Saturday, May 30, 2009


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Stuff The Italians Used To Do

Historically, we don't own car companies -- or banks or insurance firms. But we do now. Tick them off on your fingers: GM, Citi, AIG. Oh, and let's not forget Fannie and Freddie, those big, quasi-government, taxpayer-owned housing agencies. California is broke and likely headed to bankruptcy. Will we the taxpayers own that, too?

Altogether, we're talking about hundreds of billions of taxpayer dollars that will never be repaid. This is the stuff the Italians used to do, and the Brits before Margaret Thatcher, and the Soviets a long time ago.
But it's something very new and very different for America.

Is this onslaught of government ownership an attack on free-market capitalism? Yes, it is. Call it Bailout Nation or Ownership Nation, it's an unprecedented degree of government command, control and planning, all in the name of a tough economic downturn.

And did I mention that Fiat gets a piece of Chrysler now?

P.J.: The Retreat

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P.J. O’ROURKE: “The fate of Detroit isn’t a matter of economics. It’s a tragic romance, whose magic was killed by bureaucrats, bad taste and busybodies.” Plus this: “We’re way the heck out here in Valley Bottom Heights and Trout Antler Estates because we were at war with the cities. We fought rotten public schools, idiot municipal bureaucracies, corrupt political machines, rampant criminality and the pointy-headed busybodies. . . . And thanks to our cars, when we lost the cities we weren’t forced to surrender, we were able to retreat.”

The Dead Children Can't Speak

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Still, anti-DDT activism led to hearings before an EPA administrative law judge during 1971-72.

After seven months and 9,000 pages of testimony, the judge concluded "DDT is not a carcinogenic hazard to man... DDT is not a mutagenic or teratogenic hazard to man... The use of DDT under the regulations involved here do not have a deleterious effect on freshwater fish, estuarine organisms, wild birds or other wildlife."

Despite the exculpatory ruling, then-EPA administrator William Ruckelshaus banned DDT anyway.

Ruckelshaus never attended the hearings, didn�t read the transcript and refused to release the materials used to make his decision.

This wasn�t surprising given Ruckleshaus� bias.

Ruckleshaus belonged to the Environmental Defense Fund, an activist group formed by the National Audubon Society to lobby for its agenda without endangering the Society�s tax-exempt status.

They built their "success" on junk science and the bodies of third world children.

No Nukes For Japan?

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While at a conference in Singapore with Asian defense leaders, Sec. Gates did a little podium thumping about North Korea’s recent nuclear test:

“We will not stand idly by as North Korea builds the capability to wreak destruction on any target in Asia — or on us,” Mr. Gates told a major defense conference here that has been dominated by North Korea’s test this week of a nuclear device and the firing of at least six short-range missiles, all in defiance of international sanctions.

It took a foreign journalist to point out to Sec. Gates that while the US may not recognize North Korea as a nuclear weapons state, it was, in fact, already a “defacto nuclear weapons state.”

“We are resolutely opposed to nuclear proliferation,” General Ma said, adding that “we hope that all parties concerned will remain cool-headed and take measured measures to address the problem.”

China is resolutely opposed to nuclear proliferation only after NoKo. That means it wants no nukes in Japan.

Good luck with that. And frankly, the whole concept is silly. Japan is technically capable of doing pretty much anything it wants -- in days not weeks -- almost regardless of the technology involved.

And given that estimates are that they have enough nuclear material for, oh, 4000 or so nukes stored up from operating their nuclear reactors, well it's all, shall we dare say, a "kabuki dance".

And did I forget to mention that the NorKorComs are nuttier than cuckoo-clocks?

In Thrall

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Of course, Mr Krugman knew what I meant. "The only thing that might drive up interest rates," he acknowledged during our debate, "is that people may grow dubious about the financial solvency of governments." Might? May? The fact is that people - not least the Chinese government - are already distinctly dubious. They understand that US fiscal policy implies big purchases of government bonds by the Fed this year, since neither foreign nor private domestic purchases will suffice to fund the deficit. This policy is known as printing money and it is what many governments tried in the 1970s, with inflationary consequences you do not need to be a historian to recall.

