Last Call

When I say that conservatives in 2009 are bankrupt of serious ideas, I hold up this as an example.

The Competitive Enterprise Institute is a conservative think tank that regularly blasts out press releases condemning the Obama administration's various economic depredations, but today they demonstrate their intellectual consistency by wandering into the pirates debate:

Congress Should Consider Empowering Private Action Against Thugs of the High Seas

Washington, D.C., April 9, 2009— News that Somali pirates had seized an American ship and, after being repelled, held her captain hostage drew a response from analysts at the Competitive Enterprise Institute: the United States should consider authorizing private parties to attack pirate ships under little used instruments called “letters of marque and reprisal.”

The letters, specifically authorized in the Article 1 section 8 of the U.S. Constitution, allow private parties to attack and seize the property of other parties that have committed violations of international law. Congress has the power to grant the letters. The United States made significant use of them during the Revolutionary War and the War of 1812 and never joined 19th Century treaties in which European nations forswore their use. The U.S. issued letters of marque to ships during the Spanish-American War of 1898; and a civilian operated airship, The Resolute, operated under a letter marque during World War II. The letters also have a long history prior to the establishment of the United States. Elizabethan-era explorer and adventurer Sir Francis Drake operated under a letter of marque.

This? People PAY think tanks to come up with this as honest policy material?

This will not solve our Somali Pirate Problem. That's just ludicrous. Just what we need, more private contractors killing everything in sight. Gosh, I don't forsee anything possibly going wrong with ships full of heavily armed mercs bored out of their minds on a naval vessel for six weeks given blanket government permission to attack other ships in international water. Nope, that's not a recipe for disaster.

Geez. Isn't there some sort of international military organization that the US belongs to that might be able to help in a situation like this? And given the fact these pirate attacks have been going on for some time now, don't you think members of that organization might be out there in force stopping the pirates?

Nimrod.

In Which Zandar Answers Your Burning Questions

Josh Marshall asks:

Why is Obama following Bush's lead on state secrets?

The answer, I'm beginning to honestly believe now, is that like Bush, for whatever reason he believes he has no other choice.

As Zandardad would be the first to say, "You always have a choice." That leaves the revised statement, "For whatever reason he is not willing to accept the consequences of what his other choices would be." He IS willing to suffer the valid criticism that what he is doing appears to be wrong, if not worse than what Bush did on this subject.

Or, as James Brown said it best, "Payin' the cost to be the boss." So the REAL question is not "Why is Obama following Bush's lead on state secrets" but "Why is Obama so clearly doing the wrong thing here when he has demonstrated time and time again he is willing and able to do the right thing?"

And that is something I just don't have enough information to answer.

Dead Giveaway

How do I know today's Wells Fargo news is bullshit?

Because Jim Cramer just declared the banks to be solvent, the stress tests to be moot, and the financial sector to not need any more bailout money.



That's funny. This one's going into the future stupidity file for me to pull out later, since Jim Cramer has basically been wrong about every damn thing he's said about this economy.

Happy And Sad

If Zandar happiness is Rachel Maddow discussing why Matt Taibbi is right about how bad our economy is, then Zandar sun-melting, soul-stripping rage is Jennifer Rubin discussing why Karl Rove is right about how bad Obama is.

One school of thought suggests that Obama is deep down a far-left ideologue and would rather achieve his agenda than build a lasting coalition. He has to hurry to beat the clock to the 2010 election and wants to do everything he can to tick off the items on the liberal wish list. In this scenario, his moderate language and bipartisan themes, as central as they were to his campaign, were essentially deceptive. He’s not a centrist and has no interest in governing as one.

Another school of thought suggests that he hasn’t figured out how to set the agenda and put Nancy Pelosi and Harry Reid in their place as supporting players. They crafted the stimulus and insisted on the earmark-stuffed omnibus spending bill. He passively went along because he lacked the fortitude or skill to cut them off at the pass. The problem with that theory is that his budget — crafted by him, not Pelosi or Reid — was extreme, vastly increasing the size of government, raising taxes, embracing cap-and-trade (and with it a huge energy tax), and setting up a healthcare slush fund for which the fine print would be filled in later.

When you look at his actions it is hard to conclude that Obama is anything but a committed ultra-liberal who sees himself as revolutionizing the relationship between citizens and government. And when you throw in his “can’t we all get along” diplomacy and his unwillingness to assert America’s unique role in the world, one gets the sense we elected a throwback to the 1970s, not a groundbreaker. (More George McGovern and less Bill Clinton than many imagined.) That’s bound to be divisive since a large majority of the electorate isn’t ultra-liberal. It remains to be seen whether it is also a losing formula, both economically and politically.

No matter what Obama does, these people have convinced himselves that the people will never support what he is doing, because America is not a center-left country.

