Why Is Jamie Dimon Still On The NY Fed Board?

Analysis & Commentary, Derivatives Reform No Responses »

May 142012

What to do with Jamie Dimon? The CEO and Chair of JPMorgan Chase has tried so hard in the past several years to seem the “good banker.” He is so charming and gracious, yet all the while lobbying, cajoling, pushing, and wheedling to eviscerate any semblance of real reform on Wall Street. He shrugged off the cataclysm of 2008 as just something that happened, like the weather—no need for any structural reform.

Now the chickens have come home to roost—at least 2 billion of them—and it is clear that Chase is like every other big financial institution with distorted incentives. Thanks to a backstop of a federal guarantee, these gigantic institutions get to keep all the upside of crazy bets while the government gives them all the downside protection they need. Earlier this year, Dimon pooh-poohed concerns about the risks his traders were taking. Did Dimon not understand those risks, not care to know about them, or actually mislead the public about them?

But it isn’t so much money, they cry! True, in the context of Chase’s balance sheet, a $2 billion loss can be absorbed. But it shows once again the impossibility of trusting the banks in the absence of structural reform and regulation to control their willingness to take almost unmitigated risk. Of greater significance than the size relative to Chase’s balance sheet is that the loss was in a relatively stable market in which most people are finding it easy to trade. Imagine if the market had been choppy—the losses could have been even more gargantuan—and if several institutions had been in the same position, then the aggregate effect could have become once again cataclysmic.

31707575_1_volcker-rule-bank-gdp

Hope

A Moral Question - Not A Political One, A Time To Repent, Analysis & Commentary, Catholic Social Teaching No Responses »

Apr 072012

It is not surprising that the first reaction of the disciples to the report of the Resurrection was not joy, relief, gladness and rejoicing. The women who came to the tomb to anoint Jesus’s body were told by the ‘young man dressed in white’: ‘He has been raised; he is not here’. And they went out and fled from the tomb, for terror and amazement had seized them; and they said nothing to anyone, for they were afraid’ (Mark 16: 5-8). St Luke says that when the women later reported to the Apostles what they had seen and heard, ‘these words seemed to them an idle tale, and they did not believe them’ (Luke 24: 11).

In all the Resurrection appearances in the Gospels there is this mixture of belief and unbelief, of slow recognition and incredulity, of being sure but not yet sure. He was the same and yet transformed. They hesitated; it was all too good to be true. The two disciples on the road to Emmaus did not recognise him until he broke the bread for them, and then he vanished from their sight. Later, when they were having their breakfast of fish and bread by the lakeside, St John says: ‘None of the disciples dared to ask him, “Who are you?”, because they knew it was the Lord’ (John 21: 12).

If our experience of the Risen Christ is unlike that of the Apostles, it is much nearer to that of St Paul. He knew how the story had ended. He had heard, like us, that Jesus had been crucified. And he had also heard, like us, the report that Jesus had risen from the dead. But he resisted this, fiercely, passionately, so that he pursued the followers of Jesus even to death. Then suddenly the light broke in on him too. He was blinded, literally and metaphorically, dazzled by the light that shone on his eyes and in his mind. ‘Who are you, Lord?’ … ‘I am Jesus who you are persecuting’. The crucified, risen and glorified Jesus identified himself with those whom Paul was persecuting – and therefore also with all of us. Instantly, he recognised Jesus as Lord, and his life could never be the same again.

If then you have been raised with Christ, seek the things that are above, where Christ is, seated at the right hand of God. Set your minds on things that are above, not on things that are on earth. For you have died, and your life is hid with Christ in God. When Christ who is our life appears, then you also will appear with him in glory. Colossians 3

Your boasting is not good. Do you not know that a little leaven leavens the whole lump? Cleanse out the old leaven that you may be a new lump, as you really are unleavened. For Christ, our paschal lamb, has been sacrificed. Let us, therefore, celebrate the festival, not with the old leaven, the leaven of malice and evil, but with the unleavened bread of sincerity and truth. Corinithians 5

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“It is not for man to seek, or even to believe in God. He has only to refuse to believe in everything that is not God. This refusal does not presuppose belief. It is enough to recognize, what is obvious to any mind, that all the goods of this world, past, present, or future, real or imaginary, are finite and limited and radically incapable of satisfying the desire which burns perpetually with in us for an infinite and perfect good… It is not a matter of self-questioning or searching. A man has only to persist in his refusal, and one day or another God will come to him.”
—Simone Weil, the great French Jewish mystic who died in 1943 at the age of 34, On Science, Necessity and the Love of God, edited by Richard Rees, London, Oxford University Press, 1968.

“The concept of ‘hidden God’ (Deus absconditus) and the image of a weak or absent deity in history have been the subject of philosophical and theological debate after the tragedy of the Shoah. One question in particular has emerged: ‘Why did God allow Auschwitz?’… Rabbi Richard L. Rubenstein (1924- ) has written that the Holocaust has challenged the content of the Biblical covenant, together with the concept of divine omnipotence. The philosopher Emil Fackenheim (1916-2003) in his work has emphasized that the traditional philosophical and theological categories are insufficient to understand the Holocaust.” —Alberto Castaldini, The Hidden God and History: Philosophical and Theological Perspectives on the Holocaust, “Babeş-Bolyai” University – Cluj-Napoca, Romania, Faculty of European Studies, Ph.D. Dissertation, 2012

“When in Matthew’s account the ‘whole people’ say: ‘His blood be on us and on our children’ (27:25), the Christian will remember that Jesus’ blood speaks a different language from the blood of Abel (Heb 12:24): it does not cry out for vengeance and punishment; it brings reconciliation. It is not poured out against anyone; it is poured out for many, for all. ‘All have sinned and fall short of the glory of God… God put [Jesus] forward as an expiation by his blood’ (Rom 3:23, 25). Just as Caiaphas’ words about the need for Jesus’ death have to be read in an entirely new light from the perspective of faith, the same applies to Matthew’s reference to blood: read in the light of faith, it means that we all stand in need of the purifying power of love which is his blood. These words are not a curse, but rather redemption, salvation. Only when understood in terms of the theology of the Last Supper and the Cross, drawn from the whole of the New Testament, does this verse from Matthew’s Gospel take on its correct meaning.”
― Pope Benedict XVI, Jesus of Nazareth: From the Entrance Into Jerusalem to the Resurrection

Satan is behind Obama’s teleprompter

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Mar 102012

Satan as depicted in the Ninth Circle of Hell in Dante Alighieri‘s Inferno, illustrated by Gustave Doré.

Satan’s Agents want 4 more years of Hell

Two of them Catholic betrayers

It is the time of evil intentions, and the grim reaper cuts into the ripe grain with wide strokes. Mourning takes up her abode in the abandoned houses, and there is no one to dry the tears of the mothers. Yet Obama feeds lies to those people whose most precious belongings he has helped to steal and whom he has driven to a lonely, difficult life with lies, deceptions, and betrayal.

