The Man Who Turned Bernie Madoff Down

Just weeks before Bernie Madoff's Ponzi scheme collapsed, Madoff pitched Ken Langone, Home Depot Co-Founder, to invest in his fund. Langone turned Madoff down. But Langone said Madoff was cool as a cucumber, so cool in fact that he would have cleaned anybodies clock that he played poker with.

CNBC's Larry Kudlow interviewed Langone about his meeting with Madoff. A transcript of the fascinating interview is here.

Throwing Keynes Under the Bus, Part 2

It has to be done, but who ever thought that Greg Mankiw would cautiously, very cautiously join the movement?:

Larry Kudlow - Which would give a bigger jolt to the economy: lower taxes or bigger government spending?

Greg Mankiw - Well the standard textbook Keynesian theory suggests that if you're interested in increasing aggregate demand, a dollar of government spending is going to generate more demand than a dollar of tax cuts but there's actually some evidence that suggests that's not exactly true....that tax cuts may do more in terms of stimulating private investment than will government spending. And so I think the really[sic] question is what's the government spending the money on and is it things we really need. If it's things we need and are useful that's fine. But if there not things we need it's probably better to use the money for tax cuts.

See it wth your own eyes. Video here.

Is China's Weakening Economy Behind Today's Market Break?

Larry Kudlow thinks so:

The real source of today’s stock market plunge is a collapse of China’s purchasing managers index, which fell to 40.9 in November from 45.2 in October, its fourth straight monthly drop. Inside the index, export orders fell significantly. All of this suggests big cuts in China production, employment, and investment, including infrastructure investment.

Over dinner last week, economic Nobelist Robert Mundell, who advises the Bank of China and travels there every other month, told me the Chinese economy is in bad shape. As a bulwark for the global economy, the China card is fast turning unreliable. Not only are stocks falling everywhere else in response to this disappointing China news, but commodity prices like palladium, silver, gasoline, oil, and gold are all plummeting today. I’ve only seen one news story that reported on this China economic decline, but I’m convinced it’s the main factor behind the U.S. stock drop.

I wasn't watching the market close enough today to get a sense for how accurate Kudlow's comments are,e.g.what news the market reacted to, but if the Chinese economy is slowing, and it appears that is the case, then it will just add to the current global crisis.

But remember, we are in December, so there are always a lot of cross trends in this month, as I pointed out last week in commenting on a column by Andrew Kessler. Further, news that Paul Tudor Jones had to freeze his flagship fund because of redemptions, while being down only 5% in the year, had to make a lot of traders nervous.

As I said last week, the opportunities are being set now for huge gains in January.

Tim Geither In Profile

According to various news sources, Tim Geithner will be nominated as Treasury Secretary by Barack Obama. An official announcement is expected Monday.

Judging by his actions it does not appear Giethner believes in free markets. For him, the government needs to stand by with buckets and buckets of money.

According to reports, in 1997 he was instrumental in pushing then Treasury Secretary Rubin to OK a bailout of South Korea.

Geithner also was reportedly behind the $29 billion guarantee against losses that the Fed made to JP Morgan when JPM purchased Bear Stearns. The guarantees against losses, it should be noted was in addition to the fact that JPM stole Bear Stearns at a huge discount from its liquidation value.

His interventionist credentials are pretty well established on Wall Street. Here's Larry Kudlow's thinking on Geithner ans the next tranche of the $700 Billion Paulson boondoggle:

As for the TARP bailout story, it is generally believed that Geithner is a strong interventionist. And so we can expect him to move toward raising the second $350 billion tranche of the originally authorized $700 billion package by Congress

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Geithner graduated from Dartmouth College with a bachelor’s degree in government and Asian studies in 1983 and from the Johns Hopkins School of Advanced International Studies with a master’s in International Economics and East Asian Studies in 1985, according to his official bio on the New York Fed site.

He joined the Treasury in 1988 and worked in three administrations, serving as Under Secretary of the Treasury for International Affairs from 1999 to 2001 under Treasury Secretaries Robert Rubin and Larry Summers.

He also worked for Kissinger Associates for three years.

He become New York Fed president in 2003. In that capacity, he worked as the vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy.

One side note. Geithner graduated from the International School of Bangkok, Thailand. His father appears to be a possible CIA agent and is listed by the New York Times as the "program officer in charge of developing countries for the Ford Foundation."

Geithner falls under the Robert Rubin wing of Goldman Sachs influence, as he worked for Rubin when Rubin was Treasury Secretary.Geithner also serves as chairman of the G-10’s Committee on Payment and Settlement Systems of the Bank for International Settlements. He is a member of the Council on Foreign Relations and the Group of Thirty.

But it is his interventionist bent that could prove we have a major inflationist at Treasury. One Obama confident relates a recent conversation between an associate and a Fed official, in which the latter complained, "Christ, Geithner wants to save everybody."

More money hand outs to Wall Street, no wonder the market jumped 500 points on news of the Geithner selection.

Sweet Music: Larry Kudlow and Ron Paul Discuss Bernanke and Trends in the Economy