More Exuberant Irrationality (August 20, 2007)

Posted in Economics, Federal Reserve on August 20, 2007 by e-commentary.org

Last Friday, the Federal Reserve lowered the “Discount Rate” it charges commercial banks for the money it loans directly to them by a substantial half a percentage point.  The Fed also suggested that it might take more action to cushion the economy from tightening credit.  The “Discount Rate” is not the same as the Federal Funds Rate (FFR) which is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.  The Discount Rate is the rate charged by the Fed to a bank; the FFR is the rate charged by one bank to another.  Banks typically do not borrow from the Fed, so the Discount Rate does not usually impact the economy as substantially as the FFR.

As a professor, the Chairman of the Fed, Ben Bernanke, studied the impact of illiquidity on the Great Depression.  He also has stated that the Fed should be concerned primarily about “price stability” or in popular parlance should set rates to avoid inflation.

Junkies crave junk.  The purveyors of junk bonds/stocks (collateralized mortgage loan obligations and the like) are seeking a bail out from the Fed.  Bernanke’s concern should be the impact on the economy not on those who were and are part of the problem.  The concern should be with Main Street not Wall Street.

The meeting of the Federal Reserve Open Market Committee (FOMC) on September 18 may be the most important gathering since Bernanke began his term.  The underlying economy is unsound.  [See the e-ssay dated January 30, 2006 entitled “Greenspan’s Legacy – Apres moi, Le Meltdown”].  The dilemma is that there is both stagnation [see the e-ssay dated August 7, 2006 entitled “The Fed: Deal With ‘Stag’; Deal with ‘flation’?”] and inflation [see the e-ssay dated July 16 entitled “Back Door Inflation”].  Reducing interest rates will encourage inflation and promote more debt.  Raising interest rates will both contain inflation and attract private funds.  Tough call.

Bumper sticker of the week:

I want to be irrationally exuberant again

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F-22s: A Toy Recall? (August 13, 2007)

Posted in China, Military on August 13, 2007 by e-commentary.org

The Air Force recently took delivery of a new expensive toy, the F-22 Raptor fighter jets.  America rules the military skies.  That is not stated boastfully.  That superiority should shape policy.  American air military superiority is so overwhelming that the Fly Boys note:  “If it flies, it dies.”  They also note that the current fighter, the F-15, has never been shot down in combat.  The world’s troublemakers pose and impose a threat to civilian commercial and private aircraft, but not to American air military superiority.  America can control the sales and distribution of its military aircraft.  The current fleet of F-15s can be upgraded with new avionics and radar and is more than capable of sustaining the air superiority.  Perhaps these new toys should be recalled and the resources used for national defense.

The new high-tech airships almost fly themselves, although they carry two pilots: a man and a dog.  The man rewards the dog with a bone; the dog bites the man if he touches the plane’s controls.

See http://asap.ap.org/data/interactives/news/f22/

Those Chinese.  When a Chinese toy manufacturer did not get the lead out of the paint, the toys were recalled.  He was so dishonored that he committed suicide.  By contrast, after delays and cost overruns in the production of unnecessary hardware, American military toy manufacturers give themselves bonuses and stock options.

On the other hand, with the Army and the Marines debilitated by Bush’s War, America may need to enhance its air superiority and maintain and expand its naval capabilities.  There are growing concerns that nation-states may present conventional military challenges in the future.  Despite the delays and cost overruns, these expensive toys may turn out to be a prescient purchase.

Bumper sticker of the week:

Don’t worry what people think

They don’t do it very often

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Kids As Consumer Durables (August 6, 2007)

Posted in Consumerism, Society on August 6, 2007 by e-commentary.org

The latest effort to “keep up with the Jones” apparently requires one to breed a brood.  A program on NPR observed that some stay-at-home moms are not satisfied with two kids.  They look around at their friends (competitors?) sporting a litter in tow.  To affirm their life decisions, they are having three or four kids.  Two kids, two cars.  More kids; more cars.  The reasons to have children are admittedly more complex than just competing with one’s neighbors.

