Tuesday, July 31, 2012

The Ultimate Modern Day Money Printing Advocate: Alan Blinder

Eight days ago, I pointed to a mad scheme promoted by economist Alan Blinder that would potentially release trillions of dollars into the economy. Such a scheme, if implemented, would put us on the road to Zimbabwe price inflation in no time.

Well that's apparently not enough money printing for Blinder. A week and one day later, Blinder is in the pages of WSJ calling for even another mad money printing plan. This time he wants to follow the Brits and have the Fed give banks cheap money, if the loan it out. Writes Blinder:

For a 25-basis-point annual fee, the Bank of England will soon start lending banks Treasury bills for terms up to four years. The banks can then turn around and use these bills as collateral to borrow at exceptionally low rates in the private markets; after all, T-bills are the ultimate collateral. The key point is that the plan gives banks an incentive to increase lending at the margin: They gain access to more low-cost funds by lending more.
Imagine the Federal Reserve wanted to do something similar. 
Yeah, I can imagine:

Does Geithner Believe Draghi?

US Treasury Secretary Geithner held separate meetings yesterday in Germany with  German Finance Minister Wolfgang Schaeuble and European Central Bank President Draghi. In a thigh slapper of a statement released after the meeting with Schaeuble, according to Bloomberg, Geithner and Schaeuble “took note” of comments made last week by European leaders to “take whatever steps are necessary to safeguard financial stability” in the 17-nation euro area.

"Took note"? What the hell does that mean?

The "European leaders" who made the comments was  apparently only the off the cuff statement by Draghi, which the market has taken as a solemn indication that Draghi is about to start the ECB printing presses.  I don't think Geithner believes it for a minute.

Pentagon Orders $521 Million Worth of New Drones

They're coming.

From Business Insider Military & Defense
General Atomics, the people behind the wildly successful Predator and Reaper drones, just scored two huge contracts this week.

One contract is $411 million for Gray Eagle systems, a derivative of the Predator drone. The second contract is for $120.6 million and will buy MQ-9 Reaper spares for the Air Force. They’ll also get ground support systems and spares.

Presently, approximately 200 unmanned aerial vehicles owned by 100 non-government entities like law enforcement agencies and academic institutions, have already been authorized to fly in the U.S., Congressman Michael McCaul said in his opening statement last week at the Homeland Security committee's subcommittee on oversight investigations, and management.

In May, "the FAA began a three-year process of integrating drones into U.S. airspace by allowing police, firefighters and other civilian first-responders to fly UAVs that are no heavier than 11 kilograms," CBC News reported Friday. The next step in the integration is to select six test sites where the FAA will test how safe it is for civilian drones to share airspace with other aircraft.

Also in May, a young Pakistani filmmaker of the award-winning movie about drones, The Other Side, was denied entry into the United States to receive his prestigious award at the National Film Festival for Talented Youth in Seattle. His film follows a child whose entire family was killed by a drone.

What’s Going to Happen When the Treasury Market is Finally Shattered

David Stockman explains the developing crisis. It should be noted that "austerity" is not the only option. Default on government debt is another option, which would put the pain on those who financed the debt in the first place:

The Surveillance State at Work

Gary North has the real life version of this here.

U.K., Netherlands Suspend Millions in Aid to Rwanda

Can this mean anything other than Rwanda is now on the US enemies list. Expect overthrow of the current government or other intervention. The UK and the Netherlands are simply getting out of the way.

Enough reports:
The Dutch government announced today its suspension of 5 million euros, or approximately $6.18 million, in aid to Rwanda. The United Kingdom has also decided to delay 16 million pounds, or approximately $25.16 million, originally earmarked for Kigali, pending a decision about whether Rwanda has met aid conditions...
These decisions come on the heels of a U.N. report documenting high-level Rwandan support of the M23 rebellion in neighboring Congo. The moves by the Netherlands and the U.K. echo a similar decision taken over the weekend by the U.S. government to cut $200,000 in military aid.
A senior U.N. official confirmed to the BBC that defecting rebels have said they were recruited in Rwanda. They also use weapons, uniforms, and tactics, such as night attacks, uncharacteristic of Congolese-trained troops. Many defecting rebels speak English, which is more commonly spoken in Rwanda than in the primarily francophone Congo.

Coming Up on The Robert Wenzel Show

This Sunday my guest on The Robert Wenzel Show is the mysterious and beautiful, Livia Elena Araujo Pérez, who spoke truth to Paul Krugman. You will not want to miss this broadcast. She responds to Paul Krugman's answer to her question. Then we discuss her reading of Ludwig von Mises in original German, what is going on with the economy of Spain, the Austrian school movement in Spain and much much more.

The following Sunday my guest will be Neil Barofsky author of the new book, Bailout, about his time spent as the special inspector general of TARP.

Barofsky was once a US Attorney for the Southern District of New York where he was the lead investigator  of the Colombian drug cartel FARC, that resulted in the indictment of their top 50 leaders. Somewhere between, when I asked if he thought this resulted in anything other than the power vacuum being filled by other drug leaders and if drugs were still available on the streets of America, and when I asked him if government in general was about power centers, he decided that he was too busy to continue the interview.

Guests booked but not yet interviewed, include:

Butler Shaffer--on his new book, The Wizards of Ozymandias: Reflections on the Decline and Fall.

Lew Rockwell-- we will discuss the upcoming Republican National Convention, Murray Rothbard and the future of liberty.

Scott Horton---libertarian radio show host extraordinaire.

How Much Did Milton Friedman Love Keynes?

Don Boudreaux, a professor at Koch-funded George Mason University, steps forward to claim that Nicholas Wapshott's charge that Friedman had a "lovefest" with Keynes is untrue. Boudreaux writes of a Friedman essay that Wapshott used to form his opinion:
Does Friedman sound here like a man having a “lovefest” with Keynes?
The Friedman article starts off this way:
John Maynard Keynes (1883–1946) is the latest in a line of great British
economists who had a profound influence on the discipline of economics.
Friedman then lists a number of economists such as Adam Smith, David Ricardo, William Stanley Jevons and Alfred Marshall, and writes (my bold):
Keynes clearly belongs in this line. In listing “the” classic of each of these great economists, historians will cite the General Theory as Keynes’s pathbreaking contribution. Yet, in my opinion, Keynes would belong in this line even if the General Theory had never been published. Indeed, I am one of a small minority of professional economists who regard his Tract on Monetary Reform (1923), not the General Theory, as his best book in economics. Even after sixty-five years, it is not only well worth reading but continues to have a
major influence on economic policy.
Friedman continues:

It is a mark of Keynes’s range, creative originality, and insight that much recent work in statistics has returned to the themes of the[ Keynes' early work], Treatise on Probability.

Friedman than quotes himself from an earlier writing:

“The General Theory is profound in the wide range of problems to which Keynes applies his hypothesis, in the interpretations of the operation of modern economies and, particularly, of capital markets that are strewn throughout the book, and in the shrewd and incisive comments on the theories of his predecessors. These clothe the bare bones of his theory with an economic understanding that is the true mark of his greatness.
“Rereading the General Theory has . . . reminded me what a great economist Keynes was and how much more I sympathize with his approach and aims than with those of many of his followers.”

