Wednesday, June 30, 2010

Group Calls for House Investigation into Obama Staffers’ Use of Personal Email, Meetings with Lobbyists

Although I am against government having access at any time to our emails. I have no problem with harassing government employees by peaking into their emails. Monitor the State!

ABC News’ Karen Travers reports:
On Monday good-government group Citizens for Responsibility and Ethics in Washington (CREW) asked a House committee to look into whether the Obama White House violated federal laws regarding electronic records by using private email accounts to communicate with lobbyists and meeting with lobbyists outside the White House.

CREW wrote a letter to the House Committee on Oversight and Government Reform asking it to investigate and hold hearings to determine any violations of the Presidential Records Act (PRA) and Federal Records Act (FRA).

The group’s letter is in response to an article in The New York Times on June 25 that said Obama White House officials have met “hundreds of times” over the last 18 months with prominent Washington lobbyists.

“But because the discussions are not taking place at 1600 Pennsylvania Avenue, they are not subject to disclosure on the visitors’ log that the White House releases as part of its pledge to be the “most transparent presidential administration in history,” the New York Times reported.

The Times also reported that lobbyists said they “routinely” get emails from White House staff members’ personal accounts, not their White House emails which are subject to public records review

Another Day of Cash as King

Dow                  9,774         -96 -0.98%
Nasdaq             2,109         -26 -1.22%
S&P 500          1,031          -11 -1.01%
GlobalDow       1,711          -9   -0.55%
Gold                 1,243            -3 -0.23%
Oil                    75.27       -0.67 -0.88%

Note to Ben Bernanke: When you don't print dollars, people actually want to hold dollars.

Heavy Gold Buying by Russian Government

Whatever " very valuable" information  alleged Russian spy "Cindy Murphy"  reported back to Russia about gold, it sure hasn't dissuaded Russia from adding to its gold holding. In fact, if anything, Russia has become an even more aggressive gold buyer.

In May, Russia’s gold assets expanded by 22.46 tons. Russia increased holdings to 703.1 tons in May, from 680.64 tons, and has added gold every month since at least February, according to IMF data.

Russia isn't the only governmant buying gold. Central banks and governments added 425.4 tons to their holdings last year to 30,116.9 tons, the most since 1964 and the first expansion since 1988, data from the World Gold Council show

John Kerry Calls Rand Paul "Dangerously Radical"

In an email that clearly indicates John Kerry doesn't understand what private property rights really mean and that he doesn't understand that Social Security is a Ponzi scheme, Kerry writes to an SFChron blogger:

Republicans are betting that you don't care - that after all you did to beat them in 2006 and 2008, you're going to sit this one out.

So they're whipping up their base by blocking help to unemployed workers, blocking summer jobs for teens, apologizing to the big companies that gave us the spill in the Gulf, and doing anything else they can do to stop progress. They're betting that they can excite their radical base and you won't respond.

The stakes? Look no further than the truly radical candidates we're up against. Down in Kentucky, it's would-be Senator Rand Paul. Yes, that Rand Paul, who says freedom means a private business can discriminate against African-Americans, and that President Obama holding polluters accountable for the mess in the Gulf is "un-American."

And he's not alone. All across the country, the Republican Party has turned dangerously radical. One candidate calls Social Security "horrible policy"...
Of course, Social Security is a horrible policy that will let down and screw millions of elderly that were counting on it. As far as property rights, you should be able to do whatever the hell you want on your ownprivate property, including banning clowns like Kerry from it.

Kerry should really just stay on his own property. And if he wants to tax someone other than himself, he should tax and tax and tax his very wealthy, Heinz ketchup fortune heiress, wife and see how that works for awhile.

List of Attendees to Geithner's Meeting with "Progressive Leaders"

On Monday, Treasury Secretary Timothe  Geithner hosted a meeting with what the Treasury labeled  "progressive leaders for a discussion of jobs, the economy, and financial reform." EPJ has obtained a list of the attendees:

*Robert "Bob" Creamer, Consultant, Americans United for Change (AUC)

* Cristina Martin-Firvida, Director of Economic Security, AARP

* Lawrence "Larry" Mishel, President, Economic Policy Institute (EPI)

* Lisa Ransom, Vice President, Federal Affairs, Center for Responsible Lending (CRL)

* Eric Rodriguez, Vice President, Office of Research, Advocacy, and Legislation, National Council of La Raza (NCLR)

* Hilary Shelton, Director, NAACP Washington Bureau / Vice President for Advocacy

* Ann Sullivan, Government Relations, Women Impacting Public Policy (WIPP)

* Sarah Wartell, Executive Vice President, Center for American Progress (CAP)

* Nancy Zirkin, Executive Vice President of Policy, Leadership Conference on Civil and Human Rights (LCCR)

A Call for a Big Bang for Greece

Steve Hanke has an op-ed in today's WSJ where he calls for a three point Big Bang solution to the Greek crisis. This would work, but it wouldn't protect the elite banks pulling the strings behind the scenes, so it is unlikely to be implemented.

Here's Hanke's three points (to be implemented simultaneously)

1. Restructure the debt (That is the government needs to go bankrupt)

2. Cut government spending

3. Cut taxes (especially labor taxes).

Hanke does call for a bit of monkeying around with the VAT, which I would just throw overboard. But in realeconomik terms Hanke's proposal is a winner, compared to all other proposals out there.

Mises Naturalization Document

Richard Ebeling sends along a picture of the naturalization document from 1946 of the great economist Ludwig von Mises. Very cool. (Click for larger view)

Hotels Muscle NYC Budget Concious Travelers

New York State senators are about to vote on a bill that would ban homeowners or renters from renting out their places for periods of less than a month, reports Jason Cochran.

The new law, should it pass, is a blow for the budget traveler and a boon for the high-priced hotel-and-convention industry, which will of course be eager to host the refugees from the short-term apartment rental business

A blatant example of big business in cahoots with government to wipe out competition.

Podesta Clan's Close Ties to Obama Pay Off Big

By Timothy Carney

John Podesta, chief executive officer of the liberal Center for American Progress, may be President Obama's closest confidant outside of the administration -- he ran the transition and has visited the White House at least 37 times according to visitor logs. Tony Podesta, John's brother, is a corporate lobbyist and a leading fundraiser for Democrats.

On at least a handful of issues, John's CAP has advocated the same solutions Tony has lobbied for. On some of those issues, CAP has partnered with the companies that hire Tony as a lobbyist. Given Obama's anti-lobbyist rhetoric -- and the gaping holes in his lobbyist policies that have been repeatedly exposed -- it's worth examining where the work of the president's confidant, John, dovetails with the business of lobbyist and fundraiser, Tony.

In June 2009, Obama's health care bill got a boost from a strange-bedfellows coalition: CAP and the Service Employees International Union teamed up with Wal-Mart to endorse a proposed requirement that employers provide health insurance for employees.

The groups co-signed a letter declaring, "We are for an employer mandate which is fair and broad in its coverage." They also said, "we have worked closely in support of health care reform since 2006."

Wal-Mart benefited from this regulation, partly by forming a truce with Big Labor and good press from a gullible media. But the regulation also gave Wal-Mart a competitive advantage. Wal-Mart self-insures its employees -- meaning the company, not an insurer, collects premiums and pays providers. As America's largest private-sector employer, Wal-Mart uses economies of scale to get a better deal on health care. Smaller competitors, if forced to match Wal-Mart's benefit level, would suffer.

Wal-Mart had given at least $500,000 to CAP, according to Wal-Mart's Web site. But there was another connection: Tony Podesta was (and still is) a lobbyist for Wal-Mart, on issues that include health care policy. Wal-Mart had hired Podesta in September 2006 (the firm was then called Podesta Mattoon), just about when CAP, Big Labor, and Wal-Mart started "work[ing] closely in support of health care reform."

