31 December 2008

Relativity Diagrammed

According to Science Made Stupid:

H/T ShaMao'er for the catch.

Happy new year in...59....58....57....

So My Prediction on the Ukraine and the Crimea.....

So, I make a prediction that Russia will use the Ukrainian gas debt to get the Crimea, and it looks like I've been proved wrong in less than a week.....Narf!

It appears that Ukraine has agreed to pay their old gas bill, and a new deal for 2009 is ready....Only both sides are disputing whether Ukraine has actually paid the debt:
Russia has said it will turn off the taps to Ukraine if it
does not receive $2 billion in arrears and conclude a new supply
deal, a threat that has alarmed European states which receive
their Russian gas via pipelines passing through Ukraine.
OK, maybe I haven't been proved wrong yet.....Narf!

Gazprom is threatening to cut off gas to the Ukraine, it appears that the dispute is now their late fees, and not the actual gas themselves.

I'm wondering when Russia will construct a pipeline through Belarus.

Economics Update

It's the last day of the year, and we are finally getting a picture of how retail did during the holiday season, and it is not pretty.

ShopperTrak is revising its original holiday sales figures downward, from a sales increase of 0.1% and a traffic drop of 9.9%. which was already pretty grim, to a sales decrease of 2.3% with a 16% drop in traffic.

The estimates now are that 2009 is not going to be good either and that over ¼ of all retailers are at significant risk for bankruptcy (see graph pr0n above), which will hose suppliers too.

The unemployment claims numbers from last week were better than recent reports, 492,000 new applications, down 94,000 from the last week's 586,000, and the 4 week moving average fell by about 1%.

I would note, however, that there are two things that make this news less good than it sounds, first, we are talking about the week of Christmas which means that everything was shut down on last Thursday, and, perhaps more significantly, continuing jobless claims continued to rise, hitting a 26 year high of 4.5 million.

Real estate still appears grim, with Manhattan office rents down about 25% (h/t Calculated Risk), though mortgage application activity remains at a 5 year high.

My real question though would be as to the number of mortgages granted, not the number of applications, which are likely multiple refi applications driven by even lower mortgage rates.

Additionally, the Federal reserve is to start buying mortgage backed securities, so they are going even deeper into the sh&%pile.

In currency, the dollar is up, and infact it's up against the Euro this year, the first time 2005 that this has happened.

I guess that investors still think of the US Dollar as a safe haven, though the same cannot be said about the Ruble, which is down again.

In the stock market the VIX, the Chicago Board Options Exchange Volatility Index, fell below 40 for the first time since October 2, to 39.9, which indicates that traders are a bit less twitchy.

But that's only a bit, because before the Lehman collapse, it was around 25, and a year and a half ago, it hung around 10-15.

In energy, oil rose about 5½ bucks/bbl, to settle at $44.60/bbl.

What a Twofer from the WaPo Editorial Page

So today, on the last day of the year, they give us Amity Shlaes and Ruth Marcus.

Let's start with the skinny on Ms. Shlaes: she is simply the beneficiary of wingnut welfare. After graduating with a bachelors in English, she proceeds to spout the most predictable right wing economic theory imaginable, and following her marriage to the right wing founder the New York Sun, gets herself columns, and becomes a senior fellow at the CFR. As Matthew Yglesias notes:
I have a really, really, really hard time imagining the CFR doing something comparable for a liberal with so little in the way of relevant qualifications or track-record outside an ideological cocoon.
That being said, some of the beneficiaries are not outright stupid, and Amity Shlaes is either naturally or deliberately so.

Because in her WaPo OP/ED, she continues with riffing on her thesis, pulled from lord knows where, that the the 1937 recession was a result of rich people tucking their money back in their mattresses.

Not even Milton Friedman believed that. He blamed then Fed Chairman Marriner Eccles for tightening credit requirements.

The stupid, it burns us.

That being said, Amity Shlaes is in this instance not the columnist most deserving of opprobrium today, that honor belongs to Ruth Marcus, who does not merely set herself up as an advocate for stupidity and ignorance, but instead advocates for the aggressive protection of evil.

After getting what I am sure is hundreds of outraged emails for her last justification of letting the architects of a torturer regime go free, she thinks that she step up to the plate again 11 days later.
How, some readers asked, could future law-breaking be prevented if past misdeeds go unpunished?

First, criminal prosecution isn't the only or necessarily the most effective mechanism for deterrence. To the extent that they weigh the potential penalties for their actions, government officials worry as much about dealing with career-ruining internal investigations or being hauled before congressional committees. Criminal prosecution and conviction requires such a high level of proof of conscious wrongdoing that the likelihood of those other punishments is much greater.

Second, the looming threat of criminal sanctions did not do much to deter the actions of Bush administration officials. "The Terror Presidency," former Justice Department official Jack Goldsmith's account of the legal battles within the administration over torture and wiretapping, is replete with accounts of how officials proceeded despite their omnipresent concerns about legal jeopardy.
This is because there is already a culture of impunity among Republicans in Washington, DC, and it's been there ever since Gerald Ford pardoned Richard Nixon before even an indictment was handed down.

These people knew that George W. Bush would pardon them, like he pardoned Libby, because he was protecting his own neck.

The cycle of impunity, which appears to extend only to Republicans, needs to stop.
Third, punishment is not the only way to prevent wrongdoing. If someone is caught breaking into your house, by all means, press charges. But you might also want to consider installing an alarm system or buying stronger locks. Responsible congressional oversight, an essential tool for checking executive branch excesses, was lacking for much of the Bush administration.
I'm sure that the guy with the electrodes attached to his genitals is happy that you are considering closing that barn door after the arsonist has set fire to the cow.