Sure looks like deep love to me.

Friedman does have a somewhat different tack on monetary theory and calls Keynes out on this. But it is only technical in nature, when looked at in the full  context of Friedman's work, Friedman is quite Keynesian even here.

Indeed, it is fascinating that, the Keynesian, Paul Krugman mentions Friedman in support of his views no less than five times in his latest book. For example, Krugman writes:.
Milton Friedman...at least conceded that monetary policy could be an effective tool for stabilizing the economy. (p. 96)
Indeed, when Friedman published a paper in 1970 titled "A Theoretical Framework for Monetary Analysis,"  many economists were shocked by just how similar it looked to textbook Keynesian theory. (p.101) 
Never mind Keynes, Milton Friedman has crusaded against this kind of [Schumpeterian liquidationist] thinking. (p.205) 

Poles for Ron Paul

The revolution is worldwide, says Julie Borowski.

Forget Mitt Romney, forget Obama, for some Poles only Ron Paul will do.

GM Stock Hits New Low

In June 2009, GM filed for Obama-managed bankruptcy, costing the government some $50 billion. The vast majority of that cash was never paid back by GM. In November 2010, GM issued a new initial public offering at a price of $33 per share. Today, GM stock is trading at approximately $19.36, down about 40% from its initial price.

Says Beitbart:
Remember that big GM boom? It’s a lie. Obama may have bailed out GM, but he didn’t bail out the taxpayer – and in the long run, GM won’t be a viable business just because the government cut it a check.

ECB Prez Under Investigation

The European Union's internal watchdog has launched an investigation of European Central Bank President Mario Draghi following a complaint of conflict of interest, the institution's spokeswoman said on Monday, reports Reuters.

Corporate Europe Observatory (CEO), which tracks EU-focused lobbying, accused Draghi in June of lacking independence because of his membership in an international forum of public and private sector financial leaders, the Group of Thirty (G30).

"We received a complaint and sent a letter to the ECB," said Gundi Gadesmann, spokeswoman for EU ombudsman Nikiforos Diamandouros.

According to Reuters:
"Draghi is alleged to maintain close ties with the group and to participate in closed meetings," the transparency group said last month.

"(G30) bears all the characteristics of a lobbying vehicle for big international private banks and the President of the European Central Bank should not be able to be a member, due to concerns over the bank's independence," it said.

Chaired by former ECB President Jean-Claude Trichet, the G30 gathers influential regulators, financial executives and academics.

Former Federal Reserve Chairman Paul Volcker, Bank of Canada Governor Mark Carney and Bank of England Governor Mervyn King are also members.
Of course, Draghi is an insider. That's how you get to be the head of the ECB.

India's Power Grid Fails for 2nd Day; 600 Million without Power

This is a hint at what real economic collapse looks like. It's not a Japanese style roll in the park.

AP reports:
India's energy crisis cascaded over half the country Tuesday when three of its regional grids collapsed, leaving more than 600 million people without government-supplied electricity in one of the world's biggest-ever blackouts.

The massive failure — a day after a similar, but smaller power failure — has raised serious concerns about India's outdated infrastructure and the government's inability to meet its huge appetite for energy as the country aspires to become a regional economic superpower.
Here's AP providing the clue to what is going down:
Power Minister Sushil Kumar Shinde blamed the new collapse on states taking more than their allotted share of electricity.

"Everyone overdraws from the grid. Just this morning I held a meeting with power officials from the states and I gave directions that states that overdraw should be punished. We have given instructions that their power supply could be cut," he told reporters.
Whenever you here talk of "too much" of a product being used, it is a sure sign that market prices are not being allowed to adjust to supply and demand conditions and that price controls are in effect, distorting the picture.

If significant price inflation hits the US down the road, the implementation of price controls could be a very real possibility, causing shortages through out the economy.

Murray Rothbard on Economic Recessions

Monday, July 30, 2012

The Debt Bomb

Comedian Dominic Frisby explains the Debt Bomb. It doesn't completely get across that government spending is always coercion, nevertheless a fairly decent video that should warn the masses that something is amiss.

Sadly, the congressional leaders mocked in this video will use the video to call for higher taxes, when the point is that government spending must always and everywhere be cut.

(ht Dale Fitzgerald0

Did ECB President Mario Draghi Go Rogue Last Week?

Will the ECB start printing euros soon to save the eurozone?

Many believe this is exactly what ECB president Mario Drgahi implied as part of comments he made late last week.

But Ed Yardeni points out that these were not prepared remarks from Draghi and more in the form of off the cuff remarks. Did Draghi go rogue? Here's Yardeni with a play-by-play :
Mario Draghi likes his job and wants to keep it. He is the President of the ECB, which was created to manage the euro within the European Monetary Union implemented on January 1, 1999. Therefore, it wasn’t all that surprising to hear him say last week that “the ECB is ready to do whatever it takes to preserve the euro”.....the S&P 500 rose 3.6% on Thursday and Friday after Draghi's assurances, while the MSCI Europe stock price index jumped 3.9%. The Spanish 10-year government bond yield plunged from a record high of 7.63% on Tuesday to 6.50% this morning. The euro also surged.

The hoopla was triggered by Draghi’s presentation on Thursday, July 26 at the Global Investment Conference in London. Given the importance of what he said and its impact on the markets, it was very odd that the speech wasn’t based on a prepared text. The ECB’s website billed it as the “Verbatim of the remarks by Mario Draghi.” According to the official transcript, Draghi said, “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” A video shows that he actually repeated “within our mandate” twice. Draghi seems to be saying that his mandate is to save the euro no matter what.

The markets were happily surprised because Draghi’s remarks suggested that the ECB’s Governing Council...may vote on Thursday to restart the central bank’s program of buying government bonds of debt-challenged euro zone members like Spain and Italy. [As opposed to the markets.]not so happy might be the other members of the Governing Council, who apparently were also surprised by Draghi’s off-the-cuff statement.

Is this why Geithner is in Germany, to try and get everybody on the same page? And what page is that?

A Lovefest Between Milton Friedman and J.M. Keynes

Keynesian Nicholas Wapshott writes:
Libertarians worship Milton Friedman, and liberals lionize John Maynard Keynes. But a long-lost essay shows that the champion of small government admired the prince of the New Deal.

July 31 marks the centenary of the birth of the high priest of monetarism, Milton Friedman. Conservatives will be rejoicing at his many achievements, notably his most famous triumph in the mid-1970s, when he almost single-handedly turned back the tide of 30 years of big-government Keynesian economics.

Yet Friedman’s contemporary supporters no less than his critics will be surprised to learn that he was in fact an enormous admirer of John Maynard Keynes—the patron saint of the New Deal—and not at all the absolute opponent of big government he is usually presumed to be.

A key lost document in the story of modern economics is Friedman’s only essay to directly address the legacy of Keynes, written for a German publisher in 1988 as the introduction to a new edition of Keynes’s revolutionary book The General Theory of Employment, Interest, and Money, originally published in 1936. The essay was circulated in English in the obscure quarterly of the Federal Reserve Bank of Richmond. Most monetarists do not know of its existence, and even fewer have read it.

