The Fed did not take my advice, but they did signal that today’s 25 basis point cut was the last for a while. At this writing the dollar has moved up to 1.53 against the Euro (it was 1.60 the other day), oil is down more than $2 to $113.50 (it was $120 the other day) and gold is down again to below $870. Maybe the speculators are realizing the easy money train has left the station
Tom Friedman nails both Clinton and McCain for their pander bear move on eliminating gas taxes for the summer.
Hillary Clinton has decided to line up with John McCain in pushing to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for this summer’s travel season. This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.
The amount of stupid political posturing over this issue is truly mind-boggling. Here we are moving towards oil at $5/gallon and say anything for a vote politicians are trying to raise our consumption of gas. As Peter Schwartz of GBN says, “Maximize demand, minimize supply and buy the rest from the people who hate us the most.” What a way to run a country.
Stanley Fish wrote a piece for The Times a couple of days ago.
In 1952, when McCarthyism was at its height, Supreme Court Justice William O. Douglas labeled the investigative techniques of the junior senator from Wisconsin “guilt by association” (Adler v. Board of Education). Douglas added that McCarthyite tactics were “repugnant to our society” because, despite the absence of any overt wrongdoing, the pasts of those attacked were “combed for signs of disloyalty” and for utterances that might be read as “clues to dangerous thoughts.”
More than a half century later, “McCarthyism” was joined in the lexicon by “Swiftboating,” the art of the smear campaign mounted with the intention not of documenting a wrong, but of covering the victim with slime enough to cast doubt on his or her integrity. Now, in 2008, after a primary season increasingly marked by dirty pool and low blows, “McCarthyism” and “Swiftboating” have come together in a particularly lethal and despicable form.
Professor Fish goes on to write about Bill Ayres, who he knows personally and how he was used to tar Obama. But it is just as true for the Jeremiah Wright association: that the Clinton and McCain campaigns, with the total cooperation of the MSM, have combined McCarthyism and Swift Boating against Barack Obama. Obama can be accused of naivete for not publicly breaking with Wright before he announced for the Presidency. He made a point of not inviting him to the announcement ceremony, but he never made a Sister Souljah moment of it. That’s part of his character that is in the true tradition of his faith–”He who is without sin, cast the first stone”.
But even if he has handled it poorly, what Wright says has nothing to do with Obama’s candidacy. It is “Guilt by Association.”
UPDATE:The Daily News says an associate of Hillary Clinton arranged the appearance of the Rev. Wright at The National Press Club yesterday. If so, that will go down in the history of dirty tricks in this country.
The greatest confidence builder Ben Bernanke and his colleagues could craft in the next two days would be for the Fed to not cut interest rates any further. It would have three salutary effects.
- The Dollar would rally. The differential between U.S. aggressive cutting of rates and European stasis has moved short term money into Euro Bonds and out of the dollar. A rate pause would force all the currency speculators who are short dollars to unwind those trades.
- Commodity prices (especially oil, wheat and corn) would fall. Because we buy oil in dollars, the sellers keep raising prices to compensate for the fall in the dollar (84% vs. the Euro). As the dollar rallies, oil prices will moderate. Same is true in world food commodity markets.
- It would signal a bottom to the credit crisis. It is clear that some risk taking has come back into the market. Big smart money like Buffet and Kerkorian are putting their money to work and the banks have raised billions in new capital over the last six weeks.
I don’t for a minute think we are out of the woods financially in this country. But the nature of the threat is different than the one the Fed has been fighting since the fall. I have suggested that we are in a world of Malthusian resource constraints for the first time in history. As the Times pointed out this morning, “Higher (oil) prices have done little to suppress global demand or attract new production, and the resulting mismatch has sent oil prices ever higher.”
What is needed now is a complete rethinking of how we measure societal success. Is the only marker for happiness an incresing GDP? If we understand that a strategy of more savings and less consumption is the only way to avoid what Buffet calls “the sharecropper society“, then it would require both an economic but also a philisophical and spiritual transformation of our country.
This is where the Digital Utopians can help.
I have made the point before that we are entering an Interregnum, that pause between eras when the old king of neo-conservatism is dead, but the new king has not been named. This afternoon, the Wall Street Journal nailed up another signpost. The headline reads–Has the Financial Industry’s Heyday Come and Gone?
For the past three decades, finance has claimed a growing share of the U.S. stock market, profits and the overall economy.
But the role of finance — the businesses of borrowing, lending, investing and all the middlemen in between — may be ebbing, a shift that would redefine the U.S. economy. “The role of finance in the economy is going to come down significantly in the coming years,” says Carlos Asilis, chief investment officer at Glovista Investments, a New Jersey money manager. “From a societal standpoint, we got carried away with finance.”
Hillary Clinton and Bob Rubin are a matched set. They were always at the table when the great decisions were made, but they are never accountable for the mistakes. Here’s former Clinton Treasury Secretary and Citibank Exec Rubin on his role in Citibank’s recent credit meltdown.
“People know I was concerned about the markets,” he says. “Clearly, there were things wrong. But I don’t know of anyone who foresaw a perfect storm, and that’s what we’ve had here.”
“I don’t feel responsible, in light of the facts as I knew them in my role,” he adds.
As I have said before, Rubin’s fight to deregulate the banking industry while he was at Treasury has a direct link to the financial crisis we face today. in 1998, Brooksley Born, the chairwoman of the commodities commission, tried to push through a more stringent regulation of derivatives. Rubin went ballistic.