It was Keynes who noted that "even the most practical man of affairs is usually in the thrall of the ideas of some long-dead economist". Today the long-dead economist is Keynes, and it is professors of economics, not practical men, who are in thrall to his ideas.

Redux: Peter Schiff On Russia Today

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I'd Call It Hypocrisy But That's Somehow Not Sufficient

Exactly As Intended

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As we know, most of the stimulus spending does not take place until next year and beyond, so the short-run gains are puny. On the other hand, the big increase in the projected deficit creates the expectation of higher interest rates, which raises interest rates now. These higher interest rates serve to weaken the economy.

According to this standard analysis, the stimulus is going to hurt GDP now, when we could use the most help. Much of the spending will kick in a year or more from now, with multiplier effects following afterward, when the economy will need little, if any, stimulus.

This is the flaw with using spending rather than tax cuts as a stimulus. The lags are longer when you use spending.

Of course, if the real goal is to promote government at the expense of civil society and to create a one-party state in which business success is based on political favoritism, then the stimulus is working exactly as intended.


Losing Un-America

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TED RALL thinks Obama should resign. “We expected broken promises. But the gap between the soaring expectations that accompanied Barack Obama’s inauguration and his wretched performance is the broadest such chasm in recent historical memory. This guy makes Bill Clinton look like a paragon of integrity and follow-through.” I think this is just something Axelrod set up to make Obama look more centrist . . . .

UPDATE: Rand Simberg emails that Rall is probably bitter and clinging to his lack of religion because he got laid off. And the “stimulus” doesn’t look likely to save him.

MORE: “If Obama’s lost Ted Rall, he’s lost un-America.” Heh. Now that’s funny. Plus, a stroll down memory lane.

Friday, May 29, 2009


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STIMULUS! Crude Oil Caps Biggest Monthly Gain Since 1999 on Dollar Drop. Money quote: “The devaluation of the dollar is leading to the revaluation of energy and commodities in general.” Nothing says “economic recovery” like “expensive oil!”

The Spending This Time

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No Decoupling? Really?

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Man O Straw

Ross almost sounds like he’s debunking a strawman when he says believers in the theory of ‘linkage’ think “all other Middle East conflicts would melt away” if only the Palestinians had a state. I don’t know if President Barack Obama would go that far, but former President Jimmy Carter nearly does. “Even among the populations of our former close friends in the region,” Carter said, “Egypt and Jordan, less than 5 percent look favorably on the United States today. That’s not because we invaded Iraq; they hated Saddam. It is because we don’t do anything about the Palestinian plight. Without doubt, the path to peace in the Middle East goes through Jerusalem.

The populations of Egypt, Jordan, and other Arabic countries have a nearly inexhaustible list of grievances against the United States. Many are based on phantasmagoric and state-manufactured conspiracy theories that have nothing to do with the West Bank, Gaza, or anything else in the real world.

COTD: Today's FDR=O Duce Nugget

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Both of my late parents switched to Republican when FDR ran for his fourth term. He was obviously dying and they thought his running again was a fraud. (As it turned out Harry Truman had the guts to drop the bomb, so their concern was misplaced.)

If they were alive today they'd be well into their 100s - and there is no way they would ever have voted for Obama.

Cycles Illustrated

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The Dow (DJIA) to Gold (Au) ratio: You can think of the ratio as the balance between enthusiasm and fear. When we are enthusiastic for our financial prospects, the Dow is higher. When we have financial fear of losing our assets, we value gold more. While gold is not a productive asset, it is a relatively safe one. In contrast, investing in business and the Dow is a productive asset, but a relatively unsafe one. You can also consider the ratio to be the changes in the Dow corrected for inflation by basing it on gold or Dow per unit of gold.

The Great Depression, the Carter Stagflation, and the Bush-Obama Downturn all follow a pattern that is striking: The economic peaks are separated by almost exactly 35 years. There are also suggestive patterns in politics, military affairs, and technology, all of which are tied into the repeating pattern.

