Saturday, July 11, 2009

We Should Have A Better System

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The discussion, which took place between the leaders of five emerging economies
and the G8 industrialised nations, including Barack Obama, caused concern
among western leaders.

"We should have a better system for reserve currency issuance and regulation,
so that we can maintain relative stability of major reserve currencies
exchange rates and promote a diversified and rational international reserve
currency system,” said Mr Dai, according to the Chinese foreign

While he did not single out the dollar, Mr Dai was clearly calling for the
world to diversify its reserve currency system and stabilise exchange rates
among leading currencies.

China has made a series of attacks on the dollar in recent months, and went as
far as to question Hillary Clinton, the US secretary of state, about the
trustworthiness of the currency on her visit to China earlier this year.

We will. It's called gold.

OCity Limits

As I read founder of Creators Syndicates Rick Newcombe's explanation
of why he is moving his business out of the increasingly corrupt confines of Los Angeles and the anti growth policies of California in general, I had to wonder.  Business aren't the only one who relocate to get away from high taxes and arbitrary, out of control bureaucrats. 

Americans have been voting with their feet for decades now.  During the last half of the 20th century, all across America, married people with children voted with their feet rather than take on the dirty job of trying to reform the nation's corrupt urban political systems and the seemingly impossible task of fixing urban school systems.  

It was do that, or shell out a small fortune in local taxes and then pay private school tuition for your children's education on top of it. 

Mayor Daley, a consummate political survivor, now rules Chicago from a much different power base than the largely white blue collar machine he inherited from his father.

Melting Mei Jin

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THE Chinese used to call dollars mei jin, which means “American gold”. Buying black-market dollars was considered the safest way to protect one’s savings. Yet in June when Tim Geithner, America’s treasury secretary, told students at Peking University that China’s official holdings of Treasury bonds were safe, the audience laughed. Faith in the greenback is waning.

In an essay in March, Zhou Xiaochuan, the governor of the PBOC, argued that basing the international financial system on a national currency will tend to exacerbate global imbalances. The dollar’s reserve-currency status let America borrow cheaply, causing the country’s credit and housing bubbles to persist for longer than they otherwise would have. Mr Zhou proposed that the world should replace the dollar with a global reserve currency, the SDR (Special Drawing Rights).

Concerned In China

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July 10 (Bloomberg) -- Returning from China last month,
U.S. Congressman Mark Kirk had a bearish take on a high-level
visit by American officials.

Treasury Secretary Timothy Geithner claimed the U.S.’s
biggest creditor voiced great confidence in its debt. Kirk, an
Illinois Republican, came back with the opposite impression.

“China is beginning to cancel Congress’s credit card,” he
told Fox News on June 10. It “doesn’t want to lend much more
money to the United States and especially is worried about the
Fed’s policy of printing money to buy new debt.”

A month later, there’s no doubt about whose assessment was
more accurate. Chinese leaders are clearly very concerned about
the dollar. How they will react is a key question hanging over
markets, and it’s time to take the discussion to the next level.

Total Control

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Entrepreneur Dan Kennedy writes of the fear Obama’s economic policies are sowing in the business community. He offers the following quote from a board member of a community bank, a man Kennedy describes as someone not prone to wild fears and exaggerations:

The new and proposed regulations will remove every competitive advantage of the community bank, and make every bank identical, forced to operate exactly as does Bank of America,” he explained. “Then, absent competitive opportunity, all of the independent banks will be greatly de-valued and handicapped. They’ll be vulnerable and easily rolled up into the handful of remaining giants … the small bank’s wealth made into fresh food for the insatiable hunger of the big banks’ deficits and losses. This is, I and others believe, the next step in Obama’s plan to take total control of the financial system and money supply, a requirement of dictatorship.

Did I Forget To Mention We're Going The Wrong Way?

But let's first look to the China story.

We know that China is already our principal banker, to the tune of nearly $1 trillion. As President Obama's record spending and borrowing continues -- he'll be the greatest bond salesman in American history -- our financial reliance on China grows daily. But that's not all.

Fortune magazine recently reported that the number of U.S. companies in the world's top 500 fell to the lowest level ever, while more Chinese firms than ever made the list.