The essay is a revelation. While Friedman spent most of his life insisting that Keynesian measures had led governments to grow too large, in this devastating critique of the American system of government he concedes not only that Keynesianism can work but that big government is not evil so long as it is honestly administered.
Hah, this might be news to Wapshott and fans of Milton Friedman, but Murray Rothbard understood Fiedman's true colors, decades ago. He wrote 4 decades ago (my bold):
Friedmanism can be fully understood only in the context of its historical roots, and these roots are the so-called "Chicago School" of economics of the 1920s and 1930s. Friedman, a professor at the University of Chicago, is now the undisputed head of the modern, or second-generation, Chicago School, which has adherents throughout the profession, with major centers at Chicago, UCLA, and the University of Virginia. 
The members of the original, or first-generation, Chicago School were considered "leftish" in their day, as indeed they were by any sort of genuine free-market criterion. And while Friedman has modified some of their approaches, he remains a Chicago man of the thirties. The political program of the original Chicagoans is best revealed in the egregious work of a founder and major political mentor: Henry C. Simons’s A Positive Program for Laissez Faire.Simons’s political program was laissez faireist only in an unconsciously satiric sense.
It consisted of three key ideas: 
a drastic policy of trust-busting of all business firms and unions down to small blacksmith-shop size, in order to arrive at "perfect" competition and what Simons conceived to be the "free market"; 
a vast scheme of compulsory egalitarianism, equalizing incomes through the income-tax structure; and 
a proto-Keynesian policy of stabilizing the price-level through expansionary fiscal and monetary programs during a recession. 
Extreme trust-busting, egalitarianism, and Keynesianism: the Chicago School contained within itself much of the New Deal program, and, hence, its status within the economics profession of the early 1930s as a leftish fringe.

Here's an audio of Murray on Friedman, mostly on Friedman on free riding:

The Central Bank Olympics

While the eyes of many are focused on the Olympics going on in London, the sport of totalitarians, central bank money printing, will be on stage later this week, both in the United States and in Europe.

The Fed's monetary policy open market committee is scheduled to meet this Tuesday and Wednesday, with a policy statement to be issued on Wednesday at 2:30 ET.

Although monetary policy is not expected to be eased by FOMC members at this meeting, there is a slight possibility that the members may choose to lower the interest rate on excess reserves, in an attempt to nudge banks into loaning more money out---which could result in monetary growth.

On Thursday, in Europe, the monetary policy making members of the European Central Bank will meet, followed by a policy statement, and a press conference held by Draghi.

Since Draghi has recently stated that the ECB will take the steps necessary to maintain the eurozone, it will be important to see whether he follows up his words with actual money printing.

Murphy Responds on Krugman

Just emailed Murphy to see if he is going to take Gary North up on his suggestion on how to get at Paul Krugman.

His response:



Is Paul Krugman's Life About to Become More Difficult?

Wow, breaking news from Tom Woods.

Woods, Bob Murphy and Gary North have apparently hatched a plan to put make things very uncomfortable for Krugman.

Tom explains:
Some of you know about Bob Murphy’s debate challenge. If you don’t — and heck, even if you do — visit KrugmanDebate.com. Make sure you understand the specifics before saying, “Krugman will never do it.” Murphy has made it hard for Krugman to say no, given the money that would go to charity if it occurred.

I talked to Gary North, a marketing genius, about this over the weekend. He already knew about the debate challenge, but as we were talking he came up with a great idea. I am not sure Bob will do it. I hope he does. It would inflict pain on Krugman, week after week. It would do so humorously. It may inflict so much pain as to force Krugman to debate. As a pleasant side effect, it would put Bob on the map in a way far beyond what he has already achieved, which is itself considerable.

Here’s an excerpt from North’s members-only article today:

The trick for Murphy is to smoke Krugman out. He must inflict so much humiliation on Krugman for not debating him that Krugman will be forced to take him on.

I have a plan. It is risk-free for Murphy and could be permanently disastrous for Krugman. It involves the use of YouTube. It involves the strategic use of ridicule. But the form of ridicule will leave Murphy untouchable. That’s because it will involve humor
Read the rest here.

Let’s Shatter the Myth on Glass-Steagall

Steve Pearlstein does an awesome job of slaying clueless mainstream reporters. It would be too much to expect him to explain the role of the Federal Reserve in printing money as the ultimate cause of the financial crisis, but he does get what most don't, that Glass-Steegal had nothing to do with the crisis. Read this and become the most knowledgeable person in your neighborhood about Glass-Steegal and the financial crisis:

You can blame Aaron Sorkin for this column.

I was watching “The Newsroom” last week, the latest hit show by the producer and screenwriter, when the brainy-but-beautiful economics correspondent for the fictional cable news network was explaining to her gutsy-but-impulsive executive producer how the world’s financial system recently came to the brink of collapse.

“So after the Great Depression, Congress wanted to put a firewall between the [banks and the] investment banks. They wanted to make sure that Wall Street could melt to the ground and the commercial banks wouldn’t be touched. They passed a law, the Glass-Steagall Act. Now you could be Gordon Gekko [tycoon in the movie “Wall Street] or George Bailey [small-town banker in the movie classic, “It’s a Wonderful Life”], but you couldn’t be both.”

Then, explains the brainy-but-beautiful correspondent, Ronald Reagan launched a two-decade push toward deregulation, which culminates in the repeal of Glass-Steagall in 1999. Suddenly, Gordon Gekko could make risky bets with George Bailey’s deposits, and the rest, as they say, is history.

It was vintage Sorkin: eloquent, fast-paced dialogue that perfectly channels the liberal political/cultural zeitgeist, transforming what appears to be a complex story into a simple morality play.

The only thing is, it’s not true — not even close. Yet it has been repeated so many times — on PBS and NPR, in the liberal blogosphere, on very-serious Op-Ed pages, in an Oscar-winning documentary — that whenever I give a talk to a group of college students about the financial crisis, the first question predictably is, “Yeah, isn’t it all really about the repeal of Glass-Steagall.”

It’s not just students, however. Paul Volcker, the former chairman of the Federal Reserve, surely helped to validate the Glass-Steagall fable with his fixation on a new rule barring banks from using their own capital to speculate in securities. And British regulators are considering a proposal to put a fence around their banks. Then, just last week Sandy Weill — who flouted Glass-Steagall in creating today’s Citigroup before Congress finally repealed it — even the wily Weill said the old law should now be reinstated.

Repeal of Glass-Steagall has become for the Democratic left what Fannie Mae and Freddie Mac are for the Republican right — a simple and facially plausible conspiracy theory about the crisis that reinforces what they already believed about financial markets and economic policy.

But why let facts get in the way of a good screenplay?

Facts such as that Bear Stearns, Lehman Brothers and Merrill Lynch — three institutions at the heart of the crisis — were pure investment banks that had never crossed the old line into commercial banking. The same goes for Goldman Sachs, another favorite villain of the left.

The infamous AIG? An insurance firm. New Century Financial? A real estate investment trust. No Glass-Steagall there.

