Tag Archives: Federal Reserve policy

2 Cents Worth On Life Its Ownself

Coming out of a winter hibernation and a move so its time to crank up the word machine and brush off the mental cobwebs…..

Moving ain’t fun.  A fundamental truth.  Especially true if you have been in the old homestead for a long time.

The Russians call the Ukraines in Kiev Nazis.  Even some of the media has picked up on that theme and talks about the Ukrainians who fought with the Nazis during the War leaving the clear impression that the Ukrainians were true Nazis at heart.  The truth is much more complicated.  Stalin during the ’30’s literally starved to death untold millions of Ukraines.  The exact number will never be known.  In addition many of the Ukraines like the idea of owning their own piece of dirt as had been their tradition for centuries.  When the War and the Germans came it is true that many of the Ukraines joined the German army to fight against the commies and Stalin.  That did not make them fans of Hitler or the Nazis but simply people who were faced with two difficult choices but decidedly believed the Nazis were the lesser of the two evils and the Germans fostered that notion with hints of some autonomy.  They weren’t Nazis, they were Ukrainians fighting communism.

If Monica wants to be taken seriously then she should have avoided that picture spread with her lounging on the couch.  Didn’t exactly portray the image of a mature gal not trying to exploit her prior persona of the Linda Lovelace of the White House.

When will the civilized world quit pretending that Africa is a legitimate part of the world community?  The latest episode in Nigeria is only representative of their dysfunction.  There is not only Nigeria but we have Mali, South Sudan, Somalia, Kenya, Cameroon, the Congo, Uganda, Chad and Libya to name merely the most outrageous places.  The West needs to stop sending any kind of aid.  Those people have the resources to do quite well.  It is up to them to make the countries and world they want.  We can’t import decency or democracy.  Their militaries by turn are cowardly, incompetent, tyrannical or corrupt.   They need to live in a house they built, not one provided by the Peace Corp.  Can anyone honestly say that the generosity and sympathy of the West has made any significant difference in the last 60 years?  That is three generations.  How would letting them fend for themselves possibly be any worse than the current situation.

Remember that science is never “settled”.  The very nature of the beast is questions and then more questions after apparent answers are found.  Not my brilliant observation but from David Deutsch.  He refers to the dire predictions due to  global warming, prophecies, not science.  Just for you consideration, he is an Oxford don, world renown physicist, philosopher and member of the Royal Society, not exactly marginal thinker or denier.  He would no doubt be apoplectic being called a “denier”.  Check out his The Beginning of Infinity.  Pretty heavy going but worth it in the end.

The current rate for a 10 year Treasury note is about 2.5%.  That rate is strictly a function of the market manipulation of the Federal Reserve.  What do you think  the rate would be if the Fed was neutral and let the market alone determine what the proper rate should be?  Maybe 2% or maybe 6%.  Whatever you think it would be the difference between a true market rate and what the Fed is dictating now means that there are some serious losers in the market due directly to their policies.  Those losers aren’t so-called fat cats on Wall Street necessarily but there are some of them too.  For every trade on Wall Street remember that there is a seller for each buyer whether for stocks or bonds.   Pension plans and unions are some of the biggest investors along with endowments of major universities on Wall Street.  Current losers are the seniors for sure and the savers among us.  It makes those in their mid years to start eating their seed corn rather than save because there is no incentive or reward for saving  in the near term.  Supposedly the Fed works for our benefit but its hard to discern that benefit.  Seems more like the inmates are running the asylum or Dr. Frankenstein let loose on the financial system and sure enough he has created a monster he can’t control.

We’ve all known someone who talks too much.   They will never shut up.  Worse they think you are interested in everything they have to say;  even the stuff that is stupid,  logically inconsistent or borders on that line between outright lies and embellishment.  Why does such a thought evoke images of daily briefings or speeches from the occupant of  the White House of today?

We are approaching  the 70th anniversary of D-Day.  I wonder what the average heart rate was for those boys jumping out of a C-47 or down the ramp from a LST?   It had to be a terrifying experience and their bodies reacted accordingly.  We should be very thankful that they were able to overcome that fight or flee syndrome all men have in face of extreme danger.   I not only tip my hat to them but am grateful and worry whether this generation is worthy of the sacrifice they made.

