Normally, if an event is considered material by a company, it needs to be filed pronto with the SEC. But Charlie sued Time Warner weeks ago. Have Time Warner lawyers just concluded that Charlie, born small but now big, may prove to be the winner in the lawsuit?

Here's footnoted with further musings:
What we can’t figure out here at footnoted is why it took Time Warner this long to mention this in an 8-K. The company seems to be taking the position that it’s an “Other Event” that doesn’t have to be disclosed within the usual four-day window for most 8-Ks. But then why file it now? Or have Time Warner’s lawyers concluded that the lawsuit is a bigger deal than they previously thought?

Helping Out Paul Krugman

Paul Krugman seems anxious to find material for his NYT blog about an economist who was way off in his forecasts. He even went back as far as 1932 and made an absurd attempt to portray Friedrich Hayek as making an incorrect forecast.

So Paul, here's a little help. If you are really looking for forecasts that were really off base and if you really look hard, you might find something in this clip.

A Busy April for Ron Paul; Including Appearances on The Colbert Report and The View

In a letter to supporters, Dr. Paul details his April schedule.

On April 11th, he will head to Iowa to speak at Dordt College and then attend several events in the East.

On April 20th, he will go to Mississippi State University, and then on to Florida State on April 21st.

On April 25th, he will be in New York City for a book signing and appearances on "no less than 6 tv shows, including The View and The Colbert Report."

And, on April 28,  he will head to The University of Nevada in Reno.

Congressman Paul concluded his letter by saying he is also considering an additional trip to New Hampshire in April, and then trips to New Hampshire, Iowa, and Nevada in May.

The Fed Explains Why It Is Great

The American banking system is always on the edge of crisis because of the Federal Reserve System.

For all practical purposes, the United States has one bank, the Federal Reserve with a bunch of branches that are treated with different degrees of respect. Some are treated rudely, while others in the eyes of the Fed, can do no wrong.

One support method the Fed uses to protect its favored "branches" is the discount rate. At its blog site today, the New York Fed attempts to justify this Fed tool that serves to prop up the entire convoluted Federal Reserve System.

We can see a key problem with the Fed as overlord, current banking system by taking a look at the first paragraph of a post by NY Fed bloggers applauding themselves. The bloggers write:

 ...the basic rationale for [the discount window] is that circumstances can arise, such as bank runs and panics, when even fundamentally sound banks cannot raise liquidity on short notice
But how can a "fundamentally sound" bank ever face a liquidity problem? A liquidity problem comes about only because the Federal Reserve system encourages (partly through the discount window) the mismatch between time structure of money deposited at the bank and money loaned out. A liquidity problem simply means that a bank may have loaned out money for 30 years, when a depositor has the right to withdraw such funds after 30 days. Banks aren't too concerned about this mismatch, since they know they can always go to the Fed to get money (via the discount window) if  withdrawals are occurring that are greater than cash the bank has on hand or can borrow from other sources.

In other words, it is the Fed's backstop that encourages the mismatch between length of deposits and length of loans. Without this backstop, banks would never create such a mismatch. It would be too risky for them (And this is aside from the moral implications of promising to pay in 30 days some funds on money that has been loaned out for years.)

Without a Fed, banks taking in short-term money would loan it out for short-terms and would make long-term loans with money that depositors had agreed to keep on deposit for the long term. End of liquidity problems for banks and the start of truly fundamentally sound banks.

The NY Fed bloggers go on to discuss the various ways the discount rate should be implemented by what the Fed bloggers think are somehow "fundamentally sound" banks, when the deposit versus loan time structure of these banks is more distorted than a Dali painting.

The final sentence of the final paragraph on the NY Fed post is probably most telling:
Admittedly, the existence of the discount window may create some moral hazard, but of course, the Federal Reserve limits moral hazard by restricting discount window access to depository institutions that are closely regulated and supervised by federal banking authorities.
Bottom line: The Fed holds all the cards over its "branches", get out of line and they will suddenly see you as an insolvent bank versus a bank with just a liquidity problem. The bloggers admit that some economists don't think the Fed can even technically tell the difference, if they wanted to:
Some observers contend that central bankers are no better equipped to distinguish illiquid but solvent banks than are private investors.
It's a rigged game, boom, busts, bank failures versus just a liquidity crisis, Ben Bernanke just strokes his beard and decides what's what. (After consulting with his controls, of course.)

(Thanks 2 Bob English for pointing this post out to me and who also writes: Must be a coincidence this is being published one day ahead of tomorrow's court-ordered fulfillment of Bloomberg's FOIA request.)

Why Europe's Feeding of the PIIGS Continues to Be a Problem

tWSJ's Alen Matich does an excellent job of explaining the continuing crises in the EU.
There’s a widespread view the 2008 banking crisis is over. It’s not. At least not in Europe. And the eventual fallout could result in a significant shrinkage of the financial services industry.

To see the scale of the problem, it’s important to start with Europe’s rolling sovereign-debt crisis. Core European countries, led by Germany, are hammering out an expanded bailout facility for a “periphery” sinking under the weight of unmanageable debt.

So far, the bailouts have been structured as loans, albeit with ever longer maturities on ever better terms. But loans nonetheless. That’s because core European governments are terrified their voters will rebel at a deal that would entail massive transfers to pay off peripheral Europe’s debts. But peripheral European countries already can’t pay back what they owe. New debt, even on better terms, doesn’t solve the problem.

The scale of austerity demanded of peripheral Europe’s populations and scale of debt service needed to pay back loans is already beyond what these countries will be able to tolerate for long. And they need new loans.

The latest estimates are that Irish banks will need as much as another €23 billion to meet tightening capital requirements. Although Spain is not yet in the same boat as Ireland, Portugal and Greece, it runs the risk. By some estimates, its banks will need as much as another €70 billion of capital, although it’s not clear what the scale of real-estate losses they have on their books really is.

Spanish real-estate prices have been marked down by an improbably small amount given the vast amount of overcapacity.

This is why the likes of Ireland have been talking about imposing losses on bondholders. These losses are not acceptable to core Europe because they would fall on their own banks, which are heavily exposed to peripheral Europe. But when push comes to shove, it’s likely to be more politically defensible for these countries to refinance their own banking sectors than to bail out foreigners. This, though, is likely to come at a price.
The endgame here, thus, becomes one of whether the PIIGS default outright and the lending nations then step in to bailout their local elitist banks, or whether the eurozone cracks up, the PIIGS resort to their pre-euro currencies and print themselves out of the mess. The printing would be highly inflationary, but a bailout of elitist banks is also likely to also be inflationary---just using a different money printing shop, with impact on a slightly different sector of the eurozone.

It's going to be painful. The only question will be whether the pain will fall on the PIIGS or creditor countries such as Germany. It make come down to which citizenry screams the loudest and breaks the most windows.

Russian Commodities Billionaire Blames Quantitative Easing for Increase in Commodity Prices

Bloomberg's Michael Serrill interviewed Bloomberg reporter Stephanie Baker about her recent story on the Russian oligarch Oleg Deripaska.