This isn't the only overlap of interests between the nonprofit CAP and the Podesta Group.

Tony has represented BP since 2006, recently lobbying for current climate legislation. BP was a prized ally for Sen. John Kerry, who is leading the charge in the Senate for a global warming bill.

According to the Wall Street Journal, John Podesta is nearly writing the president's response to the BP spill. While Obama hasn't coddled BP, he is using the spill to advance the climate legislation BP supports and for which Tony Podesta has been lobbying.

There are more green overlaps in the Podesta clan. In May 2009, CAP drafted a plan for a "Green Bank" -- a permanent government institution to finance alternative energies, like the solar energy BP dabbles in. One aspect of CAP's proposal: "The bank should work closely with private banks to provide loan guarantees, credit enhancement, and other financing tools."

The Podesta Group represents U.S. Renewables Group -- an investment firm focused on renewable energy. Podesta's lobbying issues for the group include "Congressional support for renewable energy funding" and "Options for alternative financial structures for federal government support of renewable energy."

Read the rest here.

ADP: U.S. Companies Added 13K Workers

The 13,000 gain was the smallest since February and followed a revised 57,000 increase the prior month, figures from ADP Employer Services showed today.

ADP measures private sector work, so this doesn't include the census worker hire/fire monkey business. But the decline in employment gain is not a good sign.

As would be expected based on Austrian Business Cycle Theory, the report showed a decrease of 17,000 workers in goods-producing industries including manufacturers and construction companies. Employment in construction fell by 35,000, while factories added 16,000 jobs. Service providers added 30,000 workers.

Krugman Reports on the 10 Year Bond

As I have said, Paul Krugman is totally clueless about theory and policy, but he is a great numbers watcher. This morning he points out that the 10 year Treasury bond closed below 3.00% yesterday, at 2.97%.

Anyone who owes money, whether for business or personal reasons, should lock in these rates. They will not last. When the rates start to climb higher, the move is going to be fast and furious. Everyone entering these markets now, will come flying out. Don't be on the wrong side of this trade by holding any long term debt paper.

"Prominent Financier" Russian Spy Targeted Is ID'd

Alan Patricof, a venture capital figure and the finance chairman of Clinton's Senate campaign, as well as a top presidential campaign fundraiser, has been identified as the target of activities by alleged Russian spy "Cynthia Murphy". Patricof has confirmed to the WaPo that he was the target:
"It's just staggering," said Patricof in a telephone interview. "It's off the charts."

Patricof made clear that he and the alleged spy, known as Cynthia Murphy, "never discussed anything but paying the bills and taxes in normal phone calls or meetings." For three years, he has been a client of the Manhattan firm Morea Financial Services, the tax service that employed Murphy.

"She never once asked me about government, politics or anything remotely close to that subject," Patricof said...A shocked Patricof reiterated in the interview that, "We never discussed anything but paying the bills."

According to a federal complaint filed in New York, the alleged spy's superiors apparently saw promise in the connection to the unidentified financier. They suggested that he could supply "remarks re US foreign policy," and "roumors" about White House internal "kitchen."

"This is the most wild story ever," said Patricof.
Patricof is the founder of Apax Partners, one of the largest private equity firms. Patricof was an early investor in, among many others, Patricof was an early investor in venture capital and has been involved in the development of numerous major companies including America Online, Office Depot and Apple Computer.

Volcker Not a Happy Camper

The nutty Volcker Rule, which goes nowhere near the real problem of elite banks playing footsie with government, has turned into The Volcker Putty in the hands of the banking elite. Volcker is not happy about this. According to Bloomberg
Paul Volcker is disappointed with the final version of the rule that bears his name.

As first envisioned, the Volcker rule would have banned banks from running private-equity and hedge funds, an attempt to curb risk-taking that fueled the financial crisis. Last-minute congressional negotiations aimed at winning Republican support led to a compromise that allows banks to invest up to 3 percent of their capital in such funds.
But, really, Volcker is 82 years old, if he doesn't get the fact that elite bankers rule and shape policy, he is likely to never get it, and they will continue to use him as the towering pawn, just like they have throughout his career.

Ireland Officially Exits Recession (Before Heading Back Into Recession)

Ireland officially exited recession as gross domestic product grew 2.7% in the first quarter.

Roubini: I Never Had One on One with the Russian Spy

FT has the details:
Turns out erstwhile über-bear — and sometime ladies’ man – Nouriel Roubini was casually acquainted with Ms Anna Chapman, one of the 10 alleged Russian spies arrested in the US. Chapman, it seems, cut a somewhat glamorous swathe through the New York social scene, and, according to Roubini, the two “may” have met socially at a couple of parties, with Chapman befriending him on Facebook.

But, Roubini says he never had a “one to one conversation or meeting with her.”

Demand for ECB Loans Falls Short of Some Analyst Expectations

Some 171 banks took just €131.9bn in three-month liquidity, the ECB reported on Wednesday, reports FT. Some analysts were forecasting that banks would demand €250bn or more. But the interest rate charged by the ECB for the three-month loans, in which the central bank met eurozone banks’ demands in full, was 1 per cent – higher than market interest rates.

Those that view this smaller than expected demand for funds as a sign of liquidity in the markets are simply ignoring the fact that the funds, only available at the above market rate, were priced way above market. The real interest rate is simply very low across the globe right now. Put the funds at market rates and the demand would have been in access of 250bn. The market optimism based on the low demand as a sign there is plenty of liquidity in the system is just way off. There is no liquidity in the system and the ECB attempting to provide funds at above market rates is not going to change that.

Russian Spy Worked for The Conference Board

The recently arrested alleged Russian spies appeared to have a strong interest in financial matters. We know from the original complaint that the spies relayed some kind of "very valuable" information back to Moscow about gold.  Now comes word, via WSJ, that one of those arrested worked at the economic research organization, The Conference Board.

Mikhail Semenko, who was arrested on Sunday for spying for Russia, worked from August 2008 until January 2009 at The Conference Board.

The Conference Board publishes the monthly Consumer Confidence Index, which is followed by Wall Street very closely and can often lead to a market moving event, once the number is released.

The most recent downturn in China's stock markets was the result of a downward revision to the Leading Economic Indicator for China that is put out by the Conference Board.

Plunge Protection Team Meets Today

In the morning,Treasury  Secretary Geithner will convene the President's Working Group on Financial Markets (PWG) at the Treasury Department. The PWG includes the Secretary of the Treasury, who serves as its chairman, and the Chairmen of the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.

Note: This was a previously scheduled meeting and not the result of market conditions.

Tuesday, June 29, 2010

Facebook Video of Alleged Russian Spy

Dr Athreya as a Public Nuisance

By Ambrose Evans-Pritchard

Like a mad aunt, the Fed is slowly losing its marbles.

Kartik Athreya, senior economist for the Richmond Fed, has written a paper condemning economic bloggers as chronically stupid and a threat to public order.

Matters of economic policy should be reserved to a priesthood with the correct post-doctoral credentials, which would of course have excluded David Hume, Adam Smith, and arguably John Maynard Keynes (a mathematics graduate, with a tripos foray in moral sciences).

Adam Smith didn't have an economics PhD

“Writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy.”

Don’t you just love that throw-away line “decent”? Dr Athreya hails from the University of Iowa.

“The response of the untrained to the crisis has been startling. The real issue is that there is an extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading.”

You couldn’t make it up, could you?

“Economics is hard. Really hard. You just won’t believe how vastly hugely mind-boggingly hard it is. I mean you may think doing the Sunday Times crossword is difficult, but that’s just peanuts to economics. And because it is so hard, people shouldn’t blithely go shooting their mouths off about it, and pretending like it’s so easy. In fact, we would all be better off if we just ignored these clowns.”

I hold my hand up Dr Athreya and plead guilty. I am grateful to Bruce Krasting’s blog for bringing this stinging rebuke to my attention.