Strange we don’t hear a peep about the antarctic ozone hole or the impending ice age that were all the rage 30 years ago based on “settled” science.  Although the Yankees might have thought they were in at least a mini ice age last winter.   But, lo, spring came again as it has since the earth began spinning and circling the Sun.

“The instinct of ownership is fundamental in man’s nature”  William James, American psychologist and philosopher. http://www.olcranky.wordpress.com





1 Comment

Filed under business, Economics, Environment, Foreign Affairs, Global Warming, history, military history, Mother Nature

2 Cents Worth On Life Its Ownself

We will scan the headlines and the back pages today for your edification….

Per the Democrat Elijah Cummings the IRS scandal is all over because a conservative Republican was responsible for all the targeting and the case is solved and over.   He did back off that a bit, but only a bit.  But his original assertion and that of fellow Democrats that everything was contained to those low- level folks in Cincinnati runs into one pretty big contrary fact.  If it is really true that everything was done by those peons in Ohio and actually just the one guy–then riddle me this Batman–why did Lois Lerner feel the need to plead the Fifth during her Congressional testimony?   If that Democratic narrative is true then all the higher level people should have absolutely nothing to fear or hide.

The Nazis in Germany are rightfully vilified for their actions during the War.  One can reasonably wonder though why some of the same moral outrage isn’t directed at their allies during the War.   For example when Germany invaded Russia in June 1941, the Finns quickly joined into the fray as allies with the Germans and attacked toward Leningrad.  They understandably wanted payback for the unpr0voked attack of the Russians in the fall of 1939 into their country.  Indeed the Finnish forces helped complete the encirclement of that city which lasted for over two years and cause the death there of more civilians through starvation than all the losses of both Britain and the US during the entire War.  Likewise many aren’t even aware of the armies supplied to support the German crusade against the Soviets from Hungary, Bulgaria, Romania and the hundreds of thousands of Russians who all gladly joined the Germans to fight against the Commies.  It is always best to know some true history or you will be intellectually trapped into knowing only “headline” history or the headings in the Chapters of your World History book.   That will give you a distorted picture of your world today.

Noticed the report just this last week that in spite of that pathetic photo in Al Gore’s book and movie that there are more Polar  Bears today than in the last 40 years.

The peach crop was pretty meager this year. Don’t know why but the crop does vary from year to year even when the weather and other conditions remain pretty constant.  But the ones we did pick were juicy and delicious as ever.  Let my 10-year old grandsons help me pick them this year.

Always interesting to note that your Federal government can do things that people in the private world would go to jail for doing.  I mean the Fed is literally cornering the market on the US Treasuries buying up 75% of all the new issues for the last couple of years.  At the same time is it manipulating the interest rates for all banks and mortgage companies.  Can you imagine the outcry if JP Morgan was buying up 75% of all US Treasuries?   The Fed is also in clear violation of the Sherman Anti-Trust Act because it is definitely restricting trade in financial markets.

Recall last year when several Democrats floated the idea of simply printing a trillion dollar platinum coin and using it to pay down the national debt.  As predicted here earlier you will see at some point as the debt ceiling debate heats up again that the Fed should simply legally  forgive a trillion or two of the US Treasuries held by the Fed.  Again that would magically reduce the national debt.   We would all have the free lunch and Democrats love those free lunches.  I can’t find any statutory injunction that would prevent such an action.  Forgiveness of debt and a release by a lender is well-established law and could be done.   The Lender doesn’t have to offer any reason for the forgiveness.   Of course that could mean the Fed would have less money to pay over to the Treasury Department and Lord only knows what the domestic and international markets would think of such an action.  It wouldn’t be favorable.  It would be like pulling back the curtain on the Wizard of Oz.