Perhaps we can use this to see where we are and where we will go financially, politically, and technologically.

Thursday, May 28, 2009


And please don’t be taken in by the predominant liberal view that the best economy is a “mixed economy,” or a “blended” one.

In actuality, there is no such a thing. That is also collectivism.

Private ownership of the means of production (market economy or capitalism) and public ownership of the means of production (socialism or communism or “planning”) can be neatly distinguished. Each of these two systems of society’s economic organization is open to a precise and unambiguous description and definition. They can never be confounded with one another; they cannot be mixed or combined; no gradual transition leads from one of them to the other; they are mutually incompatible. With regard to the same factors of production there can only exist private control or public control (Ludwig von Mises, Human Action, Chapter 27).

In short, any kind of blended system — or “hampered economy” — effectively means rule by lobbyists.

Big Stones

I decided to stick to direct quotes from the President within the last 18 months. Some I have commented on, the others, as they say at Harvard Law, res ipsa loquitur.    

1)  ”…not because I believe in bigger government — I don’t — not because I’m not mindful of the massive debt we’ve inherited — I am.”   Speech to Congress, February 24, 2009

2) “And that is why I have ordered the closing of the detention center at Guantanamo Bay and will seek swift and certain justice for captured terrorists…” Speech to Congress, February 24, 2009

3) “My administration has also begun to go line by line through the federal budget in order to eliminate wasteful and ineffective programs.” I wonder if the President knows he doesn’t have a line item veto.  

4)  “My immediate task is making sure that the second half of that money, $350 billion, is spent properly. That’s my first job.”  Press conference February 9, 2009, talking about TARP money.

9) “I can no more disown him than I can disown the black community.”

The Normal One

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Mancur Olson, in his book The Logic Of Collective Action, highlighted the central problem of politics in a democracy. The benefits of political market-rigging can be concentrated to benefit particular special interest groups, while the costs (in higher taxes, slower economic growth, and many other second-order effects) are diffused through the entire population.

This general model has consequences. Here are some of them:

There is no form of market failure, however egregious, which is not eventually made worse by the political interventions intended to fix it.

Political demand for income transfers, entitlements and subsidies always rises faster than the economy can generate increased wealth to supply them from.

Although some taxes genuinely begin by being levied for the benefit of the taxed, all taxes end up being levied for the benefit of the political class.

Corruption is not the exceptional condition of politics, it is the normal one.

Any more questions?

Wednesday, May 27, 2009

COTD: The Creature

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WASHINGTON — The Obama administration is proposing that the Federal Reserve serve as an all-seeing regulator to detect activities that could pose risks to the entire financial system.

I am reading "The Creature from Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin.
If accurate, it describes the concept of the "Fed" as a banking cartel set up by wealthy bankers and politicians in 1910. The cartel was designed to suppress competition from the new crop of banks sprouting up away from the old New York hub. The "bosses" wanted a secure hold on power, and the ability to inflate the money supply to enrich themselves and enable "The Government" to fund its favorite schemes invisibly.
All this is a lengthy intro to this idea of "The Fed" as "risk regulator" as: "the foxes guarding the chicken coop". The Fed should not be the regulator, rather it should be regulated out of existence, thus stopping the monetary inflation that is destroying the dollar.

The Prohibition This Time

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A government-sponsored study into greenhouse gases found that producing 2.2lb of lamb released the equivalent of 37lb of carbon dioxide.

The problem is because sheep burp so much methane, a potent greenhouse gas. Cows are only slightly better behaved. The production of 2.2lb of beef releases methane equivalent to 35lb of CO2 Tomatoes, most of which are grown in heated glasshouses, are the most “carbon-intensive” vegetable, each 2.2lb generating more than 20lb of CO2. Potatoes, in contrast, release only about 1lb of CO2 for each 2.2lb of food. The figures are similar for most other native fruit and vegetables.

Funny how that works in a carbon based eco system, wouldn’t you say?

Oh, and barley and hops? FAIL!

Alcoholic drinks are another significant contributory factor, with the growing and processing of crops such as hops and malt into beer and whisky helping to generate 1.5% of the nation’s greenhouse gases.

