IOER on Trial

February 10th, 2016 13:36 Central Time by t0mmy berg

Today I watched the Fed Chairwoman in her semiannual testimony before the US House of Representatives.  The highlight, I think, was in the back and forth with her over the issue of Interest on Excess Reserves (IOER).  Representatives on both sides expressed their concern over what they perceive as subsidies to the big banks.  These too big to fail banks (meaning too big to exist for at least one of them), none of whom have been disciplined by the Justice Department nor excluded from the industry by the Fed over their role in precipitating the Great Financial Crisis, are being paid now 50 basis points in interest on something like $2.5 Trillion in excess reserves.  That is about $12.5 Billion dollars paid to huge banks for essentially doing nothing.  Much of that will make its way into bonuses for these same bankers held in such low opinion by our esteemed leaders (what does it mean to be held in low esteem by those who are themselves held in such low esteem?).

Yellen’s response was that IOER was an important tool for the Fed to be able to control rates in the prosecution of monetary policy.   She stressed that the Fed, through its holdings of securities (Treasuries and MBS purchased from these self same banks, in order to maintain the fiction that the central bank was buying in the secondary market and hence somehow not doing direct financing of deficit spending by the sovereign), was itself paid vast sums in interest and that this interest was paid to the Treasury and hence the taxpayer – many times what was paid to the banks in IOER.  In other words, don’t worry about how much we paid them, look at how much we paid you!

Of course the Representatives were not buying this, even those who actually understood what she was talking about, which I am sure was few.  Not the Chair, not the Ranking Member (one of the dimmest wits on the Hill).  So there is already a political uneasiness with this whole payment of interest to big banks for doing nothing.  And that is at a mere 50 basis points representing just over $10 Billion.  Now I ask, what would happen if the Fed was actually successful.  If the economy picked up and all the Fed hoped for and assured everyone would happen came to pass.  In order to keep those excess reserves from flooding out into the real economy and and leading to massive inflation in the real economy, as opposed to merely in asset prices, the Fed would find itself paying what, 100 basis points?  200 basis points, 300 basis points?  Whatever it is would have to be in excess of Fed Funds.  Fed Funds was more than 5% as recently as the middle of 2007.  That is not even 10 years ago.

Under such circumstances what might the hearing today have looked like?  Imagine the Fed was paying huge banks not $12.5 Billion at 50 bips, but $50 Billion at 200 bips or $100 Billion at 400 bips.  Now that $100 Billion she is so excited to have remitted to the Treasury and the taxpayer is all or substantially all paid out to bankers.  My guess is that there would be a calamitous uproar in Congress.  My guess is the Fed would face a significant threat to its independence.  So Ms. Yellen should be happy the economy is not expanding as it has in the past.  If so then does the fact she is so sanguine about paying IOER to bankers at the current level represent an admission of sorts that Fed policy has failed and in fact will be unlikely to work in the future?  If not, then Ms Yellen or her successor is likely to face an unpleasant  political reckoning in the indeterminate future.

UPDATE:  After thinking about this a little more the answer is that the only likely way the Fed Funds Rate target and hence IOER goes north of 2% in the near future is that the economy has rebounded such that the Fed needs to move rates up.  In other words their dream HAS come true.  In that case they would feel confident enough to allow their hoard of Treasuries and MBS to roll off the balance sheet as they matured so the pile on which IOER was being paid would shrink and the total payouts to banks would therefore fail to reach the catastrophic levels which would bring greatly enhanced political scrutiny.  Time shall tell how it plays out.

Jim Cramer And the Martin Shkrelli Show

February 4th, 2016 10:16 Central Time by t0mmy berg

I just watched the House hearing with Pharma executives.  The highlight so far was of course the appearance of Martin Shkrelli.  House members of both sides put on their best clown costumes to ask him questions, having been already informed that he would invoke the 5th Amendment, in an attempt to make him look foolish or ridiculous.  Now Shkrelli does in fact look foolish and ridiculous on a good day, but these house members really discredited themselves with their nettlesome, fruitless and largely rhetorical questions which just kept coming.  And then they would pause after inane and stupid questions as if they really expected Shkrelli to answer or at least go through his rehearsed statement that he was invoking the 5th Amendment (Shkrelli is already under indictment in New York so his 5th Amendment assertion was real and necessary given that prosecutors no longer exercise any discretion appropriate to their status as representatives of the Bar, and will use any statement to support any absurd theory they can conceive of to get a Jury to provide them an indictment or a conviction).

A brief word on Pharma.  In general, they operate in the free market like everyone else.  If they see an opportunity and find a way to take advantage of it then great.  They do not have a duty to anyone other than their shareholders.  If they want to price a drug at a certain level then they can do so.  If the people these Congress people seem so concerned about, then that is too bad until the patent runs out, a circumstance Congress DOES has control over.  That said there is a huge built in problem with the incentive structure in Pharma.  That is that Pharma companies DO NOT have an incentive to cure any of the diseases they attack.  Rather their incentive is to fashion a chemical palliative that needs to be taken over and over to create a utility like stream of income.  Cures obviate the need to buy anything in the future.  It would be like selling a car that never breaks down.  Great the one time you sell it but as soon as everyone has one then you are out of business.  For this reason it is right to be skeptical of Pharma executives, they are not the good guys usually.