The IRS scandal has caused so many pundits and commentators to make comparisons to the Nixon era and his alleged abuse of government.  He was a tough politician in the same mold as Roosevelt and LBJ, no different.   Some of the comments are so far from the truth it makes me cringe.  I didn’t care for Nixon on many issues such as he embrace of pretty big government but darn these people can’t get any of their facts correct.  Most of them weren’t even around during Watergate and darn sure haven’t done any real research of the facts.  They are simply spewing out the headline story from the era.  I have personally read the Watergate tapes.  Please don’t form any opinions of Watergate until you have read them yourself.  Also I watched every minute of those hearings into Watergate.  The tapes do NOT reveal Nixon ever proposing or demanding anything remotely criminal.  Read them for yourself.  The secret Oval Office taping  went all the way back to Roosevelt and LBJ.  Indeed the system used by Nixon was merely a continuation of that utilized by LBJ.  Yes, Nixon and his cohorts discussed lots of things mostly of a purely political nature to minimize the p0litical damage from the break in.   But unsavory conversation is not criminal.   Nixon was understandably ticked off that the break in had occurred; he was doing well and on his way to re-election and the whole thing was a terrible distraction from what he wanted to concentrate on doing.  This is not an apologia for Nixon but I abhor historical distortion.  You need to know facts to reach your own determination of culpability or moral turpitude.

Which modern American party adheres most closely to the following tenets of K. Marx? 1 Abolition of property in land….2. a heavy progressive or graduated income tax.  3. Abolition of all right of inheritance.   5. centralization of credit in the hands of the state.  6.  centralization of the means of communication and transport in the hands of the state.  http://www.olcranky.wordpress.com



Leave a comment

Filed under business, Economics, Foreign Affairs, government, history, military history, Politics, Socialized Medicine

2 Cents Worth On Life Its Ownself

Lot’s of thoughts to pass along today from the headlines of our times and times past…..

If the Individual mandate is held to be constitutional then we truly will have passed from a system of limited government to a parliamentary type system.  In upheld then any future Congress can simply state that a new law is being passed because the activity is deemed part of interstate commerce and pass anything they want.  There will be no limits as we originally intended with our Constitution.  In parliamentary systems that is the way things work.  The majority party can pass anything it likes and that is the law, period unless and until it is repealed or modified by a later parliament.  I personally like the idea of the Federal government having clear boundaries on its authority over us.  If this is upheld they could easily decide that only 5 banks were going to be allowed to operate in the future and that everyone would be required to get a debit card from one of them and use them for all purchases.  They have power over the banks already and spending your money certainly affects interstate commerce and of course the federal demographers, Census bureau, Labor department and the FBI and Homeland Security would love to have a clear track record of everything you buy.  Give it some thought.  Is that the kind of government you want? Even if they didn’t do it would you want the Feds to have that power?

Per the Federal Reserve it bought 61% of all the Treasury issues last year.  That is troubling and should concern us all.  The artificially low rates do to the Fed purchases distort and hide the true cost of our national debt.  Bernancke talks about the real demand for our debt in the markets.  The facts belie that statement.  That fact also denies his constant assertion that the Fed is not monetizing the deficits each year.  You do understand that when the Fed buys those Treasury notes they simply print up the money to do it; it is created out of whole clothe and does not represent a real increase in economic worth of our country.  It helps the federal government keep the cost of borrowing low for a while.  But even supporters of this action realize it can’t go on forever.   Sooner or later the “markets” will demand much higher rates for lending us money or the inflation dragon will begin to breathe real fire.   There is no strong demand world-wide for US debt or the Feds wouldn’t have to “buy” so much of it with their printing press.   As the political season progresses we need to pay attention to the deficits and the total debt and the real cost when we have to start paying market rates for our debt which will add hundreds of billions annually to our deficit.

Don’t rest on your oars yet about the Greek debt crisis.  The latest polls indicate that the parties that just signed and agreed to the EU bailout are in real danger of losing the elections scheduled in the next few weeks.  The opposition is vehemently opposed to the bailout and the austerity called for under it.   If they do win then the odds dramatically  that Greece will exit the Eurozone voluntarily or involuntarily.  There will be chaos again because of the fear that Portugal, Spain or Italy might be next.  Of course the Germans might sooner or later simply throw up their hands and say to hell with all of them.   Watch your stock portfolio carefully the next few months. The fat lady may have sung on the last bailout but someone might be writing a new Act to the opera.

The incident with the Jetblue pilot is a sad story.  You have to feel for him and his family for the mental torment he is obviously enduring.  The passengers must have been rightly terrified during the entire incident.  Glad all ended well and hope that man recovers his balance.