Every word that comes from Obama’s mouth is a lie. When he says peace, he means war, and when he blasphemously uses the name of the Almighty, he means the power of evil, the fallen angel, Satan. His mouth is the foul maw of Hell, and his power is at bottom accursed. True, we must conduct a struggle against the growing neo-Nazi terrorist state silencing it with rational means despite it’s endorsement by a gutless Justice(less) Department ; but whoever today still doubts the reality, the existence of demonic powers, has failed by a wide margin to understand the metaphysical background of this war.

Behind the concrete, the visible events, behind all objective, logical considerations, we find the irrational element: The struggle against the demon, against the servants of the Antichrist.

Everywhere and always demonic powers lurk in the dark, waiting for the moment when man is weak; when of his own volition he leaves his place in Creation, as founded for him by God in freedom; when he yields to the force of evil, he separates himself from the powers of a higher order; and after voluntarily taking the first step, he is driven on to the next and the next at a furiously accelerating rate.

Everywhere, and at times of greatest trials, men have appeared, prophets and saints who cherished their freedom, who preached the One God and who with His help brought the people to a reversal of their downward course. Man is free, to be sure, but without the true God he is defenseless against the principle of evil. He is like a rudderless ship, at the mercy of the storm, an infant without his mother, a cloud dissolving into thin air…”

+++

“God has a way of standing before the nations with judgment. And it seems that I can hear God saying to America, ‘You’re too arrogant! And if you don’t change your ways, I will rise up and break the backbone of your power, and I will place it in the hands of a nation that doesn’t even know my name. Be still, and know, that I’m God.’”

Martin Luther King, a true God loving Black leader.

God rest his soul.

It’s A Dark Day In Our Nation, 30 April 1967

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We live in an age where there is great emphasis on individual freedom. We live, in fact, in a secular age that has abandoned objective truth as understood through natural law. All the forefathers of our nation accepted natural law and objective truth. The Declaration of Independence and the Constitution of the United States of America are premised upon this philosophy. But we have wandered far from truth, and, as a consequence, we are descending into social chaos and despair. We are deconstructing into an abyss, a hole that has no bottom except Hell. This is an age of contradiction, an age of heterodoxy, a word that is translated from the Greek as two or more ways of understanding something. This is opposed or in contradiction to orthodoxy, a word that basically means the one and the true way of understanding something. This is why the Orthodox Jews and the Orthodox Churches use this term. They want a self-revealing identity. They are telling the world that they consider themselves as being holders of the truth. They believe that their faith system is the one and the true teaching of God. But, of course, there can be only ONE TRUE TEACHING OF GOD! How do we know the Truth? How do we choose wisely? Because it is through the voice of the Holy Spirit, the authentic and only voice of the Spirit, the Church speaks infallibly. This is what Saint Paul referred to at the beginning of his Letter to the Romans (1:5) as “the obedience of faith.” This is obedience, through faith, to the voice of the Spirit. It then follows that the teaching authority of Jesus, through the Spirit, is passed on to His Mystical Body, the Church. The authority that Jesus left to His Apostles was manifested, as Luke tells us in the Acts of the Apostles chapter 2, when the Holy Spirit came upon them at Pentecost. At that moment the Church of the original and only Apostles, led by Peter, became the “Spouse of the Holy Spirit” (John 14:26)! So we must recognize that this entire discussion of grace has no meaning whatsoever without our understanding that grace can only be obtained within the context of faith in Jesus Christ. The one exception to this profound truth would be, as we discussed previously, “invincible ignorance,” an exception that has become more and more unlikely in the 21st century. This is a time, after all, when the message of Christ is being spread worldwide through the communicative powers of global networks of television, radio, short wave, and the Internet. Praised be Mother Angelica and EWTN! Add to this the work of men like Mel Gibson who use their brilliant talents to convey through cinema Grace Himself and His Passion.

If grace is indeed the manifestation of Jesus, through the Spirit, then it certainly makes a great deal of sense to say that the closer you are to Jesus in an “up close and personal” way, then the more His grace will be able to work in you by the exercise of your free will. I again turn to Saint Paul’s Letter to the Romans (8:17): “Now if we are children, then we are heirs—heirs of God and co-heirs with Christ, if indeed we share in his sufferings in order that we may also share in his glory.” And again Romans (8:29): “For those God foreknew he also predestined to be conformed to the likeness of his Son, that he might be the firstborn among many brothers.” The presence of evil has always been in opposition to the salvation of Christ and throughout history the forces of Satan have been busy in the work of human destruction. The grace of God, however, has been the weapon that Satan cannot defeat. Grace raises us to supernatural dignity, and if we cooperate with it, then the Evil One can and will be defeated. There is only Jesus!

So we come to the end of our journey toward grace. I have attempted in a simple and straightforward way to discuss my journey and yours, my destiny and yours. The world today is so complex and full of spiritual pitfalls, and the Enemy is waiting at every moment to weave a web of evil and despair around each and every one of us. But we have available to us something that makes the Enemy run in fear, something that he knows that he cannot ultimately defeat. That something is a someone, and His name is Jesus the Christ. He also promised that the gates of hell will not prevail against His Church and that He will be with us even to the end of the world. He left us a Church guided by the Holy Spirit, a Church that will dispense His Grace and His Sacraments to sustain us in love until the end.

J. Brian Schuettler

DEFEATING EVIL IN YOUR PERSONAL LIFE – THE TRIUMPH OF GRACE

author of GOT GRACE?

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The Most Important Economic Chart Of The Year

A Picture Is Worth A Thousand Words, Analysis & Commentary, Back to the basics, Bond Market, Creditors Caveat, Deflation-Inflation-Stagflation, Devaluation, Economic Analysis Isn't Science, European Union? No Responses »

Dec 262011

courtesy of Spiegel Online:

This chart illustrates the end of euro complacency. Investors once acted as though the euro eliminated not just currency risk but sovereign credit risk. All nations–from Greece to Germany–could borrow at the same low rates. No longer. As the financial crisis enters its fifth year, markets are again distinguishing between strong nations and weak.

I subsequently discovered that I am not alone in choosing this chart. The BBC has a version of this as the first entry in its survey of top graphs of the year (with commentary by Vicky Pryce of FTI Consulting), and Desmond Lachman of the American Enterprise Institute included it in Derek Thompson’s survey of top graphs over at the Atlantic.

P.S. For the United States, I think Brad DeLong is right: behold the shortfall in nominal U.S. GDP.

The Most Important Economic Chart Of The Year by Donald Marron

Signs Point to Economy’s Rise, but Experts See a False Dawn

Analysis & Commentary 1 Response »

Dec 232011

“Unfortunately, I think we’re going to see a slowdown over the course of next year,” Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch, told reporters last week. “Not only do we have the European crisis spilling over and hurting U.S. trade and confidence,” he said, but the United States economy also faces “homegrown shocks.”