It's a fascinating interview. Baker at one point notes that Deripaska acknowledges that part of the climb in commodity prices is because of growing demand from emerging markets, such as China, but blames quantitative easing on a global level as a key reason behind the commodity price inflation.

It should be noted that in the introduction to the interview, Serrill points out the many battles that took place between oligarchs for various resources in Russia and that many were killed. He called this "entrepreneurs battling it out." Last I looked, entrepreneurship was about seeing opportunities on the free market and using exchange to profit.

I'm pretty sure this holds, even in Russia, and that someone who gains by killing a rival should be justifiably be called a thug, versus an entrepreneur.

So forget Serrill's comment, it's Baker who has the real info.  The interview is here.

The Revolving Door Spins for Another D.C. Operator (Leaves W.H. for a Nuclear Power Company)

Dan Turton who lobbies the House of Representatives for the President is leaving his position on Thursday.

On Friday, he will start his new job with the energy company Entergy, which is the second largest generator of nuclear power in the country.

Pulling no punches about it being all about access and connections, Turton said in a statement:

I’ve made a career out of building relationships and doing government affairs and I think I’ve done it successfully. And they need someone to run their government affairs office.
In other words, things have gotten so corrupt in D.C. that these guys have no clue what laissez faire means and think business only gets done by schmoozing with government and getting special legislation. They are proud of this work.

Oh Woh, The Problems Robert Reich Sees

When you think government should be involved in everything, the burdens of the world can appear overwhelming. Reich thumbs:
Libya and Middle East critically important. Japan's perils merit attention. But jobs and wages here at home must be highest priority.
Actually, I am not personally worried about any of these situations. Most of the situations Reich lists should be handled locally. In the case of jobs and wages, free markets, and the elimination of 'unemployment insurance," could solve the problem fairly rapidly.

No wonder Reich doessn't have time to study up on excess reserves. He is pretty much concerned about every problem in the world, outside of jock itch.

Tuesday, March 29, 2011

An Insider Trading Case That I Can Cheer On

I have been a severe critic of insider trading cases, as insider trading only brings good to the economy.

But there is one kind of insider trading case I can applaud, that's when the DOJ and the SEC charge another government official. The more time they spend harassing each other, the less time they can spend harassing the private sector. So I cheer on the news that the DOJ and SEC are going after FDA chemist Cheng Yi Liang. (Though, I note sadly, that the SEC specialty seems to be Asians of all kinds.)
According to the DOJ, Liang has been an FDA employee since 1996 and traded in advance of at least 27 different FDA announcements involving 19 publicly traded companies. The government alleges that Liang made as much as $3.6 million through his insider trading activities.

"This is the kind of stuff I lost sleep over," WSJ quotes former FDA commissioner David Kessler as saying. Good.

May Margaret Hamburg, the current commissioner, lose plenty of sleep over this case. And let's hope FDA employees spend most of the days to come gossiping about this arrest, instead of thinking about new ways to harass us in their new role as food fascists,

As for the SEC and DOJ, great job, keep digging in D.C. you never know what you might find.

You Might Be a Fascist, If... don't dislike government more after watching this video, says Tim Carney.

Who Is Spending Big Bucks to Dine with the Prez?

President Obama is in NYC tonight and is holding a fund raising dinner in Harlem.

According to's Nin-Hai Tseng, it costs $30,800 to attend the dinner and about 50 are expected.

She reports that President and co-founder of Chelsea Piers LP Tom Bernstein and wife Andrea are attending, along with:

Evercore Partners President and CEO Ralph Schlosstein and wife Jane Hartley, co-founder of the Observatory Group, an economic and political advisory firm.

Orin Kramer, an expected guest, is a general partner of the hedge fund Boston Provident, LP.

Also likely to attend is Michael Kempner, member of the White House Council for Community Solutions.

And Andrew Tobias, treasurer of the Democratic National Committee and best-selling author.
The dinner will held at the Red Rooster, which serves comfort food. Among the dinner items on the Rooster menu is an appetizer of lox and lax served with purple mustard.

UPDATE: Politico reports Charlie Rangel will be at the dinner.

Red Rooster Harlem Dinner Invitation 03 29 2011


Is Julian Assange an 'Electronic Libertarian'?

Journalist Robert Mann recently discussed Julian Assange in an interview with ABC News Radio International.

In the interview, Mann calls Assange an 'Electronic Libertarian', meaning that Assange is against government methods of electronic control and monitoring. Assange, says Mann, fears control by the state via the internet and Assange specifically formed WikiLeaks as a way to cripple authoritarian states. At the same time, Assange is not a free market advocate, but appears to hold some type of welfare state as an ideal model.

I think Mann is pretty accurate when it comes to understanding Assange. Assange seems to have a very sophisticated understanding of how the internet works best in a very laissez faire environment, yet, for some reason, it also appears that he has a very pedestrian view of how the economy works.

The full interview with Mann is here and well worth a listen to.

Paul Krugman Calls Hayek a Zombie

Ben Bernanke and crew must be really feeling the heat.

First, we had a senior Fed economist call Ron Paul a pinhead. Now, the Fed apologist Paul Krugman is out with a attack on Austrian school economist, Friedrich Hayek.

Krugman starts calmly and rationally enough by titling his blog post: Friedrich Hayek, Zombie.

From there, he goes on in his typical dirty street fighting style to misstate a 1932 letter signed by Hayek, Lionel Roberts and others that was sent to London's The Times. The letter was in response to an earlier letter by John Maynard Keynes, A.C. Pigou and others.

Krugman claims that the letter insists:
that big deficits somehow caused the crisis[Great Depression]
The letter does no such thing. It is simply stating that borrowing, once a crisis starts, has the harmful effect of crowding out private sector borrowing, and making it much more difficult for the economy to recover. That's all the five paragraph letter says about borrowing.

A further distortion in Krugman's column comes when he writes that:
...Hayek’s prediction that deficits would drive up interest rates despite high unemployment was, of course, totally wrong.
In the letter, Hayek and the other signers write:
...borrowing and spending on the part of the public authorities... tend to drive up the rate of interest
This is not a forecast by Hayek and the others of a particular absolute level of interest rates but merely the observation that additional borrowing by the government has the tendency to push rates higher. How could it be otherwise? Does Krugman actually think that more borrowing pushes interest rates down? I'd like for him to show us the chart on that thinking!

Instead, Krugman goes on via charts to "prove" Hayek wrong through the distortions he makes of  Hayek's views.

I'm not sure how vicious Krugman is trying to be here, or how ignorant he is, but Hayek won the Nobel Prize precisely for his work in business cycle theory. Indeed, the Nobel Committee specifically acknowledged Hayek's warning about the crisis:
Hayek's contributions in the field of economic theory are both profound and original...his theory of business cycles and his conception of the effects of monetary and credit policies attracted attention and evoked animated discussion. He tried to penetrate more deeply into the business cycle mechanism than was usual at that time. Perhaps, partly due to this more profound analysis, he was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929.
As the Nobel Committee specifically acknowledged, Hayek's business cycle theory was about monetary and credit policies (as opposed to a theory of government borrowing). It is an incredible distortion by Krugman to imply that Hayek held that government borrowing caused the Great Depression.