Any way back to the hearing.  So here comes Cramer commenting on the hearing, and I really need to do a separate piece making fun of how he talks, who goes on about how shameful Shkrelli is (yeah pretty much) but then goes on about how these are elected representatives whose very stature demands a modicum of respect, not smirking.  Whoa!!!  Urnnnhhhht.  Stop right there Jim.  These ARE our elected representatives in Congress.  People who are so brazenly stupid, duplicitous and absolutely worthless that you would have to be a cretin to assert they deserve ANY respect whatsoever.  They do not.  They deserve scorn, smirking and frankly to be strung up and then beaten until nearly dead.  Pretty much just about every last one of them.  So do the world a favor Jim, and just shut the hell up.  Moron.

Congress thought they were going to embarrass and discredit Pharma executives.  They succeeded only in discrediting and embarrassing themselves.

Bear Markets and The End of Two-Term Presidencies – Also, Bernanke Dooms the Markets

January 20th, 2016 17:31 Central Time by t0mmy berg

It occurs to me that the last two times the US has entered the final year of a two term Presidency, the stock market has crashed.  Stocks made a high in March 2000, 8 months prior to the voting that elected Bush W.  Then they ground lower until March 2003 when that same W shared the stage with the UK’s Tony Blair to announce war with Iraq.  They then made a high in October 2007, just over a year prior to the vote that led W out and Dear Leader in.  The low was in March 2009, 2 months after Dear Leader was sworn in.  Will the high in July 2015, just 16 months prior to the blessed end of Obama’s relentlessly lying reign, also signal a drop of 50% form those highs sometime in the next year or two?

Well, one thing that happened in the run-up to the mortgage crisis that comprised the last bear market and financial crisis is that one Ben Bernanke, academic idiot savant, said that “the problems in the subprime market seem likely to be contained”.  A year after he said this in the speech on the Federal Reserves own web site, Bear Stearns collapsed and 6 months after that, Lehman Brothers.  Lately he has been at it again.  These days, the credit bubble of the day is in China, and it is an order of magnitude larger even than the subprime crisis that almost stopped the world.  Apparently Helicopter Ben said (thanks to Mish) “Bernanke also said the $28 trillion debt pile facing China was an ‘internal’ problem”.  Seriously.  Which of course means that it isn’t internal, but will likely lead to the end of the financial world as we know it.  Or something like that.  In any event it will be a large problem not contained solely to China.

Getting back to the stock market tanking at the end of two term presidencies, does the pattern hold further back than 2000?  Well the one before that was the transition from Reagan to Bush the Elder in 1988.  The market had its biggest one day decline about 13 months prior to that election and then an echo crash in 1989 less than a year after the election.  So I think that fits the pattern.  Prior to that maybe Nixon second term?  Well technically his second term ended in 1976, but he resigned in 1974 to avoid his impeachment.  The markets crashed in 1973-74 so I do not know if that really counts or not, but his second term ended right then so sort of.  The only semi-modern presidency of two term prior to that was Eisenhower.  The election that ended his second term was in 1960 when Kennedy was elected to succeed him.  The market went sideways to down in 1959 to 1960.  So sort of but not a big crash like the most recent 3 and now 4.

S&P500

How Expectations on Economic Freedom Have Changed

January 18th, 2016 10:39 Central Time by t0mmy berg

Just now I was watching CNBC and in a recap of what is going on this MLK day, Sara Eisen was talking about China.  She said “We are watching to see if the officials can stabilize the currency, as a sign that they are still in control of the economy and the markets”.  Think about that.  Has it become a common and unquestioned expectation that “officials” here or anywhere SHOULD be in control of the economy and the markets?  I mean, in my worldview, “officials” are spectators of the economy and the markets, whose only duty is to stay as unengaged as possible while providing the backdrop for economic activity to take place?  Which means providing a legal system for the peaceful resolution of disputes and possibly some infrastructure and finally a strong national defense so people do not have to worry about invasion?  Emblematic of how twisted and dangerous the conversation has become when commentators can pass on such nonsense as if it were the normal way of things.

The Two Main Channels Through Which The Fed Causes Wealth Inequality

October 31st, 2015 20:35 Central Time by t0mmy berg

The Fed likes to do things in a cute way, calling the ways in which they affect things “channels”.  Too cute by half I would say, much like the SCOTUS with its thresholds and tests, but that is a discussion for another day.  It is now indisputable in my opinion that the Fed is one of the main causes of the much discussed wealth inequality plaguing the US.  Recently I saw an article about how the top 100 CEOs have as much in retirement savings as something like 50 million regular American households.  Pretty horrifying.

The main reasons this is happening are twofold.  First there is the simple fact that QE has caused nearly all inflation to manifest in asset prices.  A small and well to do segment of the population owns most of these assets, like stocks, so they reap the benefits.  The Fed justifies this to itself by claiming the “wealth effect channel”.  The idea is the wealthy, made even wealthier by QE, will spend more of their windfall profits on stuff made by ordinary peons and so the whole country will get wealthier.  The wealth effect channel.  Except that most people agree that the wealth effect is tiny if it exists at all.  It certainly does not justify the distortions it causes in myriad ways by causing social disharmony and fubaring the most important aspect of capitalism which is price discovery and the signals those send to capital to choose its outlets wisely.