There was no good will here. There were no honest mistakes. Waterboarding is torture, and has been considered so for hundreds of years, what's more, the people with experience in the field have been saying consistently that torture does not work.

Bush and Cheney and Rumsfeld were torturing not because there was a ticking bomb, there wasn't, and not because they were desperate for information, because it wasn't getting good intel, they were torturing because it made them feel like they were taking it to the terrorists.

They authorized torture because it made them feel good, and they continued it after they were shown that it did not work because it made them feel good, this is a classic definition of sadism, and absent some jail time, the sadism will be institutionalized.*
*No intention to condemn the S&M crowd. Where informed consent is present, the moral equation is different.

Crazy Misha

So on the way out, one group of batsh%$ insane people, Bush and His Evil Minions, are going to saddle us with someone who is even crazier, Mikhail Saakashvili, President of Georgia, because they intend to sign a sign a strategic partnership treaty on January 4.

Just another of those gifts to America from George W. Bush....Because leaving all 300 million of us barefoot and pregnant is logistically difficult.

This is a bad idea because the Georgian state security apparatus has been completely penetrated by the Russians, so any information that we give to the Georgians is heading straight to Moscow, and it's a bad idea because President Mikhail Saakashvili is simply crazy.

When I say crazy, I'm not speaking metaphorically. We have a report of Saakashvili throwing punches and a telephone at his Prime Minister.

While the above report is Fox News, and should thus be treated as if it came from...well...Fox News, we are seeing similar reports of erratic behavior in the New York Times, which reports his statements of grandiose plans (teaching every Georgian to speak and read English in the next 2 years), and pulling facts out of the air (claiming that the Russians invaded before he attacked).

The article also raises concerns about his increasingly dictatorial grip on the apparatus of the state, and his comparing himself to Georgian King, and Saint, David the Builder and George Washington.

I think that this report is saying, in a low key way, two things, that he's nuts, and that his continued political survival is in doubt.

30 December 2008

Robert J. Samuelson: F$#@ You White Man

Some background here, I belong to a membership only* BBS called Stellar Parthenon.

On December 21, 2003, I posted a thread on SP, called We are Unbelievably Screwed, which has continued to this day, with more than 3500 posts.

5 Years before Robert J. Samuelson wrote "hoocoodanode", I said:
  • US Society was entering into unsustainable debt.
  • Housing prices were at unsustainable levels.
  • That finance and housing were creating a phony economy.
  • A reckoning was at hand.
While I was wrong on some stuff:
  • Predicting that the dollar would fall off a cliff.
  • Assuming that this would cause a spike in interest rates which would destroy housing.
That being said, I have evidence that I was predicting the problems, and their basic causes, 5 years ago (actually I was doing this even earlier, but my posts on the Netslaves BBS went away when the website got shut down).

So now Mr. Samuelson, who rarely misses an opportunity to bash labor protections interfering with free trade, and to suggest that the only way our society will ever be prosperous is to gut the social safety net, particularly Medicare, Medicaid, and Social security, is wringing his hands and asking what went wrong, and why was everyone caught by surprise.

Well, I have 4 Words to Robert J Samuelson: F@#$ You White Man!!!!!

What is this "we" shit about anyway?

Roubini predicted this, Krugman predicted this, Dean Baker predicted this, and I predicted this!!!

I’m not an economist. I'm not a Wall Street type. I'm not a business writer.

I'm just an engineer with a background in design, and I recognized the problem.

Humbled By Our Ignorance

By Robert J. Samuelson
Monday, December 29, 2008; A15

It's the end of an era. We [what do you mean we, f@#$ you white man] know that 2008, much like 1932 or 1980, marks a dividing line for the American economy and society. But what lies on the other side is hazy at best. The great lesson of the past year is how little we understand and can control the economy. This ignorance has bred today's insecurity, which in turn is now a governing reality of the crisis.

Go back to the onset of the crisis in mid-2007. Who then thought that the federal government would rescue Citigroup or the insurance giant AIG; or that the Federal Reserve, striving to prevent a financial collapse, would pump out more than $1 trillion in new credit; or that Congress would allocate $700 billion to the Treasury for the same purpose; or that General Motors would flirt with bankruptcy?

Me, that's who you pig felching soak the poor putrescence! The system was a lie, and it was created to extract savings from the poor and give them to the rich.
In 2008, much conventional wisdom crashed.
No, conventional stupidity crashed. People were willfully blind because it made them money, and it got them cushy gigs writing for the Washington Post or Newsweek.
It was once believed that the crisis of "subprime" mortgages -- loans to weaker borrowers -- would be limited, because these loans represent only 12 percent of all home mortgages. Even better, they were widely held, diluting losses to individual banks and investors.
And again, Alt-A and all the rest of the exotic mortgage products were headed for a crash, and the rent to own ratio was out of whack, while people like you and Alan "Bubbles" Greenspan (remember him?) were suggesting that people really should go with adjustable rate, negative equity mortgages from Mars.

Roubini predicted this, Krugman predicted this, Dean Baker predicted this, and I predicted this, you festering lump of pig droppings.
Wrong. Subprime mortgage losses (20 percent are delinquent) triggered a full-blown financial crisis. Confidence evaporated, because subprime loans were embedded in complex securities whose values and ownership were hard to determine. Similar doubts afflicted other bonds. Demand for all these securities shriveled. Lenders hoarded cash and favored safe U.S. Treasuries. Because investment banks and others relied on short-term debt (a.k.a. "leverage"), a loss of confidence and credit threatened failure. Lehman Brothers failed. The financial system had overborrowed and underestimated risk.