China also surpassed the United States as the world's biggest automaker in the first half of 2009, with June sales soaring 36.5 percent from a year earlier.

And China has no capital-gains tax. It only has a 15 to 20 percent corporate tax. The United States, on the other hand, is raising its cap-gains tax rate to 20 percent. It's also increasing its top personal tax rates.

We're going the wrong way. That's why stock markets are not voting for the United States any more.

OEugenics Update

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Looks like Supreme Court justice Ruth Bader Ginsburg isn’t the only one who’s been channeling abortion champion/eugenicist Margaret Sanger.

Internet sleuth Zombie has a new report on John Holdren, President Obama’s science czar:

Forced abortions. Mass sterilization. A “Planetary Regime” with the power of life and death over American citizens.

The tyrannical fantasies of a madman? Or merely the opinions of the person now in control of science policy in the United States? Or both?

In a book Holdren co-authored in 1977, the man now firmly in control of science policy in this country wrote that:

• Women could be forced to abort their pregnancies, whether they wanted to or not;

• The population at large could be sterilized by infertility drugs intentionally put into the nation’s drinking water or in food;

• Single mothers and teen mothers should have their babies seized from them against their will and given away to other couples to raise;

Our Elected Power-Mad Nutjobs

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Secretary of Transportation Ray LaHood remarked in May that his livability initiative[1] "is a way to coerce people out of their cars."[2] When asked if this was government intrusion into people's lives, LaHood responded that "about everything we do around here is government intrusion in people's lives," a sentiment that would have certainly surprised the authors of the United States Constitution, a document whose major purpose was to restrain government.

LaHood's endorsement of government coercion comes as no surprise to those who have been tracking the Obama Administration's incremental endorsements of the environmentalists' smart growth strategies to slow growth, crowd development, and deter automobile use. And with LaHood's most recent presentation, the Administration has formally embarked on an unprecedented and costly exercise in social engineering toalter the way Americans live and travel.

No wonder they love the Mullahs.

Ritter: On Corruptly Getting Advice On How To Be Corrupt

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Colorado Gov. Bill Ritter has awarded some of the state's first stimulus money to his former employer in a no-bid contract.

Ritter hired his former law firm, the Washington-based Hogan & Hartson, in a no-bid contract to review stimulus spending, The Denver Post reported Friday. It said the firm was paid $40,000 in stimulus money through June.

Aides to the governor insisted the contract was properly awarded. The state attorney general's office deemed the contract necessary to allow the state to have speedy legal advice about stimulus money. The contract is too small to require competitive bidding.

Ritter worked for the Denver office of Hogan & Hartson in 2005, leaving the following year when he ran for governor. The law firm has about 1,300 lawyers across the country and specializes in public finance, real estate, white-collar litigation and environmental and governmental regulation.

Many of Hogan's lawyers are Ritter supporters
The circle of corruption in Colorado.

Banana LALA Land

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I founded Creators Syndicate in 1987, and we have represented hundreds of important writers, syndicating their columns to newspapers and Web sites around the world. The most famous include Hillary Clinton, who, like Eleanor Roosevelt, wrote a syndicated column when she was first lady. Another star was the advice columnist Ann Landers, once described by "The World Almanac" as "the most influential woman in America."
From the beginning, we've been headquartered in Los Angeles. But 15 years ago we had a dispute with the city over our business tax classification. The city argued that we should be in an "occupations and professions" classification that has an extremely high tax rate
Everything was fine until the city started running out of money in 2007. Suddenly, the city announced that it was going to ignore its own ruling and reclassify us in the higher tax category.
As long as City Hall operates like a banana republic, why is anyone surprised that jobs have left the city in droves

Signing Up For Yoga

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For new readers, the title is what the shortened QandO stands for.

  • I thought one of the things the Obama administration was promising it wouldn’t do was use signing statements to ignore the law? Apparently not.

  • It would appear that a witch-hunt for “extremists” in the military is building. First we had the DHS warning claiming veterans might be recruited by right-wing extremist organizations. Then Alcee Hastings proposes law (a law already on the books, btw) to prohibit “extremists” from joining the military. Now the Southern Poverty Law Center is asking Congress to investigate the military based on a cuple of postings it found on a suspect website.  The premise, of course, is because we now have a black Democratic president, there is more of a threat from such extremists who might be in the military.