The second channel is the “make corporate executives fabulously wealthy by ZIRP allowing them to print money for themselves” channel.  The way this works is that corporations can borrow money for very close to no cost, the cost having been forcibly suppressed by the Fed, and they can recycle this money into share buybacks which increase the price of their shares, which of course causes their regular stock option grant strike prices to go into the money and be very very valuable.  They can do this over and over again as ZIRP now enters its eighth year.  So it is no wonder that top executives make multiples now in the hundreds of times what their non-option granted employees make.  This dynamic is just disgusting and directly a result of the Fed flooring rates at zero for years and years.

There might be a third “channel” which is quite simple.  The noted problem with any kind of inflation is that it helps those who are closest to the money inflation the most.  Well, in the case of creating trillions of excess reseves through QE, those who are closest to the money spigot are the Primary Dealers and those who control them.  These people are literally paid by the Fed to buy and sell Treasuries and MBS.  No idea how much they make but it is certainly unbelievably substantial.  The Fed pays these banks between 5 and 10 billion dollars a year just in interest on excess reserves at 25 bips, to say nothing on the markups they surely command on the bonds they buy from Treasury and then turn around and sell right back to the Fed.

The unseemliness of this outrageous transfer of wealth to those who need it the least while Main Street remains stuck in squalor and penury with the Feds and their Bureaucrats with their boots on the necks of real business people can really only be fixed in one way.  That is to cut the Fed off at the knees by either ending it altogether or at the very least cutting it way way back to its only valid functions as lender of last resort and a way to have a solid clearing function.  Setting the price of overnight money and worse, engaging in fiscal policy through QE should be seen for what it is, an anachronism straight out of the 1930s.

The Necessary Revolution

October 12th, 2015 08:58 Central Time by t0mmy berg

I am in the camp that believes, like Thomas Jefferson, that “The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants”.  Our Federal Government has come to closely resemble that unbounded tyrannical monster against which our country rebelled in the late 18th century such that now is one of those times.  The problem is that with our bread and circuses, EBT, sports, video consoles and so on, no one really cares that the foundations of our Republic have been so weakened as to be about to crumble.  There is no spark to ignite revolt.  I wonder if that may be about to change.

On Friday, October 9th, 2015 Rick Santelli, father of the Tea Party, interviewed Dr. Lacy Hunt, one of the best economic thinkers out there in my opinion (and one of the only guys to work David Hume into his musings without missing a beat, God bless him), and they touched on the notion of negative interest rate policy (NIRP).  Just after 2:35 he hits the money quote which is that to enforce negative rates the Fed would have to “call in the currency”.  Calling in the currency might just ignite the spark of revolution.  Why?  Well it would arrogate even more power and control of peoples every day lives to the government for one thing.  How?  All transactions would have a digital record and be trackable by the Leviathan.  No more underground economy to supplement the livelihoods of those least able to withstand the overwhelming tide of regulation and taxation emanating from the Beast(s).

As an example, the Apple House near here sells their autumn haul at frankly ridiculous prices but the product is awesome so people pay…in cash only.  If NIRP comes to be they will have to use trackable forms of payment tech which means ultimately they will probably close, or prices will rise to adjust for the costs incurred.  Tax revenues will probably rise initially, but at the end of the day, the scope of activity will settle out lower than it is today.  And those people will know who killed their businesses.  And they will be pissed off, hopefully at the government.  Perhaps that along with other things will finally push people over the edge and spark the Necessary Revolution.

Lacy Hunt on NIRP at CNBC

 

 

 

 

Jill on MPR – Fair Foodies Friday Roundtable with Kerri Miller at the State Fair

September 4th, 2015 12:16 Central Time by t0mmy berg

My wife Jill got in some awesome comments at the Minnesota State Fair when she was picked to respond about the effect of love in cooking on the outcomes thereof.  Jill is a trained chef who studied at the Cooking and Hospitality Institute of Chicago.  She was a pastry chef for Jean-Claude Poilevey at Le Bouchon on Damen Avenue.  Then she started her own place called Kaleidoscope at the intersection of Damen, North and Milwaukee in the space she bought from the Bongo Room right at the Damen blue line el stop across the street from the Double Door (where she saw the stones in a private little concert one day).  The food and atmosphere were awesome as anyone who ate there would attest.  Babies intruded and she eventually closed the restaurant as the crazy landlady wanted a small fortune to keep it open.  Anyway here is an mp3 of her well-received comments (Sameh Wadi of Saffron Restaurant & Lounge and World Street Kitchen in Minneapolis humorously offers her a job on the spot) {click to the left of the leftmost 00:00 if the Play/Pause image fails to show up, you can see it changes cursor if you hover over that area) (original Minnesota Public Radio page with the whole Foodies Friday podcast is at this link – go there is this whole page blows up in your face or something – Her part starts at about 6:40 in the podcast or at 45:15 minutes remaining if you use their backward counting player):

 

SCOTUS Renders More Wrong Decisions: Lack of Respect for US Institutions Justified

June 25th, 2015 09:46 Central Time by t0mmy berg

Recently Gallup put out a poll showing that faith in the institutions in the US has fallen to all time lows.  And with good reason.  The President lies about Obamacare and everything in between.  Congress passes Obamacare using the most heinous and ridiculous parliamentary tricks and dodges imaginable.  The Supreme Court twice upholds what is clearly unconstitutional in the individual mandate and then says the statute did not mean to apply subsidies only to state exchanges as the statute says but to anyone.  They will undoubtedly find state failure to recognize gay marriages as unconstitutional.  It seems as if nearly every SCOTUS decision coming out is flat out wrong on both the law and the equities.