It was once believed that American consumers could borrow and spend more, because higher home values and stock prices substituted for annual savings. Consider: From 1985 to 2005, the personal savings rate dropped from 9 percent of disposable income to almost zero. But over the same years, households' net worth (assets minus liabilities) quadrupled, from $14 trillion to $57 trillion.
Which, of course, means nothing, because for 90% of the population, that net worth went to other people.

That growth in net worth was mostly going to the top 1% in our society.

What you speak so glowingly of was nothing more than the efforts of the connected to extract the wealth of those who work for a living, and put it in their back pocket.
Wrong. In recent years, consumers increasingly overborrowed, especially against inflated home values.
Wrong....People borrowed because contemptible greed heads like you have spent the past thirty years waging an assault on wages and the social safety net.

People borrowed because they could not earn the money they needed, because of a war on labor and labor rights.
With the housing "bubble" now collapsed, net worth is falling. Homeowners' equity in their homes -- the share not borrowed -- is at a record low of 45 percent, down from 59 percent in 2005. Consumers have responded by retrenching big-time. Retail sales have dropped for five straight months; vehicle sales are a third below 2006 levels.

It was once believed that the rest of the world would "decouple" from the United States. As Europe, Asia and Latin America expanded, their buying would cushion our recession. A better-balanced world would emerge, with smaller U.S. trade deficits and lower surpluses elsewhere.

Wrong. The crisis has gone global; economic growth in 2009 will be the lowest since at least 1980. Even China has slowed; steel output was down 12 percent in November from a year earlier. The crisis has spread through two channels: reduced money flows and reduced trade. Global financial markets are interconnected. Customer redemptions forced U.S. mutual funds and hedge funds to sell in emerging markets (such as Brazil or Korea), whose stocks have dropped about 60 percent from their peak. Credit has tightened, as money flowing into developing countries is expected to shrink 50 percent in 2009 from 2007 levels, estimates the World Bank. The bank expects trade, up 7.5 percent in 2007, to fall in 2009 for the first time since 1982.

So much that has happened was unexpected that the boom and bust's origins are obscured. These lie in the side effects of declining inflation that started in the 1980s and, in the process of reducing interest rates, boosted stock prices and housing values.
Only the dropping inflation was a fiction created by the BLS with the acquiescence of Alan "Bubbles" Greenspan (remember him?), who has been calling for even more extreme massaging of the inflation numbers since at least 1980.
Recall that in 1981, when inflation was 9 percent, 30-year mortgages averaged 15 percent. As rates fell (mortgages were 10 percent by 1990, 7 percent by 2001), home prices rose. People could afford more. With lower interest rates, stocks became more valuable.
Homes did not become more affordable, people buy on monthly payment, not price, so falling interest rates just raised the price of the house, and falling interest rates did not make stocks more valuable, it chased people away from other, more secure, investments because their returns fell...It's basic economics, but I guess that it's beyond you.
All the bad habits of recent years -- excessive borrowing by consumers and money managers, careless and reckless lending -- grew in a climate when gains seemed ordained. Even after the "tech bubble" burst in 2000, stock prices at year-end 2002 were seven times their year-end 1981 level. Home prices increased steadily; in the 1990s, they rose 45 percent.

Prosperity, apparently forgiving of mistakes, bred the complacency that undid prosperity. On bad mortgages, losses could be recovered by selling the homes at higher values. Thus rationalized, bad loans were made. Some stocks might decline, but over time, most would rise. Risk seemed to recede, so investors and money managers undertook riskier strategies.

People undertook risky strategy because, like the people at Long Term Capital Management, because Alan "Bubbles" Greenspan (remember him?), was always there to bail them out, and they undertook riskier strategies.

So, you were arguing that that regulation was the problem, when it turned out all you were doing was handing our economy to sociopaths with capital.
What will emerge from these shattered illusions? Will the crash stir social unrest, abroad if not here? Will Americans become so thrifty that they hamper recovery? Will economic nationalism surge? How will capitalism be reshaped? Much depends on whether the frantic policies to combat the recession succeed. Probably they will, but there are no guarantees. Our ignorance [your ignorance, not mine, I spotted this, as die Mssrs Roubini, Krugman, Baker, Ritholtz, Tanta, etc.] is humbling.
(end of OP/Ed)

No sir, you are just stupid and venal, and because you cannot see … because you refuse to see that the policy of supporting the phony economy of Wall Street and basic shelter as a revenue stream was an illusion just as certain as the Dutch Tulip mania.

You did so because because you and yours benefited from the system, even as it hollowed our society and our nation.

*It's membership only because it was started by refugees from the old Netslaves board when it was torn apart by right wing trolls. SP is a chatty community with a decidedly liberal bent, with a refreshing absence of trolls, though there are still arguments, but there are good faith exchanges of opinion...Which is good...I like to argue.
The trolls were never dealt with because the sysop, Splat ,was getting paid off by one of the worst trolls who fed him consulting contracts.
F$#@ You Lauren Bandler, aka "Uncle Meat".

Election Update

Well, there is now a number for the absentee ballots that the counties mistakenly rejected, and that number is 1350.

So Franken wants all the ballots that were positively identified as being incorrectly excluded to be counted, which is fair, unless you are a Republican, in which case, I guess that it is communism, because Coleman only wants 136 of those ballots counted....and a "review" of another 654 ballots that aren't identified as improperly excluded.

I'm shocked, shocked to find that gambling is going on here!
Gee, you think that Coleman is trying to ensure only absentee ballots in precincts that went for him get counted? (Cue Captain Renault)

In the meantime, Amy Klobuchar is suggesting that once the vote is certified, that the winner be seated without prejudice by the Senate.