  • Government’s attempt to regulate every aspect of your life takes another step in that direction, but in an unexpected area – licensing yoga teachers.

Only 20 Percent?

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No country is going to create wealth if its leaders exploit the economy to enrich themselves — (applause) — or if police — if police can be bought off by drug traffickers. (Applause.) No business wants to invest in a place where the government skims 20 percent off the top — (applause) — or the head of the Port Authority is corrupt. No person wants to live in a society where the rule of law gives way to the rule of brutality and bribery. (Applause.) That is not democracy, that is tyranny, even if occasionally you sprinkle an election in there.

American businessmen, meanwhile, are exclaiming, only twenty percent?

Nothing But Good

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Americans are still out there eight months later buying firearms like mad - and I think this can be nothing but good in the longer term. Let me count the ways:

1. More firearms in civilian hands means a larger constituency to oppose restrictive firearms laws and regulations.

2. More firearms in civilian hands means more people carrying concealed, depressing crime rates.

3. More firearms in civilian hands means the balance of coercive power shifts in favor of the people and against government, making some of our nastier potential futures just that much less likely.

4. Higher demand means more firearms-manufacturing capacity in the future, leading to lower prices and a likelihood that the previous three virtuous effects will be sustained.

Thank you, Barack Obama. You didn’t intend this good result, but then I suspect that pretty much all of whatever little good you end up doing will have been unintentional. I’m grateful for it anyway.

They Must Know What They're Doing

Bubblenomics Update

Slowly but surely, I think that as "green shoots" come and go without really yielding a lot (read "Will economy's 'green shoots' wither?"), more folks will start to grasp that we have an enormous hole to dig ourselves out of.

What landed us there was Federal Reserve money printing, which created the bubbles -- aided and abetted by greed on Wall Street and Main Street, and by authorities' abdication of responsibility. All of that allowed us to experience a decade-plus of bubblenomics. Until folks fully process those facts, I believe that they will find it virtually impossible to navigate this post-bubble period.

higher interest rates caused by both our own massive borrowing needs and a weak currency will not be "fixed" via stimulation. Once we get to that point, only austerity and intelligent policies will extricate the country from that quagmire.

The one bright spot? In that environment, the financially prudent may actually get a fair return for saving money.


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HEH: It Would Have Been Nice to Hear This Before We Spent $787 Billion. “I understand Nouriel Roubini just told him to cheer up.”

Friday, July 10, 2009

The Chinese Laugh

Imagine you are Chinese, and you are peering in on the American economy from afar. You see a debate taking place that doesn't compute.

All the while, America has access to one of the most enviable sources of offshore oil and gas in the world, one that could create jobs and stimulate the economy.

And yet, as you watch this American reality TV show, you see oil companies continually prohibited from going after it.

As an energy-thirsty country yourself with many financial decisions to make, you have a dilemma — do you lend more money to America or go after that oil yourself?

China along with Cuba and Russia are beginning to do the latter. While we debate, they are inching in on our supply.

Cuba has announced plans to develop oil in the Gulf of Mexico.

And Chinese firms appear to be playing a role in development in this arena.

our political leaders talk about the tough measures they will take to repay our debt tomorrow.

And they wonder why the Chinese laugh.


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Outside The State

Conservatives are dismayed by his calls for increased foreign aid, the redistribution of wealth, and a United Nations with “real teeth.” Liberals are wondering why the pope had to ruin such lovely sentiments by bringing up the evils of abortion, euthanasia, and birth control. Prominent voices on both sides think the pope is hopelessly na├»ve and unrealistic. Reading Charity in Truth for partisan purposes can yield moments of agony and ecstasy for left and right alike.
Charity in Truth tells us that the Catholic faith creates “breathing-space” for human beings first of all by rescuing us from determinism and the denial of free will and action. The good of eternal life taught by the Catholicism is a “higher good” that liberates us from the relentless accumulation of wealth. And finally, the pope employs terms such as “integral human development” and the “common good” that promote a myriad of social activities outside state control

OHypocrisy Watch, African Edition

All this talk about a "new approach" to food aid for Africa — instead of deliveries of food, money is to be spent helping countries develop their own agriculture industries — brings to mind a provision in the 2008 farm bill (which Obama voted for):

But perhaps the most egregious item in the new farm bill relates to international food aid. A longstanding provision governing U.S. food aid to foreign countries requires that all the food America sends abroad be purchased from American farmers. This means that, however much we allocate toward international food aid, a chunk of the money goes toward transporting food from the U.S. to its final destination.