However, Dr Athreya’s assertions cannot be allowed to pass. The current generation of economists have led the world into a catastrophic cul de sac. And if they think we are safely on the road to recovery, they still fail to understand what they did.

Central banks were the ultimate authors of the credit crisis since it is they who set the price of credit too low, throwing the whole incentive structure of the capitalist system out of kilter, and more or less forcing banks to chase yield and engage in destructive behaviour.

They ran ever-lower real interests with each cycle, allowed asset bubbles to run unchecked (Ben Bernanke was the cheerleader of that particular folly), blamed Anglo-Saxon over-consumption on excess Asian savings (half true, but still the silliest cop-out of all time), and believed in the neanderthal doctrine of “inflation targeting”. Have they all forgotten Keynes’s cautionary words on the “tyranny of the general price level” in the early 1930s? Yes they have.

They allowed the M3 money supply to surge at double-digit rates (16pc in the US and 11pc in euroland), and are now allowing it to collapse (minus 5.5pc in the US over the last year). Have they all forgotten the Friedman-Schwartz lessons on the quantity theory of money? Yes, they have. Have they forgotten Irving Fisher’s “Debt Deflation causes of Great Depressions”? Yes, most of them have. And of course, they completely failed to see the 2007-2009 crisis coming, or to respond to it fast enough when it occurred.

The Fed has since made a hash of quantitative easing, largely due to Bernanke’s ideological infatuation with “creditism”. QE has been large enough to horrify everybody (especially the Chinese) by its sheer size – lifting the balance sheet to $2.4 trillion – but it has been carried out in such a way that it does not gain full traction. This is the worst of both worlds. So much geo-political capital wasted to such modest and distorting effect.

The error was for the Fed to buy the bonds from the banking system (and we all hate the banks, don’t we) rather than going straight to the non-bank private sector. How about purchasing a herd of Texas Longhorn cattle? That would do it. The inevitable result of this is a collapse of money velocity as banks allow their useless reserves to swell.

And now the Fed tells us all to shut up. Fie to you sir.

Read the rest here.

Notorious Economics Student: Anna Chapman

Move over Osama bin Laden and Mick Jagger (Both studied economics in college), alleged Russian spy Anna Chapman has a masters degree in economics, according to NyPo.

The Economy Has Been in Contraction Since Mid-January

Rick Davis from Consumer Metrics Institute emails with his take on the latest GDP numbers put out by the BEA. As long-time EPJ readers know, I consider Rick's macro data collection work to be the best in the business. The latest GDP numbers put out by the BEA are in sync with the data Rick has put out, but get this, Rick had his data at end-November 2009. What does Rick see ahead? At this point his indicators show that the economy went into the second leg of the recession in mid-January. He's sees know bottoming action yet. The decline continues. Here's Ricks email:
On June 25th the BEA quietly revised its measurement of GDP growth for the first quarter of 2010 down for the second time, this time to 2.7%. The newly revised growth estimate nearly matches the Consumer Metrics Institute's original projection for the first quarter, which was 2.62%. The big difference is that the Consumer Metrics Institute's projection (based on our Daily Growth Index) was available on November 30, 2009 -- seven months ago.

Because the Consumer Metrics Institute's Daily Growth Index only lags the real-time consumer economy by several days and has a day-by-day time resolution, the Daily Growth Index can also tell us something totally missing in the BEA report: that the newly revised GDP 'freeze frame' picture captures a moment in time when consumer demand was dropping at a rate of about .08% per day. This means that the difference between the revised GDP and our original projection represents only a single day of economic change. But more importantly, our Daily Growth Index shows the dynamics of the
economy at the point in time when the BEA 'still picture' was taken.

One other important note should be made about the June 25th BEA release: in it the BEA also increased the inventory component within the 2.7% number from 1.65% to 1.88%. That means that the net-after-inventory-adjustments number was less than 0.9%, and over two-thirds of the reported aggregate growth was from relatively unpredictable inventory swings.

If factories were unwittingly growing inventories during the first quarter in the face of what was really slackening consumer demand, the official GDP numbers for both the second quarter and the third quarter (to be released 4 days before the U.S. mid-term elections) could be interesting, since factories could very well over-correct again -- but in the opposite direction.

Because Friday's BEA release mirrors our Daily Growth Index from November 30th, the index's subsequent course provides some insight into where theeconomy has been heading since then. Roughly half a quarter later (on January 15th, 2010) the index fell into net year-over-year contraction. During the nearly two quarters since then the index has been showing mild but continued contraction. When that contraction is charted along with similar contraction 'events' from 2006 and 2008 it can be seen that 2010 is shaping up as wholly unique:

As the chart shows, the current contraction has progressed for nearly two quarters without yet tracing a clearly formed bottom. And any measure of the severity of an economic slowdown must include not only maximum rate of contraction, but duration as well. Although the 2010 event has been milder than 2008 in terms of absolute negative growth rates observed, if it progresses long enough the aggregate economic pain could be substantial. For a little perspective, the total economic impact of 2010's contraction is already nearly twice what was experienced in 2006, when the GDP slipped to a
barely positive +0.1% growth rate. And (to date) the total economic impact of the 2010 event represents nearly a full third of the pain experienced during the 'Great Recession' of 2008-2009.

The key message to take from these numbers is that the fundamental change in consumer behavior which we have been observing over the past three quarters is likely to be protracted. Although this change in behavior is most clearly shown in our data by consumer reluctance to take on new or increased debt, it probably reflects de-leveraging much more than balance sheets -- almost certainly including de-leveraged consumer expectations for the near future.

At the Consumer Metrics Institute we measure day-by-day changes in the discretionary durable goods transactions of internet shopping consumers. We genuinely believe that the real economy lives where 'Main Street' consumers are (figuratively and/or literally) clicking 'Add to Shopping Cart', not where the BEA's factories slavishly follow the consumer's lead. The millions of consumers we measure respond collectively to what they see going on with their own local economy, family and friends. And right now real-world 'Main Street' consumers are demonstrating significant caution.

Interview with a Zombie

Great creative work from Tom Woods and Bob Murphy, as Woods tries to defend his new book, Nullification, from those who name call rather than debate the argument for nullification.

Why Are Treasury Rates Falling?

Harvard economist Jeffrey Miron tries to explain, given that the Federal deficit is about to explode (along with state and local deficits) :

Perhaps, as the article intimates, the resolution of this puzzle is akin to the old joke about two friends who see an angry  bear approaching their camp site. One starts to put on his running shoes. The other says, “Are you crazy, you can’t outrun a bear.” To which the first replies, “I know, but I only have to outrun you.”

As bad as policy is in the U.S., it is worse in most other countries. That may help the U.S. avoid the day of reckoning for a while.
 Obviously the key here is the "the U.S. [may]avoid the day of reckoning for a while". It's coming, our number just hasn't been called yet.

HOT RUMOR: Roubini and The Russian Spy

This totally unsubstantiated rumor comes courtesy of Dealbreaker. The only reason it makes a tiny bit of sense is that:

A. As I have pointed out many times, Nouriel Roubini is the most connected economist in the world. On New Year's eve, he was photographed partying at Russian oligarch Roman Abramovich's party, where he could have possibly met alleged Russian spy Anna Chapman.

B. He is a consultant to most of the central banks in the world. He is as tied in as they get, a great target for spies. And Roubini would easily fall for the charms of alleged Russian spy Anna Chapman (pictured above).

Here's Dealbreakers' complete unsubstantiated report:

Did Dr. Doom Tap One Of The Russian Spies?

 From the mail bag:

Did I Mention There Was No Liquidity in the System?

Oh yeah, I did.