Of course, Senator John Cornyn (R-Taliban) is insisting that this would be outrageous and without precedent, despite the fact that the House seated a representative without prejudice in 2007 (Vern Buchanan), and the Republican controlled Senate did this in 1997 (Mary Landrieu), but Cornyn also believes that there are people out there who want to have sex with box turtles.

BTW, for a quick primer of what the heck has been going on, the St. Paul Pioneer-Press has this useful FAQ.

Economics Update

It's a heavy news day. I know this because I was not sure whether or not consumer confidence falling to its lowest level ever recorded, and the Conference Board’s sentiment index began in 1967.

Economists were predicting an increase from 44.9 to 45.5.

This probably explains why the International Council of Shopping Centers says that this has been the weakest holiday sales season since 1970.

Well, the Standard & Poor's/Case-Shiller home price index fell 18% from October 2007 to October 2008, so the index is now at March 2004 levels, and by all indications, it's still headed down.

Will the last realtor please turn off the lights?

Finally, in 4th place in the competition for which story should be the lede, we have
assets in mutual funds falling 3% in November, they are down 22.7% since December 2007.

What we are seeing here is a slow run on mutual funds by investors who are fleeing to quality.

Banks are fleeing to quality too, with banks cutting lending this year by 55%, to the lowest level since 1994.

In currency, Russia has devalued the ruble again, it's now down about 18.6% from its peak.

The dollar fell again against the Yen and Euro, though it rose against the Pound, largely because the UK appears to be in worse shape than the US.

I wonder if this might give additional impetus for the UK to move from the Pound to the Euro.

The fall of both the USD and the Pound are largely because of "quantitative easing", otherwise called printing money, by the central banks.

One bit of financial news that surprises me is that the
Israeli Shekel just had it's biggest pop vs. the dollar in 10 years, and this was despite the fact that the central bank cut its benchmark rate by 75 basis points (¾%).

The claim is that it's year end repatriation of profits that drove the Shekel up, but my guess is that it's people who think that the current fighting will calm things down in the short term (3-18 months) and are trying to flip the currency for a quick buck.

In energy, both oil and retail gasoline were down today, and this picture is from today. (Click picture for link)

Why Yes, We Are A Bunch of Racists

Today's Republican party, where not only does a candidate for chairman of the RNC, Chip Saltsman, release a holiday Christmas CD with "Barack the Magic Negro" on it, but it now appears that doing so help his bid to succeed current Republican National Committee Chairman Mike Duncan.

Of course, former Ohio Secretary of State, Ken Blackwell, decided to weigh in in favor of Mr Saltsman, cementing his role as the biggest Tom of the century in an attempt to use this in his bid to become RNC chair.

When this crap is so toxic that Michael Steele (also looking for the chair) is keeping his head down, Ken Blackwell is bringing Tomfoolery to a new level.

Gaza Upate

First, something we can all agree on, that this clusterf&$% is Bush and Condi's gift to the middle east.

You remember, first they insisted on elections in the territories, and then when Hamas won, because the PA is corrupt and incompetent at governing even by the standards of the Arab world, they proceeded to encourage Israel and the PLO to go after Hamas, which led to Hamas kicking the PLO out of Gaza, because the PLO is the worst army ever.

In breaking news, it looks like there may be a 48 hour cease fire, though both sides are currently acknowledging any negotiations.

Also I have one report of a ground offensive starting, it's an eyewitness account, but it has since been corrected to say that tanks are shelling from over the Green Line.


The only governor to give Sarah Palin a run for her money in the "just plain nuts" department Rod Blagojevich has named former Illinois AG Roland Burris to replace Barack Obama.

Given that the Senate Dems have already said they won't seat him, it guts ugly, particularly since the precedent of Adam Clayton Powell indicates that they may have to.

Furthermore, we have reports on him, and we know that he is 71, that he is the first Black man to be elected to state wide office in Illinois, that it appears that he is not interested in running for reelection in 2010, and he has excoriated Blago:
Burris has also condemned Blagojevich and supported his removal,and that he's said he would not seek another term."
The Illinois secretary of state is trying to reject the paperwork, though the legality of that is unclear.

The initial reports on Burris is that he's squeaky clean, and he ran against, and lost to, Blagojevich in the primary. See here:
My home state's culture of political corruption is well documented. Roland Burris managed to build a career in politics in this state without falling into that muck. He is, to the best of everyone's knowledge, squeaky clean, and he's highly respected. He's 71 years old, so I wonder if he intends to serve as a caretaker. But he's an honorable guy, well liked by people across the state in both parties. It's a stroke of brilliance by Blagojevich in my opinion."

A Photograph of Him in a Mariachi Outfit?

Peter S. Goodman and Gretchen Morgenson have what might be the single most entertaining account of bank mismanagement of the year.

They recount the story of WaMu, and start by quoting former CEO Kerry K. Killinger"
We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe’s-Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.
Well, he's right, it's 5 years later, and nobody is calling Washington Mutual a bank anymore.

But it gets even better when they interview a former supervisor at a WaMu mortgage processing center, John D. Parsons, who is now in prison on drug charges:

Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.

Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.
(emphasis mine)

Yog-Sothoth's Yam Yogurt, this is eerily reminiscent of the Tulip Mania of 1637.

H/T Wallstreetjackass for noticing this bit of absurdity.

The Post-Soviet Politicians are Dancing to a Non-Existent Tune

I used to think that John Paul II's jihad against the church working for the poor, going so far as to expel priests who were causing right wing despots grief, which pretty much repudiated 1800 years of church history was an anomaly.

JP2 clearly hated the Soviets, he hated communism, and it left him with an antipathy to anti-poverty action by the Roman Catholic Church.