Seems to me that the best way to help African countries to develop their own agriculture industries would be to stop flooding them with subsidized food grown here.

Making Product

I think when most of us hear the word “stimulus,” we think of jump-starting the economy by getting the productive sectors producing, spending, and employing. But when the administration talks about the “success” of the stimulus package, they say things like:

The president also touted his programs that have allowed states to halt firings of teachers, police officers and firefighters.

Those are the jobs we saved? Doesn’t he see the obvious problem with this?

But then an investor arrives and says he’ll dump $10 million into your business. What do you spend it on? What’s the best way to get the company humming along?

And specifically: whose jobs do you save first until things get going again?

I think the answer is obvious, and it certainly doesn’t involve saving the training people (= teachers) and the security guards (= police officers) at the expense of the people who are actually making the product.

Trading Dictators

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Of course, we have a source for electricity in abundance: nuclear power.  IBD suggests that a program to rapidly expand our nuclear-power generation could fill the gap while generating zero carbon emissions.  The Obama administration and the Democrats don’t want that, though.  They shut down the Yucca Mountain nuclear storage facility, which would have recycled used fuel rods into material for more nuclear power, giving us an almost-completely renewing resource for decades into the future.

The GAO also points out that electric cars would have the US trading one set of dictators for another in order to power our cars.  The batteries for electric vehicles are lithium-ion, and for the experimental production levels in the US at this moment, we have enough lithium resources to keep pace.  However, once we start building electric cars in mass numbers, we will quickly run through our proven stores of lithium.  We would most likely have to do business with Hugo Chavez lackey Evo Morales of Bolivia


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Remember signing statements? Those were the dastardly little postscripts George Bush attached to legislation that he didn’t completely approve of. Signing statements ignore the “fundamental principle’’ of the separation of powers, the American Bar Association huffed. On the campaign trail, candidate Obama was asked, “Do you promise not to use presidential [signing statements] to get your way?’’ “Yes,’’ he answered. “I taught the Constitution for 10 years, I believe in the Constitution, and I will obey the Constitution of the United States. We are not going to use signing statements as a way of doing an end run around Congress.’’

That was easy!

Less easy is explaining away his six signing statements so far, an impressive one-a-month clip. “Signing statements serve a legitimate function in our system,’’ Obama now says, “at least when based on well-founded constitutional objections.’’

Thursday, July 09, 2009

Way Ahead

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But eventually, large budget deficits and their monetization are going to lead--toward the end of next year and in 2011--to an increase in expected inflation that may lead to a further increase in 10-year treasuries and other long-term government bond yields, and thus mortgage and private-market rates. Together with higher oil prices driven up by this wall of liquidity rather than fundamentals alone, this could be the double whammy that could push the economy into a double-dip or W-shaped recession by late 2010 or 2011.

So the outlook for the U.S. and global economy remains extremely weak ahead. The recent rally in global equities, commodities and credit may soon fizzle out as an onslaught of worse-than-expected macro, earnings and financial news take a toll on this rally, which has gotten way ahead of improvement in actual macro data.


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What does it mean? The truth about the cap-and-trade farce revealed:

During a hearing today in the Senate Environment and Public Works Committee, EPA Administrator Jackson confirmed an EPA analysis showing that unilateral U.S. action to reduce greenhouse gas emissions would have no effect on climate. Moreover, when presented with an EPA chart depicting that outcome, Energy Secretary Steven Chu said he disagreed with EPA’s analysis.

“I believe the central parts of the [EPA] chart are that U.S. action alone will not impact world CO2 levels,” Administrator Jackson said.

Sen. James Inhofe (R-Okla.) presented the chart to both Jackson and Secretary Chu, which shows that meaningful emissions reductions cannot occur without aggressive action by China, India, and other developing countries.

Too Many Of?