There are two reasons for the renewed pessimism. First, economists say that temporary trends increased growth in the fourth quarter and may not continue into next year. Second, the economy faces significant headwinds in 2012: some from Europe’s long-lingering sovereign debt crisis, and some from domestic cutbacks beyond the control of President Obama, whose campaign would like to point to a brightening economic picture, not a darkening one. Even the Federal Reserve is predicting that the unemployment rate will remain around 8.6 percent by the time voters go to the polls in November.

The fourth quarter benefited, for instance, from wholesalers restocking inventories of goods like petroleum, paper and cars, giving a jolt to growth.

“We had lean inventories, so those required additional production to satisfy demand,” said Gregory Daco of IHS Global Insight. “But once inventories are restocked, there is no need to restock them anymore. That means there’s going to be less production,” he said.

Consumers also pulled back on their savings, helping to finance a recent spurt in spending. a trend that forecasters doubt will continue. Other short-lived factors include falling gasoline and commodity prices, and an increase in orders from Japanese companies returning to business after the devastating spring tsunami.

But next year, Washington is increasing some taxes and reducing spending as temporary measures enacted during the worst of the recession expire. That will damp growth by a percentage point or more next year, forecasters say. Provisions like a tax write-off to help businesses pay for equipment are winding down or ending.

Signs Point to Economy’s Rise, but Experts See a False Dawn

I think the most notable development this week was Thursday’s big release of global factory activity surveys. It wasn’t pretty. Overall, the JP Morgan Global Manufacturing PMI dropped for the third straight month and fell below the 50 level — the line of demarcation between growth or contraction in monthly factory activity — for the first time since recession was descending upon us back in early 2008. Scary stuff.

Although U.S. activity was buoyant (no doubt a remnant of the sentiment tailwinds enjoyed from the market rally in October), we cannot remain an island of tranquility as Asia and Europe fall into the abyss.

Here are the highlights (any reading under 50 indicates a drop in activity):

*Brazil PMI: 48.7 vs. 46.5 prior
*Ireland PMI: 48.5 vs. 50.1 prior
*Sweden PMI: 47.6 v. 49 estimated
*Norway PMI: 48.6 vs. 50.2 estimated
*Denmark PMI: 47.7 vs. 43.6 prior
*Poland PMI: 49.5 vs. 51.7 prior
*Spain PMI: 42.8 vs. 43.9 prior
*Swiss PMI: 44.8 vs. 46.6 estimated
*Czech PMI: 48.6 vs. 51.7 prior
*Italy PMI: 44 vs. 42.8 estimated
*France PMI: 47.3 vs. 47.6 estimated
*Germany PMI: 47.9
*Greece PMI: 40.9 vs. 40.5 prior
*South Korea PMI: 47.1 vs. 48 prior
*Taiwan PMI: 43.9 vs. 43.7 prior

And, now for the big boys:

*Eurozone PMI: 46.4 — lowest reading since recession ended in July 2009
*U.K. PMI: 47.6 vs. 47 estimated — lowest since June 2009
*China PMI: 49 vs. 49.8 estimated — lowest reading since February 2009
*China HSBC PMI: 47.7 vs. 51 prior — 32-month low

In addition to signs of economic weakness — which was enough for a Chinese vice finance minster to say the global economy faces a “worse situation” than in 2008 — there was evidence that the financial system remains under severe stress despite the freak out over Wednesday’s move by the Federal Reserve to lower dollar funding costs for foreign banks (which, as I discussed at the time, wasn’t really a game changer). The European Central Bank reported that eurozone banks borrowed nearly €9 billion in overnight emergency cash — up from €2.7 billion earlier this week. Not good.

Other signs of strain could be seen in the way German 12-month bill yields dropped below zero on Wednesday as European investors were willing to pay Berlin for the luxury of lending it money. The motivation is that, if you’re holding a big wad of euros, German short-term debt is one of the few “sure bets” left out there. It’s a sign of extreme risk aversion and fear.

Of course, the epicenter for all this is Europe.

Adding to concerns were comments this week from new ECB chief Mario Draghi that while downside risks to the economic outlook have increased, he cannot ride to Europe’s rescue by engaging in unmitigated money printing and bond buying; instead, it must adhere to its founding principles, including an inability to engage in monetary financing of government debts (exactly what the likes of Italy would love right now).

Draghi’s comments were akin to yelling “fire” in a crowded theater before announcing all the fire extinguishers are empty. Whoops.

According to the team at Capital Economics, based in London, the eurozone economy is on track to contract by 1% next year and by 2.5% in 2013, with risks to the downside for both forecasts. Recession will only deepen the budget deficits at the center of the eurozone debt crisis. The only way out is growth. And the only way the likes of Greece, Portugal, and Italy can restore growth is via massive currency depreciation and domestic inflation — something that’s not going to happen as long as they’re in the eurozone.

Sure, there will be distractions like Wednesday’s move by the Fed or additional stimulus measures out of places like China and Brazil. That’s just how the market gods like it. All the better to keep the masses confused and complacent as the fundamentals just get worse and worse.

To put it differently: When you look around the theater, everyone’s still focused on center stage blissfully unaware what’s happening around them. Turn around. The balcony level is in flames.

The Economy Is About To Get A Lot Worse – Anthony Mirhaydari, MSNBC

A Future Prediction

Analysis & Commentary No Responses »

Nov 272011

The governments, regulators and bullion banks have let the silver market get more and more leveraged. We’ve seen a lot of wealth destruction as a result of this leverage and we’re going to see a lot more until, finally, the governments decide to change the system
I don’t buy the argument on margin hikes at all.

It’s not up to them to decide what is parabolic. They’re not investors themselves. They don’t have money in the market. They decide a bubble is going to happen if they don’t raise margins but no one knows when a bubble is forming. It is only apparent after it’s already happened. By hiking the margins, they create the appearance of a bubble bursting. They create the bubble. They create the proof that it was a bubble. If they let it alone, the market would stabilize by itself

The job of the regulators is to protect the retail investor. That’s their only job. It’s not to protect the banks or the brokerage firms. The little guy is the primary taxpayer. Why were the Securities and Exchange Commission (SEC) and the CFTC put in place? They were put in place to protect retail investors. Prior to regulation, the banks controlled the market. Today, the banks control the market again. Who should control the market? Retail investors. Who’s protecting them? No one.
Are you saying that the CFTC does nothing while the COMEX caters to banks and brokerage firms?
Yes.

And the COMEX doesn’t serve retail investors?

No. Absolutely not.

Do you foresee a return to a free market in the future?

I’m an optimist. I believe one day that governments will rewrite the rules and force the regulators to protect investors. That’s where we were back in the ‘70s and that’s where I think we have to be again to correct the problems that have arisen over the past 40 years. Silver is being revalued. It’s going to affect a lot of people along the way and it will change the financial system. Ultimately, we’re going to have a new financial system and, hopefully, we’ll go back to natural markets, completely driven by supply and demand. It may take another 20 years but I think it will happen.