I had kind of hoped that other folks who objected to the excesses of Communism, and those excesses are legion, had found perspective if they had remained in leadership positions.

Now, in the middle of the greatest economic crisis in 3 generations, we are seeing leaders who grew up in former communist nations trying to turn to Hoovernomics, because they have a visceral revulsion to anything that remotely looks like economic management by the state.

It doesn't matter if the most successful model in fixing this has been the Swedish model, state capitalization and take over followed by sale when the conference is over, it's just too pink for them.

In the first case, we have Czech President Vaclav Klaus, who appears to be trying his level best to destroy any coherent EU response to the economic crisis:
Klaus, an admirer of Milton Friedman and Margaret Thatcher, says “excessive state intervention” and “irresponsible increases of state expenditures” are behind the global financial crisis, according to an October commentary he wrote for Mlada Fronta Dnes newspaper.
Hoovernomics as driven by what are now archaic anti-Soviet and anti-Communists.

And let us not forget Angela Merkel, who is content to (mis)manage the largest economy in the EU, and also continues to go the Hoovernomics route:
With battle lines sharpening, the German government appears determined to resist calls to spend an additional €40 billion to fight its way out of the recession, according to officials attending a meeting in the Chancellery in the past week.
It appears that in the case of Merkel, there has been extensive lobbying from what amounts to the German Chamber of Commerce to lower taxes, but that is were she wanted to be in the first place, until other EU members dope slapped some sense into her.

I'm wondering how true this is of a generation that lived through a revolution.

If the US founding fathers were the exception, we were very, very lucky.

More State Budget Worries

This time, it's significant declines in state lottery revenues.

Any state with a balanced budget amendment will see things get much worse, and the handful of states without that need to act like it. (Washington State comes to mind)

Bad Choice on Stimulus Package

It looks like much of the stimulus package will be going to roads, as opposed to mass transit and rail.

If you are going to be spending the money, do something to fix our unsustainable SUV lifestyle too.

29 December 2008

Gaza Update

The here lede is that Israel is calling up reservists, and armored units are massing on the border.

I would assume that infantry units are massing as well, as sending unsupported armor into an urban combat situation is suicidally stupid.

In terms of tactics and technoligy (I really wish that the War Nerd were not on vacation), we have a report that IDF chief of staff Lt. Gen. Gabi Ashkenazi demanded a clear exit strategy during the planning of this action.

It shows that he's rather a bit more together than the flyboy who screwed up in Lebanon in 2006.

It also appears that Israel navy is heavily involved too, though it's unclear if they are shelling, enforcing a blockade, or using the ships as bases for UAV flights. (My guess would be all three)

We are also getting some reports on the use of sophisticated multi-spectral sensors to locate targets. (The top image is post strike imagery of an underground missile launch site, the bottom image is pre-strike imagery of a Hamas military post)

We also have a "News" story from Haaretz making rather a big deal of the fact that this operation has been actively planned for months:
Sources in the defense establishment said Defense Minister Ehud Barak instructed the Israel Defense Forces to prepare for the operation over six months ago, even as Israel was beginning to negotiate a ceasefire agreement with Hamas. According to the sources, Barak maintained that although the lull would allow Hamas to prepare for a showdown with Israel, the Israeli army needed time to prepare, as well.
It's not really news. It's the job of the military to plan for contingencies, and to keep their mouth shut about it.

It would be news if the Defense minister and the Chief of Staff weren't planning for a breakdown in negotiations. It's their job.

Politically, it appears that the Israeli right wing is seeing the immediate benefit of combat operations, with Israel Beiteinu, which advocates redrawing the borders of Israel so that predominantly Arab areas of Israel are included in a Palestinian entity (I call it ethnic cleansing, but you are moving lines, not people so pedants may disagree), picking up support.

I imagine that the same thing is happening on the Palestinian side.

Finally, as to the report in the comments (BTW, go to the commenter's blog, it's cool) that Israel sent SMS warnings to warn civilians living near Gaza that they needed to get out and keep their heads down, I now have two links, one from bazonline.ch (Google translation that reads a bit like a Salvadore Dali paintint) and one from The Forward, though the latter says that it's voice mails:
Late Saturday, thousands of Gazans received Arabic-language voice mails on their cell phones from the Israel Defense Forces, urging them to leave homes where militants might have stashed weapons.
While identifying the appropriate recipients of message is involved, it's by no means impossible, particularly when the basic directory information should be available to Israeli telcos.

Note that this sort of action has been policy, and documented by independent sources going back to the 1948 war for independence.

One of the things in the coverage that has surprised me is that Guardian Columnist Seth Freedman has come down fairly hard on Hamas.

I reviewed his articles, and his beat seems to be largely Israel, Palestine, and the NGOs therein, and he generally hews fairly close to the Guardian editorial line, which has been unsympathetic to Israel for about 30 years.

Economics Update

It appears that credit is still easing, with the 3 month LIBOR (London interbank offered rates) falling.

The spread between LIBOR and Treasuries is still awful, but it's a bit better, largely because the Treasuries are effectively 0% right now.

On the other hand, the Chicago Federal Reserve Bank's Midwest factory index dropped to the lowest level in 12 years.

I'm a mechanical engineer, so I believe that manufacturing and services, and not banking, are the core activities of the economy, so I tend to believe the factory index more than LIBOR spreads.

In international currencies, Pound hit an all time low vs the Euro £0.9798:€1.000, nearly parity.

The experts are saying that they believe that the Pound will gain vs the Euro in the coming because the Bank of England won't be lowering rates much more.

This makes sense. The BOE is already bumping up against zero interest rates.

The US dollar is down too, largely on concerns that the Gaza conflict will drive up oil prices and because the Fed's zero target lending rate makes it a less attractive currency.