Whether it is because Roberts has been threatened by the black helicopter crowd by Obama and his evil minions or that he is plain stupid, the curse of W (the worst President ever before the current President raised the bar considerably and took the honors) comes back to bite us again and again.  It was W after all who appointed the now obviously moronic traitor John Roberts as Chief of the Supreme Court.  And he is young.  We can only hope he finds an accident or chooses to resign to spare the country decades of his incompetence in the highest judicial chair in the land.

The power and prestige of Nations wax and wane over the course of history.  I see little hope for the US, which is now well down the slope or into a considerable period of waning.  It will take a crisis of unprecedented magnitude to allow for a reset that can break the back of the government as it now exists and to put things on a better path so the fortunes of the nation wax again.  The ongoing loss of faith in our degrading institutions is part of that long drawn out process.

Hillary Already Disqualifies Herself With Email Horror Show

May 27th, 2015 13:52 Central Time by t0mmy berg

The race for President has not even really started and already Hillary has absolutely disqualified herself for High Office.   She already clears the hurdle just by the fact that she elected in her best bad judgment to use a private email server to handle all of her official governmental email correspondence.  Why does that matter?  This is, or was, a representative republic where high officials (and Secretary of State qualifies there) are open to public scrutiny in the way they handle their public trust, that being the fact that they are representing the people in their office, not themselves.  That necessarily means that ALL of their official correspondence MUST be handled by systems run by and for the polity.  Running your own server to handle it is insufficient to ensure that in the fullness of time, the ramblings and decisions made in the name of the public are available for scrutiny.  And it matters not a whit if such has not been officially codified.  It is patently obvious by the nature of the American Experiment that it must be so.  Yet Hillary judged, wrongly, that it would be OK for her to hold HER official correspondence outside of officially controlled and administered systems.

Why would she make such an erroneous and poor judgment?  Why to allow her to brazenly undertake the next horrific, arrogant unbelievable action – deleting ALL of the correspondence on the server!!!!!!!!!  I mean we cannot have the plebs looking at what Queen Hillary had to say to anyone or how she made any of the judgments she made on behalf of the body politic in the future can we?  No.  Deleting the emails from the server she should not have been using for official correspondence is WAY WAY beyond the line.  But who cares what is beyond the line anymore.  I mean if the President of the United States can use his minions (Valerie Jarrett) to get powerful institutions of the United States Government (IRS) to harass his political opponents for him – something Tricky Dick Nixon could only have dreamed about – why would anyone care about a corrupt lying scumbag of a politician running their official US Government correspondence on her own server and then deleting anything on it to avoid the discovery of the improprieties which almost certainly resided thereon?

So if you find yourself itching to give old Hil a vote come next November, do us all a favor and either think better of it, or get in a fatal accident first.  And if she does happen to get elected, and I would not put it past a population that somehow saw fit to elect and then reelect a Muslim Communist who likely isn’t even eligible for the position as President, I can only hope that the Space Aliens who have so far refused to come to our aid by obliterating Washington DC (a la Independence Day) with all the asshats and clowns in it will do so in that eventuality.  But I am not holding my breath.  God Help the country formerly known as the United States of America.

Abuse of Discretion Just Feels So Good

April 21st, 2015 13:41 Central Time by t0mmy berg

The latest judicial farce occurred with the verdicts rendered in the Boston Bombing Case.  We did not have long to wait as the very first count came back in all its ludicrous glory.  Count 1: Conspiracy to use a weapon of mass destruction.  Guilty.

What lunacy, what lack of judgment could have resulted in the prosecutor leveling such a charge?  What odious obliteration of the very nature of jurisprudence could have come back with a positive finding on that count?  Weapons of Mass Destruction?  Really?  They blew up a home made bomb.  By any definition that would include their method of murder as a Weapon of Mass Destruction, every weapon ever used in war or crime is a weapon of mass destruction.  By such a definition, David was guilty of using a Weapon of Mass Destruction when he took out Goliath.  What the Hell?

Don’t get me wrong, the idiots who killed those people in Boston are guilty of a heinous murder and deserve to die for their deeds, assuming they are the ones who did it.  But to try to dress it up as something it wasn’t speaks poorly not of the murderers but of our system of justice and particularly of the people who brought and prosecuted the charges in all seriousness, even though no reasonable person could have done so with a straight face.  The prosecutor should be disbarred.