Two of the biggest banks that went under, Wachovia and Washington Mutual, got into trouble the old-fashioned way – largely by making risky loans to homeowners. Bank of America nearly met the same fate, not because it had bought an investment bank but because it had bought Countrywide Financial, a vanilla-variety mortgage lender.

Read more here.

Why is Geithner in Germany?

Treasury Secretary Geithner left Sunday for Germany for meetings today with senior government officials to discuss the U.S., European and global economies.

Monday afternoon, the Secretary will meet with German Finance Minister Wolfgang Schauble in Sylt, Germany.

Later, Secretary Geithner will depart Sylt for Frankfurt, Germany.

In the evening, the Secretary will meet with European Central Bank (ECB) President Mario Draghi in Frankfurt.

Is Geithner delivering the message that it is time to take the inflation route to save the ECB and start printing?

Watch the ECB money supply, not what they say.

LBJ's Great Grand Kids Go Clothes Shopping in Rhamaland

Meanwhile, in NYC, NyPo reports:
A wolf pack of drunken young women “acting stupid” on a downtown No. 6 train in Manhattan stabbed a 63-year-old man early today — for having had the nerve to ask them to pipe down, police said.

The man was on his way to work at about 6:15 a.m. when he was attacked as the train entered the East 23rd Street station, a law-enforcement source told The Post.
“The eight females were acting stupid. He just told them, ‘Relax. Calm down,’ ” another source said.

Instead, one stabbed him in the left shoulder. He was treated at Bellevue Hospital.
The women were arrested as they exited the 23rd Street subway station near Gramer¬cy Park. Seven of them, ages 17 to 20, were charged with gang assault, disorderly conduct, riot¬ing, criminal possession of a weapon, menacing, and felony assault. A 15-year-old girl was not charged. Cops added that they recovered a knife.

A city bus driver who witnessed their arrest said the women, beers in hand, were yelling, “We didn’t do anything!” as they were being cuffed.

The suspects were dentified as Shanice Brown, 20, Ftarmeik Driggins, 19, Kimberly Molina, 20 and Sheyla Figueroa, 18, all from Brooklyn; Michelle Rodriguez, 18, from the Bronx; and Martha Bermudez, 17, and Sha-fteva Burdos, 17, from Queens.

And in Brooklyn, according to NyPo,  Sunday evening six people — including a 2-year-old girl and 13-year-old boy — were wounded in a drive-by shooting in Brooklyn.

While all this was going on, the mayor of NYC, was basking in the glory of latest nanny state move: urging hospitals to hide baby formula from mothers who have given birth.

Snoop Dogg Banned From Norway

Snoop Dogg has been banned from Norway after being caught with marijuana. His lawyer:
Snoop can live with the decision.

The Unsustainable China Economic Bubble

I recently highlighted a column on China by Dee Woo.

He has emailed me and writes:
Many people are curious about where China's Economy is heading.

It's the norm to think China's economy is ill but rarely people can trace the symptom towards the root causes.

I think what China suffers right now is not just random slow down but rather a great deleveraging in Ray Dalio's words. Contrary to the convention, The great deleveraging doesn't not only happen in the affluent west but also in the striving east.

This report analyses China's happening great deleveraging in clinical details and exposes its ills though vivid Magnifier.

I have conducted my comprehensive research through English and Chinese materials since I am bi-lingual. I consider this my comparative strength when it comes to China's economy.

I sincerely hope that you can enjoy my report on China. It's also been published on Seeking Alpha:http://seekingalpha.com/article/760141
Woo's analysis should not be considered an Austrian School Business Cycle analysis. However, Woo does a very good job of pointing out many of the facts that would be of interest to an ABCT analyst in understanding the developing crisis in China.

Murray Rothbard on the Confused Intellectuals

Is Bob Murphy Leaving the Economics Profession?

Murphy sends along this pic:

He writes:

 ...the vast majority of the kids--particularly in the front row--were just regular Auburn U students. I.e. they had no idea who I was when I got on stage.
Murph promises that a youtube video will be up soon. If Krugman grabs the video for his Friday evening music selection, I fear we may lose Murphy for good to the world of global rock'n roll tours.

Sunday, July 29, 2012

Dr. Lynne Fenton's Bio that was Deleted from U of Colorado

The psychiatrist who was treating Aurora massacre suspect James Holmes is Dr. Lynne Fenton. Her bio has been deleted from the University of Colorado where she worked.

Some quick thinkers grabbed the Google cache, so that we can all see what Fenton/U of C might want to hide:

 Lynne Fenton, MD
Assistant Professor


Positions and Employment:

Medical Director, Student Mental Health Service, University of Colorado Denver, Anschutz Medical Campus, 7-2009 – present

Research Fellow/Instructor, Research and Development Service, VA Eastern Colorado Health Care System, 7-2008 - present

Research Fellow/Instructor, Department of Psychiatry, University of Colorado Denver School of Medicine, 7-2008-present

Fellowship in Brain Imaging, Department of Psychiatry, University of Colorado Denver, 1008-2010

Residency in General Psychiatry, University of Colorado Denver, 2005-2008

Physician, private practice, Physical Medicine and Rehabilitation, Denver, CO, 1994-2005

Medical Acupuncturist, Mile High Spine and Rehabilitation, Greenwood Village, CO, 2001-2002, and 2004-2005

Physician, Colorado Rehabilitation and Occupational Medicine, Aurora, CO, 1993-1994

Chief of Physical Medicine, United States Air Force, San Antonio, TX, 1990-1993

Staff Physiatrist, Wilford Hall United States Air Force Medical Center, San Antonio, TX, 1990-1993

Residency in Physical Medicine and Rehabilitation, Northwestern University Medical Center, 1986-1990

Other Experience and Professional Memberships:

Colorado Psychiatric Society Junior Trustee, 2009-present

American Board of Psychiatry and Neurology Board-certified, 2009

Colorado Psychiatric Society Early Career Psychiatrists Trustee, 2008-2009

State of Colorado Medical License - issued 1993

American Board of Electrodiagnostic Medicine Certified, 1992

American Board of Physical Medicine and Rehabilitation Board-certified, 1991


Associate Investigator Award for training in research from the Department of Veterans Affairs, 2008-2011

PRITE Award, 2006, 2007

Medal of Commendation, United States Air Force, 1993

Scholl Fellowship Award for research in Physical Medicine and Rehabilitation, 1990

Teaching Activities (limited to Psychiatry-related teaching):


Psychiatry Residents:

weekly supervision of six R2 residents, 1-hour per resident 2007- 2008
supervision of R1-R4 residents in outpatient clinic, 4 hours per week 2007- 2008
inpatient and consult-liaison call, supervision of R2 and R3 residents 2008 - present
Student Mental Health Service, supervision of R4 and R3 residents, 2009 - present


"Pain – Diagnosis and Treatment", 2006, 2008
University of Colorado, R2 Consult-Liaison Psychiatry class
"Somatoform Disorders", 2006, 2008
University of Colorado, R2 Consult-Liaison Psychiatry class
"CATIE", 2007, 2008, 2009
University of Colorado, R3 Evidence-based Medicine course
"STEP-BD", 2007, 2008, 2009
University of Colorado, R3 Evidence-based Medicine course
"STAR*D", 2007, 2008, 2009
University of Colorado, R3 Evidence-based Medicine course