The conflict in Gaza has also driven oil up, though retail gasoline is near a 5-year low at $1.619/gal.

Yowza, I gots to buy me a Hummer!

The Best Indicator that War Will Break Out

We now have analysts saying that Pakistan and India simply cannot afford a war.

They are saying that a war would be too costly for both nations.

This was also what was said in 1913, and in 1938. War was just too damn expensive in an interconnected world where the opponents are too linked.

Here is a news flash: war is always too damn expensive, but it happens just the same.

More Pushback on Caroline Kennedy

Basically, her critics are starting to pile on, and it comes down to not voting Democratic party primaries more often than not, her refusal to endorse whichever Dem opposes Bloomberg, not making donations to the party at the state level, her unwillingness to disclose financial data, her unwillingness to talk to the press, and the increasing sense that Governor Patterson is completely unimpressed with her tactics regarding him.

Of course, she has finally done an interview, and it's been pretty widely panned, you know.

In fairness, I think that her statement that, "Have you guys ever thought about writing for, like, a woman’s magazine or something?" was justified. The entire bit with the interviewer asking her, "Could you, for the sake of storytelling, could you tell us a little bit about that moment, like, where you were, what you said to him about your decision, how that played out?" was trivial bullsh%$.

That being said, it pissed off the press, because it was not sufficiently deferential.

She increasingly sounds to me like the second coming of Kathleen Kennedy Townsend, who was the worst political candidate in the history of...well...history.

Tom Friedman, Suck on This: Part II

The Buksbaum family, one of whose members is Tom Friedman's wife, has been ejected from the management of General Growth Properties Inc., after financial irregularities were discovered.

Basically, what happened here is that GGP fueled its growth by leveraging itself up to its eyeballs:
Rather than apply for bank loans, General Growth began taking out short-term mortgages on its malls. As the mortgages came due, the company would replace them with even larger mortgages to provide cash for additional acquisitions.
This is what happens when you let the finance folks drive your business, rather than the other way around....It's also why people wonder how different Bernie Madoff was from business as usual in the US financial system.

Will Russia Buy the Crimea from Ukraine?

This is all pure speculation on my part, and my record on predictions is only marginally better than that of the Detroit Lions with regards to football, but I think that there is a distinct possibility that this might happen.

We have a number of developments going on simultaneously, with Medvedev and Gazprom playing hardball on a $2.1 billion debt and warning of a cutoff of gas if there is no resolution.

Then we have Edward Hugh's amusingly named essay, "As The Politicians Battle It Out Ukraine’s Economy Tunnels South In Search Of Australia," (H/T, Paul Krugman Blog for the link) which provides us with the included chart pr0n.*

You see industrial production falling by nearly 25%, and inflation and the central banks both topping 20%.

Simply put, this is an economic meltdown that starts looking like something out of Mad Max.

When you juxtapose this with reports that Russian PM Vladimir Putin Ukrainian PM Yulia Timoshenko are holding talks to resolve the issue, it appears to me that the Ukrainians have very little leverage.

About the only thing that I think that the Ukrainians can offer Russia is the Crimea, which is already primarily a Russian speaking province, and had been a part Russia until Khrushchev gifted it to Ukraine in 1954.

I'm not sure whether a "sale" of the Crimea to Russia would involve an actual negotiated transfer of territory. We could see extensions regarding treaty rights for the Russian naval base at Sevastopol, increased autonomy for the region, and perhaps agreements to protect the "heritage" of the province, which would mean that the Russian speaking nature of the the Crimea would be preserved.

In the long run though, a full separation of the Crimea from the Ukraine might be beneficial for both sides. For the Russians, the benefits are obvious, the protection of ethnic Russians and national pride, and for the Ukrainians, it creates a less ethnically diverse state, which means that you will likely have real issues of governance, as opposed to the current paralysis which is driven by the Russian minority being largely disengaged.

*I tend to disagree with Hugh's thesis that demographic issues are at the root of much of this problem. While the Ukrainian population has fallen by a remarkable 11% since 1992, and with the death rate exceeding the birth rate by over 50%, I do not believe that a growing population is necessary for economic well-being.
Case in point what happened in Europe following the Black Death, which had a with a mortality rate of around 50%. There was a marked increase in social mobility and wages for the average worker, largely at the expense of the landholders and other members of the economic elite, despite largely ineffective anti-labor laws that were instituted. The lesson here is that if population falls, the total GDP may fall, it certainly did during the black death, but per capita GDP went up, and if you can pry this out of the hands of the economic elites, life can be better for everyone.

Your Daily Dose of Batsh%$ Insane (Israel/Palestine Edition)

In the process of googling things about the blow-up in Gaza, I came across an opinion piece in the the Grauniad* that I found rather interesting by Seth Freedman.

Well before quoting someone's OP/Ed, I always check out their other articles, and/or Wiki them, just to make sure that they are not raving moonbats.

It is a policy that I wholeheartedly recommend.

In any case, it turns out that Mr. Freedman is not a raving moonbat, his opinions on the conflict seem to be pretty much in line with the Guardian's editorial stance.

He is "in country", and writes rather a lot about what is going on there, and his "beat" seems to involve a lot of writing about what is going on with the various NGOs out there.

So, I'm perusing his articles, and I come across one that he wrote just over a week ago, "Aid workers reveal their deep malaise in 'western-style gym' battle," and I gave it a read.

It appears that there is a mailing list dedicated to discussing issues confronting employees of NGOs in the territories, and someone posted what should have been an innocuous question, "Is there a proper, western-style gym in Ramallah? If so, where is it?

The response from a sane human being should be some asking what the person wants from the gym. "Western-style," could mean fancy machines, or mixed gender, or any other number of options.