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JUSTICE GINSBURG: Yes, the ruling about that surprised me. [Harris v. McRae — in 1980 the court upheld the Hyde Amendment, which forbids the use of Medicaid for abortions.] Frankly I had thought that at the time Roe was decided, there was concern about population growth and particularly growth in populations that we don’t want to have too many of. So that Roe was going to be then set up for Medicaid funding for abortion. Which some people felt would risk coercing women into having abortions when they didn’t really want them. But when the court decided McRae, the case came out the other way. And then I realized that my perception of it had been altogether wrong.

So Ginsburg thought the court wanted a method of eugenics that the government could use to reduce growth in certain …. populations … that we didn’t want expanding?  No wonder she has occasionally admitted that Roe was a bad decision.

Bloody Blues

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California has been garnering a lot of unwanted attention recently over the dire condition of its public finances. While California may be the most visible example - it is issuing IOUs to creditors instead of cash - our map shows that other states across the US have budgetary troubles.

Lawmakers in several US states have failed to agree on spending cuts amid falls in revenue from income and property taxes. States faced a cumulative budget gap of $121bn this year, according to the National Conference of State Legislatures, a research group.

These states are now having to make difficult decisons, including cutting spending on essential services such as healthcare, education and welfare. Even if spending cuts are made, the fiscal outlook remains uncertain.

Which one may be the next to follow California’s unenviable example of issuing IOUs to students and cancer patients? Our interactive graphic shows the “state of the states”, and shows those in most trouble.

Click over and check out the map. It's pretty striking what's happening the big Democratic welfare states.


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They're Not Worried

Come on, folks. Try to think with that part of your brain you developed after government schools. This whole spending boondoggle wasn't designed to get our economy going again. It was designed to increase the size and power of our Federal government and to inoculate the political class against voter disgust.

These are people who think that America is great because of government; and the more government we have the better America is. This is why the stimulus money had to be spent by the government sector ... not the ordinary, hard-working masses.

In the meantime ... step outside and smell the stimulus. It's really doing the job, isn't it? Yup. Government always knows best ... especially when it comes to spending our money.

The people who made this decision will stand for reelection next year. You will look at the 435 members of the U.S. House of Representatives and tell yourself that 434 of those rascals just have to go. Every one except yours. The rascals know this. They're not worried.


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The June employment report suggests that the alleged green shoots are mostly yellow weeds that may eventually turn into brown manure. The employment report shows that conditions in the labor market continue to be extremely weak, with job losses in June of over 460,000. With the current rate of job losses, it is very clear that the unemployment rate could reach 10% by later this summer--around August or September--and will be closer to 10.5%, if not 11%, by year-end. I expect the unemployment rate is going to peak at around 11% at some point in 2010, well above historical standards for even severe recessions.

It's clear that even if the recession were to be over anytime soon--and it's not going to be over before the end of the year--job losses are going to continue for at least another year and a half. Historically, during the last two recessions, job losses continued for at least a year and a half after the recession was over.

OInnumeracy (Part 86,983)

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In February, President Barack Obama signed a $787 billion stimulus bill while making lavish promises about the results. He pledged that "a new wave of innovation, activity and construction will be unleashed all across America." He also said the stimulus would "save or create up to four million jobs." Vice President Joe Biden said the massive federal spending plan would "drop-kick" the economy out of the recession.

But the unemployment rate today is 9.5% -- nearly 20% higher than the Obama White House said it would be with the stimulus in place. Keith Hennessey, who worked at the Bush White House on economic policy, has noted that unemployment is now higher than the administration said it would be if nothing was done to revive the economy. There are 2.6 million fewer Americans working than Mr. Obama promised.

Batebi Redux

Here is what Ahmad Batebi told me about Obama's response to the Iranian crisis:

"His (Obama) lack of response will not be regarded lightly. We will watch for how much his response will help the people or the regime. We will know more this week... Obama can hold talks with the regime in Iran if he wants. Is it morally correct for Obama to support the regime? Does he actually believe the people of Iran will appreciate that? The social movement requires support. If the world really wants the advent of terrorism to disappear in the Middle East, if they want peace with the Palestinians and Israel, if they want nuclear techhology to be developed for peaceful things and not nuclear weapons... They only need to support the people of Iran right now. This regime has the most dangerous of ideologies. They're killing the opposition."