During the 5th and 6th centuries what were considered heretical sects of Christianity by the Catholic Church spread across much of the mid east and even into India and China.  Little known fact but they had monasteries and priests, the whole shebang.  Indeed about a 100o years later when the Portuguese came to Gao off the coast of India they were surprised to find many there who were “Christian”.  Of course they didn’t recognize the Pope in Rome so conflict became the rule of the day in that region.   They imprisoned many of the leaders and brought rule from Rome.  However the Nestorians as they were called endured until the Dutch replaced the Portuguese and they rose up against the Portuguese and re-established they connection to their “bishop” who held sway over that Christian sect from Baghdad.  

The peach buds have popped out already but it is that time of year.  Seven or eight weeks from now we will have fresh peaches for a couple of weeks to adorn the vanilla ice cream or to do a cobbler.   Assuming the lady of the house deigns to do a cobbler.

Are you aware that the EPA has “cops” to enforce its laws and rules?  I mean they have badges and carry guns and are authorized to arrest people and shoot them.  I mean why else do they carry guns?  Its one thing for the FBI do have this authority but the list of other government agencies that allow federal cops to use force to compel compliance with Federal rules is troubling to me.   I didn’t know they had police force til just the other day.  If environment laws have been violated them let the issues citations and impose fines but arresting people under threat of being shot? I don’t think so.  Let real cops enforce our criminal laws.

On the relationship of government and man–“A ploughman on his legs is higher than a gentleman on his knees.” Ben Franklin www.olcranky.wordpress.com

Leave a comment

Filed under business, Economics, Foreign Affairs, government, history, Politics, religion, Socialized Medicine

2 Cents Worth On Life Its Ownself

If you can stop crying maybe you can see the humor in some of the political manoeuvering of the WH these days.   What are you going to believe? –your own eyes or what the Administration tells you is true?

As long as the current left-leaning Federal Reserve cooperates with the Administration; it will be able to continue running trillion plus deficits.  If it ever stopped buying the Treasury bills and notes to fund the ever-growing debt the Administration would face real difficulties running so far in the red.  Who else around the world would buy those Treasuries to fund the Federal budget?  At least who would do so at today’s ridiculously low rates? 

Reminds me of the fellow who wanted to make a small loan from the local bank and the banker wanted to see his balance sheet and income and expense statement to determine if he would be able to repay the borrowed money.  Even though his balance sheet was in the red and his income showed he couldn’t even pay his current expenses much less service the new loand he told the banker not to worry.  The fellow told the banker that he had his right pocket write a note to his left pocket and that those notes would serve as great collateral.

Heard an interview with another guy who is propsoing that we go to a cashless society because it would save money and be fairer to everyone and especially the poor.  Well, it might save the cost of fabricating and distributing the currency but not sure how much we would like that.  He argues that criminals and drug dealers and other such menances to society are the only ones who benefit from cash.  Well, another example of big government thinking.  The main thing he totally overlooks is the right to privacy.  The examples of such intrusion into your private life are as big and broad as your own imagination.   Take a 70 year-old fellow going to the drug store to buy viagra or hemorhoid salve or he wants to buy a lottery ticket.  Why should that transaction become a permenant electronic record?  Don’t even try to tell me that such records would be protected and safe from hackers or any government agency that decided it wanted to investigate him.  Such a system of credit or debit card use goes to the very heart of our privacy.  There are no firewalls strong enough to keep your secrets.  Yes, you are entitled to some secrets in your life that are your business and no one else’s.  How you spend your hard earned money is no one else’s business.   Leave us alone for God’s sake in our own affairs.  With all the minicams and surveillance systems and forced GPS monitors there is little enough privacy as it is.