Americans are consumed by their compulsion to keep up with the Jones.  However, today the compulsion requires one not only to keep up with the Jones but also to vanquish them.

Bumper stickers of the week:

My larger covey of kids can beat up your covey of kids

All seven of my kids are on the honor roll at Benedict Arnold Middle School

 

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Bridges (July 30, 2007)

Posted in Term Limits on July 30, 2007 by e-commentary.org

While Senator Ted Stevens and Congressman Don Young, Republicans from Alaska, were busy seeking funds from the federal feeder for their “Bridges to Nowhere,” some “Bridges to Somewhere” were deteriorating.  The money spent on frivolous projects detracts from beneficial projects.

Both Stevens and Young are being investigated for a variety of other crimes.  They will never be held accountable for their looting of the public fisc.

The state of Alaska reported that 100 of its bridges are “structurally deficient.”  Would the proposed “Bridges to Nowhere” also be structurally deficient?

A partial solution:  Term Limits.  [See the e-ssay dated May 14 entitled “Term Limits”].  A limit of a dozen years in each chamber is necessary.  Both Stevens and Young would have been termed out years ago.  Politicians must be termed out because many citizens impacted by their actions cannot turn them out.

Bumper sticker of the week:

Are you part of the problem or part of the solution?

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Any Justice At Justice? (July 30, 2007)

Posted in Law on July 30, 2007 by e-commentary.org

Federal courts in America typically are not in business to dispense justice.  Federal courts generally protect and advance the interests of the Justice Department including executive agencies such as the Federal Bureau of Investigation (FBI).  Last week is notable because a federal judge in Boston ordered the federal government to pay $101.8 million to make amends for framing four men for a murder they did not commit, the largest sum of money ever awarded to people who were wrongfully convicted.

“It took 30 years to uncover this injustice,” Federal District Judge Nancy Gertner said in announcing her decision. She said the case was about “the framing of innocent men,” adding that “FBI officials allowed their employees up the line to ruin lives.”

And the current head of the FBI, Robert Mueller, appears to be telling the truth to Congress which may get his boss, Attorney Generalissimo Alberto Gonzalez, in trouble for perjury, obstruction of justice and other Republican pastimes.

Bumper sticker of the week:

There is no justice at Justice

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The Dow Jones (the Murdoch ?) Hits 14 K In A Hollow Economy (July 23, 2007)

Posted in Debt/Deficits, Economics, Housing on July 23, 2007 by e-commentary.org

The Dow Jones Industrial Average (the Murdoch Average?) exceeded 14,000 last week.  At some time it will retreat because it has to retreat.  Why is it so high?  First, there are a small number of individuals who have too much money and few productive outlets.  That money has no ready home now that the last domestic American industry–the real estate industrial complex–has run its course.  However, no one, Republican or Democrat, will get elected by arguing that too much money is in private hands and not enough in government hands to pay for the common weal and reduce purposefully the nearly 9 Trillion dollar  Debt.  Government borrowing is “crowding out” funds for private sector projects.

In addition, the rampant easy credit has fueled a hollow and unsustainable expansion.  The economy since 2002 was driven and is being driven by spending that mortgages the future of the country and its citizens.  Too many Americans view their residence as an asset.  A residence may be an asset if there is some equity, yet it is not a productive asset.  Too many Americans view their residence as an ATM (automatic teller machine).  The “wealth effect” experienced by homeowners who see their home prices rise is giving way to a more realistic “poverty effect.”  The purchasers with “sub-prime loans” drove up the price of all homes and made everyone feel wealthy and thus more inclined to spend.  When some of these purchasers are unable to pay and foreclosures result, the price of all homes will decline.  Even homeowners without dubious mortgages are negatively impacted if they have used their homes as an ATM to purchase other consumer goods.  When the value of a home declines below the remaining arrears on a mortgage, some homeowners may question how long they are willing to sustain the hemorrhaging.  [See the e-ssay dated February 7, 2005 entitled “The Microeconomics of Suburban Subsistence”].