Minnesota to Entrepreneurs: Go Away

April 9th, 2015 14:09 Central Time by t0mmy berg

As I was looking to move my family out of fiscally bankrupt Chicago and Illinois two years ago, we took a vote and the result was to move to Minnesota where we have some family.  I did not know it but at the time Mark Dayton, the intellectually bankrupt governor of the state – who only assumed his position through a combination of Repubnicants splitting their vote between two candidates and his family name recognition as a latter day scion of the great Minnesota retail dynasty of yesteryear – was busily conspiring with the newly installed Progressive/Democratic (DFL or in other words evil) legislature to hike the top tax rate in Minnesota to a whopping 10% on income above a paltry $249,000.  Now that is one hell of a run-on sentence but I get breathless just thinking about the monstrous stupidity of such a thing.

Now imagine you are an entrepreneur looking to make it rich.  You could start your business here, but if you succeed, guess what, between the Feds and the State of Minnesota, you are going to pay 1 of every 2 dollars you make to inept, wasteful, incompetent, morally repugnant and progressively worse government.  Minnesota’s government is a damn site less wasteful and incompetent than the Feds or even most other state governments.  But still the idea of giving half your income to morons is not all that appealing.  Even the former top rate of 7.xx% was daunting and outrageous.  10% is just insane.  I would not have moved back to my childhood state had I known of this at the time a couple of years ago.  And it is likely I will leave this state after the kids get the excellent education on offer here (one of the good things that high taxes buys).  I am willing to pay more for honestly delivered services that improve the quality of life, but the surplus that has occurred is about to be wasted by the idiots in St. Paul.  It is wholly reprehensible.

I have also noticed that the education here, while excellent by most measures is geared toward a uniformitarian outlook well disposed to creating proper little corporate drones but not toward creating outside the box thinkers and business creators.  Almost no school systems teach anything about computer programming, the wellspring of the modern economic age and an absolute intellectual necessity for education in the computer age.  Having spoken to our local school board curriculum committee members, it seems that computer programming is though of as vocational training not worthy of serious scholarly pursuit.  Of course nothing could be further from the truth.  If taught properly computing is about logic, the very wellspring of reasoned thinking.

The emphasis on knocking off rough edges can be overcome but the very high tax rate needs to be killed if entrepreneurs are going to think of Minnesota as a good place to do their thing.

More Words That Should Be Banned From Common Use: Heartland, Absolutely

March 6th, 2015 11:33 Central Time by t0mmy berg

In addition to “folks” which has been ruined by Obama cynically using the imply he is connected to the common man and Fred Thompson cynically using it in commercials to connect his sponsor to the common man, two more words that should be banned are “heartland” or the synonym “homeland” and most assuredly the word “absolutely”

I have been meaning to write this for a long time but I had put it off until I just heard on Bloomberg an image-shaping/building commercial by the Koch brothers wherein the female spokesperson tells us how Koch industries started in the “heartland” as if that means they should be just okey-dokey with everybody who feels an affinity with the concept of the heartland.  I mean I do feel such an affinity which is why I choose to live in the “heartland”, affectionately known as “flyover country” by the ruling and business elites on the coasts.  But I am not so craven or stupid to then uncritically buy into some image refurbishment campaign by anybody, even if I am glad they are fighting the good fight against the Progressive scum looking to subjugate everybody to their utopian collectivist vision of the country and the world.  And know that almost all of the agriculture that forms the basis of our country’s ability to produce wealth on an epic scale takes place here, a fact taken for granted by those elites.  Plus we do not get hurricanes or earthquakes here, and tornadoes are a much more localized danger.  Homeland should likewise be banned as well as its namsake Department which is now chiefly in the business of destroying our civil liberties and wasting our tax dollars rather than providing any additional kind of security.  But I digress as usual…

“Absolutely” makes the list not because it is prone to misuse that makes one want to puke because it is so blatant an attempt to buy us off, but merely because of its insane amount of overuse.  Nearly every person who is interviewed on the business channels I watch during the work day starts off nearly every answer to nearly every question with the reply…”Absolutely”…  The worst was some interview on CNBC I think with the CEO (THE CEO!!!) of one of the insanely overfunded technology companies, or social networking companies (not really technology, though they all seem to be set up in or near San Francisco or Santa Cruz).  He was asked about 10 questions in a two minute time frame and started the answer to every one of them with the word “Absolutely” and then managed to even insert the word a few more times into the meat of the answers.  It was …absolutely…ridiculous.  Seriously.

Aside from the fact that few things in the world are categorical or absolute, especially on the rapidly shifting sands of technology or any business, even in these times when the government retards the operation of creative destruction, it is just bad form to overuse and misuse such a word so badly and so often by so many.  I therefore humbly submit that these two words  – “heartland”/”homeland” and “absolutely” join “folks” on the list of words that everyone should retire from common use.

Valerie Jarrett

March 6th, 2015 11:08 Central Time by t0mmy berg

I just watched an interview with the “President”‘s number one advisor, the shadow President of the country formerly known as The United States of America – before John Roberts finally threw out the document that our ruling elite progressively ignored more and more as an anachronism rather than the document setting out the powers and structure of our government.  Anyway, aside from that, what she said in the interview was most instructive.  Referring to the decisions and policies of the “president”, she did not then say “the Administration” or “the ‘President”s Administration” but rather she said “our Administration”.  Clearly she believes that she is essentially co-regent with Dear Leader.

Later on she then used words like “our policies” and “we” when referring to the goings on in the White House.  I hope she is enjoying her days in the Sun.  We now have multiple members of the Internationale running and ruining our country.  We should be so proud.