The Nobel Committee is clear on Hayek's thinking, but perhaps Krugman is not impressed with the thinking of the Nobel Committee.

Walter Block Does Chicago

Charlie Sheen eat your heart out. Following three gigs in Indiana, Walter Block will deliver three speeches in Chicago. Writes Dr. Block:
I will be giving three speeches in the Chicago area on April 8–9, two at the invitation of the Mises Institute and one brought to you by Jordan Batt (this one is free and open to the public). Here are the details:

April 8 Chicago, Mises Institute, “On minimum wage laws.” Info link.

If you have never heard Professor Block speak, and you are in the Chicago area, its well worth checking out. As I have said before, there are few libertarian advocates as hardcore as Professor Block.

April 8 Highland Park, “The general argument for privatization, applied to some hard cases: roads, food and drug safety, courts and police.” Info link.

April 9 Chicago, Mises Institute “Defending the Undefendable.” Info link
As I have written before, there are few libertarians as hardcore as Professor Block. Dr. Block was a personal friend of Murray Rothbard and is a true Rothbardian. You are unlikely to hear a presentation that more consistently applies the freedom principle. Whether it is about roads, drugs or the wages, Dr. Block speaks out and explains why a believer in true liberty needs to tell government to bud out of all these matters. If you are not convinced that government has no role in these matters, try attending the lectures and see if you still hold those views after listening to Dr. Block.

What Did Lloyd Blankfein Say To Raj Rajaratnam During Their Friendly Exchange And Handshake Yesterday?

Goldman Scahs CEO Lloyd Blankfein testified recently during the show trial of Raj Rajaratnam, who is being tried for the non-crime of insider trading.

I'll let Bess Levin pick it up from here:
After several hours of questioning,...the judge called for a quick break. During that time, Lloyd apparently “walked up to defense lawyer John Dowd,” with whom he “exchanged some words and a laugh,” and then “rapidly extended his arm and quickly shook Rajaratnam’s hand.” A very brief dialogue ensued, Raj “smiled” and Blankfein walked away.
Levin then throws out a few speculations on what Blankfein might have said to Rajaratnam. But there is only one sure thing that Blankfein could have said to Rajaratnam that would have brought a knowing smile to his face:
Jeez, I hope at least one of the jurors has read Tom Woods' book, Nullification.
I hasten to add that Woods' book also discusses state nullification of Federal laws, the truth about the Tenth Amendment to the Constitution which reinforces the rights of states to nullify unconstitutional laws and much more.

Woods book is a tool in the battle of ever encroaching government, lets hope a juror in the Rajaratnam case has read the book, but so should so many more. Have you?

Fukushima Nuclear Power Plant Owner May Avoid All Liability for Nuclear Accident

Despite extremely questionable design engineering that saved Tokyo Power and Electric many millions of dollars, but ignored the threat of a major tsunami, the company may not be liable for any damages resulting from its Fukuskima Daiichii nuclear power plant disaster.

According to Paul J. Scalise, a former financial analyst, who is writing a book on Japan’s electric power system, under Japanese law governing compensation for nuclear damage, companies are liable for the cost of all nuclear accidents resulting from reactor operations except when the accidents are provoked by a “grave natural disaster of an exceptional nature or by an insurrection.” The company might plausibly seek to avoid liability altogether within that definition, he said, according to NYT.

So the question becomes one of whether the tsunami provoked the accident or whether design shortcuts resulted in the accident, because the tsunami should have been anticipated.

Beyond that, it appears that the Japanese government may step into the picture, in any case, in a manner similar to the way the United States government stepped in to bailout elite banks during the height of the financial crisis.

In both cases, the bailout of U.S. banks and a potential bailout, of some sort, of TEPCO by Japanese authorities, the result is severe moral hazard which is created when major corporations are again protected from the risk of their actions.

In the case of the nuclear energy industry in Japan, financiers of such nuclear energy will not be concerned about the accident risk when lending to such entities since the government will protect them against  such loss.

I have already commented on my suspicions that some form of TBTF thinking was developing in the Japanese government:
Government protection of the corporate elite has reached a new level of absurdity in Japan.

Japan's top lenders, including Sumitomo Mitsui Financial Group , are in talks to provide up to 2 trillion yen ($24.7 billion) in emergency loans to Tokyo Electric Power to help the operator of the damaged Fukushima nuclear power plant.

One has to think that the Japanese central bank and the Japanese government are behind this, by letting the bankers know they are protected against down side risk.
Eliminating TBTF thinking in the nuclear industry will certainly result in banks and other financial institutions taking a much closer look at accident risk, then if they know government is standing nearby to absorb losses.

Shareholders and bankers should suffer the losses from their investments. It will cause them to pay much closer attention in the future to the types of projects they are financing and thus cause much higher construction standards before financing can be achieved.

The Screwing of the Un-Hip, San Francisco Style

The Peoples Republic of San Francisco is the only city in California that taxes stock options. It is part of the city's payroll tax.

This is causing many hip, with it, firms to consider moving out of the foggy city.

Several tech companies, including Twitter, Zynga and Yelp, have told city officials that San Francisco's tax code makes it financially unfeasible for them to stay in the city, reports the San Francisco Chronicle.

It appears the city is going to do something about this. San Francisco Supervisor Ross Mirkarimi is calling for a two-year moratorium on taxing the stock options, but not a moratorium for everyone.

The temporary tax break would only apply to technology companies that are located anywhere in San Francisco, have 100 employees or more and are not traded on a public stock exchange. There are other proposals out there, but the Mirikarimi proposal captures the essence of this elitist city.

If you are part of the elitist crowd, you don't have to worry about mad dog, incentive killing taxes, or any other rules for that matter. If on the other hand,  you are not part of the in-crowd, say a property owner, you are nothing but a Capitalist Pig only good for turning into bacon (if these Regressives actually ate bacon) or to be taxed to death and prevented from constructing the type of structure you want on your property.

Operations that can turn a man into a woman are big here. Turning a diliapidated building into a modern structure is not.

I really think it's the fog.

VIDEO: Rand Paul on Military Actions in Libya

Senator Rand Paul appeared on Freedom Watch last night following the speech by President Obama on the military actions into Libya.

Dr. Paul nails this one, and also calls out the Regressives in the blogosphere for not being critical of President Obama for his undeclared war and failure to consult Congress.

Syrian Government Resigns

Syrian President Bashar al-Assad has accepted the resignation of the entire Syrian government.

Didn't Egypt's Hosni Mubabark try this?

How Hanging Out With Two Pariah Regimes Cost Me My Top Position at the London School of Economics

By Howard Davies

March was a momentous month in the Davies household. An important chapter in my life came to a rather sad end. It was quite unexpected. Even at the end of February there seemed little sign of trouble ahead. We were purring along nicely.

Then, out of a blue sky, trouble struck. Initially it seemed little more than a cough and a splutter, so to speak, but things deteriorated rapidly, and in a rather public and embarrassing way. In just a few days, I realised that it was all over, and I needed to get used to the pain of separation.