A new financial system?

If I’m wrong, the banks will run the world, even more so than they do today, 10 or 20 years from now. God forbid that we ever get there because that’s a one currency, one government world that would absolutely be a disaster for the human race. There would be no freedoms at all to move or to invest. It would be like having shackles on our ankles. There is a movement to go in that direction, unfortunately. There are a number of very wealthy people that want to see that. I hope that we can find the politicians to prevent that type of world from coming to pass.

Keith Neumeyer

Chief Executive Officer, President and Director of First Majestic Silver Corp. (AG). Mr. Neumeyer began his career at the Vancouver Stock Exchange and worked in the investment community for 26 years beginning his career in a series of Canadian national brokerage firms including McLeod Young Weir (now Scotia McLeod), then Richardson Greenshields and then Walwyn Stogell McCuthchen (which became Midland Walwyn).

Mr. Neumeyer moved on to work with several publically traded companies in the natural resource and high technology sectors. His roles have included senior management positions and directorships in the areas of finance, business development, strategic planning and corporate restructuring. Mr. Neumeyer, who has listed a number of companies on the Toronto Stock Exchange, has extensive experience dealing with financial, regulatory, legal and accounting issues.

Time To Move To Cash?

Analysis & Commentary, Back to the basics, Cash Is King! No Responses »

Nov 272011

Is it time to exit the stock market and move to cash?

What looks like the most logical move for stock investors may not end up being the best move. We have a situation in Europe that is teetering on the brink of full-blown crisis that would likely result in a global financial contagion. Such an outcome would be decisively negative for stocks. Thus, moving fully from stocks to cash might almost appear like a no brainer.

But making such a decisive move amplifies a particular element of risk in your portfolio. It is policy risk. And it is measured by the actions or lack thereof by global fiscal and monetary policy makers in addressing the various crises that arise along the way. Just as the lack of any policy action is a downside risk, the execution of aggressive policy action is a profound upside risk for stocks. Therefore, while waiting for policy action that never comes can be perilous, it can be equally crushing to exit the stock market just as unexpectedly aggressive policy action sends the stock market soaring.

The primary challenge in managing policy risk is that it is difficult to measure. This is due to the fact that it is highly dependent on the whims of human behavior and decision-making. On what day, if ever, does German Chancellor Angela Merkel suddenly decide that Eurobonds may actually be a good idea? At what hour, if at all, does the European Central Bank opt to announce that they will engage in quantitative easing through the large scale asset purchases of the bonds of at risk sovereigns across the eurozone? And at what moment, and to what scale, does U.S. Fed Chairman Ben Bernanke decide to begin pulling the trigger on QE3? While investors can spend their days reading various tea leaves, there’s no telling exactly when during times of crisis that policy makers may finally be compelled to act if at all. This leaves stock investors on a constant tight rope since the two outcomes associated with policy action and policy inaction are so widely divergent. Stay in the stock market that receives no policy support and suffer further declines, or exit the stock market that suddenly receives policy support and miss a dramatic rally. Frustrated stock investors have to look no further than the afternoon of October 4to see how swiftly the market can shift, seemingly without any reason whatsoever other than the policy response – Operation Twist in this case – that often only becomes apparent in retrospect.

So what is an investor to do? All signs out of Europe indicate that it’s time to get out of stocks and get to the sidelines. But we could wake up on any given day and the stock market is suddenly soaring behind some extraordinary (or perceived to be extraordinary) policy response from the ECB, eurozone leaders and/or the Fed. So what is the answer? It’s not necessarily about choosing between stocks or cash. Instead, it’s about hedging your stock positions with allocations that include cash.

It should not be a question of stocks OR cash in the current environment. Instead, the answer is stocks AND cash along with a variety of other complementary positions that are designed to withstand crisis and have the potential to perform when stocks are under extreme pressure. This way, stock investors can more effectively manage against policy risk so that they can participate if stocks suddenly rise due to aggressive policy action but are also protected if stocks continue to fall.

Time To Move To Cash? by Eric Parnell

The idea of war for and on another planet

A Moral Question - Not A Political One, A Shareholder-Not Just a "Stakeholder", Analysis & Commentary No Responses »

Nov 062011

Meanwhile, the Chinese, twenty years ago, set up a plan for space which they are steadily achieving. They have hit every target so far, Paul Murdin said, though not precisely on time. Their next big goal is to colonise the Moon and he’s quite sure that they will. This scares the USA, he says, because it is still interested in global competition, even though it is not feeding its own space programme at the moment. But space programmes can be recreated, as Kennedy did when he created NASA to put men on the Moon.

There is a tendency to compare the Moon with the Antarctic and say that it will belong to everybody and nobody. This was dismissed by those around the table. Paul Murdin didn’t even think it would really apply to the Antarctic much longer. He’d been in Australia when there was a row about Australian scientists putting up a statue of a famous Australian explorer in the Antarctic. The committee demanded to know why waste so much money. It was explained that they were staking a claim. The committee demanded to know why the statue wasn’t much, much bigger.

The idea of war for and on another planet (starting with the Moon) has ceased to be H G Wells and is coming into view, it seems.

Melvyn Bragg

Marx Versus Capitalism Versus You

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Oct 222011

At Naked Capitalism:

It is a measure of how un-self critical modern economics has been, that the Marxists are starting to appear to be making the most sense of the current crises. The supine acceptance that “the market is always right” — a truism only to traders and vested interests — means that there has been precious little understanding developed about how markets can go wrong. Or what is wrong, as well as right, with markets and the modern practices of capitalism. An article in the London Review of Books came to my attention recently by Benjamin Kunkel that shows how Marxist analysis is actually looking quite pertinent to the current mess.
Read the Rest…

Missteps to Mayhem

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Oct 102011

Inside the Doomsday Machine with the outsider who predicted and profited from America’s financial Armageddon.

by Michael Burry, MD’97

I worry about the future of a nation that would refuse to acknowledge the true causes of the crisis. A historic opportunity was lost. America instead chose its poison as its cure, and the second “Greatest Generation” would never be born.

Today I expect the U.S. government to attempt continuing an easy money policy into the next presidential term—past the meat of the foreclosure crisis, and past the corporate and public financing humps that are upcoming. Junk bonds, incredibly, again are at all-time highs. Quantitative easing seems to be working for now. But this is an invalid validation of what America is doing, a Pyrrhic gamble. As we continue to debase our currency, Bernanke says he is not printing money. Yet I receive an email every day from the Fed saying we just bought another $7 billion or $8 billion in treasuries, monetizing the debt. The scope and breadth of quantitative easing raise severe questions about the Treasury’s needs.

Government borrowing of money for the purpose of injecting cash into society, bailing out banks, brokers and consumers, is an easy decision for a population that has not yet learned that short-sighted easy strategies are the route to long-term ruin. We never quite achieved the catharsis necessary to stoke a deep reevaluation of our wants, needs and fears.

