Monday, November 15, 2010

Last Call

This open letter to Helicopter Ben from the Wall Street Journal has been signed by a number of economists and would actually have some sort of merit if it wasn't from the All-Star team of conservative nincompoops who got us into this mess in the first place.

The Kroog opens up a can of whoopass...

Who knew that William Kristol was an expert on monetary policy? And who thought they’d gain credibility by adding someone who declared in 2005 that we needn’t worry about low savings, because Americans were doing fine thanks to rising home prices, then declared in 2007 that there was no reason to worry about the credit market?

And Invictus over at Barry's place levels an entire 55-gallon drum at the crowd.

Of course, one might level the same charge at another of the letter’s signers, former Bear Stearns economist David Malpass. BR has taken down Malpass here and here (to cite but two), but I don’t think Barry ever got to this one, in January 2008 (what we now know was the second month of the worst recession since the Great Depression):
Malpass’s message minimized the impact of both the ongoing U.S. housing recession and the credit crunch.
To an audience of guests representing top French financial institutions like BNP Paribas, Calyon and Natixis — all of which have been singed by the subprime crisis — Malpass sided with what appears to be a majority of U.S. economists in predicting that the U.S. economy would skirt the current crisis without falling into a formal recession.
“We will have a slowdown month by month for the next six months,” Malpass said. “But we will look back and we will say there was not a material recession.”
And here’s open letter co-author Kevin Hassett from the American Enterprise Institute (June 2008) in an article titled Seeing Recession When There’s None to Be Found, displaying near perfect partisan hackery, the lede of which was:
Are we in a recession? Despite what the media has led the public to believe, director of economic policy studies Kevin A. Hassett compares today’s economy to past recessions and finds that the current situation does not seem all that dire.
If a Democratic-leaning press can convince everyone that the economy is in recession, then it can influence the election. [...] The politically motivated pessimism, like the computer virus, can have real consequences.
I’d be remiss if I didn’t also note that Mr. Hassett was co-author of the timely (November 2000) howler Dow 36,000.

These guys got the last 4 years so incredibly wrong they shouldn't be allowed to ever handle a cash register again, and yet here they are with a group scolding of the Fed.

My niece has better macroeconomics skills.  Instead they fail upward to the WSJ.

Doing The People's Serious Business By Seriously Giving People The Business

Our new super-serious Republican Patriots controlling the House do not have time for touchy-feely non-serious liberal resolutions for post offices and National Whatever Awareness Days and congratulating sports teams!

Republicans might not pursue as many of the symbolic resolutions that traditionally dominate the congressional schedule, the No. 2 House Republican said Monday.

Rep. Eric Cantor (R-Va.), the likely incoming House majority leader, criticized many of the symbolic resolutions congratulating sports teams and other items as something in which the new Republican majority has no interest.

"The Republicans who make up our new majority did not run for Congress to provide a subsidy to a particular industry or interest; to continue the same federal programs and agencies that are failing our citizens and bankrupting our children and grandchildren; or to spend our time congratulating collegiate basketball teams for having a good season — even if we happened to be a fan," Cantor wrote Monday in an op-ed for AOL News.

The elimination of many of the symbolic votes could significantly free up the House schedule. Votes on those resolutions are fairly routine, and in the first day of the lame-duck Congress, the House has scheduled three such measures for a vote: "Recognizing Gail Abarbanel and the Rape Treatment Center," "Honoring the 30th Anniversary of the Bayh-Dole Act," and "Recognizing and honoring the 50th anniversary of Ruby Bridges desegregating a previously all-white public elementary school."

They want to focus on jobs, you see.  All they have to do is eliminate as much government spending as possible and this will somehow create millions of private sector jobs.  They're not exactly sure how that works yet, but this is why they need the extra time saved by not dealing with silly resolutions.  To recap, the GOP House Plan:

1) Eliminate resolutions congratulating sports teams.

2) ????

3)  Jobs!

Hey, it's what you voted for, remember?  They guys are serious, yo.  Serious enough to get the Fed out of the maximizing employment business.  Serious Republicans (and possible Presidential candidates) like Rep. Mike Pence:

""I appreciate the independence of the Fed, but I think it might be time to reconsider the dual mandate of the Fed, that was established in 1977. I think we ought to get the Fed back in the business of focusing on price stability and preventing inflation and not also on this dual mandate of full employment for the country. It's creating confusion here. Printing money is no substitute for sound fiscal policy. That's all we are really doing here and I think the reason you are seeing leaders across the country, and leaders across the world denouncing this action by the Fed is because they know it's going to be inflationary, and it seems to be an effort to monetize our debt."

