If you weren't already depressed

The President of the Dallas Federal Reserve Bank has two things to say to you:

1. Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion* over the infinite horizon.
   
2. This situation is of your own creation. When you berate your representatives or senators or presidents for the mess we are in, you are really berating yourself. You elect them. You are the ones who let them get away with burdening your children and grandchildren rather than yourselves with the bill for your entitlement programs.

I'm going to bet Richard Fisher is a fan of neither Ben Bernanke nor George Bush, of Barack Obama nor John McCain, and his numbers illustrate why none of them matter at this point. A few billion saved here because we put 35,000 troops in Afghanistan rather than 45,000, it doesn't make any difference. While it would be smart to get out of Iraq, immediately**, it is not going to make any difference. One trillion spent in Iraq is bad. It is nothing compared to the 99 trillion we have promised to give away and have no way to pay for but printing money from nothing.

But there are a few misleading things in Fisher's big bad numbers. They're not misleading because he's misleading us, but because he's a banker and uses jargon that is easy to misinterpret. For example, when he talks about an "infinite horizon," he's not saying we have forever to raise the money. He is talking about the "present discounted value," the amount of money in today's dollars that we would have to invest today in order to pay that bill as long as it lasts. If inflation doubles, that number doubles as well. You cannot "grow out of it" no matter what politicians say.

And when he uses decimal points, it implies an accuracy that simply does not exist. We don't know that it's 99.2 or 99.3 or 150 or 500. In fact if we use the history of government budgeting as a guide, then we are underestimating by an order of magnitude. All we know with certainty is that it's too big to be meaningful.

But the final thing is probably the most important, the assumption that there is such a thing as an infinite horizon. In math, yes. In econometric modeling, yes. In actuary, yes. In reality, not a chance. A nation that is staring at a present value debt 10 times the size of everything created in that nation does not have an infinite horizon. The best it can hope for is a beautiful sunset.

* Fisher does a little later math and concludes that the present value of just the unfunded portion of these entitlements comes out to $330,000 for every person in the country. If you divide it out by the number of people who actually have jobs actually making things that we could actually sell to raise the money, you will cry.

** While supporters of the war or the rebuilding or whatever it is now would call this losing in Iraq or turning it over to the terrorists, I would quote the wise philosopher Tom Petty: "It don't make no difference to me, everybody's had to fight to be free." If they cannot manage freedom on their own, then they cannot be free. Sorry.

Uh

Over the hill

So anyway, it's my birthday, and all the ladies on my floor decided that my office needed a makeover; black balloons, black streamers, that sort of thing. And they all wore black, too, so when we go out for Chinese in an hour and a half, we're going to look either like a funeral party or the oldest gaggle of goths in southeast Kansas.


UPDATE: And yes, Haloscan is hosing up this morning, in case you were wondering why the site is loading so slow and commenting is a hit-or-miss affair...

It's actually "cold amusement"

In an excellent piece in the WSJ, James Grant asks, "Why No Outrage?" about the fact that this Wall Street/K Street connection is robbing Americans blind, and with their blessing:

I have another theory, and that is that the old populists actually won. This is their financial system. They had demanded paper money, federally insured bank deposits and a heavy governmental hand in the distribution of credit, and now they have them. The Populist Party might have lost the elections in the hard times of the 1890s. But it won the future.

I have to confess that, though this blog occasionally sounds a lot like what progressive blogs would remind you* is outrage, I'm not outraged at all. Sure, I'll document it and explain it, but I'm really not angry about it. The collapse of the debt-based paper dollar is not the end of the world, but of a colossal and cruel fraud.

Democracy has been called the theory that the people know what they want and deserve it good and hard. Well, they want cheap money - they've always wanted cheap money - and they're going to get cheap money, good and hard. How can one be outraged at justice?

* Interminably. And they have to tell you it's outrage because they have so much outrage so often that a normal person could be forgiven for thinking they are just like that all the time. Which they are.

(hat tip: Snoop)

Bird Brains

Some extremely clever senator* thought he found a golden goose:

WASHINGTON -- The indictment of Alaska Republican Sen. Ted Stevens on charges that he lied about accepting gifts from an oil contractor only adds to his party's already** bleak electoral prospects in November, and not simply because it could cost the GOP a Senate seat that should be safe...

The amazing thing is not how crooked our elected officials are, but how stupid they appear to be. Why would you have a company give you money directly and illegally in such a way that it could be traced even by a new graduate one of those Private Investigator correspondence courses you see advertised in the back of Boys Life? If you want to get rich in government service, the way to do it is not by funneling government money to others, but by having the government funnel money to you.

For example, you might have noticed Fannie Mae in the news this week. Beloved by Democrats for providing "affordable housing" to the poor*** and by Republicans for providing billions in fees to connected Wall Street brokerages, it paid salaries and bonuses of more than a million bucks to more than 20 executives in 2002. The next year, Fannie's president pocketed a cool $21 million all by himself.

To be sure, much of that was the result of purposeful manipulation of earnings numbers that resulted in some of these guys being fired. That'll teach 'em.**** With that fox out of the hen house, Congress clucked and scratched for a bit, threatening to give them even more "oversight," which in congressional parlance means "money." Bush signed the blank check yesterday: it's all legal.

Compare that to the measley quarter million or so that Stevens accepted - if that's not proof that the Gang of 535 doesn't have the brainpower God gave a goose, I don't know what would suffice.

* The same senator who routed millions of dollars in a highway bill to build the Bridge to Nowhere and then threatened his fellow Republicans from the Senate floor when they tried to strip that and a bunch of other earmarks from the bill. He won. It was the Senate's finest hour.