I was very unhappy about it, I can tell you, and blamed myself. I had been in a state of denial. If I had realised at the right time that rust had taken hold in the chassis, my Stag would still be alive today. A trusty friend since 1998, she now stands mute and immobile in the garage, sans power, sans MoT, sans everything.

And that's not all. The nib on my antique Wyvern fountain pen has gone skewwhiff, and can't be twisted back into shape. The Davies family's anachronistic reliance on the proud traditions of British engineering has proved sadly misplaced.

I also lost my job. I haven't drafted a resignation letter before: up to now I have always been able to get out before my sins caught up with me. But this time I concluded that there was no alternative. The LSE was not, of course, the only British institution, or even the only university, to engage in activity in Libya after the country was brought into the international fold when Gaddafi renounced supporting terrorism and his nuclear programme. But the fact that Saif Gaddafi had two degrees from the School, and that his foundation supported a research programme on civil society in North Africa, put us in the eye of the storm when the civil war began.

The impact on the School's reputation was severe, for a while at least. Some of the criticisms that surfaced in the media were misplaced, or plain daft, but it was a mistake to take his money, and I supported it (among others, it is fair to say). Also, I yielded to the blandishments of the previous government to go to Tripoli as an economic envoy, and so became associated with two pariah regimes at the same time, Blair's and Gaddafi's, a fatal combination. So I asked for my P45.

Read the rest here.

Fed to Disclose Emergency Crisis Lending Data on Thursday

Forced by court order to name the banks that it provided emergency loans to during the Financial Crisis, the Federal Reserve has announced it will provide the data this Thursday.

Super Bargains at Borders Books; Economics Books 70% Off

The liquidators who are liquidating the contents of 200 Borders bookstores have just 3 days left, including today, for their liquidation. Then their contract runs out.

In other words, the liquidators have every incentive to mark down books as low as they can, right now. Books in the economics section at the San Francisco Borders in the San Francisco Centre Mall are marked down by as much as 70%. I headed over to the Borders in Union Square today.

NYT reports that the liquidators:
agreed to pay Borders 85.75 percent of the “cost value” of all merchandise, according to court papers. The estimated cost value is between $180.6 million and $204 million.

The liquidators must sell as much as possible before their contract expires in order to maximize profit. Afterwards, their options are limited: They can sell stock to a non-retail customer, hang onto it and attempt to sell it later when liquidating other stores, or abandon it. They can’t sell to wholesalers or bulk purchasers who may return Borders stock to publishers, and thus Borders’s competitors.
Here's the full list of stores that are closing

S&P Downgrades Portugal and Greece

The Standard & Poors ratings agency has downgraded Portugal to triple-B-minus and Greece to double-B-minus.

Bankruptcy or inflation is the ultimate "solution", given that residents of the PIIGS will riot against cuts in government payouts.

A bankruptcy would hurt the elitist banks holding PIIGS paper, which means if you are a betting man, choose inflation. The only question remaining is whether the European Central Bank does the printing, or whether the eurozone breaks up and each of the PIIGS resorts to bringing back their separate original currencies that they then inflate.

Video: First Reactions to the Atlas Shrugged Movie

Hollywoodland attended a Washington D.C. screening of Atlas Shrugged Part 1. Following the screening they talked to producer Harmon Kaslow and several people who attended the event. Here's what they had to say:

Geithner to Jet to China

Late Tuesday morning, Treasury Secretary Geithner will depart Washington, DC for Nanjing, China.

Geithner is very familiar with the country. When his father worked for the CIA Ford Foundation, Geithner studied studied Mandarin at Peking University in 1981 and at Beijing Normal University in 1982.

On his last trip to China in June 1, 2009, during a question-and-answer session following a speech at Peking University, Geithner was asked by a student whether Chinese investments in U.S. Treasury debt were safe. His reply that they were "very safe" drew laughter from the audience.

Monday, March 28, 2011

Does Being a Harvard Professor Mean Never Having to Have to Say Your Sorry?

At his web site, David Warsh has broken down how the Libyan crisis has unclothed some at the heart of eltist education, who played  footsie with the Gadaffis. Warsh also shows the significantly different ways it  was handled at the top of the London School of Economics versus the way Harvard's Michael Porter is handling his involvement with Libya.

Warsh writes:
There at the bottom of the front page of the Financial Times [in February 2006] was a story that no one else had that day, or any other – a scoop. It turned out that [Michael] Porter, [the Harvard Business School management guru], and his friend Daniel Yergin and the consulting firms which they had respectively co-founded and founded, Monitor Group and Cambridge Energy Research Associates, had been working for a year on a plan to diversify the Libyan economy away from its heavy dependence on oil...

A year later, in February 2007, BusinessWeek trumpeted the relationship, first on the eve of another Porter lecture on the “New Dawn” in Tripoli, then again a month later. The Cambridge, Mass., firm that Porter had started fifteen years before with seven other HBS professors had become. BW reported, “deeply engaged in overhauling the Mediterranean petro-state.” It wasn’t clear, the magazine noted, that partial bank privatization and “mini-MBAs” for some 250 emerging leaders would prevail over statism and red tape.

We now know that Khadafy’s son bribed his way into his PhD from the London School of Economics (LSE); that Monitor Group had been paid to help him write his dissertation there (much of which apparently turns out to have been plagiarized, anyway); that the Libyan government was paying Monitor $250,000 a month for its services; that, according to The New York Times, Libya’s sovereign wealth fund today owns a portion of Pearson PLC, the conglomerate that publishes the Financial Times and The Economist...

Sir Howard Davies resigned earlier this month as director of the LSE after it was disclosed he had accepted a ₤1.5 million donation in 2009 from a charity controlled by Saif Khadafy.

It turns out that Monitor also proposed to write a book boosting Khadafy as “one of the most recognizable individuals on the planet,” promised to generate positive press, and to bring still more prominent academics, policymakers and journalists to Libya, according to Farah Stockman of The Boston Globe...

Among those enlisted were Sir Anthony Giddens, former director of the LSE; Francis Fukuyama, then of Johns Hopkins University; Benjamin Barber, of Rutgers University (emeritus); Nicholas Negroponte, founder of MIT’s Media Lab; Robert Putnam and Joseph Nye, both former deans of Harvard’s Kennedy School of Government. Nye received a fee and wrote a broadly sympathetic account of his three-hour visit with Khadafy for The New Republic. He also told the Globe’s Stockman he had commented on a chapter of Saif’s doctoral dissertation. (When The New Republic scolded Nye earlier this month, after Mother Jones magazine disclosed the fee, Nye replied that his original manuscript implied that he had been employed as a consultant by Monitor, but that the phrase had been edited out).

Connoisseurs of the consultant’s art will relish Monitor’s 2007 proposal, with its elaborate plan to write and sell a book about Khadafy as a world-historical figure to a major publisher, and its hints of prospective visits from Cass Sunstein, future constitutional adviser to President Barack Obama (“positive preliminary conversation”) and Nelson Mandela....