We have to take the Fed out of the employment game so that Congress can step in and create jobs using that plan I outlined above. You know, so that Republicans can fix the economy. They'll get you the details on that just as soon as they can. In fact, they'll tell you after you vote the GOP into controlling all of Congress and the White House.

But it's a great plan. They've got top men working on it.

Top. Men.

Zandar's Thought Of The Day

Steven D reads the writing on the wall on Howie Kurtz's hit piece on Keith Olbermann:

Guess what I predict happens when the Comcast merger goes through. Keith will get fired or backed into another "confrontation" with "management" in which he will be sorely tempted to resign rather than change his show. They'll find some excuse, any excuse. Lawyer up now Keith. When network executives start leaking this crap to Kurtz it means the fix is in

Damn right.  Second Phill Griffin gets his excuse to axe Keith, he's gone.    But to what other "liberal cable news channel" does Olbermann go for his new show?

Not So Broadband

One wouldn't expect to think of the United States falling behind in technology, but Slate illustrates how easy it is to manipulate numbers and give two very different stories about where we stand.

Basically, what we have here is a gross misunderstanding about where the US stands in comparison to other countries with Internet access. If you look at the numbers and factor in citizens who don't have access or have extremely low access as the best available, we are 15th (27 broadband subscribers per 100 people). There are a lot of things that can skew these numbers, but the bottom line is we are not as equipped as one might think. Because of my own work-related knowledge, I know there are many people begging for broadband and cannot get it. Granted, we do have a far bigger area to cover than most countries, this is something we should watch and consider.

What I found most interesting was the author's mention of "broadband nutrition labels" that allow us to compare aspects of a service the the public is mostly ignorant about. Also, he suggests that the FCC should routinely collect data on this industry now, so we can have numbers to fall back on when trying solutions and scenarios. Right now it is mostly guesswork. I'm actually surprised, because I assumed that on some level this was already being done. It's time to at least collect the data, so we can look at trends and areas and prioritize where we can get the most benefit from expansion. But there is more to the Internet than YouTube, and access is only going to become more important to people as time passes. In another five to ten years, this gap will be much more damaging for the have-nots.

Badly Needed Perspective

Just when I've convinced myself that the Democrats can't possibly be this stupid, Digby comes along to remind me that not only are the Democrats stupid, they're being stupid on purpose.

Who knew that Peter Orszag was such a comedian. He tells us that the social security shortfall years from now has nothing to do with the federal deficit but says it should be cut anyway. Evidently, it is necessary to solve a problem that doesn't exist in order to establish "credibility."

[E]ven though Social Security is not a major contributor to our long-term deficits, reforming it could help the federal government establish much-needed credibility on solving out-year fiscal problems — which in turn could improve the political prospects for providing additional short-term stimulus for the economy. All of which suggests that Democrats in Congress should support the basic construct of the Bowles-Simpson proposal, while arguing for some changes to improve it. That has not, however, been their reaction thus far.

Yes, that's Peter Orszag telling us that Democrats should support Social Security cuts so that they can regain "credibility" with the Tea Party.  Digby knows the results of this and exactly what the GOP will do:

And then they will tell senior citizens that Democrats just cut their social security and run with it all the way to the White House. Think they can't get away with it? Think again. These are the same people who had no compunction about telling the American people that Saddam Hussein was responsible for 9/11.

Let me reiterate that Simpson-Bowles is the Democratic Party Mass Suicide Bill Of 2011.   Obama thinks he's going to get a bipartisan consensus if he pushes it.  He's right, and that bipartisan consensus will keep the Republicans in power for a very, very long time.  If Obama's budget guru is out here saying "Yeah this plan is a great starting point" then the Dems are about to be obliterated...and rightfully so.

Don't think so?  David Broder loves it.  It's coming, just a question of how much.  And the Dems will take 100% of the blame for it.

Irish Eyes Are Crying, Part 5

Just so everyone's sure what's going on re: the coming Greek-style bailout of Ireland, it's not that Ireland needs to borrow money right now, it's that investors in the bank of Ireland are getting their money the hell out of Dublin.  It's a good old fashioned bank disaster.

While the government says it won’t need to raise money in the bond market until the middle of 2011, Irish lenders are depleting the collateral they need to get the emergency funding from the European Central Bank on which they depend. Corporate clients have pulled deposits from lenders including the country’s biggest, Bank of Ireland Plc.

With its lenders frozen out of Europe’s money markets and with their deposits shrinking, the Irish government may be forced to seek the bailout ministers have so far resisted. European Central Bank Vice President Vitor Constancio said today Ireland could use the European Financial Stability Facility to help prop up its banking system to restore investor confidence.