** I wonder if it would be opining in the news section if one were to replace this word with "deservedly."

*** with loans up to $600,000 for the kind of people who buy their "poor clothes" at Gap.

**** Pay me $20 million and fire me, please. I promise I'll never work again.

Well, because then Lulu would have a gun

Beware of Democrats

Thus say the brave unnamed officials of the Bush administration:

WASHINGTON — The White House is expected to report a projection for a $490 billion budget deficit for the budget year ending in September 2009, a number that would be the highest number recorded...

[A] senior administration official said "a lot can happen" in 18 months that could worsen or improve the outlook, such as an improved economy leading to better tax returns, or increased spending under a new administration. The official specifically warned about the impact of Democrats.

"Democrats could blow the doors off spending and drive the deficit even higher," the official said.

If this abomination of a budget deficit - which I still expect will top $1 trillion dollars when all is said and done* - occurred on my watch, I wouldn't allow my name to be printed, either. But it is the ultimate in arrogance for Republican officials to, as the article says, downplay the impact of the biggest budget deficit in history out of one side of their mouths, while warning out of the other that the Democrats will be big spenders.

While it would be a cold day in hell before I would vote for a Democrat**, I am really looking forward to the baby seal hunt they will be performing on the GOP in about three months. No one has ever worked harder to earn the beating they are about to receive.

The only thing better would be if the housing market around DC was so bad next year that they had to sell their houses to the incoming Democrats at half what they paid for them.

* Well, when all is done. Due to the exclusion of so much spending from the budget, it will never be said, by either party.

** There have been a couple of cold days in hell. Having grown up in Minnesota, I've seen them.

Brother can you spare me?

You know you're in a depression when the Gap is selling gray clothes:

Taking a cue from the grim economy, this fall's fashions at Banana Republic, Gap and H&M are featuring a distinctly Depression-era trend of cloche hats, pencil skirts, conductor caps and baggy, vintage-style dresses.

One of the most popular styles appears to hark back to the impish, newsboy getup of the 1930s: baggy trousers, caps, pinstriped vests, oxford lace-up shoes and utilitarian handbags.

"We associate the newsboy look with urban poverty - street kids of the 1930s," said Daniel James Cole, a professor at the Fashion Institute of Technology.

"Given that we're in an unstable economy and an uncertain political landscape, it's possible that a retro style has come back as a way to connect with our heritage."

You know, I am occasionally troubled by the very existence of Gap*; it is a powerful argument against the idea that there is justice in the universe. But I do take solace in the thought that when we actually do "connect with our heritage" - rather than making smarmy fashion statements about it - we will no longer be tormented by its existence.

* Banana Republic, on the other hand, is probably here to stay, not as a store but as a nation, thanks to the efforts of the Banana Republicans.

The Process

(hat tip: David Craft)

The end of an error

Global Warming might soon be going the way of the Playstation:

When I started that job* in 1999 the evidence that carbon emissions caused global warming seemed pretty good: CO2 is a greenhouse gas, the old ice core data, no other suspects...But since 1999 new evidence has seriously weakened the case that carbon emissions are the main cause of global warming, and by 2007 the evidence was pretty conclusive that carbon played only a minor role and was not the main cause of the recent global warming.

Dr. Evans gives 4 reasons** why the carbon-based "greenhouse" model for climate progress utterly fails to explain what it is supposed to, concluding with "The world has spent $50 billion on global warming since 1990, and we have not found any actual evidence that carbon emissions cause global warming."

But that makes me wonder, if there is no "actual evidence that carbon emissions cause global warming," how could there have been "pretty good" evidence back in 1999? What happened to the evidence? Did it get lost in the Katrina flood? Filed away in that big warehouse from Raiders? Is "pretty good" a euphemism meaning the opposite of "actual"?

There was never evidence "for" carbonated global warming then if there is none now: it was either "theoretical evidence" - evidence that needed to exist in order for the theory to work - or it was misinterpreted. What probably happened is that scientists had some facts, developed a theory to explain them, and then assumed the existence of all the missing evidence that was still needed to make the theory work.

Hey, it happens all the time in science. It's just not generally a problem until a politician gets ahold of it.

* Building Kyoto carbon accounting models for the Australian government.

** In an easy-to-chew, layman's format. I highly suggest you read the whole thing.

Who you gonna call?

With nary a fight

A funny thing happened on the way to the federal takeover of housing:

And [the bill] increases the statutory limit on the national debt by $800 billion, to $10.6 trillion.

It used to be not so long ago* that any time the administration wanted to increase the debt ceiling, the Treasury Secretary was forced to remonstrate publicly about the horrible things that would happen if Congress didn't give the administration more spending room**, and the Congress would respond by carefully pretending to care about the financial health of the country before giving Bush exactly what he wanted. It was a comforting ritual, this public throat-slitting of the financial future of America.

So I guess it is a bit out of sorts that the latest increase to the debt ceiling is attached without fanfare to a bill that the administration assures us will not cost the taxpayers a penny.

I wonder what it could mean?

* thought still far too often.

** Why they were deemed 'bad' I never understood. Most of them sounded pretty cool to me.

Senator Strangelove

Change you can believe in:

Washington, Jul 21 (PTI) Democratic presidential nominee Barack Obama has warned Pakistan saying his administration will strike at al-Qaeda targets there if Washington gets "actionable intelligence" on the presence of terror groups...

"I think actually this is current doctrine. There was some dispute when I said this last August. Both the administration and some of my opponents suggested, well, you know, you shouldn't go around saying that. But I don't think there's any doubt that it should be our policy and will continue to be our policy... I don't think there is going to be a change there."