Near the bell:

Dow                  9,889   -249 -2.46%
Nasdaq              2,136    -85 -3.82%
S&P 500  1,041     -33 -3.12%
GlobalDow      1,720     -58 -3.24%
Gold                1,240        -3 -0.21%
Oil                   75.33   -2.92 -3.73%

Do not pay any attention to any of the talking heads that will be on the news tonight. They are, for the most part, all trend followers. You had to be out of this market before the downturn started a few weeks back.

From Larry Summers on down, they had no clue this was going to happen to the markets.

In September, 2009, Larry Summers wrote this nonsense:

The wisdom of Keynesian policies has been confirmed by the performance of the economy over the past year. After the collapse of Lehman Brothers last September, government policy moved in a strongly activist direction.

As a result of those policies, our outlook today has shifted from rescue to recovery, from worrying about the very real prospect of depression to thinking about what kind of an expansion we want to have

At the time I wrote:

Now as the Dead Cat Bounce is long in the tooth, Larry Summers has come out to tell us, on the White House blog, everything is fine, thanks to Keynesian economics...After setting himself up for a major embarrassment as we head towards Bernanke Crash II, he amazingly writes about the importance of innovation...

This as President Obama wants to choke off innovation by propping up the old and suffocating creativity through new regulations everywhere you turn, from health care to global finance. And, as there is a growing deficit and talk of new taxes, which will result in less money for new ideas.

With thinking like this, and reality not even making an appearance, I can see how Summers' management at Harvard brought the university to its financial knees.

What's going in the stock market is pretty simple stuff. The Fed has not been printing any money. The ECB is not printing any money. And China has slowed its money printing. This means the economy is moving away from the distorted structure built up by previous money printing during the Greenspan years, and parts of the Bernanke years. For whatever reason, most likely because the Fed and the ECB (and Larry Summers) really don't know what the hell they are doing, they have stopped the money printing presses. As long as the money printing is stopped it's going to be pretty ugly---even for gold, until the economy readjusts. Left alone the economy will completely readjust itself within six months. But that isn't likely to happen. Cash will be king until the Fed and ECB turn on the money presses, then everything reverses with inflation becoming the real threat.

Another very real danger is that governments will try and regulate and spend the economy into prosperity, this will mean protracted problems for the economy.  Governments are designed to be spending and regulation machines. They will take a problem that could work itself out in months and turn it into a multi-year problem. If you don't have superior skilz in knowing how to operate in this type climate, and few do, it is going to be very, very tough going.

Count on nothing. Your pension could be cut, if you will even get one. Social security payments will be reduced. Are you a recent college grad? Good luck with that. In this environment unemployment could hit 20%. Your house and your investments will fall in value. The gold price will be whipsawed just enough to scare the hell out of you. Superior skilz, or stagnation, that's what it will be all about. The only chance you have to achieve anything during the period ahead is to become an entrepreneur in the Israel Kirzner sense of the word. And that is all about skilz, i.e., spotting opportunities and grabbing them.

Ruusian Spy Anna Chapman and the Linked In Groups She Belongs To

Now this is what I call serious spy networking. Chapman belongs to all these LinkedIn Groups:

On Startups - The Community For Entrepreneurs

Media Professionals in Russia

eMarketing Association Network


Online Advertising Professionals

Global Private Equity & Venture Capital

Russian Speaking Professionals

New York Venture Community

Angel Investors

GoBigNetwork Startup Community

Online Marketing Network

New York Russian Club

Social Media Marketing

Structured Finance World

Russia & CIS Real Estate

NYC Real Estate

Real Estate Finance & Investment Society

Priavte Equity/Venture Capital Central and Eastern Europe

CleanTech & Renewable Energy Finance Forum

Commercial Real Estate Referral Network - Powered by

Real Estate Financial Professionals

National CEO Network

Game Entertainment Europe

Distressed Real Estate Investment

High-Tech start-ups in Russia

New York Entrepreneur Week

Private Property

Steve Forbes to Host a Fund-Raiser for Rand Paul

On July 12 in NYC, Steve Forbes will host a fund-raiser for Rand Paul. Tickets go for $1500 a seat

Taxation by Regulatory Discretion

What is most startling about the Financial "Reform" package before Congress is how vague it is and how much regulative power and tax power is simply left to the discretion of government agencies. Talk about the creation of power centers, that's really what the "reform" bill should be called, "The Power Center Creation Act". John Carney emails (My emphasis) :

A bank tax of nearly $20 billion was attached to the Dodd-Frank financial regulation reform bill in the final, late night hours of negotiation. When Senator Scott Brown (R-Mass) discovered the tax at the end of the huge bill, he explained that he may have to change his vote to oppose the bill. He's pledged to oppose any new taxes and fears the bill for the tax will be passed on to bank customers.

But the worst part of the bank tax--officially known as the "Financial Crisis Special Assessment"--probably is not the fact that it could result in higher bank fees. It's the fact that the tax is extremely vague and its application is largely left to regulators. This means that financial companies--from hedge funds to community banks to huge Wall Street firms--have no idea what the bill for the tax will be. That uncertainty will roil bank stocks and financial markets, as analysts and investors try to guess how this tax will impact bank earnings.

The regulators are told that they must assess around $19 billion from financial companies, but given wide discretion about how much to charge any individual company. The law instructs regulators to consider 13 factors. Some are entirely sensible: the size of the balance sheet, the reliance on short term funding, and the nature of the assets and liabilities of the firm. Others are a perplexing, including directives to consider whether a company is an important source of credit for low-income and minority communities and the role of a company in supply muni credit. Does lending to low-income communities count for or against a bank? The law doesn't say.

This opens the possibility for the further bureaucratic control of bank lending, with banks pressured to lend according to political priorities rather than credit-worthiness. This is a recipe for economic distortion and increased risk in the financial system.

Meanwhile, banks cannot know how their businesses will be taxed and what asset mix will trigger higher taxes. This uncertainty may lead to paralysis and contracted credit until the regulators make clear how the tax will be applied.

Brown's opposition may kill the tax. But the very fact that lawmakers inserted it into the bill without any public debate indicates how heedless Capitol Hill's chiefs are about the unintended consequences of the financial reforms they are putting in place.
John's full report on the tax is at CNBC.

Greece Protests Get Violent

It's not a pretty day. Global markets crashing. ECB sterilization failure and riots in Athens. AP reports from Athens:

 Dozens of masked youths clashed with police at a union protest Tuesday in Athens during a general strike against the cash-strapped government's planned pension and labor reforms.

Riot police fired tear gas and stun grenades to disperse troublemakers who threw chunks of marble smashed off a metro station entrance and set rubbish bins on fire. Running clashes continued along a major avenue — lined with shuttered shops and banks — as rioters armed with wooden clubs made repeated sallies against police.

The violence came as some 10,000 people took part in a demonstration organized by the country's two main labor unions and fringe left-wing groups.


This is very dangerous news (Note: Markets were going down in Asia before this very negative news, but this is very serious.).

FT reports:

The European Central Bank’s latest attempt to sterilise its government bond purchases has landed with a resounding thud. Results from the ECB’s Tuesday one-week fixed-term deposit (FTD) auction, in which it planned to drain the €55bn of extra liquidity created by its €55bn of bond-buying, are in.
And they are not pretty.

The ECB failed to auction the €55bn in fixed term deposits it had planned to, and what it did auction (€31.86bn) was at a much-higher rate (0.54 per cent) than what it offered at the start of its Securities Markets Programme (SMP). The market seems to be holding tight to liquidity.
This is just stunning. The only way the ECB is going to pull this drain off is at much higher rates, since the drain will have to suck money from other sectors. The FAIL here means there is no loose money around to be sopped up. It is going to have to be ripped out of the heart of the EU economy. Not good. The alternative? Leave the money in the system and start a huge wave of inflation.

Eric Margolis in Yalta

Was FDR senile when he negotiated with Stalin in Yalta? Eric Margolis thinks he might have been.

Read Margolis' fascinating report on what really went down at Yalta, here. It's not the history you were taught in high school or college.