Mr. Rubin made no secret of his feelings about her proposal. “It was controlled anger. He was very tough,” Mr. Greenberger recalls. “I was at several meetings with him, and I’ve never seen him like that before or after.” Ms. Born didn’t return calls for comment. Mr. Rubin says he was against the proposal because he feared it could create chaos in the markets, rather than actually improve oversight of derivatives.
But during his time in Washington, he says, “the politics would have made this impossible. Even if I’d taken a placard and walked up and down Pennsylvania Avenue saying the financial system would come to an end without strict regulation of derivatives, I would have had no traction.” Continue reading
TheTimes reports a rather mindblowing story this morning on the death of local food.
Cod caught off Norway is shipped to China to be turned into filets, then shipped back to Norway for sale. Argentine lemons fill supermarket shelves on the Citrus Coast of Spain, as local lemons rot on the ground.
One of the problems stems from a law passed in 1944, in the middle of a war.
Under a little-known international treaty called the Convention on International Civil Aviation, signed in Chicago in 1944 to help the fledgling airline industry, fuel for international travel and transport of goods, including food, is exempt from taxes, unlike trucks, cars and buses. There is also no tax on fuel used by ocean freighters.
Until we start taxing aviation and shipping fuel, this ridiculous market distortion will continue. Because we do not factor the externalities of shipping food all over the world, the local farmer gets screwed and the carbon footprint of all our food increases.
Afghanistan’s President Karzai complained in an interview yesterday that U.S. tactics in his country were weakening the local governments and not strengthening them–“Eventually, if the world is to succeed in Afghanistan, it will be by building the Afghan state, not by keeping it weak.” Obviously his biggest internal problem is to fight the corruption brought on by the immense fortunes to be had in the Opium trade.
“Afghanistan is providing close to 95 percent of the world’s heroin,” the State Department’s top counternarcotics official, Tom Schweich, said at a recent conference. “That makes it almost a sole-source supplier” and presents a situation “unique in world history.”
In 2006, Afghanistan accounted for 92 percent of global opium production, compared with 70 percent in 2000.
We spend close to $500 million a year to try to forcibly eradicate the poppy crop in Afghanistan. As The New Yorker’s brilliant John Lee Anderson showed last year, the eradication program itself is corrupt and politically motivated. Why don’t we give Karzai the $500 million to set up a government opiate production company to buy up all the poppies at the current market price of $250 per kilo to supply the world’s legitimate pain mitigation drug industry? The 2 million kilos that would buy is probably more than the world needs, but it would sure go a long way towards strengthening the central government and eliminating corruption.
Twenty-five years ago Education Secretary T. H. Bell presented to his boss, President Reagan the report of the National Commission on Excellence in Education, entitled “A Nation at Risk”. It’s findings were a shock to both Bell and Reagan.
“The educational foundations of our society are presently being eroded by a rising tide of mediocrity that threatens our very future as a nation and as a people,” it warned. “If an unfriendly foreign power had attempted to impose on America the mediocre educational performance that exists today, we might well have viewed it as an act of war.”
I would be hard put to say that we have made much progress in 25 years. The same forces of inertia control the agenda of education. What can be done? Are we teaching the right subjects?
I throw out one more piece of data that complicates the matter. The conventional wisdom is that you are doomed without a college education and yet more than 30% of high school students drop out before graduation. But Manpower, Inc just released their list of the top ten hardest jobs to fill.
2. Machinists/Machine Operators
3. Skilled Manual Trades
5. Sales Representatives
6. Accounting & Finance Staff
9. IT Staff
10. Production Operators
Could it be that we have drunk our own “knowledge society” kool-aid and are neglecting the manual arts training aspect of high school for those that could fill most of these jobs?
This is a verbatim copy of a comment post on the new McCain-Will.i.am video on You Tube. I have no idea if this video is just some creative mashup of UGC or whether its a real Will.i.am production. I thought it was pretty funny. This You tube contributor obviously did not.
Hitler was not a communist, they defeated him. I have advised both Dems and Reps. Now I am a Truthocrat who will soon come out with an Obama-Hussein-Hitler Political Tree video. It was not me who Xeroxed Hamas Terrorist propaganda into my church newsletter. That would be white and Jew hater Rev. Jeremiah; Barack’s special Spiritual Adviser and “Crazy Uncle”. If Obama is elected get ready for the coming of God D*** America. I know it, the Clintons know it and the people better get a clue.
In 1964 Richard Hofstadter wrote an Atlantic Monthly essay called “The Paranoid Style In American Politics” and the quaint little quote from above is a result of this style which both the Clinton’s and McCain are using to a fare-thee-well the last two weeks. While Hillary runs ads with Osama in them, Rush Limbaugh is repeating the phrase “Barack, The Magic Negro”20 times a day to 20 million people.
Maybe our country has to go through this trial by fire–to see if we will elect a person of color to the Presidency. I of course fear for Obama’s life–because like most of my generation I saw people who brought me a message of hope–gunned down. If Barack Obama is brave enough to risk his life for our country, I and my family are brave enough to stand with him.
I’m lucky–I teach at a great university, USC, in beautiful Southern California–for everyday I see kids of all colors from all over the world who converged on this mecca called LA. On campus we do live in the post racial world Barack Obama talks about. But we also know our parents and grand parents may not live in that world. So on one level we need to have patience, but on another level we are impatient to present a face to the world that is more like the world’s face.