My goodness, just look at what is happening to us.


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They're back. We refer to the global investors once known as the bond vigilantes, who demanded higher Treasury bond yields from the late 1970s through the 1990s whenever inflation fears popped up, and as a result disciplined U.S. policy makers. The vigilantes vanished earlier this decade amid the credit mania, but they appear to be returning with a vengeance now that Congress and the Federal Reserve have flooded the world with dollars to beat the recession.

Treasury yields leapt again yesterday at the long end, with the 10-year note climbing above 3.7%, its highest close since November. Treasury yields had stayed low, and the dollar had remained strong, as long as investors were looking for the safest financial port amid the post-September panic. But as risk aversion subsides, and investors return to corporate bonds and other assets, investors are now calculating the risks of renewed dollar inflation.

Behind The Confidence Game

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Of course, the stock market's reaction would certainly appear to be quite rational. Won't more confident consumers spend more money, thereby jumpstarting the economy -- and, in turn, propelling the stock market ever higher?

Intuitively appealing as this argument appears, however, it receives little support from the historical data.

To find out what the historical record can teach us, I analyzed the Conference Board's consumer confidence index back to 1977, which is when this research firm started updating this index on a monthly basis. I then compared each of the index's monthly readings over this three-decade period with how the stock market performed over the subsequent month, quarter, year, and two-year period.

The biggest monthly jumps in the consumer confidence index were, on average, followed by sub-par returns. Conversely, big drops in the index were typically followed by above-average returns.

They found that consumer confidence is more of a lagging indicator than a leading one.

Obscure Nerd Cosmoclimatological Interlude

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Report number
CERN-SPSC-2009-015 ; SPSC-SR-046
2008 Progress Report on PS215/CLOUD
Kirkby, Jasper
Corporate author(s)
The CLOUD Collaboration ; CERN. Geneva. SPS and PS Experiments Committee ; SPSC
(Status Report)
And looking very interesting -- especially to measurement nerds.

Tuesday, May 26, 2009

What Could Go Wrong? (Part 2,497,925)

A lawyer for Chrysler dealers facing closure as part of the automaker's bankruptcy reorganization said on Tuesday he believes Chrysler executives do not support a plan to eliminate a quarter of its retail outlets.

Lawyer Leonard Bellavia, of Bellavia Gentile & Associates, who represents some of the terminated dealers, said he deposed Chrysler President Jim Press on Tuesday and came away with the impression that Press did not support the plan.

"It became clear to us that Chrysler does not see the wisdom of terminating 25 percent of its dealers," Bellavia said. "It really wasn't Chrysler's decision. They are under enormous pressure from the President's automotive task force."



To The Gulag With Them!

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Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls.

Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.
Of course, you may need to invade Florida to pull it off...

Monday, May 25, 2009

COTD: Hijacked

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What we are are seeing here in the global-warming / climate change / thingy meme is several trends converging:

+ Cultural vertigo: life in developed countries is just so lovely that many people feel somehow guilty about enjoying an unprecedented standard of living.

+ Lefty trouble-makers: disappointed after the fall of the Berlin Wall and unsure where to go next so they hijack the conservation / nature movement.

+ Conservation / nature and animal lovers like the old WWF: hijacked by the new religion.

I guess the answer is to give the lefties some new cause to jump aboard and help the conservation peeps to get back to what they were good at like saving particular species that really were having a hard time like the natterjack toad etc.

I went for a walk in the hills last week with a local “Green” activist and she couldn’t name any of the trees or shrubs or small plants.

It really did seem like she had never been this close to nature before.

Just Like Nobody Disagrees That O Duce's Stimulus Is Needed...