When we have really bad leadership at the national level and we’re headed in the wrong direction I draw encouragement from the history of the Roman Empire.  It had its many ups and downs over the course of centuries.  Sometimes really bad guys worked their way to the top with bribery, buying votes or even assasination but then things would settle again and decent folks would emerge.  Caligula, Nero and others of that stripe were followed by Marcus Aurelleus even though it took a long time.  The people of all levels of society kept the dream alive through all the terrible times to remember their heritage of basic democracy and the rule of the  Senate.  It wasn’t one man, one vote democracy but it was one nevertheless for its age.  Even those who didn’t have a vote still influenced the votes of those who did.  The Senate was after its fashion responsive to the people.  Even after Rome was sacked by the Vandals in 465 AD (which most standard history texts mark as the fall of Rome)  the Empire came back in a few more iterations of itself for over a hundred years.   If most of our people keep as their Pole Stars freedom, liberty and sovereignity of the people over government we have a chance to endure yet for a while.

What do we owe Winston Churchill?  He was our “cousin” since his mom was American.  After the fall of Dunkirk in 1940 and the surrender of France there was no opposition to Hitler on the Continent and he was at peace with Stalin indeed they were still allies; they had just finished their mutual military operation against Poland.  All seemed quite hopeless and in fact there were many in Great Britain that believed they should sue for peace with Hitle from the man on the street to members of the War Cabinet itself.  Even if Hitle didn’t try to invade there was no realistic possibility that they saw to ever defeat him and the land of Avon would be pounded mercilessly by the Luffwaffe.  Churchill beat  back and/or ignored such calls for peace and used all his oratorical skills to rally the people to resist which they did for another long 18 months before the US joined the fray.  The time called for bold and heroic clarion calls to the ramparts.  The people were scared, they had seen what had happened on the Continent and the British army had just been hammered at Dunkirk.  He delievered.  It is hard to imagine the course of history if Great Britain had not held out until we joined.  Remember the anti-war faction was very strong in the US then and there is no way we would have taken on Hitler by ourselves.   A peace with Great Britain would have allowed all the German troops to muster for the assault on the Soviet Union and minimal forces to garrison the West.   If Churchill had heeded the faint of heart and capitulated it is not hard to imagine that the Nazis would have endured for generations.   Why did BO return the bust of such an icon of heroism to Great Britain?  

The latest possible Fed move reported is that it will print more money to buy Government bonds but then borrow that money at short term with low rates.  This supposedly will assure those concerned about money printing leading to inflation.  I am not making this up, Lord I wish I were.  But not to worry those mad scientists in there no how to take care of you; you just aren’t smart enough like Geithner, the tax cheat or fumbler, to understand the wisdom of all this.

“God give me strength to face a fact though it slay me.”  Thomas Huxley, of the famous Huxley family and biologist.   www.olcranky.wordpress.com

Leave a comment

Filed under business, Economics, government, history, Politics

2 Cents Worth On Life Its Ownself

Let’s rummage through some of those leftover thoughts from the last week and see if there is anything worth the advertised price.

Sometime around election day this year the total national current debt will be about 16.2 trillion dollars.  That isn’t the total debt because it doesn’t include the unfunded liabilities for Social Security and Medicare for example.  Those push the debt higher by tens of trillions of dollars.   And we sit here and worry about Greece!  How are we going to pay our debts if we don’t rein in spending.  There simply isn’t enough money from the so-called rich to pay for our bills.   Don’t believe Bernie Sanders, the self-avowed socialist from Vermont when he says Social Security is sound for the next 20 years because it has lots of assets on its balance sheet.  Those assets are nothing but IOU’s from the Treasury.  We have already reached the downhill side of the mountain and are paying out more than we collect for Social Security each year and the deficit is growing.   Ok, politicos, start talking about this problem. 

Oh, the “entitlement” programs aren’t permanent despite the common belief.   First of all they are only good until the next Congress is in session.  Any Congress could simply repeal the whole thing.  Besides what good does it do you to have an entitlement if you are paid in Monopoly money?

Despite all the hysteria over the BP oil spill in the Gulf it appears that everything is fine.  That is not my opinion but that of NOAA.  The story was on the back pages of the papers but essentially they said that the oil was all gone.  It evaporated or was eaten by microbes in the Gulf for the most part.  That finding shouldn’t really surprise any thinking person.  The amount of oil leaked would be enormous if it all spilled out in your back yard but the Gulf and oceans generally are huge, huge places and the amount of volume was de minimus compared to the oceans of Mother Earth.  Other than those tar balls on the beaches which were cleaned up with over kill there isn’t any long-term effect.  When it comes to issues of Man versus Mother Earth it seems that hubris always comes to the fore and we think we have more influence than we do in reality. 