I didn't realize it was current doctrine to drop bombs on nuclear powers because we don't like who's camping within their borders. Maybe we're just going to invade them instead. I mean, you've got to be sure there are no terrorists in other people's countries, and while dropping bombs from planes looks like a lot of fun, it seldom affects anything in areas where wealth is measured in goats but the goats. I have to admit, that does follow the Democratic habit of only using American force where it cannot possibly do us any good. This is in complete contrast to the Republican habit of using it where it could theoretically do us good before completely blowing the opportunity.

But hey, if that's the current doctrine, then in some weird Progressive Logic*, it's going to be a worthwhile change to go from invading enemies to invading allies. I'm sure that will work out just fine. The Pakistanis will just have to get used to hordes of infidel American soldiers crawling all over their villages searching for Muslims who hate infidel American soldiers; after all, we've got actionable intelligence**.

I suspect that before we're done, finding Muslims who hate American soldiers will be a significantly easier task.

* "Progressive" here apparently meaning "complete lack of anything recognizable as."
** "Actionable" here apparently meaning "complete lack of anything recognizable as."

Redneck science

In defense of the SEC

Wow, I never thought I would find that in their panic, the SEC might almost do the right thing:

From next Monday, the SEC will require traders to have formal arrangements in place to borrow shares before shorting Fannie Mae, Freddie Mac and 17 other financial institutions.

Broker-dealers now need only a reasonable belief that borrowable stock can be located in order to execute a short sale for a client. That standard allows brokers to make a market for clients without tracking down the actual shares they plan to borrow.

However, beginning next Monday, they will have to take the extra step of arranging to borrow shares.

A lot of folks on the bear side of the market are screaming right now that the SEC is only acting to make it harder to short these 19 stocks because they want to drive their prices up. They are exactly correct. In fact, they will tell you last week's upward market action, especially in the banks, was nothing but a "short squeeze," in which people who are short the market are forced to buy back their bets, driving up the price. They are exactly correct. It's unfortunate that people who have called the market correctly find themselves suffering losses because of a Treasury Department power play*, but in this case, the SEC is doing the right thing.

The theory behind short-selling is sound. The short-seller, in expectation that the price of a stock will go down, borrows and sells shares with the understanding that he will replace them later, after the price has dropped. It's a legitimate way to "play" the market**, though I have never in my life shorted a stock and don't intend to start now.

So what's the problem? The problem is that it costs money on the part of brokerages to locate shares that can be borrowed, so often as not, they don't actually bother to borrow them. They sell, on behalf of the short-seller, non-existent stock, known as a "naked short." Whether the process is illegal or no***, that, my friends, is fraud. Think about a share in a company like some other asset, like a house. Let's say that some clever market operator believes that houses in your neighborhood, like stocks in a certain company, are going to fall in value. If he is a naked shorter, he simply sells someone a house, even though he neither owns one nor has access to one. That is obviously fraud - there is no house to be sold.

But as is often the case on that rare occasion when the government has a good idea, they do not take it far enough, instead simply limiting that legitimate protection to a couple dozen of their most favored companies. In fact, it should be far more difficult to short any company at all: shorting should require that the actual owners of the stock agree to it being borrowed, if only because it is their property. Back to our house example, if our clever operator is a covered short seller, he has borrowed a house to sell, hoping to buy it back and return it to the actual owner later. An actual house is being sold to an actual person who takes legal possession. Should the shorter be able to borrow and sell your house without permission?

I have no problem with short selling, but I have a real problem with crooked brokerages who create mythical shares from nothing and dump them on the market****. The fact that so many are screaming because the SEC has suddenly demanded that they have actual shares to sell short just shows how widespread the practice of screwing legitimate shareholders is.

* get used to it. This administration and the next one will go to previously unheard of lengths to protect stock and bond values.

** Assuming that treating the market like a huge casino where bets are placed rather than companies are purchased is legitimate. While I have serious misgivings about that fact that this is *precisely* what the market is, so long as people are playing with their own money it's not my place to tell them to do otherwise. I "play" the market as well, though I'll admit I play it like the crooked brokerages rather than the investors. It's far more profitable that way.

*** And I don't know, all I know is that you'll get as many opinions as commentators you ask.

**** It is especially common when a brokerage knows a company will be raising money. They short the hell out of a stock, driving the price down, and then are able to get a far larger stake in the company for their investors at a lower price.

The beauty of stealing photos from NPR is that you don't even need to change the captions.

Sorry for the redundancy, but some things simply demand to be demotivated...

Poverty in America

The saddest story ever written:

The rising cost of food means their money* gets them about a third fewer bags of groceries — $100 used to buy about 12 bags of groceries, but now it's more like seven or eight. So they cut back on expensive items like meat, and they don't buy extras like ice cream anymore...

This NPR story, like most that come from that organization, contains every fact necessary for a reasonable person to conclude that for the good of poor people themselves, every penny in transfer payments ought to be cut off. Today.

It won't be, of course, because why should Americans - no matter how foolish, no matter how lazy, no matter how they pass up every opportunity to improve their own lot that this great land offers - have to go to bed hungry?

* Read: your money.

The Discount Window is always open

Wanna hear something funny?

Fannie Mae and Freddie Mac extended their rebound from last week's near-meltdown that prompted a government rescue plan and the opening of the Federal Reserve discount window to provide funding to the mortgage finance giants.

OK, so that's not all that funny - in fact, it's just a government-engineered short squeeze - but this part is pretty funny:

The Fed's discount window is not open to just any schmuck who walks in the door asking for a loan. You have to be big and either really rich or (more likely) really poor. But most importantly, you have to have collateral. Citibank can slither up and get some cheap money, but they have to provide ultra-safe collateral that will still have value if they go bust. The whole idea of collateral is that it's an asset that does not rely on your own ability to repay.