Importantly, the toxic twins—fiat currency and an activist Fed—remain even more firmly entrenched with the financial reforms of last year. The Federal Reserve, having acquired new powers of regulation, has insisted that nothing in the field of economics or finance was of any help in predicting the crisis—period, no more comments. It’s a worthless conclusion that guarantees we’ll make the same mistake again and again.

We need better leaders, but frankly this isn’t going to happen. A problem cannot be solved if it is never acknowledged.

Taxes need to be raised, spending needs to be cut, and loopholes need to be shut if we are to have any hope of returning to a stable base. Home ownership should not be a policy of the U.S. government. The banking system needs substantial reform and bank breakups. Glass–Steagall needs a second run in a strong form. And 22.5 million public workers have no business unionizing against the taxpayer. The list of things that won’t happen—but should happen—goes on and on.

By 2020, interest expense on our national debt could very well exceed $1 trillion. All personal income taxes collected in the U.S. in one year do not total $1 trillion. Our country’s math is scary big, but even scarier is that it simply doesn’t work…

Read the rest here.

Some things never change…

A Moral Question - Not A Political One, A Time To Repent, Analysis & Commentary No Responses »

Sep 252011

A remarkable document has been placed today on the “London Banker” blogsite, the testimony of Marriner Eccles to the Senate Finance Committee in early 1933. His testimony later was rewarded by President Roosevelt by bringing Eccles to Washington to help write or draft several seminal laws that essentially saved US capitalism from itself. In fact, “London Banker” highlighted this particular passage from Eccles’ testimony:

It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving. They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they can not save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying. It is for the interests of the well to do – to protect them from the results of their own folly – that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not “soaking the rich”; it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment.

Where are people such as Marriner Eccles today?

I strongly recommend reading the post in full. Eccles gave a eloquent diagnosis of how the Depression became so severe and intractable, and a cogent, layperson friendly set of recommendations. I have yet to see any similar length discussion of our current crisis that is as clear and compelling.

BUSH’S TRAGIC LEGACY

A Changing Europe, A Moral Question - Not A Political One, A State of Distress, A Time To Repent, Analysis & Commentary No Responses »

Sep 122011

How 9/11 Triggered America’s Decline

The events of Sept. 11, 2001 led to a wave of solidarity with the US. But the superpower has lost that goodwill over the course of the wars it subsequently waged. Now America is mainly seen not as the victim of terrorism, but as a perpetrator of violence itself.

*****************

Ten Lost Years

Ten years have passed since Sept. 11, 2001, and today only losers remain. Islam has been taken hostage by blinded ideologues. The West has betrayed its values in its struggle against terror, and we are now burdened with Islamophobes. Without 9/11, the crimes of Anders Behring Breivik and the rise of right-wing populists in Europe would be inconceivable.

Politicians playing poker – Pig-Headed Economic Policy May Still Lead to Disaster

Analysis & Commentary, Dismal Science-Ignorant Scientists?, Pig-Headed Economic Policy May Still Lead to Disaster, Political Chaos, Political Implications, Read and Weep Entries No Responses »

Jun 192011

The reasons for the lull suggest it should be temporary. First, the tsunami in Japan sent its GDP tumbling and disrupted supply chains, and thus industrial output, around the world, particularly in April. But just as that slump shows up in the economic statistics, more forward-looking evidence points to a rebound. The summer production schedules of American car firms, for instance, indicate that the pace of annualised GDP growth there will accelerate by at least a percentage point.

Second, demand was dented by a sudden surge in oil prices earlier this year. More income is being shifted from cash-strapped consumers in oil-importing countries to producers who tend to sit on their treasures. Costlier fuel has knocked consumer confidence, particularly in gas-guzzling America. And there is still an uncomfortable possibility that further instability in the Arab world will send prices soaring again. Nonetheless, at least for now, the pressure is waning. America’s average petrol price, though still 21% higher than at the beginning of the year, has started to fall. That should boost shoppers’ morale (and their spending).

Third, many emerging economies have tightened monetary policy in response to high inflation. China’s consumer-price inflation accelerated to 5.5% in the year to May. India’s wholesale prices leapt by 9.1%. Slower growth is, in part, a welcome sign that their central banks have taken action, and that those measures are beginning to work. There is no evidence that they have gone too far, even in China, where the worries about bringing the economy down with a bump are loudest. The bigger risk is that nervousness about a weakening world economy leads to a premature pause in the tightening. With monetary conditions still extraordinarily loose, such a loss of resolve would make higher inflation and an eventual crash far more likely.

A growth lull may be just what most emerging markets need, but it is the last thing that any advanced economy wants at the moment. The recovery in the rich world is weak and vulnerable, as recoveries tend to be after balance-sheet recessions. This lull is particularly dangerous because it coincides both with a move away from fiscal and monetary stimulus and with an outbreak of risky political brinkmanship on both sides of the Atlantic.

Pig-Headed Economic Policy May Still Lead to Disaster – The Economist

THE WORLD FROM BERLIN

A Changing Europe, A State of Distress, Analysis & Commentary, Back to the basics, Beer Here!, Bilderbergers 1 Germany 0, Collateral Damage, Coming Social Unrest, Patience is a virtue...Delusion is a vice, PIIGS, PIIGS Default?, Political Chaos, Political Implications No Responses »

Apr 102011

‘Euro-Zone Leaders Need the Courage to Tell the Truth’

A day after Portugal formally requested aid from the European Union to help ease ongoing debt problems, Madrid on Friday insisted that it was “out of the question” that Spain would be next. German commentators aren’t so sure, and say that it’s time for European leaders to reveal the true extent of the problems.

Paul Krugman does an excellent job of summarizing the genesis of the current crisis:

THERE’S SOMETHING peculiarly apt about the fact that the current European crisis began in Greece. For Europe’s woes have all the aspects of a classical Greek tragedy, in which a man of noble character is undone by the fatal flaw of hubris.

Enlarge This Image

Alfredo Falvo/Contrasto/Redux

ROME Students protested planned changes in the university system on Dec. 22 in Italy, where youth unemployment is about 25 percent.

Not long ago Europeans could, with considerable justification, say that the current economic crisis was actually demonstrating the advantages of their economic and social model. Like the United States, Europe suffered a severe slump in the wake of the global financial meltdown; but the human costs of that slump seemed far less in Europe than in America. In much of Europe, rules governing worker firing helped limit job loss, while strong social-welfare programs ensured that even the jobless retained their health care and received a basic income. Europe’s gross domestic product might have fallen as much as ours, but the Europeans weren’t suffering anything like the same amount of misery. And the truth is that they still aren’t.

Yet Europe is in deep crisis — because its proudest achievement, the single currency adopted by most European nations, is now in danger. More than that, it’s looking increasingly like a trap. Ireland, hailed as the Celtic Tiger not so long ago, is now struggling to avoid bankruptcy. Spain, a booming economy until recent years, now has 20 percent unemployment and faces the prospect of years of painful, grinding deflation.