The recent Solar flare eruption caused only minimal disruption to our daily affairs unless your transpolar flight was cancelled.  Some day Old Sol will really belch and send a big wave of electromagnetic ions and such our way.  Everything will be cancelled and all our electronic gear will need to be shut down.  Supposedly the GPS satellites have some protection from those radiation waves.  Sure hope so but I would suggest you keep handy that old-fashioned magnetic compass.  History records that in the past these solar flares have caused the Northern Lights to be seen as for south as the Old South but hasn’t happened in the modern era with our dependence on electronic devices to manage our lives and our economy.  We’ll survive but it will be something to tell your grandkids about when next it occurs.

Iran in 1979 took Americans hostage and kept them for over a year until Ronald Reagan was sworn in.  Now its 2012 and the new Egyptian government, whatever that is, has held up some Americans from leaving the country.  They aren’t called hostages yet but the action is eerie.  There were those last year talking about how wonderful everything would be once Mubarak was gone.  Well, he is and things aren’t.  The one constant is that it is another Muslim nation being dominated by the Islamists.  The Muslim Brotherhood will soon be in complete charge of affairs there and we best deal with them for what they are, not what we would like them to be.

Of all the almost 200 nations on earth how many have a net worth equal to that of Apple?  Maybe the way to solve the Greek debt problem is to have Apple simply buy Greece.

Speaking of that national debt, you might what to do the math and you’ll find that every single, man, woman and even child owes over $52,000.00 for that debt.  How are you going to pay off your share and that of your family?

A government can unite the evils of liberty (mob rule) and servitude (submission to an all-powerful central state) by having the people oppressed with a multiplicity of laws and the arbitrary actions of their master.  Not an original thought with me but from Gibbon writing about the Romans of yore.  Still valuable food for thought.

The ancient Romans allowed interest to be earned on money at risk.  Their rates were 4% for regular loans, 6% for real estate, 8% for trade or commercial transactions and the highest was for marine insurance which went for 12%.  Yes, folks, the idea of insurance has been around for a long time.  Contrary to current political debate it is not something we invented in the last century.  Just as it was in our Colonial times, there was vast amounts of money to be made in the safe passage of ships with valuable cargo and a great deal to be lost if it was sunk by storm and taken by pirates.

For those believing that almost every scientist in the world buys into the Al Gore version of global warming you should review the letter in the WSJ on Jan. 27.  It is signed by 16 very distinguished and legitimate scientists, academics and Nobel winners from all corners of the world.   Maybe someone is finally willing to say the Emperor’s has no clothes.

Don’t understand the original thinking behind the dual mandate for the Fed–stable money and unemployment.   The money part is hard enough to understand and implement and the Fed’s success in doing that is quite mixed to say the least over the decades.  But unemployment?  Exactly how is monetary policy supposed to create jobs?  I am not the only one who doesn’t understand this.  Employers hire for many reasons but most have nothing to do with the monetary policy of the Fed.  Unless the Fed is going to extend its reach into the market and outright buy and own some industries how can it influence employment?  That is a scary thought especially since BO and his gang have already done that with GM, Chrysler, GMAC, AIG and of course Fannie and Freddie and then there are the misfires in Solyndra and that ilk.  Let the Fed just give us stable and sound dollars and low inflation and leave the market place alone; it can take care of itself if not hog-tied by regulations and money manipulation.

“No two human beings have made, or ever will make the same journey in life”  A. Keith, Scottish anthropologist.  Hmmm, but some liberals seem determined to attempt to make sure we all take the same journey and reach the same destination because they know what is best for us.  www.olcranky.wordpress.com

1 Comment

Filed under Astronomy, business, Economics, Environment, Foreign Affairs, Global Warming, history, Politics

2 Cents Worth On Life Its Ownself

The events of the day sometimes are so quick and confusing that one hardly knows whether to moan, cry, laugh or do a double-take.   Here are some laughers and moaners.  Thanks Blackie.

We don’t keep up much with the celebrity life in general but sometimes the news of the famous is so pervasive that it can’t be ignored.   The new Duchess of Cambridge is sure a cutie.  Never heard her say a word in the clips I saw but she seems accessible and she does have that Ipana smile that the movie stars would die for.   May someday the happy couple rule over a peaceful and prosperous land.

