Sunday, October 3, 2010

Weekend Newsbites: Sat. & Sun., Oct. 2 & 3, 2010


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William R. Barker said...

http://online.wsj.com/article/SB10001424052748704654004575517940057210022.html?mod=WSJ_Opinion_LEFTTopOpinion

The Federal Reserve's experiment with near-zero interest rates, which began following the credit crisis of 2008, has now become counterproductive.

* AGREED.

As a temporary fix it served its purpose. It was an emergency antibiotic appropriate for the illness.

* I DISAGREE. (*SHRUG*) THE MAIN BENEFICIARIES WERE THE OLIGARCHS. FOR THEM NEAR-ZERO INTEREST RATES WERE NOTHING MORE THAN A DISGUISED SUBSIDY, ANOTHER BAILOUT. THEY TOOK THE MONEY THEY WERE "LENT" BY THE FEDERAL GOVERNMENT AND "INVESTED" THE MONEY IN T-BILLS - WE TAX PAYERS BEING LIABLE FOR THE INTEREST THESE "INVESTMENT" "EARN."

The negative impact of current policy is clear. The near-zero interest rate experiment is weighing on consumer and investor confidence, and the Fed signals its lack of confidence with each "extended period" proclamation. It is providing banks with low-interest financing that can be used to create modest returns through a carry-trade in U.S. Treasurys but is adding nothing to the velocity of money, which is what actually generates economic growth.

* WHICH IS WHAT I JUST WROTE ABOVE!

The Fed's super-loose policy has driven down the security and spending power of savers, particularly those in retirement who played by the rules during their working years and now depend on the earnings from their savings for a decent quality of life.

* YEP! (INCOME REDISTRIBUTION FROM THE RESPONSIBLE TO THE IRRESPONSIBLE!)

The extreme monetary policy is also having no positive impact on the availability of consumer or business credit, job growth or consumer and business spending.

October 3, 2010 at 5:49 PM
William R. Barker said...

http://www.nytimes.com/2010/10/03/business/economy/03gret.html?ref=global

Consider the claims made last summer that the Dodd-Frank financial reform act reduces the threats that large, interconnected banks pose to taxpayers and the economy when the banks are deemed too big to fail.

[Contrary to that false claim,] it’s evident that the law has created a new set of institutions that will almost certainly be deemed too important to fail if they ever get into trouble.

[T]here won’t really be an effective way to keep those firms from taking big, profitable, short-term risks that are dumped on the taxpayers when the bets fail.

Our roster of bailout candidates includes the "clearinghouses," created under Dodd-Frank, that are meant to increase the oversight of derivatives trading.

Because most derivatives transactions are expected to go through these "clearinghouses," they will be “systemically important” under the law.

As such, Dodd-Frank specifically provides that “in unusual or exigent circumstances,” the Federal Reserve may provide such entities with a financial backstop, including borrowing privileges.

(*SMIRK*)

Remember this: Financial backstop is just another term for a taxpayer bailout. And the major banks and brokerage firms are the members of the "clearinghouses," so a backstop would essentially be for them.

* ONCE AGAIN, THE AMERICAN PEOPLE PLAYED FOR SUCKERS BY THE DEMOCRATS.

According to the Bank for International Settlements, the entire derivatives market had a gross credit exposure of $3.5 trillion at the end of 2009. Obviously, even a small fraction of that amount could represent a sizable call on the taxpayers if a clearinghouse hit the skids.

So much for eradicating too-big-to-fail.

Walker F. Todd, a lawyer and economic consultant in Chagrin Falls, Ohio, was assistant general counsel and research officer at the Federal Reserve Bank of Cleveland from 1985 to 1994. He’s also an expert on the widening financial "safety net" - a net that offers taxpayer backstops for the institutions that got us into this mess and will most likely, alas, get us into the next one. He says he is disturbed by the explicit backing of derivatives clearinghouses provided in Dodd-Frank. “There is no reason whatsoever for exposing taxpayers and ordinary citizens to paying for the gaming losses incurred through over-the-counter derivatives,” Mr. Todd said.