Now on the Fed's discount window collateral page, there is a list of acceptable securities, and one of these just happens to be "Obligations of ... government sponsored enterprises." GSEs. Like Freddie and Fannie. Citi can use Freddie and Fannie bonds as collateral because they are safe*.

As of this week, so can Freddie and Fannie.

Which means that there is actually no need for Paulsen's scheme to back Freddie and Fannie with unlimited amounts of taxpayer money through an act of Congress**. If they want money, all they have to do is create a security from nothing which they can use as collateral to borrow money from the Federal Reserve, which creates it from nothing.

Pretty sweet, huh?

* because if the bond pays off, you win; if it defaults, the government will give you your money back so you can try again.

** In which case the government would borrow money at interest from the Federal Reserve, which would create it from nothing, and then re-lend it to Freddie and Fannie, who would then re-lend it to banks who would then re-lend it to people who can't afford to buy the houses they want. This is called "free market capitalism."

Wow, have some drama

Horsing Around

"At least part of my motivation for partaking in this mud wrestling match is that I didn't really believe either the Obama campaign or the McCain campaign when they issued statements calling The New Yorker cover 'tasteless and offensive.' That's boilerplate -- the same kind of fake outrage that all the candidates have been displaying during this election year. It seems as if the Obama campaign and Hillary Clinton's campaign spent the whole winter and spring seizing on mildly rude comments from people in the other camp, feigning outrage and demanding apologies and firings. Part of this is because the media has pounced on every tiny gaffe and turned each one into a 24-hour news story. Everybody's been appalled about something and no one has had the good sense to say, 'lighten up.'" - David Horsey

It would have been a welcome change if at least one of the campaigns would have answered a question about the cover with some version of, "It's a cartoon. Next." Instead we get somber statements issued on official campaign letterhead with every word crafted, not to say anything about the issue, but to create in the collective minds of carefully-defined voter groups a carefully-defined impression of the candidate.

Maybe the news cycle is part of this problem* as Horsey says, but I rather think the real problem is that the candidates are not serious people and they do not think serious thoughts nor deal seriously with serious issues. This election is the political equivalent of a Coke vs. Pepsi advertising campaign, full of slogans, blind taste tests, and celebrities, all attempting to sell competing versions of artificially-flavored sugar water.

* The press is the adult version of those kids who run back and forth between two other kids, telling Kid A what Kid B said and then rushing breathlessly back to Kid B to see if they can get him to up the ante. What is said is never important, they just want to see a good fight.

Sometimes it's difficult

to distinguish satire from Congress:

WASHINGTON—A panel of top business leaders testified before Congress about the worsening recession Monday, demanding the government provide Americans with a new irresponsible and largely illusory economic bubble in which to invest.

"What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future," said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. "We are in a crisis, and that crisis demands an unviable short-term solution."

I suggest we just print up a bunch of money and hand it out to people.

Fire up the choppers - redux

The first one didn't work, so guess what?

Many economists have concluded that a second dose of government stimulus spending is required to prevent a broad economic unraveling and provide relief to millions of Americans grappling with joblessness, plunging home prices and tight credit.

Democratic leaders* in Congress have already begun fashioning a package of proposed measures...

I'm betting that "If at first you don't succeed, try try again," was written by someone on the government's payroll. If the first helicopter drop was designed so we could spend ourselves rich, well, we're still not rich. So I guess we just need to do the same thing again, maybe with a bigger chopper. But since Democratic leaders** told us in January they're going to keep stimulusizing us until we get it right, that's not a surprise.

What is also not a surprise is the GOP response:

The White House and Congressional Republicans maintain that the best way to reinvigorate the economy is to adopt legislation to limit home foreclosures and expand domestic production of oil***.

“Those will do more than any $300 you might send out to the taxpayers,” said Senator Johnny Isakson, Republican of Georgia.

"Any $300 you might send out to the taxpayer" was considered the salvation of the nation when it was a GOP idea, now they dismiss it with a contemptuous wave of the hand****. So either an idea is only a good idea when it was your party that proposed it first, or the GOP realized that if the Democratic leaders took it for their own, it really was a stupid idea after all.

* Am I the only one who thinks that phrase is extremely funny for some reason?

** sorry, I can't help it. It just makes me laugh.

*** They're wrong, especially about limiting home foreclosures. The sooner people who can't afford their current houses get out of them, the better off they will be. When enough people get better off, the economy will be reinvigorated, and not until.

**** and Bush just removed the preposterous executive branch ban on offshore oil drilling the day before yesterday. He's only been president for 7 1/2 years, so obviously it was a high priority

Nong fong bong

So about a week ago, the lovely and gracious Rogue gets an email sent to everyone in the office asking who wants to go out and get some "slant-eye" for lunch. Then yesterday, she gets another one, this time from her walking partner, asking the same thing. So she writes the second gal back telling her how offended she is by her use of this racial epithet, since her husband is Chinese. Then she scoots out to lunch* without giving it a second thought.

Anyway, when she gets back, walking-gal is waiting for her and profusely apologizes for offending her. Rogue just laughs, "I was totally kidding, he's not Chinese**."

"Well, you got me in big trouble," the women responds, and she shows Rogue the email she received from HR, including cut-and-pastes from the Employee Handbook, explaining in excruciating detail why "slant-eye" is not an acceptable term for Chinese food. It took a little while for Rogue to convince her that she hadn't told anyone, that she just told her she was offended as a joke, and that someone completely different had passed the email to HR. Of course, by that time, walking gal had already told everyone in the office*** that it was Rogue who squealed. So the ladies all spent the rest of the day trying to figure out who the real weasel was.