“It’s totally clear that they absolutely must accept external support sooner or later,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. Confidence in “the banking system is collapsing, and they can’t stop it by themselves.”

Bank of Ireland, the country’s biggest lender by market value, said Nov. 12 it suffered “deposit outflows over a five- to six-week period in late August and early September.” It didn’t provide a figure. The lender lost 10 billion euros ($14 billion) in deposits in the period, Ciaran Callaghan, an analyst at Dublin-based NCB Stockbrokers, estimated today. 

With Europe pulling billions out of Irish banks, the game is now up.  Their banking system is melting down as we speak.  It's just a question of time before the Irish agree to accept the EU's money.

Let's also recall that Ireland took the extreme austerity route as a measure to fix its economy.  What happened instead is that the country's economy plunged deeper into recession if not depression because the government was the buyer of last resort.  That support was taken away.  The result is that in the last three months, Ireland's economy locked up because all the oil was drained out of the engine.  "We had to fix the deficit!  We had to reign in spending!"  They did.

And this is the result.  It made a bailout all the much more likely.

So how are things going across the Irish Sea? Well, figures out today showed that the economy has bombed after briefly flickering into life in the first three months of 2010. There are rumours swirling around Dublin about the viability of Anglo Irish Bank. And the bond markets that were once impressed by the bravery of prime minister Brian Cowen's government have now turned on Ireland with a vengeance.

One measure of market confidence is the difference, or spread, between the yield on Irish government bonds and German bunds. Today that widened to a record level.

The reason for this is simple: the budget cuts have impaired the economy's ability to grow. The Irish government wants to slash the country's budget deficit from 12% to less than 3% by 2014, which would be eye-wateringly tough even if the economy were growing robustly. But when the economy is shrinking, it means the government is in effect running to stand still, hence the calls for even greater austerity to mollify the markets. That would, of course, simply weaken growth prospects still further.

Ireland, in other words, is perilously close to locking itself into permanent depression and deflation, from which the only way out may be a default that would further damage consumer and business confidence. There is indeed a lesson for the UK from Ireland: how not to do it.

And now Ireland is locked into that trap.  It's bailout or bust now.  The UK will be next...and we will follow if we listen to the austerity hawks. 

Deficit Attention Disorder

CBS News asked people what they wanted the new Congress to take up first.  Can you guess?  Hint:  it wasn't lower the deficit.

56% say Congress should immediately tackle the economic situation including jobs a clear majority, 14% said health care, but only four percent said the deficit was the most important agenda item.

So can someone explain this drivel to me in the Sioux City Iowa Journal?

When America was attacked on Sept. 11, 2001, the nation united behind a common purpose: Going after the terrorist network responsible for the carnage.
It's time for Americans to join together in similar fashion to fight a different kind of enemy.
This enemy lives within our own borders and is of our own making. Like the war against terrorism, this battle will be difficult, require sacrifice and take years. Unlike the war against evil overseas, however, we can't rely on our men and women in uniform to carry the load for us on this one.
In every year since 1969, the federal government has spent more money than it has taken in. Today the federal budget deficit has grown to the staggering level of nearly $14 trillion. One need not be a Nobel Prize-winning economist to understand the dire ramifications - for Americans of all generations, present and future - if the country continues down this road. Rest assured, the day of reckoning will arrive and America will be bankrupt.
We can look back by arguing about what presidents and what political party is most responsible for the appalling size of the deficit while the red ink grows deeper or we can collectively roll up our sleeves and commit to changing course for the future.
Because we prefer the latter approach, we were disappointed (although not surprised) at much of the initial reaction on Wednesday to a plan put forth by the co-chairs of President Obama's bipartisan deficit reduction commission - former White House Chief of Staff Erskine Bowles, a Democrat, and former Sen. Alan Simpson, a Republican.

How can anyone, particularly a newspaper editorial board, compare lowering the deficit right now to defending the country from 9/11 terrorists...which I might add our massive over-response to 9/11 is one of the big reasons we can't lower the deficit, by the way...when we have lost 8 million jobs?

Isn't it far more important to create jobs right now?  This is insanity.  And yet, our lords are telling us "welcome to the new normal, here's your austerity program or the terrorists win."

Repugnant stuff, really.

Saving America From Terror, One Three-Year Old At A Time

This right here is a national shame.

To recap, this is a three-year old girl getting the full TSA treatment at the airport.  And mistermix is dead solid perfect when he says:

The oldest cliche in the pundit arsenal is to say “let’s do it like the Israelis do it”, and it is true that the Israelis do an excellent job with airport security. They use a combination of profiling and screening implemented by multiple layers of highly-trained security personnel to implement a high-quality, fast security process. That’s because they take it seriously. We don’t.