(*NOD*)

Given the multiple bailouts of 2008, it is to be expected that the line of institutions clamoring to join the cannot-fail party will grow longer. That’s the definition of moral hazard - if you rescue one group, others are sure to want the same treatment and behave in a way that ensures they’ll get it. The losses that taxpayers may endure in the next debacle, meanwhile, mount higher.

“The crisis is about loss redistribution,” said Edward J. Kane, professor of finance at Boston College and an authority on regulatory failures. “In a crisis, these institutions have much more power with the government than taxpayers do and they will make it seem in the interests of responsible officials to rescue them, whether that’s Congress, the Treasury or the Federal Reserve. But the notion that you can always throw these losses on the taxpayer in the long run is very, very dangerous. There will come a time when the taxpayers will come close to revolt.”

* I'M ALREADY THERE. DOWN WITH THE OLIGARCHS! DOWN WITH THE CRONY CAPITALIST POLITICAL/FINANCE CLASS!

October 3, 2010 at 6:43 PM
William R. Barker said...

http://www.nytimes.com/2010/10/03/us/03tunnels.html?_r=1&ref=world

On Thursday, the Border Patrol was filling an underground tunnel that had been discovered right under the immigration checkpoint in Nogales, Arizona. But even before the concrete was poured to make that tunnel inoperative, another subterranean passageway was discovered a block away.

The second tunnel, which had been used to bring bales of marijuana from Mexico, will be filled as well. There are patches, in fact, all across this city, where the authorities have tried to tap the tunnels that traffickers build off the extensive underground storm drain system that connects Nogales with another city by the same name across the fence in Mexico.

Drone aircraft patrol the United States-Mexico border from the skies. Fast boats look out for smugglers at sea. ... Border Patrol agents use trucks, horses, all-terrain vehicles and bicycles to stop unauthorized crossers on land. But there is another route across the border, one in which smugglers slither north. As...border barriers have been built, tunneling has gained in popularity, with Nogales becoming the capital.

[T]he two Nogaleses are where drug trafficking has literally gone underground. Burrowing from one country to the other happens elsewhere along the border, particularly in the smuggling zone around Tijuana. But officials say most of the tunnels discovered along the entire stretch of the border are from the Mexican Nogales to the American one.

Over the last four years, at least 51 unauthorized tunnels, or more than one a month, have been found in the two border cities. Some are short, narrow passageways that require those navigating them to slither. Others are long, sophisticated underground thoroughfares strung with electric cables and ventilation hoses.

It is not just the flow of drugs that concerns the authorities here. The tunneling weakens roadways, sometimes causing them to buckle, and puts buildings at risk.

“There is a joke in Nogales that someday its entire downtown will collapse into a giant sinkhole due to the many drug tunnels in the city,” Hugh Holub, a former public works director in Nogales, wrote recently.

* A "JOKE," HUH? ROADWAYS BUCKLING... BUILDINGS - OCCUPIED BUILDINGS - PUT AT RISK. I FAIL TO SEE THE HUMOR.

October 3, 2010 at 6:44 PM
William R. Barker said...

* TWO-PARTER... (Part 1 of 2)

http://www.weeklystandard.com/articles/war-young

Last week, in an effort to limit the damage to congressional Democrats in November’s elections, President Obama set out in pursuit of the youth vote, traveling to several college campuses to rally the young activists who were so important to his presidential campaign. “What I want to do is just to speak to young people directly and remind them of what I said during the campaign,” he told reporters on Monday.

[R]ather than listen to the President talk about what he said two years ago, young voters should look at what he has been doing ever since.

In fact, it is precisely younger Americans who should be most distressed by Obama’s agenda and governing choices as President: Their future is at stake, and they are on the losing end of his key policies.

To begin with, the debt we are amassing will have to be shouldered by the young throughout their working lives. President Obama has added nearly $3 trillion to that debt in his first two years in office (after his predecessor had added more than $4 trillion in his eight years).