This is exactly why I don't talk to anyone I work with.

* I think she went to Taco Bell.

** I am wearing a Hawaiian shirt at the moment, so that's something.

*** This grapevine is even faster than the internet. For example, I just found out that our beloved Mitzibel (hat tip for the picture, btw) is pregnant, so I told Rogue. "I've known that for three days," she told me. Someone seven time zones away**** had told her over the phone.

**** and who speaks Chinese. No foolies.

Speaking of the Princess Bride...

This is probably one of my favorite scenes of any movie...

That's Easy!

Jim Cramer gives us the airspeed velocity of an unladened swallow:

If the Bush Administration had any sense, it would guarantee all of the debt of both mortgage houses and take 20% of the companies in warrants. If it took this step, mortgages would become the new treasurys and investors would scramble to buy mortgages and sell treasurys for a huge win that would stop the depreciation of housing prices cold.

If the Feds were to adopt this plan, Cramer thinks the mortgage market would immediately rally as some much-needed liquidity would flood the system. Banks would rally and all the credit default spreads would implode. The beauty of the plan is that the government doesn’t have to spend a penny to do it, but it would fix what should have been fixed last year – WITHOUT A BAILOUT.

Wow! I guess no one ever thought of simply having the government take over about $6 trillion in troubled mortgage debt. The Bush administration may not have the sense God gave a squirrel, but at least they have enough sense* to stay away from this idiotic idea. Why? Because if the government promised to make good on all this debt, it would not make mortgage bonds the new Treasuries, it would make Treasuries the new mortgage bonds. Think on the implications of that.

Besides that obvious point, there are three other problems with Cramer's plan**, hidden assumptions that nearly guarantee that it would sink the finances of the United States of America once and for all.

The first assumption is that the scramble to "sell treasuries" would have no other effects. In fact, it would immediately drive interest rates up all over the rest of the economy. The mortgage market is huge, bigger than the treasury market, and interest rates in the rest of the economy are based, in large part, on Treasuries. Any "good" move in mortgages will be, must be, offset by a corresponding "bad" move in Treasuries. Cramer is simply ignoring any and all side effects that might occur outside the range of his self-imposed tunnel-vision.

The second is that the depreciation in housing prices is occurring because of the drop in mortgage bonds - that's like saying it's raining because the weatherman said it would. In fact it's the opposite: the value of mortgage bonds is dropping because the value of houses are dropping and will continue dropping so long as people own more house than they can afford to pay for.

The final, and perhaps most important, is that the plan will not cost a penny. In fact it will cost billions, maybe trillions. You simply cannot guarantee $6 trillion in falling-value debts without putting something in the pot. That something is thousands of millions in newly-printed money to cover these bonds when, not if, a significant number of them fail. Government guarantee or not, they are still made up of foolish and fraudulent mortgages that the people who bought the houses cannot afford to pay. That's the whole problem in the first place.

The fact is that if these bonds were good, if the mortgages they represented were without risk, there would be no need for a government guarantee. Making the US Treasury the biggest loan co-signer in the history of the world is not NOT A BAILOUT, it is in fact the biggest bailout imaginable***.

The whole plan is nothing but socialism for the rich: all the profits accruing to the risker, all the losses shouldered by the taxpayer. CNBC has once again proven that for the good of mankind there are some people who shouldn't even be allowed to own a TV, much less be on one.

* Or maybe "have had enough sense" is more fitting. This thing is not over, not by a long shot, and as Jim Sinclair recently noted, "Rest assured that something really stupid is about to happen."

** I hate to disgrace that word by calling this brainfart a plan, but there it is.

*** It also blatantly ignores the fact that such a guarantee is a green light for Freddie and Fannie to become even more reckless. Why worry about underwriting if nothing you do can fail?

(hat tip: Huck)

Naturally you must expect me to attack with Ronald Reagan*

Naturally, but I find that Teddy cancels out Ronald Reagan. Don't you?

HUDSON, Wis. — Senator John McCain in a wide-ranging interview called for a government that is frugal but more active than many conservatives might prefer. He said government should play an important role in areas like addressing climate change, regulating campaign finance and taking care of “those in America who cannot take care of themselves.”

“I count myself as a conservative Republican, yet I view it to a large degree in the Theodore Roosevelt mold**,” Mr. McCain said, referring to Roosevelt’s reputation for reform, environmentalism and tough foreign policy...

[McCain] expressed a willingness to deploy government power and influence where free-market purists might hesitate to do so and to consider unleashing military force for moral reasons.

Famous for his war exploits, Theodore Roosevelt was a progressive who championed government regulation of business, pro-union policies, and mucking around in other nations' internal affairs. A man of incredible vigor with a magnetic personality, he made the White House the center of America and the federal government the prime mover in society. Of course he did take on "special interests," but like all honest and naive reformers, he often just set up opposing special interests in their place.

Teddy's steady lurches to the left alienated conservatives in his own party and eventually split the GOP, resulting in the election of the single worst President in American history, Woodrow Wilson, when he ran as the standardbearer of the Progressive (Bull Moose) Party. The Progressive Party platform called for higher inflation, expanded welfare, imposition of income and inheritance taxes, agricultural price supports, and making it easier to amend the Constitution. It is no accident that hip liberals call themselves "progressives;" then as now it is the political polar opposite of "conservative."

McCain's idolization of TR is a clear view into what he sees for the GOP's future. But the problem with the GOP is not that it is no longer the party of Teddy Roosevelt, but that it is once again that party.