Psychiatry Board and PRITE Review Course - Developed and co-taught 10 session weekly course for R1-R4 residents, 8/2007-10/2007
Psychopharmacology for Non-Prescribing Clinicians - Developed and taught weekly course for social work interns, 9/2007-3/2008
R-3 Evidence-Based Medicine - Co-taught weekly 90 minute course for R3 residents
Axis-II Disorders - 4 lecture series, part of R-1 introductory lectures, 1/2009, 4/2009
Student Mental Health - New 5 week course for R-4 residents to begin 2010
R4 Clinical Rotation in Student Mental Health - One-half day per week, 2009 - present


Grand Rounds: "Bipolar Disorder, Borderline Personality, and Chronic Pain", University of Colorado, Department of Psychiatry, 9/28/2005
Poster presentation: "Psychotherapy for Patients with Neuropsychiatric Disorders", Junior Faculty Poster Show, University of Colorado Department of Psychiatry, 3/2007
Grand Rounds: “Student Mental Health – a Developmental Perspective”, University of Colorado, Department of Psychiatry, 10/11/2009

Clinical Activities:

Medical Director, Student Mental Health Service, University of Colorado Denver, Anschutz Medical Campus, 2009 – present

medication and psychotherapy for 15-20 graduate students per week
coordination of team of four mental health clinicians
supervision of R4 and R3 residents who treat student
lectures, outreach to students, administrators and faculty

Psychiatrist, 5-10 general psychiatry patients, medication and psychotherapy, 2008 - present


Selected Peer-Reviewed Publications:

Roth EJ. Fenton LL. Gaebler-Spira DJ. Frost FS. Yarkony GM. Superior mesenteric artery syndrome in acute traumatic quadriplegia: case reports and literature review. Archives of Physical Medicine & Rehabilitation. 72(6):417-20, 1991 May.

Green D. Lee MY. Lim AC. Chmiel JS. Vetter M. Pang T. Chen D. Fenton L. Yarkony GM. Meyer PR Jr. Prevention of thromboembolism after spinal cord injury using low-molecular-weight heparin. Annals of Internal Medicine. 113(8):571-4, 1990 Oct 15.

Geary GG. Fenton L. Cheng G. Smith GT. Siu B. McNamara JJ. Failure of pretreatment with propranolol to reduce the zone of myocardial infarction after 2 hours of coronary occlusion in the primate heart. American Journal of Cardiology. 52(5):615-20, 1983 Sep 1.

Grants and Contracts:

Reward Processing in Schizophrenia: the Effects of Aripiprazole and Risperidone, 2008-present

A functional MRI investigation

False Pattern Recognition in Schizophrenia, 2009 - present

Involvement of the dopaminergic reward system.

Functional MRI Correlates of Overeating in Schizophrenia Treated with Olanzapine, 2009 - present

Associate Investigator Award, Department of Veterans Affairs, Schizophrenia Research Department, 2008-2010

Lynne Fenton, MD

Bldg. 500, Level 4, Rm. C4002

Gene Callahan and I Get Annoyed By the Same Thing

Who would have thought it?

He writes:

Things the Weatherman Does to Annoy Me
1) Treats averages like they are norms: "Well, the temperature ought to be about 83 today...
I don't watch it often enough to remember who it is, but there is a gal on The Weather Channel, who does it regularly.

Obama’s Executive Order to Make Inner City Schools Great

By Gary North

President Obama has signed an executive order. He has set up a new bureaucracy. This bureaucracy plans to make inner-city education so good that whites will move back.

You remain skeptical? O, ye of little faith!

This executive order has this goal: to give black children top-flight public education, which means non-flight education. Blacks who have been able to get out of inner-city school districts have been fleeing for several decades. This is what the President is trying to stop.

There is a problem with his plan: public education. It has been declining visibly for approximately 100 years, give or take a decade. The decline has sped up over the last 50 years.

For blacks, the decline has been a disaster. The inner-city schools have been deliberately dumbed down as policy. Thomas Sowell has written on several occasions about the all-black high school in Washington, D.C.: Dunbar High School. From 1870 to 1955, it provided education as good as any white district’s program. (It was surely better than mine, 1955-59.) It taught Latin. It taught advanced courses in science. Its students went to college. Ralph Bunche was one of its graduates. It was deliberately dumbed down half a century ago as a matter of district policy.

President Obama intends to smarten up the inner-city schools. How will he do this? With a new bureaucracy.

His executive order is a litany on the failure of tax-funded education in America. It’s hard to fault him on this. The problem is this: the federal government has been laying down the law to school districts for 40 years. The schools have gotten worse. Dr. Charles Sykes’ book has it right: Dumbing Down Our Kids: Why American Children Feel Good About Themselves, But Can’t Read, Write, or Add.

Candidate Ronald Reagan vowed to shut down the Department of Education. Its budget went up ever year he was in office.

Read the rest here.

"Bootleggers and Baptists" in the California Sun

Peter Gordon writes:
The late Senator William Proxmire famously awarded his annual Golden Fleece Award to the silliest or most wasteful federal program.  A worthy successor migh be a Bootleggers and Baptists award, perhaps awarded by Prof. Bruce Yandle or his followers.   I realize the competition would be intense because there are so many contenders.

Today's LA Times reports "California Senate vote keeps bullet train alive ... In a victory for Brown, the Legislature approves funds to begin the system in the Central Valley."   California politicians do not want to surender their $3 billion federal grant.  But no one has any idea how much matching from State taxpayers will be required.  
No serious economist or transportation expert believes this project has any merit.  I cited some of the discussion here.
The Obama and Brown Administrations have been pushing hard for this boondoggle.  "Green jobs" says it all.  Jobs at any cost dressed up as "green".  But who can blame them?   "Green jobs" is nothing but Bootleggers and Baptists.  These guys know what they are doing.

Oakland's Financial Time Bomb

The SF Chronicle reports on what is a microcosm of what is going on at the local level of many cities. The time bombs will starting going off in just a couple of years. Here's SFC on Oakland:
It was 1976 when the city of Oakland realized it had a major problem on its hands: A pension created 25 years earlier to benefit police officers, firefighters and their widows was proving too costly to afford.

So the city closed the plan to new employees and later passed a parcel tax to pay for the pension. Yet today, that pension remains the source of one of Oakland's biggest headaches.

It's a generous plan that awards its retirees and widows - who now number 1,086 - raises to match up to two-thirds of the pay of the current-day workforce. But the city's costs ballooned because it never adequately contributed to the pension fund, relied on borrowing for years to give itself holidays from pension payments and watched investments go south. The result of the borrowing is that the pension, known as the Police and Fire Retirement System, has cost Oakland taxpayers hundreds of millions of dollars more than it should have. In 2010, City Auditor Courtney Ruby found Oakland spent $250 million more on the pension than it would have if the city had simply paid into the pension - and that was just for one of its bond deals.