* AS ALWAYS FOLKS, NOT AS A "DEFENSE" OF GEORGE W. BUSH, BUT IN THE INTERESTS OF ACCURACY AND CONTEXT ALLOW ME TO REMIND YOU THAT DURING THE LAST TWO YEARS OF BUSH'S SECOND TERM - 2007 & 2008 - NANCY PELOSI AND HARRY REID HAD COMPLETE CONTROL OVER BOTH HOUSES OF CONGRESS - THE HOUSE AND THE SENATE. IT IS CONGRESS WHICH SPENDS MONEY. IT IS CONGRESS WHICH DEFICIT SPENDS AND TAKES ON DEBT.

* AGAIN, FOLKS... IT IS MISLEADING AND DISINGENUOUS TO TALK OF "PRESIDENCIES" ABSENT PARTY CONTROL OF CONGRESS. THE BOTTOM LINE IS, DURING 2001 THRU 2006 WHEN THE GOP CONTROLLED CONGRESS THE DEMOCRATIC MINORITY WAS CERTAINLY NOT TRYING TO STOP REPUBLICAN OVER-SPENDING; IF ANYTHING, THE DEMOCRATS REGULARLY ATTEMPTED TO ADD TO SPENDING. (THAT'S JUST A FACT!) AS TO THE SPENDING OF 2008 - "UNDER BUSH" - PLEASE RECALL THAT OBAMA BACKED TARP... PELOSI BACKED TARP... REID BACKED TARP... AND THAT IT WAS A DEMOCRAT-CONTROLLED CONGRESS WHICH PASSED TARP!

* To be continued...

October 3, 2010 at 10:26 PM
William R. Barker said...

* CONTINUED... (Part 2 of 2)

Obama’s [current] budget [blueprint] would add a total of more than $11 trillion over just the next decade.

By the time today’s young workers are at the peak of their working lives, America’s national debt will equal more than 200% of our GDP (up from roughly 60% today), according to the Congressional Budget Office. Today’s young voters will be left with the bill, but without many of the benefits of that spending.

* ANOTHER POINT. NOTE THAT THE AUTHOR POINTS TO AMERICA'S NATIONAL DEBT EQUALING 60% OF GDP TODAY. QUESTION: WHAT WAS THE RATIO IN DECEMBER 2006, THE LAST MONTH REPUBLICANS CONTROLLED CONGRESS?

(*SMIRKY SMILE*) (SEE WHAT I'M GETTING AT...?!?!) (*GRIN*)

[O]ur entitlement system, which transfers immense amounts of money from the young to the old, cannot be sustained. ... [T]he burden of Social Security and Medicare spending will increasingly crush the dreams of the young, leaving them with less disposable income and a less prosperous and competitive country.

Both the Social Security and Medicare trust funds are projected to be depleted long before today’s young workers retire, and the resulting drain on general government revenue will squeeze out other programs and require colossal tax increases.

* SOCIAL SECURITY IS ALREADY "UPSIDE DOWN!" RIGHT NOW IT'S PAYING OUT MORE THAN IT'S TAKING IN! (FUNNY HOW RARELY THE MEDIA MAKES MENTION OF THIS...) (*SMIRK*)

Rather than address these problems, President Obama and the Congress have chosen to pile an enormous new entitlement program atop them. The health care bill enacted in March is a massive transfer of wealth from people at the beginning of their working lives to (generally much wealthier) people toward the end of their working lives. Beyond the sheer cost of its new system of subsidies, the law strictly limits the difference between insurance premiums paid by 18-year-olds and those paid by 64-year-olds - despite enormous differences in health care costs between the young and the old. It therefore makes health insurance far more expensive for younger people while compelling them to buy it. It is also slated to increase overall national health care spending, which will of course be borne by today’s young taxpayers in the coming decades.

The fact is that the implicit ideal of the Left - the European-style social-democratic welfare state - is hostile to the young and to future generations. It prioritizes present benefits over future growth, present retirees over productive workers, and the present generation over those to come. No society can remain wealthy and strong with such distorted priorities. It is up to the young in particular to resist further steps in this direction, and to press the nation’s leaders to change course and reform our entitlement system.

October 3, 2010 at 10:27 PM

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