But that's not what happened.

Instead, someone suggested that the request was racist, "You forgot to add: 'where only white people go,' so it can't be 'proper' if not 'western-style'? If you miss western styles that much, get your ass out of here and keep it in your western world."

From that point, it devolved in a flame war lasting at least a week.

Too many people in this world take themselves way too seriously.

In any case, it is a very amusing read.

*According to the Wiki, The Guardian, formerly the Manchester Guardian in the UK. It's nicknamed the Grauniad because of its penchant for typographical errors, "The nickname The Grauniad for the paper originated with the satirical magazine Private Eye. It came about because of its reputation for frequent and sometimes unintentionally amusing typographical errors, hence the popular myth that the paper once misspelled its own name on the page one masthead as The Gaurdian, though many recall the more inventive The Grauniad."

28 December 2008

Brazil to Buy French Assistance on Nuke Boat

It's a part of a $12 billion purchase by Brazil
Brazil on Dec. 23 signed contracts worth $12 billion to buy 50 military transport helicopters and five submarines from France.

The submarine deal involves the purchase of four conventionally powered Scorpene submarines, and the construction of a nuclear-powered submarine to be built with French cooperation.
It's unclear to me what "French Cooperation" means, though it appears that the nuclear reactor would be a wholly Brazilian endeavor.

Like This is a Surprise

Well, defence ministry spokesman Huang Xueping has announced that China is considering building an aircraft carrier.

This is really no surprise. There have been indications that China was considering building a carrier for some time, as I have noted.

It will be news when China actually starts formally drawing up requirements, and again when it starts cutting metal or negotiating a purchase, but this is no surprise.

Your Defense Procurement Dollars at Work

The USAF has announced a "restructuring" of the Transformational Satellite Communications System which will delay the launch of the first satellite from 2013 to 2019.

It's supposed to replace MILSTAR, and it is suppose to have 100 times the bandwidth, and from what I know of the "systems of systems" that is supposed to be the new networked military, this capability is very much a part of it.

And now it's been delayed 6 years.

Whiskey Tango Foxtrot?

Russia Tests New Missile for S-400 SAM

Unfortunately, the report offers few details, so it's unclear to me whether this is a new missile, and the Russians do use multiple different missiles with this system, or simply the certification of an existing system.

The range of 400km seems to have been floating around for a while now.

27 December 2008

We Are All Completely Doomed

In addition to financial collapse, it now appears that we will be facing a chocolate shortage as well.

Be very, very afraid.


OK, Israel has launched a large air strike on Gaza, see here, here, and here, with total reported casualties somewhere in the 225 range.

As to what the eventual death toll will be, FAIR's report on Jenin noted that similar numbers were initially counted there, but it turned out to be 52, and the original estimates at deaths on 911 were over 6,000, when the final tally was 2974, so the final number is likely to be much lower.

Note that is not meant to minimize what happened, but to note that people who are going to simply spew what are very preliminary numbers by and imply that this constitutes reasoned arguments are ninnies.

I tend to be more hawkish on these things than my other political leanings would indicate, so here is my assessment at this point.

I do not think that this, whether or not it is followed by a ground assault, will solve anything in the long term, but it will have the effect of disrupting the chain of command of Hamas, particularly as the leadership of the organization is likely to go to ground at this point, as they have when similar strikes have been launched against them.

It does not buy peace, but it will buy somewhere between 6 and 18 months of quiet.

I disagree with the rather simplistic assessment at Worldwide War Pigs of, "Don't like getting bombed? Clean up your act," particularly when he invokes the rather awful Sly Stallone movie Cobra in the process.

Nothing good ever comes from evoking Sylvester Stallone, and there is no purely military solution.

By the same token, I think that Jeremy Ben-Ami, Executive Director of J-Street is wrong too, where he makes rather mealy-mouthed statements about, "Respecting Israel's right to defend itself," but at it's core is the argument that this will contribute to the, "cycle of violence", which is such a useless cliche that it borders on the moronic.

Further I disagree with Mr. Ben-Ami's assertion that, "strong diplomatic intervention by the United States, the Quartet and allies in the region to negotiate a resumption of the ceasefire," is essential.

The Quartet has been part of the problem, as it has distracted the principals, Israel, the PA, and Hamas, away from dealing with each other, and toward gaming their position vis-a-vis support from the 4 nations. It has taken negotiation, and made it theater.

I believe that the stage given to all parties by the Quartet serves no one except the members of the Quartet, who are allowed to pretend that they are doing something positive.

At this point, the best course is for the rest of the world disentangle themselves from this situation.

As to final status negotiations, I do not believe that Israel can achieve its goals purely through military force, and I do not believe that the Palestinians, either Hamas or the PA are currently able to negotiate in good faith, as any serious good faith negotiations would result in compromises that would delegitimatize whoever made them.

I would also note the lesson of the American Civil War, where ambiguities that were "left for later", became the basis for conflict. Incrementalism is the enemy of a solution, not a friend.

Pardongate is Coming Early This Year

George W. Bush released 19 pardons, including one for Mr. Isaac Robert Toussie, a crooked real estate developer who victimized minority first time home buyers.

When the details came out, and it was revealed that his father, Robert Toussie, had contributed heavily to the Republican National Committee (RNC), Bush decided to reverse the pardon.

No bit surprise there. It's embarrassed having been caught selling a pardon, and it makes it very difficult for the 'Phants to challenge Obama's AG nominee, Eric Holder, on the Mark Rich pardon.

The interesting thing is that Bush may not have the power to reverse the pardon, maintaining that it had not been "delivered" because the, "Pardon Attorney had yet to "execute and deliver grants of clemency to the named individuals."