Curiously enough, Porter’s name didn’t appear in the Boston Globe account until the twelfth paragraph under the headline “Local Consultants Aided Khadafy/Cambridge firm tried to polish his image”, well below the continuation of the article on an inside page....

It’s true, too, that Harvard University was in no way institutionally involved. After its mission to advise the Russian government on behalf of the US State department collapsed in 1997 amid a welter of conflict of interest charges, Harvard closed its Institute for International Development. After losing a long court battle, and partly as a consequence of it, the university relieved Lawrence Summers of his presidency (but made him a university professor) and revoked economics professor Andrei Shleifer’s endowed chair.

But Porter is also a university professor, one of just twenty who hold Harvard’s highest honor. Monitor consultants and journalists writing about the Libyan program have indiscriminately brandished the Harvard name. How can he have been so personally reckless?

I’ve followed Porter’s career with interest for twenty-five years. Some part of the explanation for his interest in Libya surely has to do with a nearly boundless sense of personal efficacy....

But there is also all that Libyan oil and money. The sovereign wealth fund at its peak was worth $70 billion or so, all of it operating under the indirect control of Saif Khadafy. Income from Libya’s oil production is as much as $40 billion a year....

In a statement last week, Monitor wrote that “just a few years ago many saw a period of promise in Libya.” That was certainly true in Cambridge. What dissenting Libyans in Tripoli witnessed was a parade of well-paid visitors flattering their half-mad dictator, and a squad of Harvard-connected consultants bent on creating a National Security Organization for the government, designed to augment the existing security apparatus with a new corps of MBA-trained personnel officers.

I’m not going to hold my breath waiting for Porter to give some evidence of contrition about his mission to Tripoli. Sir Howard Davies may have resigned as director of the LSE (“The short point is that I am responsible for the school’s reputation and that has suffered”), but being a Harvard professor apparently means never having to say you’re sorry. Perhaps instead the university will find some way to rein in on its professors’ more self-serving ambitions.
Read Warsh's full overview here.

Libyan Oil Kaching $$$

Somebody is about to cash in big time on oil cash flow from Libya.

Reuters reports:
FLASH: Libya rebel official says rebels in "active discussions" to have sanctions lifted on purchases of crude from rebel-held east Libya
Huh, it's a good thing the Treasury included in its sanctions against Libya the provision that as soon as oil changed hands the sanctions might be lifted. And that the central bank structure, for such cash flow, has already been put in place.

Nothing planned here in advance. Just something new, bureaucrats and rebels with keen financial foresight. That's all. Nothing to see here, please keep on moving. I repeat the no fly zone is strictly a humanitarian effort.

The NYT Paywall is Up, BUT So Are the Hackers

Yes, there are ways to get around NYT's new paywall.

So if you

1.don't believe in IP

2.believe in IP but are morally corrupt

3.believe in IP, don't think you are morally corrupt, but can do mental jujitsu to justify why you shouldn't pay for NYT content

there are solutions. Extremely helpful: One is even moral for IP believers.

So what are these hacks?

Business Insider and its crack team of TEN engineers have come up with seven ways that you won't have to put money in NYT's meter.

Rizzo on NATO and Libya

Mario Rizzo has an excellent commentary on the overall U.S. adventure into Libya and, also makes this important observation about NATO mission creep:
The mission of NATO has changed from the days when the NATO Treaty was ratified by the US Senate. Even a cursory reading of the treaty and of the debate at the time will tell us that it was about joining forces to prevent an armed attack on the member nations, almost exclusively by the Soviet Union. The Soviet Union no longer exists. More importantly, no NATO nation was in danger of armed attack by Libya. We also have it on Secretary of Defense Robert Gates’s authority that the situation in Libya is not one in the “vital national interest.” Therefore, it seems to me that stripped of mumbo-jumbo there is no legal basis for the US engaging in a “humanitarian” bombing with NATO forces. (I should also add that it seems reasonable that with the change in mission a new NATO Treaty should have been submitted to the Senate for ratification. I fully understand how inconvenient for American foreign policy this would be. But should law follow convenience needs of a certain policy?)

Is a Large Bank Going Down?

An email discussion among some Fed watchers began with this question: Why and Why Now?

The reference was to this to notice from the FDIC:

Temporary Unlimited Coverage for Noninterest-bearing Transaction Accounts

From December 31, 2010 through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account and the ownership capacity of the funds. This coverage is available to all depositors, including consumers, businesses, and government entities. The unlimited coverage is separate from, and in addition to, the insurance coverage provided for a depositor’s other accounts held at an FDIC-insured bank.

A noninterest-bearing transaction account is a deposit account where:

•interest is neither accrued nor paid;

•depositors are permitted to make an unlimited number of transfers and withdrawals; and

•the bank does not reserve the right to require advance notice of an intended withdrawal.

Note: Money Market Deposit Accounts (MMDAs) and Negotiable Order of Withdrawal (NOW) accounts are not eligible for this temporary unlimited insurance coverage, regardless of the interest rate, even if no interest is paid.
Yup, the FDIC has suddenly, seemingly out of the blue, decided to insure ALL non-interest bearing accounts regardless of the size of the balance.

One respondent to the email, replied:

I talked to a former FDIC official (she has a Ph.D. in finance) who interviewed for a position on our faculty a few months ago. I told her that I thought the Fed should not have bailed out banks and should have let various banks fail in 2008. She said that the problem is that the FDIC is not organized enough to take over a bank with more than about $10 billion in deposits because they have to do it over a weekend and they can't do enough due diligence with a bank larger than that to figure out who gets 100 cents on the dollar and who doesn't.

So it might be that the FDIC thinks it will need to take over larger banks and this is the first step.
The respondent added that this comment was made just thinking the possibility out quickly, but it does make sense. If the FDIC doesn't have the capacity to determine who should be paid, and who shouldn't, well then, pay them all. Sounds like FDIC logic to me. This would make even more sense if any such big bank that were to go down had sizable deposits from the power elite.

UPDATE: I have received several emails pointing out that the FDIC notice is from December 2010. Yes, I am aware of that. In fact, I quote the FDIC above stating the insurance coverage would start as of 12-31-10.

Those of you not familiar with banking may not realize that often individual bank collapses may be seen well in advance.

Here's a very oversimplified example. A bank has $100,000 cash in its safe and no other assets. It owes to depositors a million dollars. Net-withdrawals are made at the bank on average of $1,000 per day. Thus it's clear the bank will collapse in 100 days.

It's pretty much the same thing with real more complex banks, you can see the trouble down the road.

Thus, if at the end of 2010 the FDIC saw problems developing later this year, they could have very well started to act at the end of the year to position themselves for an eventual large bank collapse(s).

Libyan Rebels Form Central Bank

Here's one for the Guinness Book of Records. The Libyan rebels in Benghazi said they have created a new national oil company to replace the corporation controlled by leader Muammar Qaddafi whose assets were frozen by the United Nations Security Council and have formed a central bank!

The Transitional National Council released a statement announcing the decision made at a March 19 meeting to establish the ‘Libyan Oil Company as supervisory authority on oil production and policies in the country, based temporarily in Benghazi, and the appointment of an interim director general" of the company.