Behind the Timing of Spy Arrests

My first reaction to the timing of the arrests of the Russian spies was,  "President Obama sure knows how to stick a finger in someone's eye,"  given that President Obama and Russian President Medvedev were photographed having hamburgers together just days earlier, during a Medvedev visit to the White House. But was Obama behind the timing or was it rogue elements in the U.S. government?

The Russians seem to be thinking that the arrests won't be good for U.S.-Russian relations, but that instead of Obama directing the timing of the arrests it may be other operators within the U.S. government.   FT reports:

Sergei Lavrov, Russia’s foreign minister, echoed the prevailing consensus when he said ... that the timing of the arrests “was very artfully chosen”, implying that it was designed to do maximum damage to bilateral relations.

Vladimir Kolesnikov, deputy chairman of the security committee in the Russian state Duma, or lower house of parliament, said that the scandal was “provocation” inspired by “structures that live with the old baggage”, in other words, hard liners. The scandal, he said was “a blow aimed at [US President Barack] Obama.”

“I have no doubts that the our reaction will be adequate,” he said. “It is no secret that their special services continue to work here,” adding that Russia could potentially prosecute American “illegals” working in Russia.

Nikolai Kovalev, the ex-director of the Federal Security Service, the successor to the KGB, told Interfax news agency “someone is trying to put a virus into the reset programme”.

Interest Rates on Treasury Securities Continue to Plunge

The yield on the US 10-year Treasury has dropped below 3 per cent, while the yield on the 2-year note has fallen below 0.6 per cent, a record low.

It appears that sizable amounts of money continue to  be flowing into the perceived safe haven of Treasury securities. Given the huge amount of new debt the Treasury will be coming to market with in the years ahead, this is truly stunning.  But panic is panic.

Russian Spy Who Provided Secrets to Moscow

Russian national Anna Chapman was part of a Russian spy team busted Sunday by the FBI. The spies were under surveillance for a decade.

Another member of the spy group, also a female who went under the cover name "Cynthia Murphy," discovered secrets about the gold market that Moscow reported back to her were "very valuable" and told her that the information was passed on to Russia's Finance Minister.

At her arraignment last night, Chapman was held without bail as federal prosecutor Michael Farbiarz called her a "highly trained agent" and a "practiced deceiver," NyPo reports.

Bloodbath Overnight; Shanghai Down 4.27%

Europe and Asia stock markets experienced heavy losses overnight.

Asian market indexes closed with the following declines:

Nikkei           9570.67  -123.27 (-1.27%)
TOPIX            852.19     -8.61 (-1.00%)
Hang Seng  20248.90   -477.78 (-2.31%)
Shanghai        2427.05  -108.23 (-4.27%)

At 5:53 am ET stocks indexes in Europe were down as follows.

STOXX 50     2597.86     -70.81 (-2.65%)
FTSE 100       4970.40   -101.28 (-2.00%)
DAX              6022.26    -134.96 (-2.19%)

What's most interesting about these declines is that there does not appear to be any specific news event that triggered the sell-off.

The biggest negative news came out of China where
the leading economic indicator for China was revised to up only 0.3 percent in April, less than the 1.7 percent gain reported on June 15, the Conference Board said. The previous release contained a “calculation error” for total floor space on which construction began, the Conference Board now says. This could explain some of the downward pressure, but more than anything, stocks seems to be following because of their own dead-weight. Translation: Global liquidity is at very low levels. The ECB and Fed tight money policies coupled with the slowdown in China's money printing are causing huge restructurings in the economic structure of the world. The capital sector, as evidenced through the stock market downside activity, is at the core of the restructuring---which is what you would expect to occur as explained by Austrian Business Cycle Theory.

Geithner's Tuesday

In the morning, Treasury Secretary Geithner will attend the President's Economic Daily Briefing at the White House.

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

Monday, June 28, 2010

Ten Russians Arrested in the U.S. as Spies; Relayed Report on Gold Market

Eight individuals were arrested Sunday for allegedly carrying out long-term, "deep-cover" assignments in the United States on behalf of the Russia, the Justice Department announced today. Two additional defendants were also arrested Sunday for allegedly participating in the same Russian intelligence program within the United States.

Some of the Russians adopted Irish names in their spy work, including using the names Murphy and Foley.

Information they were seeking was pretty broad based but it included at least one report about gold. Moscow relayed back to the spies that the gold report was "very valuable" and reported that it was passed on to Russia's finance minister.

Also, according to the complaint, one spy, "Cynthia Murphy," was developing a relationship with a prominent New York financier. The financier is apparently a big political money raiser and has a close friend in the Cabinet.

The most interesting question is, of course, what kind of information could the spies have turned over about gold that Moscow deemed as "very valuable"? And let the guessing game begin as to who the "prominent New York financier" is.

It should also be noted that this decade long investigation was publicly revealed just days after Obama and Russian President Medvedev shared hamburgers together.

Obama sure knows how to stick a guy in the eye, doesn't he?

Below are the two complaints. The second complaint is the juicy one.

Complaint in Chapman and Semenko Case

Complaint in Mestos Case

HOT Russian Spies Arrested in U.S.: Reports Relayed Included Info about Gold Markets


Bilderberg 2?

Reinhard Schwach emails a link to the St. Petersburg International Economic Forum and writes:

Developments are worth watching here

The Krugman Long Depression Warning

Paul Krugman is clueless when it comes to economic theory, but I have always argued that he watches the data closely and that he would be among the first to detect the second dip of the double dip recession.

He has detected such. He writes:
Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy.
From there he launches into government spending prescriptions that will only make the downturn worse.

The man sees whats in front of him (even when few others do), but he has no clue as to how to deal with what's in front of him. It's as if he is one of the few to detect a massive hurricane that is about to hit, but then recommends wearing straw hats as protection. Heed Krugman's warning, ignore his mad spending "solution."

Conventional 30 Year Fixed Rate at 4.375%

Michael Dunton at Mt McKinley bank emails:

I never thought I’d see the day—4.375%.
This will not last, if you haven't locked in rates yet, niw is the time.

The Fed In Panic

Below I reprodouce a report from Tyler Durden, where he writes of a second-tier Fed economist, Kartik Athreya, who has published a paper advising the general public to avoid blogger comments on the economy and to pay attention to only those with PhDs.

Now, although Athreay is just a second tier Fed grunt, it is highly likely he has put to paper the mumblings of senior Fed officials he has heard. Grunts don't wander far off the reservation.

Bottom line, the Fed appears to fear they are losing the propaganda campaign. The Fed generally tends to simply ignore the blogsphere. In fact, the only other known recognition of the blogsphere by the Fed was when they, much more subtly, attacked me. They still haven't lived down the blowback from that episode.

In 2004, New York Federal Reserve economists Jonathan McCarthy and Richard W. Peach wrote a paper Are Home Prices the Next Bubble? Of course, there was a bubble and I argued so, against their findings. Their absurd conclusion was based on ruling out lower interest rates as a cause of a bubble because interest rates were a "fundamental factor." I went off on them:
...the record climb in housing prices is, indeed, a bubble... the Federal Reserve study fails to consider past declining interest rates as a cause of the bubble. The faulty conclusions reached by Federal Reserve economists Jonathan McCarthy and Richard W. Peach may make many potential new home buyers comfortable about a purchase, when, in fact, we are very near the top of a housing market that will experience substantial declines in prices...

They reach the conclusion that because of ....[the] "fundamental factor" of low nominal interest rates, higher housing prices are justified.

But does this mean real estate prices will not drop? Our answer is decidedly no. Indeed, McCarthy-Peach report that "since 1995, real home prices have increased about 36 percent, roughly double the increase of previous home price booms in the late 1970's and late 1980''s." We view this increase as largely the result of the Federal Reserve's lowering of interest rates and the pumping of liquidity into the banking system, thus producing the byproduct of higher housing prices. But by incorporating falling nominal interest rates as a "fundamental factor" that can not be a cause of a bubble, McCarthy-Peach have literally defined the cause of the current bubble from being taken into consideration....