This time without the charisma.

* This post is a modified rerun; new story but illustrating something I said about a year and a half ago. So I swapped out the old story, removed a sentence about the likelihood of McCain being nominated, and added a few asterisks solely for the edification of Giraffe. If it sounds vaguely familiar, that means you've been here too long.

** like being a teatotaller in the Ted Kennedy mold.

Relative victory

The day that nearly every one of the hundreds of 30-something, whiz-kid mutual-fund managers feared has arrived: retirement and mutual fund statements for the second quarter are in the mail. Upon looking at mine, I notice that my hyper-conservative money market fund is on course to earn a whopping 2.17% for the year, roughly 1/3 of the real rate of inflation. While losing money relative to inflation is generally considered a loss, I consider those returns a great victory.

They are a victory because as I look down the list of available funds, and there are dozens that this to-remain-unnamed* fund family offers, I notice an interesting trend:

Growth & Income YTD: -10.62%
International Equity YTD: -18.53%
Large-Cap Value YTD: -15.71%
Large-Cap Value Index YTD: -13.69%
S&P 500 Index YTD: -12.03%

And you might think I'm cherry-picking the worst results, and I am, because these are the largest funds, made up of the largest stocks that the largest number of people invest in for their retirement. However, looking over the rest of the list I note that a whopping 3 funds delivered positive returns over the last 6 months and 2 of those were less than my paltry 2.17%. Only the Inflation-Linked Bond Fund, at 4.82%, has done better over the course of this year than cash-equivalents. I do not expect the results to be any different for the rest of the year, and maybe next year as well.

I may have received only 2%, but if today I move it into a stock fund**, I will receive 15-20% more of that fund than I would have had I put my money there in the first place like the whiz-kids recommend for someone my age. If second-half returns are similar, that gain will become 30% or more.

There's an old joke about two guys who come across a bear while they are camping. As the bear rears up and looks to charge them, the first guy starts to lace up his running shoes. The second guy, confused, says, "What are you doing? You can't outrun that bear."

"I don't have to," the first guy responds, "I only have to outrun you."

In times like these, victory is defined not by how fast you run, but by whether you avoid getting eaten by the bear.

* mostly because it doesn't matter. Since all similar funds generally invest in the same things, they are liable to have similar results. Your results may vary, though I doubt by much.

** Which I will do with each of my two "cash-only" retirement funds, at separate times, in the future. Stocks really are the only place one can invest this kind of money over the long term.

Pull my hoof

What's the difference between this from the UK:

Scientists are examining cow farts and burps in a novel bid to combat global warming.

Experts said the slow digestive system of cows makes them a key producer of methane, a potent greenhouse gas that gets far less public attention than carbon dioxide.

and this from America:

BUENOS AIRES - Argentine scientists are taking a novel approach to studying global warming -- strapping plastic tanks to the backs of cows to collect their burps.

Researchers say the slow digestive system of cows makes them a producer of methane, a potent greenhouse gas that gets far less public attention than carbon dioxide in efforts to fight global warming.

Obviously they are the same story, with a few edits*. But one edit is of such scientific importance that its exclusion - if that is indeed what happened - is nothing short of journalistic fraud: there are no farts in the American version. Not one. No one-cheek-sneaks. No SBDs. Not a single barking spider nor a slice of old cheese nor a gambled-and-lost.

American journalists never leave important facts out of a story**, and whether this methane that is destroying the planet comes out of the front end of the cow exclusively or out of both ends is an important fact. There are important scientists spending important money to attach inflatable toys to cows, and they need to know whether those toys require one tube or two. No way would they edit out such a critical piece of information.

Which all makes me wonder: Are the Brits making the fart part up? Did some editor think it would be really funny to sneak in the idea that animals fart? A lot? And it's destroying the earth?

If they did, maybe there is hope for England after all.

* e.g. "experts" vs. "researchers." Some of the paragraphs are moved around as well.

** No matter how embarrassing to Republicans or damaging to national security.

Stolen from Snoop

Circling the drain

So as both of the government-sponsored, declared-insolvent, would-be-saviors of the housing market continue to plummet towards financial doomsday, rest assured that at the bottom of the deep, dark pit where the few remaining options short of outright nationalization of the housing market swim circles in a fetid brew of lies and wishful thinking, there awaits a solution that no one previously thought of:

Mason has a different twist on a possible intervention. If either [Freddie or Fannie] were to face insolvency, he says the government should purchase a large voting block of equity in the institution and use that as a tool to eliminate any dividends, replace officers and manage the firms back to solvency.

Yeah, Congress should make Barney Frank and Nancy Pelosi President and CEO. They could even bring back Cynthia McKinney to chair the board of directors. I think I just peed myself.

UPDATE: what a nice open:

Fannie Mae

FANNIE MAE FNM 7.16 -6.04 -45.76% NYSE

Quote | Chart | News | Profile

[FNM 7.16 -6.04 (-45.76%) ] and Freddie Mac

Freddie Mac FRE 4.41 -3.59 -44.87% NYSE

Quote | Chart | News | Profile

[FRE 4.41 -3.59 (-44.87%) ] left the S&P-500 teetering just above bear-market territory Thursday and gave investors little hope for an end-of-week rally.

Somebody better call Cynthia...

UPDATE II: What a nice close:

SAN FRANCISCO (MarketWatch) -- IndyMac Bancorp Inc. became the biggest casualty of the subprime mortgage crisis on Friday, as federal regulators shut down the troubled Pasadena, Calif.-based savings bank in one of the largest U.S. bank failures ever.