The Council also said it "designated the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and the appointment of a governor to the Central Bank of Libya, with a temporary headquarters in Benghazi."
This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences.
I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising.
This buttresses the suspicions in my earlier post where I highlighted an odd U.S. Treasury statement that froze Gaddafi's assets but made clear that if "subsidiaries or facilities come under different ownership and control, Treasury may consider authorizing dealings with such entities."
This continues to look like a major oil and money play, with the true disaffected rebels being used as puppets and cover, as the oil/money transfer takes place..

Goldman to Its Tokyo Employees: Suck Up the Radiation


John Carney reports:
At least four Goldman Sachs executives flew into Japan last week to speak with nervous ex-pat employees about radiation fears, according to a person familiar with the situation. They also conveyed another message: don't leave Japan and don't leave Tokyo...."The message was clear: no one is to leave. If you do leave, you can't come back and expect to still work for Goldman," the person said...The orders to stay put seem to have been effective. Another person at Goldman's Tokyo offices said that almost everyone was still in place.

Afghan Central Bank Learns from the Federal Reserve

NYT reports:
When a brother and nephew of an Afghan vice president wanted to build up their fuel transport business, they took out a $19 million loan from Kabul Bank. When a brother of the president wanted to start a cement factory, he took out a $2.9 million loan; he also took out $7.9 million for a luxury townhouse in Dubai. When the bank’s chief executive officer wanted to invest in newly built apartments in Kabul, he took almost $18 million

The terms were hard to beat: no collateral, little or no interest. And repayment optional, at least in practice...Those are just a few of the loans detailed in a damning internal report by Afghanistan’s own Central Bank, which depicts the Afghan political elite as using Kabul Bank, the country’s biggest financial institution, as their own private piggy bank.
This is really not any different from the way the Federal Reserve takes care of the elite in America (See TARP), except in Afghanistan the transactions are more transparent.

But the results are always the same. More from NYT on Kabul Bank:
“It was like a Ponzi scheme,” said a Western diplomat familiar with the bank’s dealings. “The bank had to keep marketing and getting more deposits to fund the loans that they weren’t getting interest on.”

Koch versus Soros: Enter the Neo-Cons

Hardcore pro-war, anti-Ron Paul, writer Matthew Continetti has put out an 8,400 word defense/fawning profile of the Koch brothers in the neo-con, Weekly Standard.

Watch this guy in this video clip, I'm talking real hardcore pro war, anti-Ron Paul. He wouldn't defend his mother, if she wasn't as hardcore. Does he know something about the Kochs the rest of us don't?

Meanwhile, on the side of the Soros-backed Regressives, Politico informs on filmmaker Robert Greenwald:
This week, Greenwald’s non-profit group Brave New Films plans to release the first part of its documentary series, focusing on what Greenwald asserts are the five most harmful impacts of the Kochs’ political efforts. That will be followed by what is billed as an 8-part investigative series “exposing the billionaires’ control over your job, your life, and your well being.”

Deutsche Bank Economist: Portugal May Need IMF to Meet Bond Payments

 Deutsche Bank's Chief Economist Charles Mayer Tells Bloomberg that given the recent election results in Germany, where German Chancellor Angela Merkel's party was trounced, it will be difficult for Germany to approve another debt bailout. Mayer says it may come down to an IMF "bridge loan" for  Portugal to make its bond payments.

A bridge loan from the IMF, of course, doesn't eliminate a contribution from Germany. It just makes the connection murkier and brings the U.S. into the bailout picture.

Elizabeth Warren Vs. Jamie Dimon

It will be billed as the power elite (Dimon) versus the consumer advocate (Warren).

It will, in fact, be two power hungry freaks battling for, uh, power. Dimon for elitists banks and Warren attempting to wrench control from the banks in favor of unions and Regressives.

The two will be speakers at an event set for Wednesday at the U.S. Chamber of Commerce, in Washington D.C.

Sunday, March 27, 2011

Walter Block To Do Indiana

The great Austrian economist, Walter Block, will be giving three speeches in Indiana between March 30–31.

I hope Indiana will never be the same.

Dr. Block was a close personal friend of Murray Rothbard's and is as hardcore of a Rothbardian as you can get.

Here are the details and contact information for the events. They all are free and open to the public.

March 30. At 7pm. Topic: Free market environmentalism (IU Bloomington—main campus, Woodburn Hall, Room 101). For some, free market environmentalism is a logical contradiction. Block will demonstrate that the last best hope for preserving our environment is not socialism and government control, but, rather, yes, free enterprise and capitalism; For further information, contact Lindsey Ferguson, President YALiberty,, (812) 350-1009

March 31. At 2pm. Topic: Minimum wage and unions (IU Kokomo, Kelly Center Room 130 AC). Unions, both private and public sector, are an evil institution; one of their most heinous acts is their support for minimum wage laws, which create havoc and great unemployment for young, unskilled, and black workers. For further information, contact Justin Clark President, Young Americans For Liberty at IUK,, (765) 327-3283

March 31. At 7pm. Topic: Egalitarianism (Purdue University, Rawls room 1086). Wealth heterogeneity is often seen as a market failure. It is no such thing, as Prof. Block will demonstrate. Also, he will show that egalitarians are hypocrites, in that not a one of them, Rawls certainly included, can or actually does live according to this pernicious philosophy. Voluntary egalitarianism (charity) is fine. Coercive egalitarianism (progressive taxes, affirmative action) are rights violations. Spread the wealth schemes are a snare and a delusion. For further information contact: Nathan Murphy, Indiana YAL State Chair, Treasurer Purdue YALiberty,, (260) 415-6845


Was Gaddafi's Call for Nationalisation of the Oil Sector Behind the No Fly Zone?

In early 2009, Libya's President Muammar Gaddafi told students at Georgetown University, via satellite that the then-low oil prices were unbearable and nationalisation of Libyan oil properties might be necessary. At the time, here's how Forbes write rChristopher Helman reported Gaddafi's comments:
On Wednesday Libya's President Muammar Gaddafi made a bad week for ConocoPhillips even worse. Talking with Georgetown University students via satellite, he said, according to Reuters, that oil prices ($43/barrel Wednesday) were "unbearable" and that Libyan oil "maybe should be owned by national companies or the public sector at this point, in order to control the oil prices, the oil production or maybe to stop it."

Hmm, that's Georgetown University, as in Washington D.C. Georgetwon, where more than one government spook has known to have graduated from.  I don't think the CIA, the State Department or the oil industry missed those Georgetown comments made by Gaddafi.

Most interesting, look at how Helman, speculated at Forbes where Gaddafi's comment might lead:
Is Libya about to take the lead of its friends in Venezuela and Russia and launch a new round of energy-sector nationalism? The thought sends a shiver through the collective spines of ConocoPhillips, Marathon Oil, Occidental Petroleum, Amerada Hess  and Royal Dutch Shell . All have made massive new investments in Libya since Gaddafi renounced his nuclear weapons program, made reparations for past terrorist activities like the Lockerbie jetliner bombing and returned to the fold of seemingly responsible nations.