Further, the current structure of many mortgage loans whereby no money down is acceptable and/or adjustable rate mortgages are popular, sets up the possibility that many may walk away from current mortgage commitments down the road as interest rates begin to climb. Indeed, as ARM's rates become more and more burdensome and as housing prices begin to decline, walk away situations are likely to become quite prevalent, thus adding even more downward pressure to the housing market.

It is our conclusion, then, that by defining nominal interest rates as a fundamental factor and not as the Fed induced causal factor of the real estate boom, and by completely ignoring the structural features of current mortgage loans, McCarthy and Peach have blinded themselves to the real estate bubble that does exist. They have set themselves up for perhaps making the worst economic prediction since Irving Fisher declared in 1929, just prior to the stock market crash, that "stocks prices have reached what looks to be a permanently high plateau."
Now what is sweet about the event is that not only is there proof that McCarthy and Peach read my critique, but they got such a kick out of it that in a power point presentation ,when they went around the country declaring there was no housing bubble, under the headline Opposing View, they would flash a slide with this quote from me:
The faulty analysis by Federal Reserve economists McCarthy and Peach may go down in financial history as the greatest forecasting error since Irving Fisher declared in 1929, just prior to the stock market crash, that stocks prices looked to be at a permanently high plateau.
As I have said before, I'm sure it got a chuckle at the time.

So in the only known direct battle between bloggers and the Fed. It's Bloggers 1 - Fed 0.

And now we have one,  Kartik Athreya, telling the world that bloggers should be ignored because the topic is much too complex.

Whenever anyone has ever told me something was too complex, there was usually a scam around the corner, as indeed it is with the Fed. The Fed is, itself, a scam. The complex matter in which they carry on is done to obfuscate the scam. The blogger world is uncovering the scam and that is what is making Athreya and the rest of the Fed nervous. The Fed is losing the ability to cover it up.

The word about Ron Paul, the audit the Fed movement, and the End the Fed movement were spread by bloggers and the like. Athreya knows this. He wishes it were different. He prefers word coming down from him and his Fed  buddies only, that way when the next bubble is blown, they can tell us all, in a very complex manner, that there is no bubble.

Not a chance Athreya. Audit the Fed! End the Fed!

The Fed Has Lost It; Publishes Essay Bashing Bloggers, Tells General Public To Broadly Ignore Those Without An Econ PhD

By Tyler Durden

Some Fed economist (with a hard-earned Ph.D mind you) named Kartik Athreya (who lasted at Citigroup as an associate Vice President for a whopping 7 months before getting sacked in 1998 only to drown solace for his expiring unemployment benefits in the public sector) has written the most idiotic "research" piece to come out of the Federal Reserve since 1913, and the Fed has written a lot of idiotic research since then - after all you don't destroy 98% of the dollar's purchasing power in 97 years with non-idiotic research. But this just takes the cake. In "Economics is Hard. Don’t Let Bloggers Tell You Otherwise" Kartik says: "I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contribute any insight to discussion of economics and, as a result, should be ignored by an open-minded lay public." Alas, all Kartik achieves is to convince the general public that feeding Fed "economists" alcohol after midnight and letting them directly upload their resultant gibberish to the Fed's broad RSS feed the second they think they have a coherent thought , is generally a disastrous idea. In his piece, which has no other intention than to discredit and outright malign bloggers such as Matt Yglesias, John Stossel, Robert Samuelson, and Robert Reich: "In what follows I will argue that it is exceedingly unlikely that these authors have anything interesting to say about economic policy. This sounds mean-spirited, but it’s not meant to be, and I’ll explain why." Instead in what follows, the Fed presents 4 pages of thoughts so meandering, that the author's blood alcohol level must have certainly been well above the legal norm for the duration of the writing of this ad hominem pamphlet.

Amusingly, the Fed shows that it also enjoys cannibalizing its own most vocal defenders:

The list of those exhibiting this zest also includes, in addition to those mentioned above, some who might know better. They are the patron saints of the “Macroeconomic Policy is Easy: Only Idiots Don’t Think So” movement: Paul Krugman and Brad Delong. Either of these men will assure their readers that it’s all really very simple (and may even be found in Keynes’ writings). Lastly, before you dismiss me as a right- or left-winger, I am not. I’m simply less comfortable with ex cathedra pronouncements and speculations than the people I have named. (Somewhat strangely, in an earlier era Paul Krugman very effectively took the same sort of “accidental theorist” to task, so what I’m saying is really a bit of a rehash of his arguments.)

Here are some of the pearls of wisdom contained in this stunning paper:
Before I continue, here’s who I am: The relevant fact is that I work as a rank-and-file PhD economist operating within a central banking system. I have contributed no earth-shaking ideas to Economics and work fundamentally as a worker bee chipping away with known tools at portions of larger problems.

Why should anyone accept uncritically that Economics, or any field of human endeavor, for that matter, should be easy either to process or contribute to? To some extent, people don’t. Would anyone tolerate the equivalent level of public discussion on cancer research? Most of us readily accept the proposition that Oncology requires training, and rarely give time over to non-medical-professionals’ musings. Do we expect advances in cell-biology to be immediately accessible to anyone with even a college degree? Science journalists routinely cite specific studies that have appeared in specific journals. They generally do not engage in passing their own untrained speculations off as insights. But economic blogging and much journalism largely does not operate this way. Naifs write books, and sell many of them too. People as varied as Matt Ridley and William Greider make book-length statements about economics. I’ve never done that, and this is my job. This is, to say the very least, bizarre.

So far, I’ve claimed something a bit obnoxious-sounding: that writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy.

You might say, “you’re telling us to leave everything to the experts, so why should I believe you are adequately policed?” This is a fair question, but as someone who has worked for a decade to publish in leading academic journals (with some, but hardly overwhelming, success), I now have the referee reports to prove that I live in a world where people are not falling over themselves to believe my assertions. The reports are often scathing, but usually very insightful, and have over the years pointed out all manner of incoherence in my work. The leading journals have rejection rates in the neighborhood of 80%, and I’ve had my share of them.

How can this be changed? A precondition for the market delivering this is a recognition by the general public that they are simply being had by the bulk of the economic blogging crowd. I hope to have alerted you to the giant disconnect that exists between the nuanced discussion that occurs between research economists and the noise (some of it from economists!) that one sees in the web or the op-ed pages of even the very best
newspapers of the US. As a result, my hope is that the broader public will ask for a slightly higher bar when it comes to economics, rather than self-selecting into blogs that merely confirm half-baked views that might have been acquired from elsewhere.

And this punchline:

For my part, seventeen years after my first PhD coursework, I still feel ill at ease with my grasp of many issues, and I am fairly confident that this is not just a question of limited intellect.
We disagree.

We would comment on this if it had any merit, and central point worth arguing or even debating, but since this whole thing sounds like the ramblings of a deranged lunatic, we will just leave it out there for your comedic enjoyment.

The above originally appeared at Zero Hedge.

Economics is Hard

The Poison Pill Jamie Dimon is Brewing in His Executive Suite

Simon Johnson is best when he is decoding the machinations of the banking elite. And, he sure has sniffed out what Jamie "President Obama's Favorite Banker" Dimon is up to. Johnson writes:

While the financial reform negotiation process grinds to its meaningless conclusion, the real action lies elsewhere – in Jamie Dimon’s executive suite.

Dimon, the head of JP Morgan Chase, is apparently seeking to (a) become more global, (b) move further into emerging markets, and (c) become more like Citigroup.

This is terrific corporate strategy – and very dangerous for the rest of us.
Jamie Dimon clearly wants to become too big to fail, too interconnected to fail, and – above all – too global to fail.