The Prime Minister, The President and The Bomb

March 3rd, 2015 10:11 Central Time by t0mmy berg

Today is a strange day in the history of American Democracy.  A foreign leader is going to address Congress a little less than an hour from the time I am writing this to try to head off the Diplomatic efforts of the President of the country formerly known as the United States of America.

Backing up a little bit – in the aftermath of Nine Eleven, America flexed its weirding muscles by electing Barack Obama as President.  That is, after an attack by Islamic Radicals bent of harming American Capitalism, the country essentially said:

“Yeah? Well watch this – this country is so strong we will elect a Muslim Communist in response, and not only that but we will give him a full two terms.  What do you think of that?”

And so it was.  And now we also have a clandestine member of the Muslim Brotherhood heading up our clandestine service in John O. Brennan.  You cannot make this stuff up.  So naturally there is some tension when the Congress of the United States asks a Jewish leader to speak.  He will necessarily be addressing the top issue of the day in the region.  No, not Islamic State, but the effort by the Mullahs of Iran to get themselves and their terrorist allies around the world the Atom Bomb.  Now Our Muslim President and his idiot Lackey Secretary of State John Kerry Heinz are in the middle of “negotiations” with Iran in which their policy of weakness is going to grant Iran the right to build nuclear weapons.  Delayed a little but basically giving away the whole house.

Naturally Israel is not too keen on Iran getting the Bomb.  So here we have the Israeli Leader, whose relationship with our Muslim President is predictably rocky and unproductive to put it mildly, addressing Congress in an end run to try to derail the delicate “negotiations” in which, again, our Dear Leader and his minions are to allow the Theocracy of Iran to get The Bomb.   Crazy stuff.

Thank the Gods there are only some 22 months or so that Obumbler can wreak his havoc at home and abroad.

The Myth of Fed Independence

February 25th, 2015 11:42 Central Time by t0mmy berg

In a reversal of the usual course of events, the more interesting day of Humphrey-Hawkins testimony the last two times it has occurred has been day two in the House of Representatives.  Usually House members, who by and large merely reveal their stunning levels of ignorance of anything economic through their questioning and statements, have little interesting to say and fail to elicit anything interesting from the Fed Chair.  Senators by contrast are usually better informed and better orators.  But the last couple of times this has manifested as cowardly deference to the Fed Chair whereas several House members have come out swinging with feisty lines of questioning for Madame Yellen, the speech-challenged Fed Chair, who though she sounds like she has suffered several strokes, has obviously been well coached by the Administration in the fine art of lying to Congress and the American People.

I have meant to write about this since the last testimony 6 months ago.  In that testimony, the Chair of the House Financial Services Committee Jed Hensarling of Texas, raised an interesting fact.  He brought to light a regular meeting that the Fed Chair has with Treasury and its Secretary Jack Lew.  He asked her if she would share transcripts of her conversations at these meetings and she stated that would not be possible.  Hensarling left the questions on these meetings to someone else on the Committee this time around (Huizenga from Michigan).  She similarly refused to provide information on the substance of such meetings.  One wonders why.

I will herein proffer a reason why she might hesitate.  This reason will be out there in the realm of fringe conspiracy theory.  She will not share the contents of such meetings, which she claims are private meetings which is ridiculous, because it is in these meetings wherein Barack Obama dictates to the Fed what their monetary policy will be.  After all, he believes he is personally the person best able to handle decisions for basically every realm of human activity and thought.  He likely leaves the details to the apparatchiks at Treasury and the Fed.  After all he doesn’t have time as he is so busy being the President.  But I believe it is likely he, through the Secretary of the Treasury at these weekly meetings, personally dictates to the Fed what the general thrust of policy will be.  In other words the Fed is very far from being independent.  And if you do not believe that then why would the Fed have contravened decades of established practice – to not influence political elections – by announcing QE3 just a month before the Presidential election of 2012, juicing the markets and helping Obama in the imminently pending and hotly contested election?  For that alone the Fed needs to be brought down several notches, or be disbanded altogether.

A 3rd Bush for President in 25 Years? No Thanks

December 16th, 2014 14:19 Central Time by t0mmy berg

I have often said that I have never voted for a Democrat for any office and I never will.  Democrats are destroyers.  They are also now almost universally intellectually dishonest lying scum.  That said, I also thought George Bush Jr, though a likeable guy, was one of the worst presidents the country has ever suffered (until Obama made the scale of his putridity vanishingly small by comparison).  But one of the most important principles of governance in the United States of America, or what used to be the United States of America when it still had the authority due it by having a Constitution that was adhered – anyway one of the important principles is that governance is to be taken up by the people and that there should be no imperial dynastic element to it.  Accordingly, even if Jeb Bush were to look like the best thing since sliced bread, and I doubt he would, I would not vote for him and I would urge others to refrain as well.  Two Bushes in a generation is quite enough thank you – in fact it was already too much.  If the powers of the Republican Party wanted to run Jeb then the Bush family ought to have taken care of that before W ran.  The same thing goes for Clintons.  And Obamas and for every other family.