Last month, the majority of the Oakland City Council, at the urging of Mayor Jean Quan's administration, voted to borrow money once again to cover the pension bill - $210 million in new pension bonds that will cost another $105 million in interest over the next 14 years. But the loan will allow the city to avoid paying for the pension from its general fund for four years. If the city hadn't borrowed the money, it would have been forced to take $38.5 million from its roughly $400 million general fund to pay for the pension this year. Such a move would have required deep cuts to city services, which already have taken a hit due to the slumping economy, state budget cuts and redevelopment shutdown....

Councilwoman Libby Schaaf, who voted against the bonds last month, criticized the idea of paying $105 million in interest to avoid a $38.5 million payment into the pension fund this year.

"Pensions are supposed to be paid for while the person is working," said Schaaf. "Obviously, we failed terrifically in doing that."

The bond sale relieves fiscal pressure now, but Schaaf said it creates pressure in the future. In the last three years of bond payments, starting in 2024, the city will have to pay $161 million in bond and interest payments on top of the $123 million it will owe for the pension itself.

"I'm terrified that the city of Oakland will someday need to declare bankruptcy," said Schaaf. "It creates a false sense of security that our finances are in order while our pension obligations mount and the debt balloon payment becomes due, starting in 2024."...

By all indications, the city never had a plan to pay for the Police and Fire Retirement System when it was started in 1951.

It had a $38 million hole from the beginning, said Bob Muszar, a retired Oakland police captain and president of the Retired Oakland Police Officers Association. Muszar has spent years researching the pension. He said that by the 1970s, the pension's shortfall had grown to over $200 million...

The City Council this year sued the board that manages the pension fund, alleging that retirees' benefits should have been cut when current officers got pay cuts. "All of it is outrageous," said De La Fuente, who voted against issuing the latest bonds...

Nita Balousek feels a sense of betrayal. The city's lawsuit and the city's seemingly tenuous grasp on its finances have her fearful that someday it might file for bankruptcy - and the pension might be lost forever.

"I feel on edge," she said. "I'm deferring making any financial decisions."

DHS Gears Up for Civil Unrest Prior to Presidential Elections

RT reports:

The Department of Homeland Security has ordered masses of riot gear equipment to prepare for potential significant domestic riots at the Republican National Convention, Democratic National Convention and next year’s presidential inauguration.
The DHS submitted a rushed solicitation to the Federal Business Opportunities site on Wednesday, which is a portal for Federal government procurement requisitions over $25,000. The request gave the potential suppliers only one day to submit their proposals and a 15-day delivery requirement to Alexandria, Virginia.

As the brief explains, “the objective of this effort is to procure riot gear to prepare for the 2012 Democratic and Republican National Conventions, the 2013 Presidential Inauguration and other future similar activities.”

The total amount ordered is about 150 sets of riot helmets, thigh and groin protectors, hard-shell shin guards and other riot gear.

Specifically, DHS is looking to obtain:

- “147 riot helmets” with “adjustable tactical face shield with liquid seal”
- “147 sets of upper body and shoulder protection”
- “152 sets of thigh and groin protection”
- “147 hard-shell shin guards” with “substantial protection from flying debris, non-ballistic weapons, and blows to the leg” and “optimized protective design for severe riot control or tactical situations.”
- “156 forearm protectors”
- “147 pairs of tactical gloves”

The riot gear will be worn by Federal Protective Service agents who are tasked with protecting property, grounds and buildings owned by the federal government.
The urgency of the order can be explained by the fact that there is a growing anticipation that many demonstrators will travel to the Republican National Convention (RNC), scheduled for August 27-30 in Tampa Bay, Florida, and Democratic National Convention (DNC), planned for September 3-6 in Charlotte, North Carolina.
The RNC itself, for example, will have free speech zones, which will serve as containment quarters for the protesters by not allowing them to leave the designated areas and cause trouble.

Another recent DHS move to gear up was back in March of this year, when it gave the defense contractor ATK a deal to provide the DHS with 450 million .40 caliber hollow-point ammunition over a five year period.

Peter Klein as Suicide Bomber

The George W. Bush Institute is out with a book, The 4% Solution, that is a collection of essays by various economists, mostly Keynesians and econometricians.

Somehow among these interventionists, an essay by Peter Klein is included.

Perhaps, this should not come as a surprise.

The first paragraph of Klein's essay mentions organizations conducting "important" research: the World Bank, the Federal Reserve, the European Commission, the United Nation's Food and Agriculture Organization and the Organization for Economic Co-Operation and Development.

He then favorably quotes the war criminal Donald Rumsfeld.

But before you throw up your hands in disgust at the Mises Institte scholar Klein, may I suggest that Klein has thrown these names into his essay to get past the front door and into the party. Because once Klein is through the door his essay evolves into a brilliant attack on all things interventionist.

His discussion of entrepreneurship is decidedly Austrian with his highlighting the work of Mises, Schumpeter, Kirzner and Lachmann.

He manages to include in his essay a mention of the Austrian business cycle theory developed by Mises and Hayek. He spends the rest of the essay blowing up other types of government interventions.

In other words, Klein has gotten to the core and blown up bomb after bomb at the interventionist policy suggestions made by others in the book. That Klein may still be alive after this attack should not down play the daring it took to speak truth to interventionists. It may, however, attest to the skillfulness with which he was able to enter the interventionist lair, place the bombs without the others noticing his attack, until much too late. If they have even, yet, noticed what he has done.

Pro-Ron Paul Delegates Challenged in Maine

A pro-Ron Paul slate of delegates from Maine to the Republican National Convention is being challenged, reports the Boston Globe.

Peter Cianchette, a prominent Republican leader, and Janet Martens Staples, a Maine representative on the Republican National Committee, filed the challenge to 14 pro-Paul delegates and alternates on Saturday, the last day they could be challenged.

Staples told the Maine Sunday Telegram that there was no quorum at May's Republican state convention when the delegates were elected, that illegal votes were cast and parliamentary rules were broken.

One of the challenged delegates, Matt McDonald, said the challenge is "utter foolishness".

This comes on the heels of the Louisiana Republican Party last Friday afternoon certifying the Republican National Committee its slate of delegates to the party's national convention in Tampa, filling Ron Paul slots with supporters of Mitt Romney.

It's a rigged game.

My Fed Speech Translated Into Slovenian

Matej Ogorevc emails that he has completed a translation of the speech I delivered at the New York Federal Reserve, into Slovenian.

The link to the translation is here.

Krugman, Draghi and Bumblebee Myths

Paul Krugman notes:
Given the tsunami of reporting about Mario Draghi’s remarks last week, not to mention the huge market reaction, it’s kind of strange how few links I’ve seen to what he actually said, which is considerably stranger than you’d gather from the coverage — and has a definite plaintive note, too.

Here’s the passage that caught my eye:
The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does. So the euro was a bumblebee that flew very well for several years. And now – and I think people ask “how come?” – probably there was something in the atmosphere, in the air, that made the bumblebee fly. Now something must have changed in the air, and we know what after the financial crisis. The bumblebee would have to graduate to a real bee. And that’s what it’s doing.
Only considerably later did he make the declaration that the ECB would do “whatever it takes” — a declaration everyone seized on, but which may mean little.