The tragedy of the Euromess is that the creation of the euro was supposed to be the finest moment in a grand and noble undertaking: the generations-long effort to bring peace, democracy and shared prosperity to a once and frequently war-torn continent. But the architects of the euro, caught up in their project’s sweep and romance, chose to ignore the mundane difficulties a shared currency would predictably encounter — to ignore warnings, which were issued right from the beginning, that Europe lacked the institutions needed to make a common currency workable. Instead, they engaged in magical thinking, acting as if the nobility of their mission transcended such concerns.

The result is a tragedy not only for Europe but also for the world, for which Europe is a crucial role model. The Europeans have shown us that peace and unity can be brought to a region with a history of violence, and in the process they have created perhaps the most decent societies in human history, combining democracy and human rights with a level of individual economic security that America comes nowhere close to matching. These achievements are now in the process of being tarnished, as the European dream turns into a nightmare for all too many people. How did that happen?

THE ROAD TO THE EURO
It all began with coal and steel. On May 9, 1950 — a date whose anniversary is now celebrated as Europe Day — Robert Schuman, the French foreign minister, proposed that his nation and West Germany pool their coal and steel production. That may sound prosaic, but Schuman declared that it was much more than just a business deal.

For one thing, the new Coal and Steel Community would make any future war between Germany and France “not merely unthinkable, but materially impossible.” And it would be a first step on the road to a “federation of Europe,” to be achieved step by step via “concrete achievements which first create a de facto solidarity.” That is, economic measures would both serve mundane ends and promote political unity.

The Coal and Steel Community eventually evolved into a customs union within which all goods were freely traded. Then, as democracy spread within Europe, so did Europe’s unifying economic institutions. Greece, Spain and Portugal were brought in after the fall of their dictatorships; Eastern Europe after the fall of Communism.

In the 1980s and ’90s this “widening” was accompanied by “deepening,” as Europe set about removing many of the remaining obstacles to full economic integration. (Eurospeak is a distinctive dialect, sometimes hard to understand without subtitles.) Borders were opened; freedom of personal movement was guaranteed; and product, safety and food regulations were harmonized, a process immortalized by the Eurosausage episode of the TV show “Yes Minister,” in which the minister in question is told that under new European rules, the traditional British sausage no longer qualifies as a sausage and must be renamed the Emulsified High-Fat Offal Tube. (Just to be clear, this happened only on TV.)

The creation of the euro was proclaimed the logical next step in this process. Once again, economic growth would be fostered with actions that also reinforced European unity.

The advantages of a single European currency were obvious. No more need to change money when you arrived in another country; no more uncertainty on the part of importers about what a contract would actually end up costing or on the part of exporters about what promised payment would actually be worth. Meanwhile, the shared currency would strengthen the sense of European unity. What could go wrong?

Red the entire article at NYT:

Can Europe Be Saved?

By PAUL KRUGMAN

Is there any way to save Europe’s democracies from sinking together in the ill-conceived currency union?

Then the bubble burst

A State of Distress, Analysis & Commentary No Responses »

Dec 192010

The bipartisan Financial Crisis Inquiry Commission was established by law to “examine the causes, domestic and global, of the current financial and economic crisis in the United States.” The hope was that it would be a modern version of the Pecora investigation of the 1930s, which documented Wall Street abuses and helped pave the way for financial reform.

Instead, however, the commission has broken down along partisan lines, unable to agree on even the most basic points.

It’s not as if the story of the crisis is particularly obscure. First, there was a widely spread housing bubble, not just in the United States, but in Ireland, Spain, and other countries as well. This bubble was inflated by irresponsible lending, made possible both by bank deregulation and the failure to extend regulation to “shadow banks,” which weren’t covered by traditional regulation but nonetheless engaged in banking activities and created bank-type risks.

Then the bubble burst, with hugely disruptive consequences. It turned out that Wall Street had created a web of interconnection nobody understood, so that the failure of Lehman Brothers, a medium-size investment bank, could threaten to take down the whole world financial system.

It’s a straightforward story, but a story that the Republican members of the commission don’t want told. Literally.

Wall Street Whitewash Paul Krugman, New York Times

Every society since the “primitives” has traded and has had very sophisticated oral agreements that were enforced by intricate traditions and customs

Analysis & Commentary No Responses »

Dec 122010

Matt Ridley’s latest book, The Rational Optimist: How Prosperity Evolves(Harper, 2010), addresses history with a big “H” and dabbles in futurism. Bill Gates, in an exchange with Ridley, notes that though he disagrees with Ridley’s futurism, he admits that there are two ideas in the book that are powerful and important.

The first is that “trade” has been a key to rising prosperity over the course of human history. No argument there, but no novelty either. Adam Smith’s “instinct to barter” has been by now dissected to esoteric boredom, though Ridley manages to put some new life in his narrative.

The second idea is “rational optimism.” Ridley argues that there is no reason to be pessimistic about not solving problems that have been plaguing Africa or those linked to climate change. He argues that humanity has been good at coming up with solutions. Bill Gates, however, remains concerned and recommends urgent action.

Surprisingly, neither one addresses key issues. And Ridley, more than Bill Gates, misses the forest for the trees. The book is like Hamlet without the ghost.

What Drives Innovation and Rational Optimism – Reuven Brenner, Forbes

The real Jamie Dimon

Analysis & Commentary No Responses »

Dec 052010

Back in 2004, way before the mortgage bust and before Americans thought of banks as four-letter words, Jamie Dimon took charge of JPMorgan Chase & Company. Known as a tough, hands-on manager, Dimon was supposed to avert the sort of foolish risks that tempted so many of his peers. And sure enough, he was different.

Headshot of Jamie D

Instead of reviewing brief summaries of the bank’s operations, as his predecessor had, Dimon demanded to see the raw data — hundreds of pages detailing J. P. Morgan’s businesses every month. Instead of simply trusting his traders, Dimon put himself through a tutorial, so that he would understand the complex trades the bank was exposed to. And rather than run its mortgage machine at full throttle for as long as possible, Dimon reined in lending earlier than did others and warned his shareholders of looming trouble.

Jaime Dimon: Our Least-Hated Banker – Roger Lowenstein, New York Times
Jaime Dimon: Most Dangerous Banker – Simon Johnson, Huffington Post

Sovereignty is the quality of having supreme, independent authority over a geographic area, such as a territory.

****************************************************************************

European Council

President of the European Council, Herman Van Rompuy.

The European Council gives direction to the EU, and convenes at least four times a year. It comprises the President of the European Council, the President of the European Commission and one representative per member state; either its head of state or head of government. The European Council has been described by some as the Union’s “supreme political authority”.^[58] It is actively involved in the negotiation of the treaty changes and defines the EU’s policy agenda and strategies.