Separation of Church and State: A Bridge Too Far

December 12th, 2014 11:16 Central Time by t0mmy berg

The first amendment to the US Constitution is perhaps the most important doctrinal assertion codified by the founders of the country.  Here is the full text in all its sublime brevity:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Keeping the state out of the religious business of its citizens is one of the crowning achievements of mankind.  As an acutely anti-clerical person I place a great deal of importance on it.

However, the level and purity of the enforcement of this prohibition is costing our people dearly.  This has come clear to me powerfully in the last couple of years as a parent of school age children.  When I was young, I sang in all of the singing groups I could.  I attended the Blake School, a private college preparatory institution in Minnesota.  I was in the Glee Club, the Choir and in the two a capella groups that come with those, the Blaker’s Dozen and Mixed Company.  I greatly enjoyed the music we sang.  It had beauty and grace and was uplifting and spiritually remunerative.

Now I have kids singing in their school choirs.  I went to one of their concerts just last night.  And here is the problem.  I do not have the $30,000 each per year needed to send my kids to the private school I attended.  Because of the doctrine of separation of church and state, the songs available to these kids to sing are limited to the most insipid and useless twaddle imaginable.  It is not worth singing nor listening to.  It is garbage.  No carols and no religious music.   These kids have no possibility of encountering truly beautiful music unless they join a church or other choir.  One of my kids is in a choir outside the school system we pay for her to join.  Being anti-religious, we do not go to church.   But though I am anti-religious, I can recognize the surreal beauty of the music inspired by religious feeling by so many composers through the years.

The First Amendment sets up this impossible tension between protecting thought from the intrusion of the State, but at the same time is used to prevent people from participating in the most beautiful music there is, which happens to be religious.  This impoverishes the nation and the character of the people in it.  This cannot be the right answer.  Contemplate the awesome beauty of the following (to me the most beautiful piece of music I have ever heard):

Kids have no chance of performing or hearing this.  Even the music without the words was held by the Ninth Circuit to be unacceptable and the Supreme (useless) Court refused to hear the case.  It is a tragedy.

The Thing About Murdering Cops

December 7th, 2014 22:43 Central Time by t0mmy berg

I have watched the video of the police in NYC murdering the large black guy selling cigarettes several times now.  They unnecessarily put him in a smothering choke hold after taking him down to the ground when he had his hands up and planting their boots in his chest and crushing his head into the concrete pavement.  How is it that none of those who killed that man are going to even be prosecuted?  This case is not like Ferguson, where the murdered black kid was a common criminal and the cop was arguably acting in self-defense.  It is not like the Trayvon Martin case.  It is more like the case of the merchant in Tunisia  who set himself on fire, setting off the Arab Spring, to protest abuse of the police and authorities which caused him to lose his means of making a living.  Eric Garner is our Mohamed Bouazizi.  The guy in Staten Island selling loosies is trying to make a living.  Because the state does not like the tax consequences they make it illegal.  Then they send out hooligans with badges and guns to shake him down.  The central issue in this case transcends race.  Race isn’t an issue as it was in the other cases.

This case is a potent living symbol of an out-of-control government that has become the enemy of the people.    He did not put up a fight.  He was not threatening them.  Yet they murdered him in cold blood in the light of day on camera!!!  And still the justice system failed to even start the process of obtaining justice.  He told them over and over he could not breathe.  They completely ignored him.  He was not a person to them.  He was an object on which they were exercising their power.  And that power is the unbridled power of an out-of-control state apparatus.

The failure to bring an indictment in this case is an indictment of our justice system.  Those who lose faith in the system are right to do so.  Those cops are murderers.  And they should get what comes to murderers.  Ideally, in a healthy functioning polity, that justice comes through the justice system.  That the justice system is no longer dispensing justice means that resolution of such cases is now going to happen through extra-legal means more and more leading to vigilantism, anarchy and the perpetration of more and more injustices.  It means our polity is not healthy.  It is a broad failure of governance, as the impartial dispensation of justice based on widely known and well-considered law is one of the few valid purposes of government.  When you hire banana republic type politicians to run your country, your country becomes a banana republic.  We are becoming more like a banana republic every day.

The Thieving State of Illinois

December 3rd, 2014 16:14 Central Time by t0mmy berg

Things must be getting pretty desperate in the state we left because things were going to get desperate.  Unfortunately my employer did not switch paying withholding to Minnesota when we moved in 2013 and continued to pay Illinois.  As a result of that plus the fact that we could deduct moving expenses, we actually had a tax refund due from Illinois for 2013, something which I always try to avoid.  Would that we had avoided it for 2013 as well.  We had a refund due of about $2415.  When we got the check the State of Illinois had reduced the refund by $315.  What for?  They reduced it by the amount of a fee which my wife had apparently neglected to pay to Northeastern Illinois University, where she went briefly sometime in the…oh…late 1980s or early 1990s, before we had even met.  That’s right, a university fee from more than 20 years ago was deducted from my tax refund.  I now pray that the State of Illinois gets what’s coming to it and that is a fiscal implosion of epic magnitude.  My guess is it is not far off.   My condolences to my friends and anyone else still living there.