It's interesting that Krugman the disseminator of Keynesian myths, misses Draghi myth spreading. There is no mystery as to why the bumblebee is able fly. Wikipedia explains the situation accurately:

According to 20th century folklore, the laws of aerodynamics prove that the bumblebee should be incapable of flight, as it does not have the capacity (in terms of wing size or beats per second) to achieve flight with the degree of wing loading necessary. The origin of this claim has been difficult to pin down with any certainty. John McMasters recounted an anecdote about an unnamed Swiss aerodynamicist at a dinner party who performed some rough calculations and concluded, presumably in jest, that according to the equations, bumblebees cannot fly....
The calculations that purported to show that bumblebees cannot fly are based upon a simplified linear treatment of oscillating aerofoils. The method assumes small amplitude oscillations without flow separation. This ignores the effect of dynamic stall, an airflow separation inducing a large vortex above the wing, which briefly produces several times the lift of the aerofoil in regular flight. More sophisticated aerodynamic analysis shows that the bumblebee can fly because its wings encounter dynamic stall in every oscillation cycle.

Even more baffling, and Krugman does not comment on this either, Draghi seems to think that a bumblebee is something akin to a caterpillar that only later grows into a full bee. This is simply greater bizarre commentary by Draghi, once a bumblebee develops from larvae into a bumblebee and it stays a bumblebee.

Indeed, Krugman seems to buy into this Draghi bumblebee myth with the same relish he buys into Keynesian aggregate demand myth. He writes:
And as for graduating to a real bee — that will take time that Europe doesn’t have.
What the hell are these clueless, uniformed, characters talking about?

The Stefan Molyneux Interview

Below is my interview with Stefan Molyneux. It is the longest interview I have conducted to date for the Robert Wenzel Show and yet I feel compelled to add more commentary to this show than to any other show I have completed.

As I note during the interview, I consider Molyneux a great communicator and this is a reason his views must be examined carefully. His eloquent communication style has apparently resulted in his developing something of a strong following. Yet, outside of his communication style, it is difficult to understand why he is enjoying such a following. For what he communicates tends to be confusing and contradictory.

Much of this interview consists of an examination of a recent podcast he completed on the subject of economics and the looming economic collapse. With regard to another commentary I made about Molyneux, some have critiqued in the comments to the post my focus on Molyneux's views on economics. They have stated that Molyenux's strength is not economics. But this is precisely my point. If Molyneux's strength is not economics, why does he continue to make error filled podcasts on the topic? The most recent being earlier this month.

I would like to point out that during my interview, Molyneux, in a fairly jovial manner, on many points states he agrees with me, but in stating he agrees with me he is contradicting the very statements that I am questioning him about, where he says the exact opposite elsewhere.

For example, at one point during the interview, he says he does not have a problem with speculation, but in an earlier podcast, he attacks speculators.

During his podcast and during the interview, he states that what could occur in the United States is the same as what occurred in Japan, where more money is printed and we could end up with "QE99", but nothing of the sort is going on in Japan. There has been no significant growth in Japanese money supply for decades.

During the interview, I point this out to him and state that his view that the United States may go into a Japanese style decades of slow growth economy is very unlikely, since the debt pressures in the U.S. are different and are likely to lead to the Federal Reserve becoming an aggressive printer of money or, alternatively, a massive default on debt will have to occur. During the interview, Molyneux says he agrees with me that this "crisis scenario" is most likely, but this is the opposite of what he said in his podcast. At another point, he says of Japan versus the U.S., "I agree with you that there are many differences.' But again, this is the exact opposite , of what he said in his podcast.

During the interview, Molyneux and I have a debate over "profit", where it appears that Molyneux doesn't understand the difference between profit and interest. Indeed, as you will hear, he attempts to want to create an average of profit, something I strongly object to. It is possible that I did not make my point clear concerning Molyneux's error. If so, here is the great economist Ludwig von Mises making the point very clearly:
... it is absurd to speak of a "rate of profit" or an "average rate of profit." Profit is not related to or dependent on the amount of capital employed by the entrepreneur. Capital does not "beget" profit. Profit and loss are entirely determined by the success or failure of the entrepreneur to adjust production to the demand of the consumers. There is nothing "normal" in profits and there can never be an "equilibrium" with regard to them. Profit and loss are, on the contrary, always a phenomenon of a deviation from "normalcy," of changes unforeseen by the majority, and of a "disequilibrium."
Finally, I must point out that on several occasions, I did not raise other errors that I believe Molyneux made the show. As I said, this interview was by far the longest I have ever conducted and it is simply impossible to touch on all of the errors without causing the the interview to stretch to absurd lengths. Among the erroneous points Molyneux made, which I did not raise, but I feel obligated to point out here, Molyneux states that the Austrian School of Economics is in favor of property rights. This is technically an error.  ASE is a science and thus value free. Thus, ASE,  as a science, is not in favor of anything. It can explain why a society that respects property rights will likely have a higher standard of living, but it does not pronounce that this should be such a goal. It is beyond the realm of economic science proper. For someone who touts himself to be a philosopher, I find this error baffling.

Molyneux also states that Ayn Rand in "Atlas Shrugged" forecast an economic collapse decades ago that has never occurred.  First, I do not consider Rand, by any stretch, an economist. Second, "Atlas Shrugged" was a novel about producers versus takers, and nowhere near a forecast about economic collapse. In her novel, Rand was pointing out what would occur if producers suddenly stopped producing and the takers were left to fend for themselves. I bit my tongue here because I wanted to raise other errors that Molyneux made, but to point to Rand's novel as a failure of a forecast is the height of confusion that I trust even beginners in the study of economics and philosophy will be able to detect.

Molyneux also went on an odd rant about religion, which, if I would have challenged, would have perhaps extended the interview another five hours. Suffice to say, I found Molyneux's linking religion with war because they have both existed side by side and that thus religion must be rejected, as an unusual argument. One could also point out that advancing science has existed side by side with war. Should we thus in Molyneux style reject science for the same reason?

In the interview, I also question Molyneux about his defooing technique, which is a method whereby Molyneux advises that  some young adults separate from their parents. I am not familiar enough to comment accurately on what Molyneux has done in promoting defooing. Molyneux states in the interview that such defooing should only be done under the guidance of a mental health professional. From some internet sites, the impression I have received is that defooing has been encouraged by Molyneux without such mental health professionals. I leave if for others to do the investigative work here.

However, I would like to add that there is nothing wrong with a young adult, when he is ready, to move on from beyond the house he was brought up under. A young adult should do this when he is ready to do so. However, defooing, with a total cut off from family, seems to  be an odd step.

It's curious that during an interview with Jeffrey Tucker that Molyneux condemns Bill Clinton for taking advantage of Monica Lewinsky. He specifically notes the age gap between Clinton and Lewinsky and the power position the president was in relative to Lewinsky. How is this different from the age gap between Molyneux and those Molyneux is advising on his radio show to defoo? Further, Molyneux is also coming from a position of power, as a philosopher, author and radio show host. There is nothing wrong with encouraging youth to explore and consider various alternative views of the world, but to advise youth to cut off some views (such as that of their parents) is worse than asking for a blow job.

My interview with Molyneux ends with his turning the tables and asking me a couple of questions. At first I was going to leave this exchange on the editors cutting floor, but Molyneux is indeed a skilled communicator and the questions are interesting so I left them in.