I get very angry with the Fed and its policies for lots of reasons.  Mostly because it is way too cozy with the current administration rather fulfilling its role as an independent banker to support the dollar, eliminate inflation and help with monetary policy to enhance job growth.  We all need to remember that is not the Fed that creates Federal debt.   That is done by our good pals in Congress and the President.  Unfortunately the Fed has from time to time and especially the last couple of years been too much of a lap dog and supported the debt madness by buying the Treasuries.  Rather than Congress refusing to raise the debt limit there could be another way to halt the increase–the Fed could refuse to buy the Treasuries to support the debt.  They print the money to buy those and debase our currency and even Bernancke agrees that our real long-term threat is the debt and fiscal deficits.  I wish we had a Fed strong enough to let the administration know they really didn’t plan on buying anymore.  That would be a true test of the world’s market appetite for US debt if real lenders had to step in and support our debt.  They would require pretty tough terms methinks and that would ultimately be a good thing for us.  The spoiled child needs discipline.

Some say that size matters.  Perhaps so sometimes.  So does geography.   Take a careful look at the map and you can see why the tempest in Syria is rife with much graver potential problems for the US.  It borders with our allies, enemies and those that are a dark mirror.  Israel, Lebanon, Turkey, Jordan and Iraq all share a common border with Syria.  Iran is only about 150 miles away at its northeastern terminus.   It may not have any oil but it sits in the heart of a very volatile area.   Just as with all the other Arab nations with uprisings we don’t have a clue if any new regime would be better or worse.  We do know that Iran would love to have a  complete client state in Syria.  It almost has now but that  influence could be even stronger if the revolutionaries wished it.   A significant worry is also that Syria has a coastline with access to the Mediterranean Sea.  Would be and future terrorists would love to have that kind of open ports to ship their terrorism across that ancient sea.  Iran would have a perfect launch point for aggression against Israel who they have sworn to demolish.   All and all, a very scary scenario is developing.   Sadly and factually the history of Arab nations is not encouraging–just look back to Lawrence of Arabia and the high hopes he had for their democracy and how that never occurred.  Things change but often remain the same.

Trick geography quiz.  If you went due south from Dallas, Texas which South American countries would you encounter?  Answer is none.  You would actually end up going west of the Galapagos Islands by hundreds of miles.  More than 1800 miles from the western coast of South America.  South America is canted much farther east than most realize from the US.

Both Geithner and the Fed say they believe in a strong dollar.  Yet neither has undertaken any policies that would strengthen the dollar.  The dollar has dropped over 8% since the first of the year.  That is a huge decline on a historical basis.  Some argue that the weaker dollar helps with exports and that is true but, but, but, that is only a relative small part of the US economy.  For the overwhelming majority of us that means everything we buy that is imported is much more expensive.  These days that sadly means darn near everything.  That weak dollar also is a direct contributor to the rising costs of oil and all our other commodities.   The grocery store prices will continue to go up as long as the dollar is weak and is in fact devalued by printing even more of them.  Of course a stronger dollar would imply that we are raising interest rates and finally getting our budget and debt under control.  That will require some short-term to mid-term pain.  That is the truth and our politicians need to tell us all that in an honest way.  Of course that pain will be a lot less that the pain of economic collapse from the weight of our debt.

You have the fellow who exercises a bit and watches his diet and the other guy who believes a double cheeseburger is an appetizer, is a couch potato  and is overweight by 100 pounds.  Explain to me again the moral argument why the first one should be responsible for the medical expenses of the second for his diabetes and heart issues?

“A newspaper is always a weapon in somebody’s hands.”  C. Cockburn British writer.  www.olcranky.wordpress.com

1 Comment

Filed under business, Economics, geography, government, Politics

Money, Money, Everywhere

You have certainly heard the references to Bernacke over the last couple of years as “helicopter Ben” because of the allusion that he would simply fly over America and dump money out of a helicopter to stimulate the economy.  Of course we are too well aware that the trillions of dollars dumped into the economy was not that evenly spread.  Perhaps all that stimulus money would have done more good if it had been dumped from the helicopter rather than the methods employed by the Fed in reality.   Of course the Fed was not directly involved in the TARP funding, that was a Treasury action, but they made if possible by printing more money for Treasury to buy those bank stocks rather than the “toxic assets” they said they were going to buy.  Again, we probably would have been better off it they had bought all those bad mortgages. After all the government, us, owns over 90% of all the mortgages out there through Fannie, Freddie and the FHA anyway. 