The Tyranny of the Non-Economic Market Players

November 14th, 2014 14:42 Central Time by t0mmy berg

Anyone paying attention has by now noticed that these are not your father’s markets.  Stocks go one way, up.  Commodities swing wildly up and down as the “stock guys” wax and wane over their love of this or that market (for the second time this year it is Ag markets – after all everyone knows you just have to own Ag).  Metrics that people have used for years are at values that are hard to believe.  Technical analysis of markets is futile because nothing works any longer.  Why is this?  Largely it is because there are at least three classes of players massively active, in bond, stock and commodity markets in decreasing order, whose agendas make them relatively insensitive to price.  As a result, prices go places that do not make sense.  Bubbles form and collapse.  Price signals, the mother’s milk of capitalism, become noise rather than signal and fail to allow for the proper alignment of incentives that make for the creation of real lasting widespread wealth rather than temporary wealth that accrues mostly to those closest to these players.

The 3 players are Central Banks, Sovereign Wealth Funds and Corporations themselves.  Central banks are engaged in massive pushes of liquidity into the banking systems of the world, ostensibly with the goal of spurring growth and hiring in a world that needs to deleverage its balance sheets.  The problem is that liquidity has not been a constraint for at least 4 or 5 years.  The means they usually choose is the buying of sovereign and sometimes corporate bonds and mortgage backed securities in the secondary market.  The massive size of these purchases by a buyer who either doesn’t care about the price of the bonds, the rate they bear, or may be purposely trying to lower the rate they bear, drives yields to levels below what the market itself would likely realize.  The effects are many.  It means investors must look to other assets, like high yield bonds and equities, to get yields consistent with their mandates or needs.  It also means savers face insufficient yields to incentivize saving.  In most cases, nominal yields are below the rate of inflation and so real yields are negative.  The Central Banks think this means the cost of financing business activity declines and will therefore result in more activity.  What they often fail to realize is that providers of capital will simply not provide it because they are not adequately compensated for either risk or inflation.  This is called financial repression.  It also means that the governments who are operating on persistent deficits and racking up debts of historically unprecedented proportions, are able to continue to borrow and operate while keeping interest expense within seemingly tolerable limits.  To the extent the repression of savers enriches speculators, increasing the divide between the rich and everyone else as financial market asset bubbles accrue more wealth to those with the most wealth already and the facilitation of irresponsible spending by governments allows the further buildup of debt to be paid by future generations, these policies are both immoral and unconscionable.   Lately the Bank of Japan has jumped the monetary shark, and will buy not just all of the bonds issued by the Japanese Government, but will also buy hundreds of billions of dollars of domestic and international stocks directly, alongside Japan’s giant pension authority which will also be buying stocks.  I just read today that the Swiss Central Bank has also been in the market for small company stocks in the US and I know that the Bank of Israel also buys stocks (their Chief recently joined the Fed as Vice Chair!).

The second major player is Sovereign Wealth Funds.  Collectively the funds of countries such as Norway, Saudi Arabia and other Middle Eastern oil powers like Kuwait, Abu Dhabi and Qatar, China and Singapore control Trillions of dollars which they are investing in all kinds of assets, but mainly bonds and stocks.  Such funds typically have a very long-term view of markets and so are willing buyers not just on pullbacks but all the time and hence represent a consistent bid under markets.

Finally, the prime mover in the current equity bubble taking place in the US, and yes it is a bubble, are Corporations themselves.  This effect is massively insidious.  Rather than spend earnings on productive investment, company managements, with the approval of activist shareholders like Carl Icahn, have spent something like 91% of after-tax cash flow on buying back stock in the last several years.  This explains why the stock market is at record highs while the real economy is in the doldrums.  Fewer shares outstanding means any earnings are shared among fewer holders and so the per share price rises.  Managements love this because they get a huge part of their compensation in stock options.  If the price rises their options go into the money and they get rich.  So price is completely irrelevant to them.  In fact their incentive is to overpay as the higher the price on the market, the better the outcome for their stock option grants!  I recently read that JP Morgan has estimated that 80% of the rise of stock markets in the US since the 2009 low has been because of corporate buybacks (that is 160% of the 200% runup so far).  These hundreds of billions go directly to a relative few wealthy corporate managers while doing nothing for workers or the real economy.  It doesn’t flow down at all.  This is a disaster for the economy made possible because the corporations can borrow for nothing thanks to the Fed’s ZIRP policy and its flooding of the banking system with reserves through QE.  The Fed makes this rape of the economy possible and is yet another reason the Fed is about the most immoral institution in America and deserves to be ended for these reasons.  Of course shareholders love the rise in prices made possible by the corporate borrowing binge to buy back shares.  And the government and the Fed love the rise in prices because it makes 401ks look better and provides the illusion that retirement funds are available to support the baby boom as it retires.

The net effect of all this activity by price insensitive market participants is that markets give the appearance that all is well while underneath the foundations of the real capital economy continue to rot.  It is a form of can-kicking to avoid taking responsibility for actually fixing the underlying problems with the economy that will cause major dislocations to be worse than they would have been in the fullness of time.  And of course the destruction of price signals means that capital will be misallocated to a degree unprecedented in history which will eventually make the entire economy poorer.  Hedge Fund manager Paul Singer recently published a rant where he talked about the fakeness of all around us and the reprehensible abuse of their duties by lawmakers that has perpetuated this Potemkin state of affairs.  He is right.


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