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  • Hendrik Tennekes, retired Director of Research, Royal Netherlands Meteorological Institute: "The blind adherence to the harebrained idea that climate models can generate 'realistic' simulations of climate is the principal reason why I remain a climate skeptic. From my background in turbulence I look forward with grim anticipation to the day that climate models will run with a horizontal resolution of less than a kilometer. The horrible predictability problems of turbulent flows then will descend on climate science with a vengeance."[11]

  • Antonino Zichichi, emeritus professor of nuclear physics at the University of Bologna and president of the World Federation of Scientists : "models used by the Intergovernmental Panel on Climate Change (IPCC) are incoherent and invalid from a scientific point of view".[12]
  • ... there are certainly no eminent scientists that disagree with the alarmists. Really?

    How About Those Earnings?

    Inquiring minds keep asking "Is The Bottom In?" Of course, no one knows for sure. However, I believe it is not, and one of the reasons is the complete collapse in S&P earnings.

    Earnings Estimates

    In Is That Recovery We See? John Mauldin posted the following chart of earnings estimates.
    The S&P closed Thursday at 888. That's a richly priced PE of 31. Let's assume that earnings recover to $48. That's still a richly priced PE of 18.5. A bear market bottom might sport a PE of 10-12 but let's be generous and use 15.

    15*$28.51 would put the S&P 500 at 382!
    Let's be more generous and use an earnings estimate of $48.
    15*$48 would put the S&P 500 at 720!

    Those expecting still higher earnings need to consider the Effect of Household Deleveraging on Housing, Consumption and the Stock Market.

    No matter how you slice and dice things, fundamentally the stock market is very pricey.

    Please Honor Our Fallen Heroes This Memorial Day

    If someone surveyed the surviving Vietnam POWs, we would likely not agree on one definition of torture. In fact, we wouldn't agree if waterboarding is torture. For example, John McCain, Bud Day and I were recently together. Bud is one of the toughest and most tortured Vietnam POWs. John thinks waterboarding is torture; Bud and I believe it is harsh treatment, but not torture. Other POWs would have varying opinions. I don't claim to be right; we just disagree. But as someone who has been severely tortured over an extended time, my first hand view on torture is this:

    Torture, when used by an expert, can produce useful, truthful information. I base that on my experience. I believe that during torture, there is a narrow "window of truth" as pain (often multiple kinds) is increased. Beyond that point, if torture increases, the person breaks, or dies if he continues to resist.

    Our naïveté does not impress radical terrorists like those who slit the throat of Daniel Pearl
    And, as these quotes from Leo Thorsness attest, you may want to take the time to listen to a few more of those than just John McCain who have been very close to being objects of that honor but survived.

    And please take the time to honor all those still alive that have served. But you should do that every day. Please understand -- unlike O Duce -- that Memorial Day is for honoring those who have given the ultimate sacrifice to keep you free.

    So O Duce can now complete your enslavement like the sheep large numbers of you have become.


    The curtain is about to rise again on the long-running nuclear tragicomedy, "North Korea Outwits the United States." Despite Kim Jong Il's explicit threats of another nuclear test, U.S. Special Envoy Stephen Bosworth said last week that the Obama administration is "relatively relaxed" and that "there is not a sense of crisis." They're certainly smiling in Pyongyang.

    The Ruins Of Vanity

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    If ever a time should come, when vain and aspiring men shall possess the highest seats in Government, our country will stand in need of its experienced patriots to prevent its ruin. Samuel Adams

    Mufti Reprise

    Muhammed Amin al-Husseini [many spelling variations] was born in 1893 (or 1895), the son of the Mufti of Jerusalem and member of an esteemed, aristocratic family. The Husseinis were one of the richest and most powerful of all the rivalling clans in the Ottoman province known as the Judaean part of Palestine.

    William Ziff, in his book "The Rape of Palestine," summarizes:

    • Implicated in the [1920] disturbances was a political adventurer named Haj Amin al Husseini. Haj Amin, was sentenced by a British court to fifteen years hard labor. Conveniently allowed to escape by the police, he was a fugitive in Syria. Shortly after, the British then allowed him to return to Palestine where, despite the opposition of the muslim High Council who regarded him as a hoodlum, Haj Amin was appointed by the British High Commissioner as Grand Mufti of Jerusalem for life. [P. 22]
    He then spent the rest of World War II as Hitler's special guest in Berlin, advocating the extermination of Jews in radio broadcasts

    Sunday, May 24, 2009

    Our Ruling Morons Succeed Once More

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    North Korea says “no”:

    North Korea conducted a nuclear test on Monday, South Korea’s Yonhap news agency quoted a ruling party official as saying.