Bottom lime: It would not be hard to make a circumstantial case that the good ol' boys in the oil industry would become very concerned about Gaddafi's nationalise the oil comments. It would certainly be seen as  Gaddafi wandering off the resevation. Could the no-fly zone really be a "no take the good 'ol boys oil zone"? As in, don't even think about it, Muammar.

Finally, Some Answers on What the Real Dangers from Fukushima Are

CNN's Candy Crowley talks to a nuclear expert Joesph Cirincione about the crisis at the Fukushima Daiichii nuclear power plant.

In this interview, Crowley asks the best questions about the situation that I have heard anyone in MSM ask. As for Cirincione, he appears to be providing straight technical answers to the questions, but it should be noted that although he lists his expertise as
Nuclear Weapons(Cooperative Threat Reduction, Nuclear Terrorism, Proliferation, U.S. Nuclear Policy)

Nuclear Materials(Nuclear Fuel Cycle, Radiological weapons)

Missiles & Space(Missile Defense, Missile Proliferation)
His expertise comes with a distinct government seasoning to it. He holds a Masters of Science from the Georgetown School of Foreign Service. He has held positions at the Henry L. Stimson Center, the U.S. Information Agency and the Center for Strategic and International Studies. He cuurently teaches at the graduate School of Foreign Service at Georgetown University.

The Junk Science that Closed Down the Craigslist Adult Section

Writes Nick Pinto at SF Weekly:
ATTORNEYS REPRESENTING CRAIGSLIST told Congress on Sept. 15 that the ubiquitous web classifieds site was closing its adult section. Under intense scrutiny from the government and crusading advocacy groups, as well as state attorneys general, owner Craig Newmark famously applied the label "Censored" in his classifieds where adult advertising once appeared.

During the same September hearing of a subcommittee of the House Judiciary Committee, members of Congress listened to vivid and chilling accounts regarding underage prostitution. They heard testimony from half a dozen nonprofit executives and law enforcement officials. But the most alarming words of the day came from Deborah Richardson, the chief program officer of the Women's Funding Network (WFN), who told legislators that juvenile prostitution is exploding at an astronomical rate.

"An independent tracking study released today by the Women's Funding Network shows that over the past six months, the number of underage girls trafficked online has risen exponentially in three diverse states," Richardson claimed. "Michigan: a 39.2 percent increase; New York: a 20.7 percent increase; and Minnesota: a staggering 64.7 percent increase."
Got that, child prostitution had increased by over 64.7% over the last six months in Minnesota?

At that rate, every kid in Minnesota would be into prostitution in no time flat.

Of course, it was wacky science, but the numbers were published in newspapers across the country, including, USA Today, the Houston Chronicle, The Miami Herald, the Minneapolis Star Tribune, and the Detroit Free Press.

Not surprising, the group pushing the numbers was looking for government funding to fight the epidemic.

Read on, about the mad science behind the research, here.

NYT Occasional Contributor Provides a Tip On How to Skirt NYT's Paywall

GMU econ Prof. Tyler Cowen thumbs:
If you blog a multi-page NYT piece...provide the single-page non-NYT subscribers can read beyond the first page.

Geithner's Monday: FSOB

On Monday afternoon, Treasury Secretary Geithner will meet with the Financial Stability Oversight Board at Treasury.

The members of the FSOB are:

Chairman of the Board of the Federal Reserve (Currently Ben Bernanke)
Secretary of the Treasury (Currently Timothy F. Geithner)
Director of the Federal Housing Finance Agency (Currently Edward J. DeMarco, Acting Director )
Chairman of the Securities and Exchange Commission (Currently Mary Shapiro)
Secretary of the Department of Housing and Urban Development (Currently Shaun Donovan)

Why the Radiation from the Fukushima Accident Could Be Dangerous Across the Globe

In the interest of  expanding the debate on the health hazards of radiation, in particular, from nuclear accidents, I present below a column by Harvey Wasserman co-author along with Bob Fitrakis, Norman Solomon and Eleanor Walters of  Killing Our Own: The Disaster of America's Experience With Atomic Radiation.

I hasten to add that I am not endorsing his view and do not hold myself out to be an expert on nuclear issues or radiation. I am merely presenting what appears to be a reasoned analysis, and I note that I have also published at EPJ critics from the pro-nuclear camp. Further, I do note that Wasserman's claim of 985,000 deaths as a result of Chernobyl is an exponential number relative to the death numbers claimed by those in the pro-nuclear community. Somebody is way, way off. 

If there ever was a time to have a debate on the health hazards of radiation and a better understanding of what may be going on at the Fukushima Daiichii nuclear plant, this certainly appears to be the time. Let's have both sides present their best arguments. I welcome comments to this post from both sides of the debate. 

 "Safe" Radiation is a Lethal TMI Lie

By Harvey Wasserman

There is no safe dose of radiation.

We do not x-ray pregnant women.

Any detectable fallout can kill.

With erratic radiation spikes, major air and water emissions and at least three reactors and waste pools in serious danger at Fukushima, we must prepare for the worst.

When you hear the terms "safe" and "insignificant" in reference to radioactive fallout, ask yourself: "Safe for whom?" "Insignificant to which of us?"

Despite the corporate media, what has and will continue to come here from Fukushima is deadly to Americans. At very least it threatens countless embryos and fetuses in utero, the infants, the elderly, the unborn who will come to future mothers now being exposed. ( )

No matter how small the dose, the human egg in waiting, or embryo or fetus in utero, or newborn infant, or weakened elder, has no defense against even the tiniest radioactive assault.

Science has never found such a “safe” threshold, and never will.

In the 1950s Dr. Alice Stewart showed a definitive link between medical x-rays administered to pregnant women and the curse of childhood leukemia among their offspring.

Dodd-Frank Blowback: Wells Fargo Stops Enrollment in Debit Rewards

It's all because the Dodd-Frank Act mandated a cap on fees that banks can collect from merchants whenever customers swipe their cards.

The current proposal would cap fees at 12 cents per transaction, versus the current 1 percent to 2 percent of the transaction amount.

The banking industry says the change could slash its debit swipe fee revenue by as much as 90 percent.

A final rule is expected from the Federal Reserve by April 21, unless Congress delays the deadline.

The rule will take effect three months later.

Wells Fargo is likely making its move now to bring attention to the rule and how it will impact debit card users. Such a dramatic cut in revenue will most assuredly impact the way banks provide debit card services---and it won't be good for debit card users.

The entire nutty scheme whereby government controls fees banks charge merchants is the result of merchant association lobbyists getting to congressmen who then put the legislation in the even nuttier Dood-Frank bill.

More and more of these gems will continue to pop up as it becomes more obvious as to what is in the Dodd-Frank Act, and how it serves nothing but special interests.

First Time in Nearly 60 Years: Merkel Party Loses Power in Germany's Heartland

German Chancellor Angela Merkel's Christian Democrats party has lost power in  Baden-Wuerttemberg in elections held there. The CDU was in power since 1953.