The myopic emphasis in business on the next quarter is not surprising.  Bonuses are paid for results in the short term not for long run performance.  Although some businesses are reporting profits, the consumer spending that is driving the economy cannot continue.  Many companies are selling to foreign consumers with more disposable income which admittedly diversifies the sources of revenue and offsets the decline in spending in America.  Americans are in debt their tonsils.  They do not save.  Soon there will be few funds available to borrow and few Americans willing and able to loan them.

Bumper sticker of the week:

It is only a matter of time

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Back Door Inflation (July 16, 2007)

Posted in Economics, Inflation on July 16, 2007 by e-commentary.org

A half gallon of ice cream is now 1.75 quarts (or 7/16ths of a gallon).  A six pack of avocados is now “Contents: 5.”  However, the prices have not gone down correspondingly.  The “2 by 4” piece of dimensional lumber has not sported 2 inch by 4 inch dimensions for decades, but they are not called 1.5s by 3.5s.  The venerable 12 ounce beer is now 11 or 10.5 ounces (or some fraction of a liter) in some countries.  Imagine the reaction when Joseph Six Pack enters a store and discovers that a six-pack of beer contains only five 11 ounce beers.  There likely will continue to be six or four containers of some size because of design considerations.  The ad types will give it some manly spin.  However, the Interstate Commerce Clause or some penumbral provision in the United States Constitution may prohibit the sale of anything less than a 12 ounce beer in anything smaller than a pack of six.  Perhaps Bobby Bork will bring the law suit.

The government’s figures on inflation do not reflect things on the ground.  Or at the gas pump.  Or in the supermarket.  The government’s “core inflation” figure does not include energy or food prices.  The “core inflation” figure is only insightful if the populace does not drive or eat.  The public policy encouraging ethanol production, which requires large quantities of corn to produce, favors energy over food.  Food prices rise even more.  The trade-off may be desirable, yet it still comes at a cost.  At core, prices are rising higher and faster than the government statistics reflect.

The price of a “Support The Troops” decal is also going up.  The decals may get smaller.

Bumper sticker of the week:

Whip Inflation How?

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The Crashing Escalation Surge (July 9, 2007)

Posted in Bush, Iraq, Military on July 9, 2007 by e-commentary.org

The escalation surge in Iraq is not working.  Less than three months away from the promised results, the answer is clear.  Even two or three or four hundred thousand troops would only make a terrible situation even more desperate.  More is less.  Less is more.  Bush likely will assert “mission accomplished” or demand a further extension of time to show results.  Bush should claim victory and begin the withdrawal.

Few have argued lately that more Americans must be killed so those who have been killed will not have died in vain.  [See the e-ssay dated February 27, 2006 entitled “The Arithmetic of Futility”].  More casualties must accrue before any sustained opposition will develop.  Each village now has lost a son or daughter (or grand niece or fishin’ buddy or Eagle Scout or practical joker); each town a few; each city a few more.  There are likely to be a few public statements when the death toll hits 4000.  The critical mass may be 5000 dead and 35,000 to 50,000 serious casualties.  Daily war statistics are becoming as pedestrian as daily car crash statistics.  A few die on the road to Baghdad and a few die on the roads every day.  Body counts may not count.  They volunteered anyway, they observe.

Bumper sticker of the week:

Those who can make you believe absurdities can make you commit atrocities.

Voltaire

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Twisted Justice (July 2, 2007)

Posted in Law, Society on July 2, 2007 by e-commentary.org

The case involving the $54,000,000.00 pair of misplaced pants was resolved.  Until the inevitable appeal.

The First Amendment was blue-penciled to protect certain individuals and certain (uncertain?) speech rather than to protect free speech.