Despite his 66% approval rating.

It will never be a mandate for them. Ever. Obama will always be Jimmy Carter making Bill Clinton's mistakes.

Documenting The Atrocities

Calculated Risk has a summary of the most recent commercial real estate news, and the reports are staggering. Some examples:

Malls: From Bloomberg: Vacancies at U.S. Retail Centers Hit 10-Year High, Reis Says

The vacancy rate at neighborhood and community shopping centers rose to 9.5 percent from 8.9 percent the previous quarter and 7.7 percent a year ago ...

Offices: Office Vacancy Rate Rises to 15.2% in Q1 and the WSJ: Companies Sold Office Space at a Fast Pace

The office vacancy rate nationwide rose to 15.2% from 14.5% in the previous quarter, and likely will surpass 19.3% over the next year, according to Reis ...

Apartments: From Reuters: US apartment market worsens with economy--Reis

The national apartment vacancy rate rose to 7.2 percent in the first quarter, up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier ...

Hotels: From HotelNewsNow.com: STR reports U.S. data for week ending 28 March

In year-over-year measurements, the industry’s occupancy fell 12.3 percent to end the week at 56.6 percent...

And it gets worse from there. Malls, office parks, hotels and apartment buildings are basically losing money on each vacancy and cannot raise rents or rates to make up for the falling revenue, or they of course risk losing more customers and tenants due to the widespread number of vacancies they have. If anything, they have to cut rates or rents, as it's the only thing they can do, and if one does it, they all have to follow suit to remain competitive.

But you can only cut rates or rent so much, otherwise the entire mall, office park, hotel or apartment building starts losing money as a whole, and as these close to relieve the pressure on vacancies, the tenants that are able to pay find themselves without a place to live or stay or do business. That kind of interruption only increases the odds that the business owner will leave the mall or office park and go out of business, or not stay at the hotel in that city, or get tossed out on the streets instead of moving to the new locations with vacancies.

That damages the economy as a whole, causing less people to spend money at the mall, or not to expand into the office park, or not to take that vacation and stay at the hotel, or not to want to move and get tied into a long-term lease in this economy, causing more vacancies...

And voila! Yet Another Death Spiral.

We've got a long, long way to go. Keep that in mind when you see CNBC telling us that a major rebound and sustained economic recovery is just a few months away.

“People have been talking about an L-shaped recession,” adds Miichael Mussa, senior fellow at the Peterson Institute for International Economics. “The record shows you come back sharply from deep recessions” like the current one.

These economists and others see a V-shaped pattern, similar to that of the recession-recovery periods of the 1970s and 1980s. And they say there is ample evidence to support it.

Among the reasons for the new optimism: a significant easing of the credit crunch, improvement in consumer spending—including better auto sales—a potential bottom in housing, a less-grim jobs picture and expectations that the government's massive stimulus spending could start boosting economic growth almost immediately.

That doesn’t mean anyone is saying the recession is over yet. But the end is closer than people think.

Sure it is. Just like a year ago when we had a strong economy and the subprime mess was nothing to worry about. CNBC was soooooo right then. Wells Fargo really did earn $3 billion this quarter and the Dow's on its way to 14,000 again.

Go right on telling yourselves that everything's fine now too.

Bank Shot

Simon Johnson over at Baseline Scenario has an excellent article on what the banking system is planning to do now that they've basically gotten everything they've wanted out of the taxpayer, government regulators, and the happy face economics media.

Now they want absolution of their sins, and they basically want to go back to business as usual, claiming that any further regulation and vilification will only harm the economy.

The big issue is of course the financial sector reform process. Some of my colleagues expressed great satisfaction with the progress made by the G20. But progressing down a blind alley is not something to be pleased about. I have yet to hear a single responsible official in any industrial country state what is obvious to most technocrats who are not currently officials: anything too big to fail is too big to exist.

If the bankers were just stupid, as suggested by David Brooks, then regulatory fixes might make some sense. But we know that bankers are smart, so it is their organizations that became stupid. What is the economic and political power structure that made it possible for such stupid organizations to become so large relative to the economy? Answer this and you address what we need to do going forward.

At a high profile conference in the run-up to this crisis, someone destined to become a leading official in the Obama Administration responded to a sensible technocratic critique of the financial system’s incentive structure (from the IMF, no less) by calling it “Luddite”. By all accounts, this is the prevailing attitude in today’s White House.

But the right metaphor is not breaking productive machines, or peasants with pitchforks, or even the poor vs. the rich. It’s as if the organizations running the nuclear power industry had shown themselves to be stupid and profoundly dangerous. You might wish to abolish nuclear power, but that is not a realistic option; storming power plants makes no sense; and the industry has captured all regulators ever sent after them.