The European Council uses its leadership role to sort out disputes between member states and the institutions, and to resolve political crises and disagreements over controversial issues and policies. It acts externally as a “collective Head of State” and ratifies important documents (e.g. international agreements and treaties).^[59]

On 19 November 2009, Herman Van Rompuy was chosen as the first permanent President of the European Council. On 1 December 2009, the Treaty of Lisbon entered into force and he assumed office. Ensuring the external representation of the EU,^[60] driving consensus and settling divergences among members are tasks for the President both during the convocations of the European Council and in the time periods between them.

***************************************************************************

The EU became illegitimate when it refused to accept the rejection of theEuropean Constitution by French and Dutch voters in 2005. There can be no justification for reviving the text as the Lisbon Treaty and ramming it through by parliamentary procedure without referenda, in what amounted to an authoritarian Putsch. (Yes, the national parliaments were themselves elected – so don’t write indignant comments pointing this out – but what was their motive for denying their own peoples a vote in this specific instance? Elected leaders can violate democracy as well. There was a corporal from Austria … but let’s not get into that).

Ireland was the one country forced to hold a vote by its constitutional court. When this lonely electorate also voted no, the EU again disregarded the result and intimidated Ireland into voting a second time to get it “right”.

This is the behaviour of a proto-Fascist organization, so if Ireland now – by historic irony, and in condign retribution – sets off the chain-reaction that destroys the eurozone and the European Union, it will be hard to resist the temptation of opening a bottle of Connemara whisky and enjoying the moment. But resist one must. The cataclysm will not be pretty.

The horrible truth starts to dawn on Europe’s leaders Ambrose Evans-Pritchard, Telegraph

Downward Spiral

A State of Distress, AIG and all that....., Analysis & Commentary, Collateral Damage No Responses »

Oct 302010

Invest by the numbers, not the political rhetoric. Right now the numbers are lousy and downright frightening.

Robert Lenzner

In housing, the Case-Shiller home price index fell almost 3% on an annualized basis in August and September, the weakest performance since May of 2009 when the recession still going on. In 19 of the top 20 cities, prices were down on a seasonally adjusted basis. During the July, August, September period sales of new homes fell at a sickening 41% annual rate to 293,000 units the lowest level ever recorded going back to 1963, when the figures were first kept.

In unemployment, emergency benefits to extend 99 weeks (almost two years) of unemployment benefits are running out or for some 4 million to 5 million people from December through April. This is proof positive that we are on the cusp of a deepening poverty at the very moment of political stalemate. Rosenberg says government handouts are responsible for 20% of disposable income in the country, so pray for the stability of the Social Security system. In personal Income, this loss of unemployment benefits means a loss of income equal to about $300 a week, or about $80 billion totted up, unavailable for consumption

I have seen no other market strategist get down to the prospects for the people at the bottom of the income ladder. Did you know that 38% of middle income families plan to spend less than $500 on holiday gifts, double the number last year?

Nitty Gritty Numbers Suggest a Downward Spiral – Robert Lenzner, Forbes

If you don’t drink the tea you will love this

Analysis & Commentary No Responses »

Oct 032010

Tea & Crackers Matt Taibbi, Rolling Stone

This is an article from the October 15, 2010 issue of Rolling Stone.

It’s taken three trips to Kentucky, but I’m finally getting my Tea Party epiphany exactly where you’d expect: at a Sarah Palin rally. The red-hot mama of American exceptionalism has flown in to speak at something called the National Quartet Convention in Louisville, a gospel-music hoedown in a giant convention center filled with thousands of elderly white Southerners. Palin — who earlier this morning held a closed-door fundraiser for Rand Paul, the Tea Party champion running for the U.S. Senate — is railing against a GOP establishment that has just seen Tea Partiers oust entrenched Republican hacks in Delaware and New York. The dingbat revolution, it seems, is nigh.

“We’re shaking up the good ol’ boys,” Palin chortles, to the best applause her aging crowd can muster. She then issues an oft-repeated warning (her speeches are usually a tired succession of half-coherent one-liners dumped on ravenous audiences like chum to sharks) to Republican insiders who underestimated the power of the Tea Party Death Star. “Buck up,” she says, “or stay in the truck.”

Stay in what truck? I wonder. What the hell does that even mean?

——————

An interested rather over the top perception of the tea party emergence…

——————-

War leads to prosperity!…Think again.

Analysis & Commentary, Back to the basics, Deficit Death Spiral, Deflation-Inflation-Stagflation, Deleveraging, Dismal Science-Ignorant Scientists?, Economic Analysis Isn't Science, Insolvency, Integrity and Responsibility, Is The Market Rally Real?, It Is Nice To Be Part of the Elite!, It Is Supposed to be a Republic!, It starts with a foundation, Let's Call What It Is - DEPRESSION, Moral Hazard, Negative Cash Flow, Obama Bingo, Obama's Hypocrisy, Our phony middle class, Patience is a virtue...Delusion is a vice, Political Chaos, Small Business-Bedrock of America, Smaller Can Be Better, Socialism, TARP fruit loops, Taxes, Taxes and Taxes, The American Financial Oligarchy, The Arrogance of Power, The Consequences of Greed, The Democrats Blew It Again, The End of American Capitalism As We Know It? - Discuss, The excellent adventures of Ben Bernanke, The Importance of Strategic Planning, The Inherent Disorder of Empires, The Intrusion of UNLAWFUL Authority, The New American Socialism, The Obama OMG magic factory, The Sorry State Of American Manufacturing, The Suffering Poor, Unemployment Catastrophe, Unindicted Co-Conspiritors, Unintended Consequences, US Trade Imbalance, USA Is the New Japan, Wage Deflation, Watch The China Market, We Are All Cooked, We Have Become Beggars To The World, Who Guarantees the Guarantor?-You Do!, Who owns Congress-Still! No Responses »

Sep 122010

The Nobel Prize committee has never withdrawn a prize. It might want to consider it. In Tuesday’s New York Times, prizewinner in economics, Paul Krugman reveals either that he knows nothing about economics…or that there is nothing worth knowing in it. We’re beginning to think it’s the latter.

“From an economic point of view,” he writes, “World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Deficit spending created an economic boom – and the boom laid the foundation for long-run prosperity….”

In the 1938 US elections, voters showed what they thought of the New Deal; Democrats lost 70 seats in the House. Then as now, the public had lost faith in public spending, says Krugman. Nearly two out of three of those polled said they were opposed to stimulus efforts. Roosevelt buckled under the pressure; he drew back from further spending to fight the slump.

Thank God for WWII! No one opposes military spending in time of war. Krugman made his position clear in 2008 in his New York Times blog.

“The fact is that war is, in general, expansionary for the economy, at least in the short run. World War II, remember, ended the Great Depression.”

According to this line of thinking, the best form of stimulus spending is money spent on the military. It creates consumer demand without creating consumer supply. Consumer prices rise; people spend. The slump is soon over.