That said, I continue to believe that David Gordon had it pretty much correct about Molyneux, when he wrote that Molyneux has a facile intelligence.

My take is that because Molyneux is such a quick study and because of his excellent communication skills, he gives the impression that he knows much more than he really does. He knows how to throw out there the libertarian buzzwords that will catch those who aren't listening carefully, but his conclusions are often very misleading, when not completely wrong. However, I do not advise you to defoo from Molyneux, but to merely judge the quality of his analysis for yourself:

Here's the podcast version:

Podcast Powered By Podbean

And here is the direct link to the audio.

Saturday, July 28, 2012

Water: "The Most Mispriced and Misallocated Resource."

A pretty solid discussion by Lauren Lyster with Rick Rule. I wasn't as excited about the comments of Jim Rickards. He wants to bring back Glass-Steegal and seems to blame the financial crisis on the removal of Glass-Steegal, while failing to acknowledge the role of the Federal Reserve money printing in causing the crisis and the moral hazard created by the FDIC which embolden banks to take on greater risk. In short, Rickards failed to understand the primary role played by the government in the crisis and thus in his confusion calls for even more government regulation via a return to Glass-Steegal. In addition, Rickards, comments on LIBIOR occurred from a rather pedestrian legal perspective, rather than an economic perspective, until Rule called him on it.

"I, Pencil" Updated to 2012 Version "I, Smartphone"

The "I, Smartphone" below is a modernized 21st century version of the classic essay "I, Pencil," written in 1958 by Leonard Reed, founder of the Foundation for Economic Education.

(ht Mark Perry)

NPR Discovers LBJ's Great Grand Kids in Rhamaland

NPR tells us:

The streets of neighborhoods like Englewood, Grand Crossing and Garfield Park are empty, even during the day. In the middle of this summer, it is rare to see a child ride a bike or walk a dog.

"A child should not have to say, 'I can't go out because I might get shot.'" resident Michelle Harris says at a community meeting at the Englewood police station. "That's bad, that's bad."...

"A lot of cliques, getting into it with each other, basically over real senseless things," he says. "It can range from somebody stepped on a shoe, to a guy swerving in the street, somebody got wet with a water gun and didn't want to get wet with a water gun. ... Anything could spark at any given time...

Ironically, he says, "gangs for a long time had an interest in keeping the neighborhood safe because if you didn't have violence, you have a thriving drug market. No police were around, you weren't getting arrested."

Now, though, there's "just the basic thrill for a lot of these young people of having a gun," Venkatesh says. "Of being able to act like a man, as it were."...

Krugman Spots a Phony Inflationist

Paul Krugman is, as ever, an inflationist, so he is pretty good at spotting a phony inflationist. He writes about European Central Bank president Mario Draghi:
... he hasn’t done anything, at least yet. But it’s now widely hoped that the ECB will start buying government bonds (although it’s not at all clear whether the Germans will allow this, particularly on a sufficient scale); this has caused a significant decline in Spanish interest rates from their peak....This still looks unworkable.

Don't Miss It: Wenzel vs. Molyneux

This Sunday on The Robert Wenzel Show .

Past shows are here.

Which Will It Be: Deflation/Depression or Hyperinflation/Depression

By Gary North

What the Federal Reserve System can do and what it will do are two different things.

The Federal Reserve System can monetize anything. It can create digital money and buy any asset it chooses to buy. There are no legal restrictions on what it is allowed to monetize.

If it were to do this, and it continued to do this, the dollar would fall to zero value. This would produce hyperinflation. The result would be the destruction of all dollar-based creditors. Debtors could pay off their loans with the sale of an egg or a pack of cigarettes. This is what farmers did in 1923 in Germany and Austria.

The economists who advise the Federal Reserve System know this. The bankers who run the banks that own the shares of the 12 regional FED banks know this. Bernanke knows this.

The day will come when the decision-makers on the Federal Open Market Committee will have to fish or cut bait. They will have to decide: mass inflation (20%) or hyperinflation (QEx). They will have to decide: recession or hyperinflation.

Will they see that it's really Great Depression 2 vs. hyperinflation? I don't think so. They have been able to manipulate the economy for over 90 years between recessions and booms. Only once did it become a depression: 1930-40. That depression became deflationary, 1931-34, because the Federal Deposit Insurance Corporation (1934) did not exist. Depositors took their money out and did not redeposit it. That created monetary deflation through the bankruptcy of banks. The fractional reserve process imploded.

The FED inflated the monetary base in order to prevent this, contrary to the account by Friedman and Schwartz in their famous book, "A Monetary History of the United States" (1963). Depositors thwarted the FED, 1931-33. A chart produced by a senior official at the St. Louis FED should forever silence those economists who think that Friedman and Schwartz proved the case of FED "complacency." It won't, of course. The Friedman/Schwartz story is just too convenient for pressuring the FED to inflate. Friedman and Schwartz wrote the single most important book favoring FED inflation ever written, because it is universally believed in academia. The only section of the book ever cited by mainstream economists is the section on the FED in the early 1930s. That story is analytical and historical bunk. Here are the facts.

Today, depositors could do it again. If the FDIC were not backed up by a $600 billion line of credit from Congress, we might see it happen again. But there is a line of credit. That calms depositors.

The creditor – Congress – is the world's biggest debtor. Congress is running a $1.2 trillion deficit each year. But it has central banks to cover the debt: Japan's, China's, America's. So, the depositors believe that Congress can save the FDIC, which will save the banks. They leave their money in banks. If they pull money out of bank A, they deposit it in bank B. The system does not lose deposits. There is no deflation. The fractional reserve system survives.

The system has worked for a long time. The day of ultimate reckoning has been delayed. I think this has given central bankers a sense of confidence. They will think that one more refusal to go to hyperinflation will succeed. They will not believe that the refusal to pump new digital money into the system will bring on Great Depression 2. They will believe in their ability to manipulate the system one more time.

The system overcame the collapse of Lehman Brothers. They will assume that credit liquidation will be orderly. If it isn't, they can intervene one more time.

Read the rest here.

As the World Turns

Dow Jones Industrial Average - 13,075.66 +1.97%

SP 500 - 1,385.97 +1.71%

Gold - 1,619.90 +2.38%

Silver - 27.68 +1.62%

Copper - 3.43 -.58%

Crude Oil - 90.04 -2%

U.S. Dollar Index - 82.71 -.92%

Euro - 123.18 +1.32%

Assembled by Chris Rossini

EPJ Week in Review

Below is what has been posted, read and debated at EPJ, during the week ended 7-27-2012. Compiled by Chris Rossini..

Friday 7/27/12

Thursday 7/26/12

Wednesday 7/25/12

Tuesday 7/24/12

Monday 7/23/12

Sunday 7/22/12

Saturday 7/21/12

Friday, July 27, 2012

The Facts about Gold

Business Insider has recently completed a report on gold. The report is very weak on theory and fails to point out the key advantage of gold as money over fiat currency, namely that the government can't print gold at will the way it can paper money.

Nevertheless, the report does provide an interesting series of facts about gold.

The Truth About Gold