The New Republican Party is the party of lawlessness and disorder.  And still the party that believes in the credo “spend and spend and spend and spend and spend.”

Stare Decisis is dying — S.Ct.  Ideology is now the benchmark.

Equal Justice under Law is wounded — Bush.  The Pardon, Part I.  First, Bush commutes Libby’s sentence and continues Scooter’s Fifth Amendment rights against self-incrimination and effectively silences him.  Second, as he departs on Marine Corps One, Bush pardons him.  The pardon is a back door absolution of Bush’s high crimes and misdemeanors.  If the sentence really was too long, why did Bush not reduce it to a more appropriate length, say, six months or a year?  Bush did not commute the sentence of prisoners wrongly sentenced to death while he was governor of Texas.

Cases to indict Bush, Cheney and Rove could still be brought after January 20, 2009.  The statutes of limitations will not have run by then.

Nixon considered pardoning himself before he left office, although he was confident that Ford would do his bidding.

Billy C. did not set any high standard with his sale of indulgences particularly to Marc Rich, the crook usually described as a fugitive financier.

Bumper sticker of the week:

He has refused his Assent to Laws, the most wholesome and necessary for the public good.  He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

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The Supreme Court On Drugs (June 25, 2007)

Posted in Drugs, Law, Society, Supreme Court on June 25, 2007 by e-commentary.org

“This is your Supreme Court.  This is your Supreme Court on Drugs.”  In Morse v. Frederick, 551 U.S. ___ (2007), some members of the Supreme Court revealed that they are on drugs.  The facts in the case are inane.  An undisputed adult (over 18 years of age) in Juneau, Alaska raised a vacuous sign to attract attention to him while some parade came through town.  How distinctly American.  DON’T TREaD ON ME or BONG HiTS FOR JESUS or something like that.  What it says isn’t exactly clear.  The Jesus reference must mean that it is a protected religious statement.  “Big whoop,” was the typical reaction of most of the kids.  The school principal reacted by over-reacting.  Let the motivated lad experience his 15 seconds (or 1.5 seconds) of fame.  Go on with life.

Not in America.  Roberts is the fellow who employed a Republican baseball analogy when he bamboozled the Senate Judiciary Committee at his confirmation hearing.  He talked about playing the role of an umpire and neutrally calling balls and strikes.  He lied.  In another decision issued today that involves the rights of the wealthy to spend unlimited amounts of money on elections, Umpire John announced that when the “First Amendment is implicated, the tie goes to the speaker,” Federal Election Comm’n v. Wisconsin Right to Life, Inc., 551 U.S. ___ (2007) (slip op., at 21) and that “when it comes to defining what speech qualifies as the functional equivalent of express advocacy…we give the benefit of the doubt to speech, not censorship.”  ( Id. at 29).  The tie, if it was even close, should have gone to the speaker in Juneau.  Thomas makes some compelling statements about the lack of order, respect and discipline in schools today, but the observations have nothing to do with the case.

The Court expresses solicitude for the kids and their vulnerable adolescent sensitivities.  What some of the Supremes are unable to fathom let alone even comprehend is that kids in their teens are especially sensitive to hypocrisy and dishonesty and condescension and arrogance in adults.  Hypocrisy and dishonesty are among the very traits that define adulthood in America.  The case allowed a few Justices with far too few life experiences to write essays revealing their fears and demons and anxieties.  Dope is not good; booze is far, far, far worse.  Don’t confuse the issues.  It was a simple First Amendment case.  Don’t be hypocritical and dishonest and condescending and arrogant.  You are not paid by the word.  The Ninth Circuit decision could have been upheld in a few paragraphs.  The principal should have been afforded qualified immunity under the circumstances; running a school is a thankless task.  The Court’s new First Amendment test is two-fold:  1) who is making the expression and 2) what is being expressed.  That is not what the Founding Fathers intended.

Bumper sticker of the week:

Celebrate the right to give offense

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