But if WWII helped the US economy, think what it must have done for Japan; proportionally, its stimulus efforts dwarfed those of the US…and began much earlier. Just this week, Ichiro Ozawa, running for prime minister of Japan, vowed to take “every measure” to lower the yen and promised a stimulus package more than twice as big as the current program. He was just following in the footsteps of Japan’s leaders from the ’30s. It was “economic security” they said they were after. And they thought they could get it by central planning and government spending. Military spending rose from 31% of the budget in the early ’30s to nearly 50% five years later. By the early ’40s it was around 70% and nearly 100% later on. Deficits and debt soared.

Did that create a boom? You bet it did. Japan was the first nation to get out of the global slump. It boomed…and boomed…and ka-boomed. When it came to warships, planes, and soldiers, Japan was soon among the richest nations in the world. Yes, Americans had more electric fans, automobiles, central heating, aspirin, ice cream, and the rest of the paraphernalia of civilized life at the time. In the mid-’30s, the US produced 40 times as many autos per person as did Japan. Even during the Great Depression, the US out-produced Japan by a factor of 7 and its workers earned 10-times as much money.

Economists can’t even measure real prosperity, let alone fiddle it. So they put on the GDP and employment numbers the way a bald man puts on a cheap wig. It makes him look ridiculous and fraudulent, but it’s the best he can do. Unemployment disappears in a war economy. Japan put a million men in uniform. Two million more were part-time reservists. Those who weren’t in the army were put to work building tanks and planes. By 1941, Japan could produce 10,000 planes a year. If you were a swallow you wouldn’t want to build your nest in Japan’s factory chimneys; they belched smoke night and day.

And talk about fiscal stimulus! Krugman would have loved it – stimulus unfettered by real money or even a casual regard for real prosperity. Takahashi Korekiyo was known as the “Japanese Keynes.” Gillian Tett notes in The Financial Times that he was assassinated in 1936 after he came to his senses and tried to bring state finances under control. He was done in by army officers who did not want the stimulus to stop. Not that we’re being judgmental about it. As far as we know, the quality of central banking could probably be improved by an occasional assassination.

Takahashi wasn’t the first. Before him Junnosuke Inoue had held out for the gold standard and balanced budgets. He was out of office by 1931 and out of luck in 1932, when he was murdered. The gold-backed yen was abolished the day he left office. Then, public spending, deficits, central planning, debt, and inflation ran wild. By 1939, the Japanese were spending $5 million a day on their war with China – a huge sum for the Japanese at the time.

Was the economy improved by all this spending? No, it was perverted…hammered into a grotesque imposter – a parody of a real economy. Most of the nation’s resources were put to work building things almost no one wanted. Then, after the attack on Pearl Harbor, the stimulus efforts were redoubled. Rations were reduced further. Working hours were extended. What few consumer items were available were three times as expensive at the end of the war as they had been when it began. Men were conscripted into factories and the army. Women were expected not only to make the tanks, but to join the home-guard and prepare themselves to repulse the American invaders with sharpened bamboo sticks. What a marvelous economy – operating at full capacity and full employment until General MacArthur finally put it out of its misery.

You say Obama; I say Ozawa! You say boom; I say ka-boom!

By Bill Bonner

Obama’s Economic “Plan”: Ten Times Less Than Adequate and Far, Far Too Late

Analysis & Commentary, Back to the basics No Responses »

Sep 072010

Obama’s Economic “Plan”: Ten Times Less Than Adequate and Far, Far Too Late Friedoglake

McCain, who was thoroughly beaten in the 2008 election in part because his economic policies were seen as too tied to the policies that produced the financial meltdown, now is calling for Bush’s tax cuts to be made permanent. Making the Bush tax cuts permanent has the pitiful stimulative factor of 0.29 in Zandi’s table. Inexplicably, the economist who is the “go to” source for why tax cuts are bad public policy when trying to stimulate the economy and who worked for McCain during that campaign, but now works for Democrats, is pushing tax cuts, apparently against his own advice. Note, however, that unlike McCain, who wants to make the cuts permanent, Zandi is advocating extending them a year or two.

That makes today’s announcement that Obama is backing off the prospect of hundreds of billions of dollars worth of payroll tax holiday appear to be good news. However, when we look at Zandi’s table, we see that payroll tax holidays have a stimulative effect of 1.29, so it is the “least bad” of tax cuts. With the $100 billion in R&D tax credits Obama is now proposing in its stead, the stimulative factor drops (that particular tax is hard to place into Zandi’s table, but likely would fall close to the value of 1.03 seen for across the board tax cuts).

Finally, Obama’s pitiful $30 billion (or is it $50 billion?) offered as infrastructure spending is a ridiculous move if it is meant to be evidence that he is attempting to do anything to stimulate the economy. Such spending would need to be higher by at least a factor of ten before it begins to even be worth putting into a Krugman-style analysis for its possible effect on reducing unemployment. Recall that in the previous analysis, Krugman worked from the assumption that it takes $300 billion of GDP growth in a year to reduce unemployment by 1%. If this “plan” is the best that the Obama economic team of geniuses can produce, Democrats don’t need to bother showing up for the 2010 or 2012 elections.

FDR’s Depression Policies: Good Deal or Raw Deal?

Analysis & Commentary No Responses »

Aug 292010

On July 9, 2010 at the FreedomFest Conference in Las Vegas (www.freedomfest.com), FEE president Lawrence W. Reed debated University of Nevada-Las Vegas economist Bernard Malamud on the subject of the New Deal policies of Franklin Roosevelt. This is a video recording of that 50-minute debate.

Get Audio File of FDR’s Depression Policies: Good Deal or Raw Deal?

Older Entries

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Why Is Jamie Dimon Still On The NY Fed Board?

The Most Important Economic Chart Of The Year

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Signs Point to Economy’s Rise, but Experts See a False Dawn

The evidence is building that global growth has stalled. And it’s about to get much worse.

A Future Prediction

Time To Move To Cash?

The idea of war for and on another planet

Missteps to Mayhem

Inside the Doomsday Machine with the outsider who predicted and profited from America’s financial Armageddon.

by Michael Burry, MD’97

Some things never change…

BUSH’S TRAGIC LEGACY

Politicians playing poker – Pig-Headed Economic Policy May Still Lead to Disaster

Then the bubble burst

Every society since the “primitives” has traded and has had very sophisticated oral agreements that were enforced by intricate traditions and customs

The real Jamie Dimon

Downward Spiral

Invest by the numbers, not the political rhetoric. Right now the numbers are lousy and downright frightening.

If you don’t drink the tea you will love this

War leads to prosperity!…Think again.

You say Obama; I say Ozawa! You say boom; I say ka-boom!

Obama’s Economic “Plan”: Ten Times Less Than Adequate and Far, Far Too Late

FDR’s Depression Policies: Good Deal or Raw Deal?

Analysis & Commentary