The technocratic options are simple, (1) assume a better regulator, of a kind that has never existed on this face of this earth, (2) make banks smaller, less powerful, and much more boring.

And of course the banks will accept neither option. They will threaten to pick up their toys and go over to a country where they CAN run business as usual, and take millions of jobs with them. "Shut up and let us make money, or we'll bankrupt you," they tell Obama. And they are the ones holding the cards. There's a reason the banks have gotten everything they've wanted and then some.

The banks were allowed to get too big. Then they got greedy and corrupt. Now, cutting the financial cancer out will kill the economic patient just as surely as not operating at all.

Until Obama admits the size and power of the financial sector is the main problem, there will be no solution. Just more bailouts.

Thanks Again Dubya

...for ruining capitalism so badly that only 53% of Americans believe it's better than socialism. Way to go on that one. You actually found a way to completely wreck it by turning it into reverse socialism.

My fav part of the Rasmussen poll (natch):

Adults under 30 are essentially evenly divided: 37% prefer capitalism, 33% socialism, and 30% are undecided.

I love it. Of course those under 30 have this idea that capitalism is not the great struggle against Communism, but "well, I got out of school, got laid off after the dot-com bust, laid off again after 9/11 recession, laid off again this year, and still have $100k in student loans due." Yes, they are going to say to themselves "Hey, capitalism kinda sucks, and I don't have health care, let's try something different." They might be on to something.



Oh, and the wingers are blaming Obama for the "death of America."

How To Make Money Without Really Trying

The Wells Fargo way!

1. Get $25 billion in TARP money and buy Wachovia with it.
2. Convince government to change mark-to-market accounting rules.
3. Now, pretend your toxic assets are worth 100 cents on the dollar when they're not.
4. Magically announce $3 billion earnings and watch stock shoot up.

Not bad work if you can get it.

The San Francisco-based bank, which has received billions of dollars in government funds, said it expects to earn 55 cents a share for the quarter ended March 31. Analysts polled by Thomson Reuters, on average, forecast earnings of 23 cents per share.

When asked if the earnings report might spur an equity offering by Wells Fargo, Atkins said that growing good earnings was the best path for the bank. "That's the best way to grow capital," said Atkins. "The best way is to keep earnings growing."

It was unclear whether the figures are comparable with those of a year ago, after the bank issued $25 billion in preferred shares to the U.S. government. It also could not immediately be determined whether the $3 billion was before or after dividends paid to the U.S. Treasury.

Ahh, but that doesn't really matter much now, does it? Watch for all the other banks to mysteriously announce "surprisingly" large "profits" as well. Wells Fargo jumping in two weeks before their scheduled earnings report to crow about the money, and all of this well before the results of the bank stress tests will be announced. How can the banks be in trouble? They're making billions in profits again!

Gee, this doesn't look like a fabulous screw job or anything. Nope.

[UPDATE] And speaking of screw jobs, BooMan discovers the NY Times has already called in the fix on the stress tests.

Dash opens his article by telling us that he has spoken to some (unnamed) bank examiners involved in conducting stress-tests on the 19 largest banks in the country and that they have good news...the books aren't as bad as many fear. Then he tells us that many of the bailed-out banks need to be bailed out again. After that, he gives us this doozy.

Regulators say all 19 banks undergoing the exams will pass them. Indeed, they say this is a test that a bank simply will not fail: if the examiners determine that a bank needs “exceptional assistance,” the government, that is, taxpayers, will provide it.

Imagine a teacher grading exams and telling you that no one will fail because failing students will be allowed to get extra tutoring and retake the test. If necessary, they'll be given the answers.

We're screwed.

Cardboard Oven For The Win

Cardboard box oven 1, firewood 0.

When Jon Bohmer sat down with his two little girls for a simple project they could work on together, he didn't realize they'd hit upon a solution to one of the world's biggest problems for just $5: A solar-powered oven.

The ingeniously simple design uses two cardboard boxes, one inside the other, and an acrylic cover that lets in the sun's rays and traps them.

Black paint on the inner box, and silver foil on the outer one, help concentrate the heat. The trapped rays make the inside hot enough to cook casseroles, bake bread and boil water.

What the box also does is eliminate the need in developing countries for rural residents to cut down trees for firewood. About 3 billion people around the world do so, adding to deforestation and, in turn, global warming.

By allowing users to boil water, the simple device could also potentially save the millions of children who die from drinking unclean water.

Bohmer's invention on Thursday won the FT Climate Change Challenge, which sought to find and publicize the most innovative and practical solution to climate change.

"A lot of scientists are working on ways to send people to Mars. I was looking for something a little more grassroots, a little simpler," Bohmer said Thursday.

This is outstanding and it's hard to think why anyone hasn't done this before. I remember creating cardboard ovens in shop class as a project 20 years ago, and just now we're getting around to using this as a major solution to the world's carbon footprint?