He knows that the reform package will, among other (very small) things, create a resolution authority that will give the government more power – in principle – vis-à-vis failing financial institutions in the future.  This is a central part of Tim Geithner’s vision for financial stability.

But Mr. Dimon also knows – as a board member of the NY Fed and sometime White House/Treasury confidante – that a US resolution authority will do precisely nothing to make it easier to handle the failure of a large global bank, e.g., Citigroup, doing business in over 100 countries.

The reason global megabanks will get bailouts in the future is simple – policymakers will fear the chaos that would ensue when competing bankruptcy claims swarm over a defaulted institution, much as happened for Lehman (e.g., in London) in September 2008.

Mr. Dimon and his colleagues – who include some top former global regulators – are also well aware that the G20 (and everyone else) will not make any serious push towards creating a cross-border resolution mechanism.

The best way to signal to creditors that they will be protected in all potential future crises is to make JP Morgan bigger and more global.  This will lower the funding costs for the organization and in turn make this global expansion more profitable when times are good – and when times are bad, there will be government support.

In effect, Mr. Dimon is constructing a “poison pill” against takeover by the government.  This is so simple, so brilliant, and so dangerous that it should take your breath away.
What Dimon is also doing is setting up a corporate version of what some individuals are doing on a personal level, i.e., the multi-flag lifestyle.

On a personal level the multi-flag lifestyle is about living in one country, working in another country and being a citizen of a third. This concept was made most famous by Harry Schultz and his PT (Permanent Traveler) concept. With a multi-flag lifestyle, if authorities question you in a given country you are just "passing through".

Jamie is setting up JPMorganChase to be something of the same on a corporate level. If regulations are particularly onerous for a given type of banking operation, in a given country, Jamie can, for example, tell onerous country X, "Oh we don't do those kinds of operations in your great country x, we only do them in country y."

Jamie will have regulators around the globe so tied up in irrelevant minutiae that he will be free to do whatever he damn well pleases. He's not the President's favorite banker by accident, the man is slick.

Geithner's Monday

On Monday, Treasury Secretary Geithner will meet with the Pew Bipartisan Task Force on Financial Reform, a group of academic and business leaders formed with the goal of building bipartisan consensus on financial reform issues. 

In the afternoon, the Secretary will attend the President's Economic Daily Briefing at the White House. 

Later, Secretary Geithner will host progressive leaders for "a discussion of jobs, the economy, and financial reform"

Sunday, June 27, 2010

On One World Socialists and Borders

Paul Huebl writes:
One World Socialists want the entire globe under their rule. One World is another way of saying, there is no escape. Socialist countries have border security, not to keep people out but to prevent people from fleeing their oppression.

Tyler Cowen: Nothing to Look at Here, Folks, Just Keep Moving

Tyler Cowen writes in today's NYT:
“THE ROAD TO SERFDOM,” the critique of socialism written 65 years ago by the Nobel laureate economist Friedrich von Hayek, was recently No. 1 in nonfiction sales at

Many people, including the Fox News commentator Glenn Beck, have contended that growth of government power has, indeed, set us on such a road today. But the reality looks different. In many respects, the expansionary phase of big government is coming to an end, and quickly.
Oh yeah, the U.S. is coming home from Afghanistan and Iraq, real soon.

Obamacare is not really going to control what type of medical service is available in America. The new consumer agency stuck into the heart of the Federal Reserve is just a paper tiger.

And Obama really isn't getting a kill switch for the internet.

Everything is just peachy, like Cowen says.

How does Cowen reach this mad conclusion?

It's peachy, according to him, because of the Greek crisis. You see, aside from fighting wars,and paying for healthcare for the masses, the U.S. is on an austerity program because the Greek crisis is scaring Americans.

Cowen is pulling a slick trick here. He is claiming that government is about to shrink, and then switches the argument from the obvious growth of government to the fear of the Greek crisis.

Of course, the Greek crisis is a warning sign for what could happen to the financial sector in the U.S., that everyone can understand, but to translate this fear into the suggestion that government growth is over is absurd. Government is growing and taking control of our lives from thousands of different directions and it is doubtful the the fear of the Greek crisis will even have real impact in slowing the deficit.

Bottom line: Cowen has simply become an apologist for the state, twisting the reality of the situation to promote a benevolent view of a government that is a monster, that continues to growl and grow.

The truth of the matter is that the situation of an out of control government is very serious. Thomas DiLorenzo writes about the same Road to Serfdom that Cowen says doesn't apply to current America:

The parallels to today's world are unsettling, to say the least. Perhaps this is why, a few weeks ago, The Road to Serfdom ascended to #1 in sales on after Glenn Beck discussed the book on his Fox News Channel program. There may not be a Hitler on the horizon, but the extent to which governments all over the world have simply ignored the lessons of the past in response to the economic crisis that they created with their own monetary policies and other interventions is mind boggling. The US government, in particular, responded to the bust portion of the Greenspan Fed's boom-and-bust cycle with the most economically destructive — but politically centralizing — policies: trillion-dollar bailouts of failing corporations that will create moral-hazard problems the likes of which have never been seen; an escalation of the money supply that dwarfs the monetary inflation of the Greenspan Fed; the Soviet-style nationalization of automobile companies, banks, and much of the healthcare industry; government regulation of executive compensation; the appointment of dozens of dictatorial "czars" with unaccountable power to regulate and regiment myriad industries; trillion-dollar-a-year deficits; an expansion of the powers of the Fed (!); and a president who believes he has the power to fire corporate executives, nationalize industries, and send unmanned "drone" bombers to any country in the world on a whim.

Washington DC no longer recognizes any limits at all to its powers to "socially plan" all aspects of American life. This totalitarian impulse is not limited to national politics. The mayor of New York City believes he has the power to regulate all of the eating and drinking habits of New Yorkers, even including how much salt they consume with their meals and what type of soft drinks they can enjoy
Clearly, it's not that government is shrinking, it is that Cowen is one of the types of operators Hayek warned about in the chapter "The End of Truth". He called them "the totalitarians in our midst".

Cowen's attack in NYT on the application of the lessons in The Road to Serfdom to present day America makes DiLorenzo's upcoming course, The Road to Serfdom: Despotism, Then and Now, more important than ever. The big government apologists clearly want to muffle Hayek's warning that is contained in The Road to Serfdom.

It's Time to Join a Gang

By Gonzala Lira

This past Monday, June 14, 2010, the Unites States Supreme Court let stand without comment or dissent the Second Circuit Appeals Court decision to dismiss Maher Arar's suit against the U.S. Government. (Arar v. Ashcroft, No. 09-923)

Mr. Arar was illegally detained by U.S. officials while in transit back to his home in Canada, and then handed over to Syrian intelligence officials using “extraordinary rendition”. The Syrians kept Arar for ten months, interrogating him using torture, and finally releasing him when they concluded that Mr. Arar was neither a terrorist, nor in possession of any relevant intelligence.

Once free, Mr. Arar sued both the Canadian government (which peripherally assisted in his kidnapping and torture) and the U.S. government. The Canadian government issued him an unequivocal apology, and $10 million Canadian in compensation.

Mr. Arar did not get any similar justice from the U.S. government, though. The Second Circuit Appeals Court quashed his suit by stating that Congress had not authorized such suits as Mr. Arar’s. (!)

By letting stand the Appeals Court decision to quash the suit Mr. Arar brought against the U.S. Government, the Supreme Court effectively ruled that the Government cannot be held accountable by private citizens for its actions. The Government can do as it pleases to any individual—including assassinating one of its own citizens—and there is no legal remedy.

Now let's compare how the U.S. Government dealt with BP, regarding the oil spill disaster in the Gulf of Mexico: President Obama met with BP officials, and as a product of that meeting, BP promised to set up a “compensation fund” of $20 billion over the next two years.