    YTN Television quoted the South Korean weather agency as saying it detected a tremor indicating a test at 0054 GMT (8:54 p.m. EDT).

    South Korean President Lee Myung-bak had called an emergency meeting of cabinet ministers over the test, Yonhap said.

    And Fareed Zakaria says Iran may not want the bomb either.

    Who Are The Capitalists Now?

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    Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior
    officials of the Chinese government grilled me about whether or not we are
    going to monetise the actions of our legislature."

    "I must have been asked about that a hundred times in China. I was asked
    at every single meeting about our purchases of Treasuries. That seemed to be
    the principal preoccupation of those that were invested with their surpluses
    mostly in the United States," he told the Wall Street Journal.

    His recent trip to the Far East appears to have been a stark reminder that
    Asia's "Confucian" culture of right action does not look kindly on
    the insouciant policy of printing money by Anglo-Saxons.

    The Oxford-educated Mr Fisher, an outspoken free-marketer and believer in the
    Schumpeterian process of "creative destruction", has been running
    a fervent campaign to alert Americans to the "very big hole" in
    unfunded pension and health-care liabilities built up by a careless
    political class over the years.

    Not O Duce, that's for sure. Just a touch of irony here.

    Our Arbitrary Rulers

    The modellers just assume relative humidity is also constant while CO2 concentrations change.

    There is no physics in support of this assumption, and no way to calculate its value from first principles. This assumption means that if temperatures increase for any reason, the amount of water vapour in the atmosphere increases. But water vapor is the most important greenhouse gas, so the GHE becomes stronger and temperatures increase more. The current theory does not determine this - it is only an assumption. If this assumption is only slightly wrong, it completely changes the expected response of increasing CO2 because water vapour is such a dominant greenhouse gas.

    The assumption, that relative humidity is constant when CO2 concentrations increase, is completely absurd. This violates fundamental energy conservation laws.
    So it makes no sense to assign an arbitrary rule for one of the greenhouse gases.

    More Choices

    In an effort to shut down the U.S. Naval Detention Center at Guantanamo Bay, Cuba, thereby restoring America's moral standing in the world, President Barack Obama today declared some 240 enemy combatants held at Gitmo to be 'human fetuses'.

    In an executive order, the president said, "Since I ordered Gitmo shut down, and people don't want us to bring the inmates here, the only way to extract them from the facility is to change their legal status to one that offers us more choices."

    While accused terrorists have access to attorneys, and nearly-limitless legal appeals, a fetus has no legal standing, cannot speak for itself, and is subject to the death penalty without regard to guilt or innocence. 
    Sources acknowledged continuing White House debate about whether a terrorist who escapes from Gitmo alive can still be treated as a fetus.


    Dying The "Smart" Way

    The Smart ForTwo is the reknowned Daimler product commonly referred to as "The Smart Car". A two-passenger, rear-wheel drive auto, the ForTwo is among the tiniest production cars ever seen on American roads.
    The EPA rates the Smart vehicle at 36 miles-per-gallon (combined city and highway driving), barely beating the Obama administration's recent directive of 35.5 MPG for entire auto fleets by 2016.
    Put simply, Obama and the Democrats want you and your family driving in these unsafe vehicles.

    The "Date"

    Ilan was lured to his death by a woman he had met in his telephone store. They met up late on the night of January 20, 2006, in one of Paris's southern suburbs, Bagneux. She was what is called a "honey pot." She lured Ilan from his home and into the hands of a group of local radical Islamists called the Barbarians. They targeted him because he was a Jew. The Barbarians had connections with Hamas. They kept him naked and tied up for weeks. They tortured him and invited their friends and family over to torture him. They cut him and burned him with cigarettes and in the end stabbed him in the neck, poured flammable liquid on him, set him on fire, and pushed him from a train.
    Ilan died that day.