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BYRON YORK: AmeriCorps stonewalls questions of White House involvement in IG firing. “A top official of the Corporation for National and Community Service, the government agency that oversees AmeriCorps, has refused to answer questions from congressional investigators about the White House’s role in events surrounding the abrupt firing of inspector general Gerald Walpin.”

And I love this:

Investigators asked Trinity whether he was claiming executive privilege, something that could only be authorized by the president. Trinity answered again that it was a White House “prerogative.” When the investigators pointed out that, in the words of one aide, “there is no legal basis whatsoever” for such a claim, Trinity still declined to answer.

Remember the fierce moral urgency of replacing Bush with Obama so we’d see an end to this sort of thing? I do . . . .

Wednesday, July 08, 2009

But Then

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But then, like Napoleon in Moscow before him, Obama began suddenly retreating for no apparent reason. In predictable fashion, echoing the scatterbrained Jimmy Carter, he was not able to carry the whole thing off coherently. Obama was interviewed on Russian TV on the preceding Thursday, and it turned out when the program aired over the weekend that he had declined to repeat the attack on Putin that he had made to the Associated Press. Speaking with Novaya Gazeta, he refused to comment on the abusive retrial of opposition figure Mikhail Khodorkovsky, who was railroaded into prison several years ago just as he began making noises about running for president as a challenger to Putin.

On Tuesday, things got worse. Obama breakfasted with Putin and, while not even able to remember whether Putin was “prime minister” or “president” for the second time during his visit (Obama once said he thought Austrians spoke Austrian)


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If you want some detail about the horrors inside Iranian hospitals, have a look at Le Figaro’s account.

Over the objections of medical staff, bodies from the demonstrations were quickly moved elsewhere. “We believe they were transferred to the Baqiatollah military hospital or some other undisclosed location”, notes the doctor. Then, under the pretext of “organ donation”, all traces of bullets were removed from the bodies. “The parents were force to accept this if they wanted to retrieve the body for burial”.

And yet, the protest goes on.  For the past three days, a general strike has been in effect, with significant results.  Indeed, Supreme Leader Ali Khamenei preemptively admitted defeat when government offices and factories were shut down in the name of a religious observance.  But the strikers only expanded the range of their actions, notably by shutting down electrical grids in several cities, including parts of Tehran.  Great swathes of the nation were plunged into darkness.

Already Marked "YES"

President Zelaya was elected democratically in 2006.
Then he started hanging out with his new buddy Hugo and – surprise, surprise – his ideology started to morph into something akin to socialism, disguised, of course, as democracy: as he defines it, “the rule of the people.” Zelaya then decided – obviously at Chavez’ urging – that he needed to stay in power longer than his 4-year term allowed in order to bring his plans to completion. He decided to hold a vote for the “Cuarta Urna” (in essence, an illegal referendum, set to take place this past Sunday) in order to give the people the option of re-electing him next year – something strictly forbidden by the Honduran constitution. The tide of public opinion had already begun to turn against Zelaya when boxes of already-marked “YES” votes were found just days before the vote was scheduled to take place. Then the whole country seemed to turn against him… The whole country, that is, except the poor whose votes he’d bought.

"Debating" Sarah

Moreover, I don't think anyone has a clearer view than Palin herself of her need for more breadth and national experience. Nor of the needs of her family, for that matter, given the taste she has received of what the media are eager to do to them (compared to the halo of protection they extend around, say, Obama's young and impressionable children).

Her course cannot be easy: she knows the enemy, and she knows that the enemy "debates" by demonizing people, not by rational argument. From her view, she has received a significant personal insight into just how degrading her political enemies can be, and the whole "progressive" culture that supports them.

Who Knew?

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BLOOMBERG: Democrats Split on Stimulus as Job Losses Mount, Deficit Soars. Well, the whole deficit-soaring thing is no surprise. But who knew that shoveling out cash to cronies wouldn’t prevent unemployment from mushrooming? Plus this: “The Treasury is increasing debt sales to pay for the spending. After more than doubling note and bond offerings to $963 billion in the first half, another $1.1 trillion may be sold by year-end, according to Barclays Plc. The second-half sales would be more than the total amount of debt sold in all of 2008.”