Yeah, 'fraid it's gonna be that way...

I wonder if his kids speak Spanish

Considering the private school they attend, I suspect they do...

But that aside, Obama has a good point which in typical, elitist, Europhile fashion, he manages to turn into a shot at all those stupid Americans* whose votes he covets. The good point is that it is an asset to be able to speak more than one language. Latin is the obvious choice for an historian-wannabe like me, but since that turned to be difficult to learn in southeast Kansas, Spanish is a decent #2**.

But his bad point is in presuming that it is a demonstration of sophistication that Europeans generally speak more than one language, that it's some mark of high culture that we provincial Americans lack, that's its just one more thing about which Obama can be ashamed of this country. It's none of those; multilingualism is just a necessity on a continent where so many languages exist so close together and there is such a difference in power among nations. Bosnians learn German because they want to trade with the Germans, not because they like to show off their high culture. If every state in America spoke a different language, Americans would generally be multilingual as well.***

But language, like any other learning, is a use-it-or-lose-it proposition. In Europe, because they must use it, they don't lose it. Living here in the American Midwest, unless I make a conscious effort to use and develop my Spanish, my ability to speak it will naturally wither away. The vast majority of Americans who learned a foreign language in high school or college don't use it; 10 years later it's gone and they speak one language again.

I'm terribly sorry that we are such an embarrassment to Obama, but Americans' propensity to be monolingual, like Europeans' propensity to be multilingual, is rooted in necessity, geography, and history, none of which the average European has any more ability to impact than does the average American. Perhaps he should run for a leadership position in a far more refined country. In fact, any number of those sophisticated European countries might be looking for a new Sultan before long.

* Voters, being too stupid to know when they are being insulted, generally clap for this sort of thing.

** I would never give the French the satisfaction of seeing me struggle with theirs. Instead I will laugh at them as they struggle to learn Arabic.

*** Even that said, that Europeans speak multiple languages does not mean they speak them fluently or even well. Many speak English like I speak Spanish - haltingly and with a limited vocabulary.

Breaking News: Jesus was a Jew!

Film at 11:

The death and resurrection of Christ has been called into question by a radical new interpretation of a tablet found on the eastern bank of the Dead Sea.

The three-foot stone tablet appears to refer to a Messiah who rises from the grave three days after his death - even though it was written decades before the birth of Jesus.

The ink is badly faded on much of the tablet, known as Gabriel’s Vision of Revelation, which was written rather than engraved in the 1st century BC. This has led some experts to claim that the inscription has been overinterpreted...

The "Jesus Stone" has been all over the news this week, even getting a mention in that esteemed theological publication Time Magazine, with various interpretations ranging from, "This is the last nail in Christianity's coffin" to "the stone is meaningless from an archaeological perspective."

Perhaps not surprisingly, I have my own spin. It can be summed up in one word: Duh!

Now obviously I have no way of knowing whether the stone is authentic or whether the writing has been interpreted properly*. That will be up to the experts** to decide. But the thing that amuses me to no end is the breathless astonishment of experts and reporters alike at the idea that Christianity is grounded in messianic, First-Century bc Judaism. And in contrast to the modern expectation that Christianity was an absolutely unique idea completely separated from the religion of its very Jewish founders, even a very cursory reading of the NT will show that not only did the disciples and Jesus himself assume that Christianity was the next logical step of Judaism, everything they said and did was grounded in the Jewish scriptures.

For example, in Jesus' very first sermon, not in public but in his boyhood synagogue, he read a rather messianic passage from Isaiah (ca 700bc) and told his listeners, "This day is this scripture fulfilled in your ears." (Luke 4:21). The Gospel authors went out of their way to show that Jesus' messiahship was foretold in the Jewish scriptures - Matthew says that specific acts fulfilled specific prophesies of the Jewish Scriptures more than a dozen times - and Jesus himself often pointed out, rather blatantly***, that everything he was doing and everything that was happening to him was demanded by the Jewish prophets.

Even after he was resurrected, when he met with a couple of the disciples on their way to Emmaus, he explained, "'You fools****, so slow to believe everything the prophets said, should Christ not have suffered these things and been glorified?' And beginning with Moses and continuing through the prophets, he explained to them in all the scriptures the things concerning himself." (Luke 24:25).

We make a mistake in assuming that modern Judaism is the same as Judaism was pre-Christ. In fact, modern Judaism is as much a reaction to Christianity as the original Christianity was based on the Judaism from which it arose. If those Jews who eventually came to be called Christians came to realize that not only had Christ risen from the dead but that the scriptures they had been steeped in since birth demanded it, we can hardly be surprised that other Jews living at the same time in the same culture discovered the same things and applied the expectations that arose from that in their own way.

* Though I suspect it has not. This stone has been under study by various experts for ten years and now one appears, amidst much fanfare, to have discovered the "true" interpretation. As with most such claims, I'm a bit skeptical.

** whose shoelaces I am not worthy to tie together.

*** For example, while he was being arrested, Jesus reassured his disciples, "Don't you realize that even now I could ask my father and he would give me more than twelve legions of angels? But if I did, how would the scriptures be fulfilled that it must be this way?"(Matt 26:53-4). The disciples considered this and ran away into the night.

**** Jesus had little patience for slow learners.

One effect will be bigger dog messes to clean up

Two researchers demonstrate the awesome power of science:

The dangerous rise in greenhouse gases in the atmosphere may be troubling scientists and world leaders but it could prove to be a boon for plants, German researchers said Tuesday.

Increasing exposure to carbon dioxide appears to boost crop yields, Hans-Joachim Weigel of the Johann Heinrich von Thuenen Institute for rural areas, forestry and fisheries in the central city of Brunswick told AFP.