Note how this was agreed to outside of the ordinary judicial process. There was no suit. Neither did this agreement follow the law. It was simply a deal the White House made with BP. A Republican politician is receiving a lot of grief over having characterised the meeting and subsequent deal as a “shake down” of BP by the Government. This politician is being censured because apparently he sided with BP, the party responsible for the oil spill disaster—clearly the guy is an idiot.

Be that as it may, the politician’s characterization is in fact accurate: The Government did “shake down” BP for the money, in a manner no different from a street gang shaking down a neighborhood grocery store.

In the Arar case, one of the Government’s arguments in favor of quashing the case was that the suit would bring under scrutiny “the motives and sincerity of the United States officials who concluded that petitioner [Mr. Arar] could be removed to Syria.” In other words, the Government was deploying its full weight and power to protect the individuals who had actually ordered Mr. Arar’s detention and deportation to Syria.

Similarly, in the “compensation agreement” whereby BP acquiesced to pay $20 billion, the company as a whole was acting to protect the executives and personnel responsible for the oil spill disaster. (I have yet to read the actual deal memo, but I wouldn't be surprised to learn that, as part of the deal, the Government agrees not to prosecute any BP executive or personnel, either in criminal or civil court. This is pure supposition on my part—but it ought to be the first thing scrutinized once the actual deal memo comes out.)

As a third example, during the financial crisis, when AIG, Fannie Mae and Freddie Mac were all bailed out, none of the executives actually responsible for the firms being in the position that they were in were indicted or punished in any way. The corporations assumed the responsibility of the individuals who had made the bad decisions.

As a fourth example, the unions, in both the public sector and the private. GM’s unions forced the company to assume pension and health care liabilities which any actuarian would have realized would eventually bring about GM’s bankruptcy—which of course is exactly what happened. Teacher's unions across the U.S. refuse to implement basic competency tests on their members, threatening to strike if such tests are imposed, even going so far as to protect not merely incompetent teachers, but pedophiles—and these are the people who are supposed to be educating America’s youth.

A fifth example: The U.S. military. Soldiers routinely violate human rights of Iraqis and Afghans, in the most despicable, egregious manner imaginable. Yet they get away with it, the military going out of its way to protect its soldiers, under the rationale that to prosecute gross human rights violations would “erode the morale of the troops”. In the Abu Ghraib torture scandal, a half-dozen non-commissioned officers were jailed—but apart from a lone Lieutenant Colonel being tried and acquitted of a couple of minor charges, no officer was tried, and none jailed.

All of this underscores the same problems we are having throughout our society in the Industrialized West: Corporate entities, be they corporations, unions, the military, or the government, act lawlessly—anarchically—trampling the individual without hesitation, yet coming to accomodations between one corporate entity and another.

In other words, our society has become a neighborhood where street-gangs—corporate entitites—battle one another for position. Even the Government is just another street gang.

People allied with a particular corporate entity have rights and the full protection of the corporate entity to which they belong, much as street gangs are fiercely loyal to their individual members. The higher up in the corporate entities’ hierarchy—CEO, General, President—the more untouchable he or she is.

However, unaffiliated members—such as Mr. Arar, such as myself—have no such protection. Neither do they have recourse to the courts, as the Arar case proves. Courts and the so-called “justice system” are busy policing individuals. Individuals’ rights are more curtailed and restricted than ever before. But corporate entities are freer than ever before.

In such a lawless neighborhood, what can an individual do? Obvious: Join a gang—any gang.

Read the rest here.

Top Ten

Below are the Top Ten most viewed EPJ posts for the week ending Saturday June 26, 2010.

#1 Bank Run in Spain and Its Destabilizing Ramifications for the Entire EU  (2nd week on list)

#2 George Soros on Jim Rogers: He Is Not a Great Investor

#3 China Officially Disses the Dollar (and Treasury Debt)

#4 Apple's Al Gore Problem

#5 George Soros Stumbles in the Face of Tom Woods' Influenced Questioning

#6 The USA is a “Failed State”: An Interview with Paul Craig Roberts

#7 Is Bernanke Preparing to Double the Money Supply?

#8 Council on Foreign Relations Warns U.S. Dollar and Debt at Tipping Point

#9 32 States Have Borrowed from the Federal Government to Make Unemployment Payments (5th week on list)

#10 Insane Insana: Ron Insana's Vicious Attack on Ron Paul (2nd week on list)

Saturday, June 26, 2010

Judge Napolitano Explains the Government's Role in the BP Disaster


Geithner's Sunday in Toronto

On Sunday morning, Treasury Secretary Geithner will attend the Opening Plenary Session of the G-20 Summit in Toronto.

Secretary Geithner will then participate in bilateral meetings with Vice Premier Wang of China and Japanese Finance Minister Noda.

Throughout the afternoon, the Secretary will participate in working sessions of the G-20 Summit.

In the late afternoon and evening, the Secretary will join President Obama for his bilateral meetings with Prime Minister Singh of India and Prime Minister Kan of Japan. There will be a pool spray at each meeting.

Secretary Geithner will return to Washington, DC on Sunday night.

The Book Washington D.C Is Afraid Of

It should be obvious to every observant American that the government based out of Washington D.C. is out of control. From a country founded on the concept of freedom, the executive branch, the legislative branch and the judicial branch ignore the fundamental precepts of the Constitution and attempt to regulate "the People"  and take at will.

It seems there is little "the People" can do, with all three branches of government ganging up against them. Tom Woods, though, argues that there is something that can be done, and that something is nullification.

In a brilliant book, Nullification: How to Resist Federal Tyranny in the 21st Century, Woods'  educates readers on the Constitution, and what it means, in a manner that most assuredly you did not learn in High School or college. Most importantly, Woods focuses on the concept of nullification, a concept that goes back to Thomas Jefferson. The concept being that states have the right to nullify unconstitutional laws.

As examples of nullification, he discusses the current attempts by some states to legalize medicinal marijuana (despite opposition at the Federal level). He discusses the actions by states that for all practical purposes nullified the federal Real ID Act of 2005. Woods writes that half of the states issued formal declarations that they had no intention of  complying with the federal mandate. Woods states that “resistance was so widespread that although the law is still on the books, the federal government has, in effect, given up trying to enforce it.”

Woods also points out that nullification  can go beyond the state level and be carried out on an individual level. He cites jury nullification as an example.

Most intriguing, Woods suggests that nullification could take the form of states requiring its citizens to send federal income tax money to the states where it would be put into escrow accounts, where the states then individually determine what legitimately should go to the federal government, with perhaps the states sending the rest back to its citizens.

If you haven't figured it out, this is a radical book, but it is radical constitutionalism, soundly argued. Given the overbearing reach of the Federal government, the nation, outside of Washington D.C., is fed up. This is the book that can provide the manual to take back the country. There are already indications Washington D.C. is scared of this book. I am writing this on Saturday June 26,  after returning from the Borders Books at the corner of 14th Street and F Street in Washington D.C. This Borders is just two blocks from the White House. Woods' book is officially not scheduled to be released until Monday June 28, but as is often the case,  the book was put on the shelf a couple of days early.

When I spotted the book it was face forward, the way they put books they want to promote, but there was only one copy. This struck me as odd given that the book was face forward, which suggested to me there was originally other copies. Further, since the book isn't officially out until Monday, it's doubly odd there is only one copy. I found a clerk and asked him if he could tell me how many copies of the book the store originally received. He looked it up for me. First, he noticed that the book wasn't officially out until Monday, but that the store had originally received 6 copies. He looked confused that there was only one copy left. I said to him, "That's alright. I think I understand."

A book that provides a playbook on how to reverse out of control government is selling like hotcakes just blocks from the White House. I get it. Some people are very afraid of this book and need to find out what is in it real fast. They know this book has nation changing potential. I say buy the book, get the nullification argument down cold, get in on the debate and scare the hell out of Washington D.C.