It appears that the CDU was hit as a result of problems that developed outside Germany, but have an impact in the country, the nuclear disaster in Japan and the PIIGS crisis . Nuclear power is unpopular in Germany and the disaster in Japan put nuclear power in the forefront of voters' minds. According to poll results, voters saw Merkel's recent move to shutdown certain nuclear plants as a political ploy.

And, of course, voters were unhappy with Merkel's agreeing at an EU summit Thursday to commit to a giant new eurozone rescue fund.

The anti-nuclear Greens claimed about 24 percent of the vote -- about 12 point higher than five years ago -- and were likely to form a coalition with the Social Democrats, who grabbed about 23 percent of the vote.

San Francisco: Hotbed for Social Networking Firms

The number of tech workers in San Francisco today is nearing its peak that was seen in 2000. This is largely the result of the growing presence of internet firms choosingto operate in the city.

The city had an estimated 32,180 tech jobs last year, compared with 34,116 in 2000, according to an analysis of state employment data by real estate consultant Jones Lang LaSalle. In 2004, the number of tech jobs had fallen to 18,210.

Twitter and Zynga both have their headquarters in San Francisco. Others include, Kabam, a gaming company, Autodesk,  PeopleBrowsr, and Viadeo S.A., a social networking site for professionals. Viadeo moved its headquarters from Paris.

The attraction seems to go a bit beyond the social network forms.

"San Francisco is home to top technology clusters in gaming, in social media and in software as a service, to name a few," said Todd Rufo, director of business development for the city's Office of Economic and Workforce Development. "The presence of these industry heavyweights, as well as the clusters around them, create their own momentum and interest."

The irony that firms, that promote networking over the internet, choose to be physically near each, partly for networking reasons is duly noted.

More Reports of Possible Reactor Leak; Reading 100,000 Times Normal

Efforts to repair the cooling systems at reactors 2 and 3 reactors at the Fukushima Dai- Ichi nuclear plant are being delayed by the need to drain radioactive water from the floors.

Tests found radiation levels at 100,000 times the normal level in the  reactor 2 at the plant. (Note:This was originally reported in error by Tokyo Power as 10 million times normal levels.) According to the World Nuclear Association, the reading of 100, 000 times normal the dose would cause vomiting, hair loss and diarrhea.

Tokyo Power Vice President Sakae Muto, in a briefing, said that reactor 2 may be leaking. “I think it is high,” Muto said of the radiation level in the pool of water at the unit 2.

As for the clean-up of the water pools, the company plans to put the radioactive water into condenser tanks. Those tanks are probably already full, so crews must find a way to drain them.

Neither Inflationst Nor Deflationist Should Thou Be (In the short-term)

I get many emails that begin something like this:
Because you are in the inflationist camp.
I get an equal number that start along these lines this:
Because you are in the deflationist camp.
Please know that at present, I am in neither camp. Although in the long-term I fully expect the Federal Reserve to launch operations that will result in huge amounts of new money entering the system, a move that will ultimately become very price inflationary, it is not clear at all that this will occur in the short run.

Although the Federal Reserve is currently pumping huge amounts of money into the system, most of that money is finding itself back at the Fed as excess reserve, and therefore back out of the system.

In late 2010, three month money supply (M2) growth peaked at just above 7% on annualized basis, since then it has dropped back to between 4% to 5%.

This is typical of monetary policy under Fed Chairman Bernanke. Money supply growth has been a bronc ride. I have literally been tracking money supply growth week after week, with pen and paper, for decades. I have never ever seen such wild swings in money growth as the swings under Bernanke.

This is partly because of the many new monetary "tools" that he has introduced by which he conducts monetary policy. Since the old tools of the Fed: controlling the discount rate, the reserve requirement and controlling open market operations, worked for the Fed chairmen before Bernanke, it is unclear why Bernanke created the new tools. Further, it is unclear as to how controllable the new tools are, e.g. since Bernanke started paying interest on excess reserves, the amount placed by bankers in excess reserves has swelled to over a trillion dollars. It is unclear that Bernanke has created the proper new "tools" necessary to battle the new tool of paying interest on excess reserves, should bankers suddenly decided to start loaning that money out.

I follow the changes in money supply, excess reserves, required reserves, etc, weekly in the EPJ Daily Alert. Money supply really has to be watched that closely at this time. The longer term money growth trends in the days gone by of Alan Greenspan and Paul Volcker are a thing of the past.

It is extremely dangerous, at present, to be bold and step out and say that inflation or deflation is imminent. If the current annualized money growth trends of between 4% and 5% continue, I fully expect stagflation, i.e., price inflation but a stagnant economy. If money growth climbs back over 7%, price inflation will be much stronger (well into the double-digit range), with a manipulated stronger economy. If money supply growth dips below current levels, the economy could move into crash mode.

All this said, the exact direction on a short-term basis is unclear because of the whipsaw action of monetary policy under Bernanke. It is too dangerous to be a hardcore inflationist or deflationsit at present for the short-term (meaning roughly for the next year or so). It is simply best to watch the money growth numbers and adjust investments accordingly.

Saturday, March 26, 2011

Did Elizabeth Taylor Die a Billionaire?

Elizabeth Taylor was very wealthy when she died. She was certainly worth hundreds of millions of dollars. Some think she may have been worth over a billion.

According to NyPo, her jewelry collection was valued at  $150 million in 2002.
But that is just the start of it.

During the 1990s, Taylor reportedly earned about $2 per second, or about $63 million per year.

Reports have her earning more than $70 million last year from sales of her perfume, White Diamonds.

At the time of her 1994 divorce from her last husband, Larry Fortensky, Taylor's net worth was estimated at $608.4 million. That figure could now be well in excess of $1 billion. According to NyPo, a financial planner who has worked with other Hollywood A-listers said, "From what I understand, she seems to have been very wise about her investments,"

30 Minutes with Hayek on Prices as Signals, Social Justice, Inequality,Pollution and Much More

Protests Get Wild in London

Unlike the protests we have so far seen in the United States where government union members have been protesting against the government and aiming their dissatisfaction against government institutions, the protests in London this weekend are proving to be of a completely different nature.

Activists are protesting against government cuts and are taking their anger out against private businesses. Whereas a protest against the government and its institutions would simply obstruct the government from harassing others, the protests in London are resulting in damage being done to the property of private citizens. Not good.

Since governments pretty much around the world don't have the funds to continue to make the handouts they have been making, we are likely in for a major period of unrest around the globe, including in the United States.

The problem, as I have suggested many times, is that the protesters do not understand that an increasing standard of living comes about only through an acceptance of private property, free markets and the rule of law.

Many of these protests are simply bizarre, not only this one in London, but the protests we have seen in the PIIGS countries. Aside from the philosophical question of whether governments should be taking from some and handing out to others, the current situation is one where governments wouldn't have the money to pay out, even if they taxed the "rich" 100%, and yet protesters are demanding the impossible handouts.

This utter madness, confusion and ignorance is not likely to lead to anything good. Out of this kind of madness totalitarians arise.

Scroll through these pictures for an up close look at the madness in London.