"Output increased by about 10 percent for barley, beets and wheat" when the plants were subjected to higher levels of carbon dioxide, Weigel said...

Weigel said that while the institute's findings may prove surprising to some, they are not intended to undermine the drive to slash CO2 emissions.

"This research is not intended as an argument for doing nothing to curb the rise of CO2 levels," he said. "It is to find out what the effects would be."

We have a solution, cutting CO2 emissions. That makes it vitally important for us to define the problem it fits.

All one has to do is look in the fossil record* and one will be immediately struck by two things: There are a lot of plants there - even as far south as Antartica - and they are freaking huge. Bugs are freaking huge. Birds are freaking huge. Dragons are freaking huge. The hotter temperatures that allowed tropical plants to grow everywhere were very good for life as a whole. I suspect that since that many plants would need a lot of CO2, there was a lot more of that, too; unfortunately there is no sciency way to test the past like that.

But I love the fact that these scientists want to reassure us** that whatever truth they find, it will not get in the way of the political issue of restricting CO2 emissions. It is inspiring to see scientists taking such a strong stand for the kind of Truth only their trade can provide mankind.

* That is, unless all those bones were planted by the devil to test our faith. I'm kidding, JD, put down the straw torch.

** Actually, they are probably reassuring the government types who provide their grants.

Hahahaha

Hahahaha haha ha ha:

Sen. John McCain (R-Ariz.) plans to promise on Monday that he will balance the federal budget by the end of his first term by curbing wasteful spending and overhauling entitlement programs, including Social Security, his advisers told Politico.

Haha ha hahaha haha haha hahaha ha hahahaha haha hahaha ha haha hahaha haha ha hahaha hahaha hahaha hahaha hahahahahaha hahahahahahahahaha.

Oh, stop, it hurts.

Perhaps I was hasty

It appears all central bankers aren't complete idiots after all:

CHICAGO, July 3 (Reuters) - The Federal Reserve's use of core inflation measures is harming its credibility, the new president of the St. Louis Fed wrote in an editorial released on Thursday.

James Bullard, who took over from William Poole in April, said focusing on inflation indices that exclude food and energy work well when those prices are rising at rates similar to those of other prices, "but that is not what is happening today.

"It is hurting Fed credibility to say that we are trying to keep inflation low and stable, but at the same time we are not counting some of the prices that are going up at the most rapid pace," Bullard wrote in the bank's magazine, "The Regional Economist."

It's nice to see that at least one banker can grasp the obvious point that a measure of consumer prices that ignores the prices that are rising fastest is not terribly credible. His point that "indices that exclude food and energy work well when those prices are rising at rates similar to those of other prices," is the height of obviousness - if they are rising at the same rate as other things, they do not affect the index. That's as close as you'll ever get to an acknowledgment that the only reason for excluding them in the first place is to create an artificially low index.

Of course it's not just the Fed's credibility that is on the line* but that of the Labor Department that publishes such tripe and the financial press that accepts it as a meaningful measure. Oh, and every organization that relies on Core CPI to adjust GDP. In short, every financial number that is based on this bogus number is itself a bogus number. Garbage in, garbage out.

That does raise the point of whether "inflation**" is even measurable by looking at some subjective collection of prices. I, for one, doubt it. But if they are going to pretend to measure their own success in controlling inflation by looking at only the prices that are convenient, they have no more credibility than a football team that declares victory by pointing out their three touchdowns while hiding the fact that the other team scored more points than they did.

* by which is meant "non-existent," since they had the audacity to pretend for a decade that "core" inflation was meaningful in the first place.

** Which, to be exact, is the increase in money and credit that causes prices to rise, not those prices themselves.

Playing the God card

God moves mountains, but can he move markets?

Rocky Twyman says nothing else has worked, so he's urging motorists to pray for lower gasoline prices when they fuel up.

Twyman says he and his fellow volunteers at a church soup kitchen launched "Pray at the Pump" today at a gas station in Washington D.C.

After fueling up their cars, Twyman says they bowed their heads and asked God for cheaper gas.

There was no immediate answer, but he says other motorists joined in and the service station owner didn't run them off.

Twyman says that if God brought down the walls of Jericho when the ancient Hebrews prayed, then divine intervention can bring down gas prices too.

I wonder how they expect God will do it. Perhaps he might miraculously strengthen the dollar so that it goes farther? But then people who work for companies that export would be hurt and we'd have to pray that the Chinese would buy our... what is it that we export here?

Perhaps God could miraculously increase the number of ships available to haul oil and the number of refineries able to turn it into gas.

Perhaps God could force all the mutual and retirement funds* out of the futures market, or like Newt Gingrich suggests, he could open the strategic oil preserve, using the power of government not only to openly manipulate the market but to punish those who "bet against America" by investing in a way that politicians find offensive.

Maybe God could drill ANWR - he wouldn't even need a permit** - or insulate our homes better, turn our thermostats down, and make sure our cars are properly tuned up.

There are quite a few things God could do, I suppose, none of which we could not do ourselves if it wasn't so darned inconvenient. I suspect they would rather God update the laws of physics so our fuel burns more efficiently, or modify the geography so all of our roads run downhill so we can get better mileage, or change the laws of supply and demand so we can all use as much as we want and never drive up the price.

After all, the only reason we keep this God guy around anyway is so that he can help us escape the consequences of our own actions, right?

* Who do people think this vague army of "speculators" is, anyway? It ain't Wendell Willke.

** I suspect the government would still make him file an environmental impact statement and post a pretty heft bond, though.