If we took airport security seriously, the Democrats wouldn’t have used it as an opportunity to hire an army of low-paid, soon-to-be-unionized federal employees who are more likely to vote Democratic. The Republicans wouldn’t use every terrorist scare as an opportunity for a big contract for some donor that makes screening equipment of dubious value.

If being an airport screener was  something taken seriously by all sides in this country, it would be different.  We would have professionals who wanted to protect America instead of rent-a-cop Blackwater thugs who enjoy power-tripping on little kids and harassing women in body scanners.  Neither political party is willing to provide the money to employ actual professionals.  Hard to get political favors that way.  But Dems get the votes for the union jobs and Republicans get to own the contracting companies, so everyone's happy that counts.

Except, you know, anyone who has to fly a plane in this country.  Ever.

And people wonder why America's filled with cynical assholes like me.  This is why, incidentally, I have such strong inclination towards improvement of national rail travel, because it's difficult to plow a train into a skyscraper, enough so that they probably won't require body scanners for trains for a while longer yet.

Buying Into The Hype

California's selling some $14 billion in bonds starting today.  The question is simple:  with the state facing tens of billions in shortfalls next year, who's going to take that bet that California's going to be able to pay them back in May?

The Golden State is the starkest example of the financial difficulty facing US local governments. Worries are mounting of a possible rise in defaults or a reassessment of risk in the $2,800 billion municipal bond market, hitherto perceived as a safe place to invest.

California’s plans to sell its debt come just days after Arnold Schwarzenegger, the state governor whose term ends in January, called a special session of the legislature to address a state deficit projected to be more than $25 billion over the next 18 months. 

Orders begin on Monday for a $10 billion, two-part sale of so-called revenue anticipation notes (Rans), an annual event that allows California to bridge the gap to its tax season in the spring. The notes, due in May and June, are targeted mostly at individual investors who benefit from tax breaks on so-called “munis.”

Muni bonds generally last week sold off on concerns about shaky finances and the looming end of federal subsidies for the Build America bonds (Babs) program, which has boosted the market since the credit crunch. 

The yield on 30-year triple A munis rose 15 bps last week, the largest such rise in about 18 months, according to an index compiled by Municipal Market Advisors.

Republican gains in midterm elections called into doubt an extension of these subsidies, prompting a rush to sell bonds before their expiry at the end of the year. Long-term muni bond yields were also rose in line with US Treasuries. 

With the GOP in change of the House purse strings, odds are very good that the buyer of last resort, the Treasury, isn't going to be allowed to continue its bond-buying program.  That leads me to believe that the Fed will be allowed to step in instead.

That means the most likely scenario is indeed a Helicopter Ben Fed bailout of the Golden State through purchase of bond debt.  And you can bet your bottom dollar (hey, in a real sense you have already!) that other states will follow through.  Somebody's going to have to buy the next batch of bonds when California doesn't have the money to pay back this set of bonds in order to raise the money to start making payments.

At some point in 2011, the Fed's going to do this.  And California's just the beginning.

A Couple Of Boobs In A Bribery Sting

When searching for bribery cash, finding it in a bra beats finding it the freezer any day, at least in Maryland.

Prince George's County Executive Jack B. Johnson and his wife, who was just elected to the county council herself, were arrested at their home in a D.C. suburb on Friday and charged with trying to hide or destroy evidence of a bribe by a local contractor.

How did Leslie Johnson reportedly try to destroy a check and hide the allegedly ill-gotten cash? By flushing the check down the toilet and stuffing tens of thousands of dollars in cash in her bra, according to the FBI.
Leslie Johnson is said to have been speaking to her husband on the phone at around 10:10 a.m., shortly after he was questioned and searched by FBI agents as part of an investigation involving bribes from developers, according to an affidavit by FBI Special Agent Wendy H. Munoz. Two female federal agents were knocking at the door of the home, looking to execute a search warrant. During that conversation, apparently taped by investigators, Jack Johnson allegedly told Leslie Johnson to put "the cash" in her underwear. "I have it in my bra," she allegedly replied.

Jack Johnson then allegedly told his wife not to answer the door and to go into their bedroom to retrieve a check from a developer from a dresser drawer.

Leslie Johnson asked, "Do you want me to put it down the toilet?" according to the feds. Jack Johnson allegedly replied, "Yes, flush that." Agents then reported hearing what they thought was a flushing toilet, according to the affidavit.

After searching the home and Leslie Johnson, agents found $79,600 in unspecified bills in her underwear, according to the affidavit.

I'll leave the pertinent "search and seizure" jokes to Bon.


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