Then the Fed bought over a trillion dollars worth of bonds, mortgages and Treasuries in ’09 to facilitate the government’s “Stimulus” bill rammed through by the Democrats.  On top of that there was the Obama budget with its built-in 1.3 trillion dollar deficit which had to be funded somehow and yes, it was with more debt.  That was mostly through the sale of Treasury bills and notes which were primarily bought by the banks and foreign entities, can you say Chinese?   The banks got their money to buy these Treasuries, from you guessed it the Fed.  Now the Fed is actively talking about doing another round of quantitive easing, that is buying more Treasuries to the tune of a trillion dollars in the near future.

Most people don’t realize how that actually works.  What will happen usually is that the Fed will go to individual banks and buy Treasuries from them at a profit.  Remember that the banks bought these in the first place with TARP or discount window money and almost zero interest rates and were making a profit without having to administer anything.   These Treasuries will be sold at a profit to the banks.  That is how the Fed gets more money into the economy.  From a technical stand point that makes sense as the banks are the conduit for the flow of money into the economy.  But the rub is that where does the Fed get the money to buy all those additional treasuries?  They are the only entity that can create money from nothing.  They simply print up more money to give to the banks.  There is no inherent worth behind those new dollars they are merely pulled out of the Fed hat like the white pigeon from the magician’s bag of tricks.   That is inflationary.  One day you had x number of dollars in the economy and the next you have x plus y but without any increase in real economic output or activity.

All of which brings us to the interest rate on the Treasuries at the moment.  The 10 year note which is the more or less the bench mark pays a yield of about 2.40 at least as of last Friday.    So you invest say 10K and you get only $240 a year in interest.  I know it is not a true interest payment but for illustration purposes it is accurate.  Interest rates and returns on investment are always related to the amount of risk involved in the investment whatever type it may be–stocks, bonds, Money Market accounts, Treasury bills or whatever.   I completely understand the arguments about safety and that many investors and investment funds are seeking security and a high degree of safety with their money.  This is especially true since Obama was elected with all the uncertainty about taxes, regulations already on the way and the promise of even more to come if the powers that be in Washington remain in p0wer.  This is exacerbated by the hostile rhetoric spewing out of Washington like a steady drum beat for the last couple of  years.

Why would anyone accept such a low rate of return?  I think those who are only thinking of safety are myopic.  What good will the safety do them if inflation takes off again and the dollars they receive years from now on their investment won’t pay for cab fare?  The uncertain future of the value of the dollar is reflected many believe in the recent rise in the value of oil, gold and silver and other commodities.  That is probably true to some extent.   But why are billions of the Treasuries still be sold at such depressed interest rates?  The Chinese will continue to buy for a while because they need our consumers and our markets for their products.  But someday it will be a revelation when many investors realize all at one time that the  Emperor is not wearing any clothes.  After all several nations have defaulted on their debts in the past;  many European and a few Latin nations are near default again and have only avoided it with help from the IMF or the European Central Bank.  We have no guaranty that our debt is sacrosanct.  

When the day of revelation comes everyone will still be willing to buy the Treasuries, especially the big banks since they are regulated by the seller, but collectively the market will demand much higher rates of interest.  The risk is high of either default, partial default or inflation that devalues the investment and interest rates will zoom.  It can happen quickly.  Just like a street crowd when one person starts looking up, then another, then another, within seconds everyone is checking out the scene.  Watch the interest rates on those Treasuries for the early warning test for our future economic well-being.  The increase in interest rates will make our deficits and debt explode.  It will have an exponential effect.

At least with the gold standard governments could not manipulate the currencies or fiscal policies.  It has its drawbacks but also has its advantages. www.olcranky.wordpress.com

Leave a comment

Filed under business, Economics, government, Politics