Geez. Anyway, good to see this is being done. I'd buy one of these myself just to see how they would work around here in the summer. Talk about a cookout!

New (long overdue) tag: EPIC WIN.

If It's Thursday...

Yadda yadda, 654,000 new jobless claims, yadda, yadda, new record continuing claims, 5.84 million.

Initial claims for state jobless benefits decreased 20,000 to 654,000 in the week ended April 4, the Labor Department said in a weekly report Thursday. That was the biggest decline since the beginning of the year, and more than doubled Wall Street expectations, according to a Dow Jones Newswires survey.

The prior week's level was revised up. The four-week average -- which aims to smooth volatility -- fell 750 to 657,250.

The U.S. has lost 5.1 million jobs since the recession started in late 2007, with over two million of those losses occurring in the last three months alone, pushing the unemployment rate to a 25-year high of 8.5%. The early-April jobless claims figures, if sustained in coming weeks, point to another monthly drop in the 600,000 to 700,000 range in April.

The risk for the economy is that if the U.S. keeps losing jobs at that pace for too much longer, it could prevent a consumer-led recovery from taking hold. Federal Reserve economists now expect the jobless rate to rise "more steeply" into early 2010 before stabilizing "at a high level over the rest of the year," according to meeting minutes released Wednesday.

According to Thursday's Labor Department report, the tally of continuing jobless claims -- those drawn by workers collecting benefits for more than one week in the week ended March 28 -- surged another 95,000 to 5,840,000, the highest level since the government started keeping track in 1967.

Yadda, yadda, we're screwed.

Praise The Dollar And Pass The Ammunition

An interesting story from Politico about the Pentagon wargaming a few future scenarios. That's not news, but the scenarios are: the DoD is looking into "economic warfare simulations" and the realization is that this is one area where America may not win.

But instead of military brass plotting America’s defense, it was hedge-fund managers, professors and executives from at least one investment bank, UBS – all invited by the Pentagon to play out global scenarios that could shift the balance of power between the world’s leading economies.

Their efforts were carefully observed and recorded by uniformed military officers and members of the U.S. intelligence community.

In the end, there was sobering news for the United States – the savviest economic warrior proved to be China, a growing economic power that strengthened its position the most over the course of the war-game.

The United States remained the world’s largest economy but significantly degraded its standing in a series of financial skirmishes with Russia, participants said.

The war game demonstrated that in post-Sept. 11 world, the Pentagon is thinking about a wide range of threats to America’s position in the world, including some that could come far from the battlefield.

And it’s hardly science fiction. China recently shook the value of the dollar in global currency markets merely by questioning whether the recession put China’s $1 trillion in U.S. government bond holdings at risk – forcing President Barack Obama to issue a hasty defense of the dollar.

“This was an example of the changing nature of conflict,” said Paul Bracken, a professor and expert in private equity at the Yale School of Management who attended the sessions. “The purpose of the game is not really to predict the future, but to discover the issues you need to be thinking about.”

Several participants said the event had been in the planning stages well before the stock market crash of September, but the real-world market calamity was on the minds of many in the room. “It loomed large over what everybody was doing,” said Bracken.

“Why would the military care about global capital flows at all?” asked another person who was there. “Because as the global financial crisis plays out, there could be real world consequences, including failed states. We’ve already seen riots in the United Kingdom and the Balkans.”

This makes sense, as China pretty much has us over a barrel on the dollar, and that the US now considers global unrest sparked by the financial crisis as the new terror threat to the country and the world.

You can bet you'll see riots elsewhere in the world as things get steadily worse. Right now in America we're limited to (mostly) non-violent demonstrations and the occasional warning tremor from the militia movements. As it gets worse over the next 12-18 months or so, you'll see a lot more of this kind of thing. Remember, the Murrah Federal building was bombed during the heart of the Clinton boom years in 1995, before Clinton's first term was even up. It's only been eleven weeks for Obama and already we're seeing the return of those elements, fueled by layoffs and racist rage and 8 years of the right wing noise machine under Bush.

Hell, we've already had mass shootings from one unemployed guy and one anti-Obama cop killer, and that's just this month. It'll get worse. Far, far worse. No matter how you personally feel about Obama as President, you'd be crazy not to think it is was going to get worse.

StupidiNews!

• Somali pirates still hold the captain of a US container ship as the US Navy arrives on scene.
• The creator of the smash hit PC game The Sims, Will Wright, is leaving Electronic Arts.
• GM says the Chevy Volt remains the company's #1 new car priority despite a government report it's not economically viable.
• The financial crisis has fueled a new wave of homelessness in Japan as Osaka's factories close.
• Microsoft says 97% of the world's e-mail is now spam.