According to the Pardon Power Blog, this may not be true, as "The Office of the Pardon Attorney (OPA) called each grantee (or his counsel) via telephone and told him that he’d been pardoned by the President," so the pardons may have already been legally delivered and accepted, and that "receiving the president's warrant and sending notifications to the petitioners is purely 'a ministerial act of notification.'"

So, once again, we are hip deep in a complete f$#@-up courtesy of Bush and His Evil Minions.

Palin In-Law Drug Bust Delayed for Election

Well, this story is interesting.

It appears that the dope-dealing case of Sherry L. Johnston, whose son, Levi is due to marry Bristol Palin, Sarah Palin's pregnant daughter, has taken a few twists:
  • Ms. Johnston Believed that she was already under surveillance, being caught on wiretap texting to a customer, ""Hey, my phones are tapped and reporters and god knows who else is always following me and the family so no privacy. I will let u no when I can go for cof. [Oxycontin]"
  • That the search warrant was purposely delayed until after the election so that Johnston was, "no longer under the protection or surveillance of the Secret Service."
    • This last bit is particularly interesting, as the only time that she should be under surveillance or protection of the Secret Service would be when she was with Sarah Palin.
This raises the question as to whether Palin was using her position to delay the execution of a search warrant.

Rumored At The Mountains Of Madness Film

It appears that director Guillermo Del Toro is interested in directing a film based on the H.P. Lovecraft story, at least that's what he is saying in this interview:
With regard to At the Mountains of Madness, I'd love to see you tackle H.P. Lovecraft in a way that hasn't been done.

Del Toro: Me too. Me too. ... Part of the arrangement with Universal--in being essentially there for now until 2017--part of the arrangement was they would finance research and development for Mountains of Madness. And we are doing it. There are many technical tools in creating the monsters that don't exist, and we need to develop them. The creatures, Lovecraft's creatures, the tools that exist for CG and the materials that exist for makeup effects, you need to push them to get there, and we're going to push them.
I am unfamiliar with Del Toro's oeuvre, but I would really like to see this made into a film.

It's my favorite Lovecraft story, and I think that it would translate to film fairly nicely.

More at link about the technical challenges....Yeah....A Shoggoth is "challenging".

Or Maybe Not

Remember the deal for Russia to sell S-300 SAMs to Iran that was likely 2 weeks ago, and that had initial deliveries confirmed last week?

Well, Russia has now officially denied the sale, both publicly, and apparently privately to Israeli officials.

I'm sure that this story will be back again real soon now.

U.S. Navy Orders 8 New Virginia Boats

The US Navy has just ordered 8 new Virginias in a fixed price multiyear deal.

The price seems to be OK: $14 billion, or about $1.75 billion a boat.

I'm wondering though how much of this is military need or, "industrial base preservation", and how much is trying to get stuff locked in before the change in administrations.

Russia Strategic Missile Forces Update

We are now hearing rumblings that Russia may be putting a nuclear missile installation in Belarus, specifically, the mobile strategic missile the Topol, though it's unclear from the report as to whether it is the RT-2PM Topol (SS-25 Sickle), or the more advanced RT-2UTTH (SS-27 Sickle B).

In either case, I'm not sure whether this intended to make the strategic missiles targeting the US less vulnerable to the interceptors, or to imply that these could be launched on a depressed trajectory against the European BMD sites, though I would lean toward the latter.

Belarus borders Poland, and so I would think that interception of missiles launched toward the US would be relatively straightforward, though the kinematics of the missiles in question and the intercept solutions are above my pay grade.

Also, we have reports that the Russian military is looking at commissioning 70 new nuclear missiles over the next 3 years, though reports of a failure in the most recent test of the Bulava SLBM (see also here) might throw a monkey wrench into what seems to be a very aggressive timetable.

A Thrust-to-Weight Ratio of 6.6:1

Bill Sweetman teases out some information which sheds some light on the relatively low thrust to weight ratio of the F-35 JSF, the fact that the Pratt & Whitney F135 engine has a thrust to weight ratio of only 6.6:1.

By comparison, the F-100 engine (F-15, F-16), whose contract was awarded in 1970, has a thrust/weight ratio of 7.8:1, and the more modern F414 and EJ2000 (Superbug and Typhoon) exceed 9:1 thrust to weight.

Additionally, he notes that the vertical lift system used on the F-35B weighs 10,472 pounds with a thrust of 40,550 pounds, giving a thrust to weight ratio in that mode of 3.87:1, as compared to 5.6:1 for the Rolls Royce Pegasus used on the Harrier.

There is a saying that you can't make a race horse out of a pig, but you can get an awfully fast pig, the F-4 Phantom comes to mind, but this is not a fast pig.

Pics of the F135 promotional brochure are from here.

Economics Update

Retail sales tanked in the Christmas shopping season, down 5.5% in November and 8% in December, though ex-retail gasoline sales, where the fall in prices drove things further down, the numbers were -2.5% and -4%, which are pretty worrying too.

I think that when the numbers are adjusted later with more complete data, they will be worse, because customer visits to retailers fell 24% on the weekend before Christmas.

FWIW, it does not look like the rest of the world will be pulling themselves, or anyone else, out of recession soon, as Japanese industrial production fell 8.1% YoY in November, and the Japanese central bank has no where to go with interest rates, having just lowered them to 0.10% (no misplaced decimal).

About the only piece of good news are The Big Picture's Credit Crisis Indicators, which are showing a bit of improvement, with the TED spread and the LIBOR-OIS spread improving, though rates on Treasuries are still very low.

In the meantime, mortgage rates for a 30 year fixed mortgagehit the lowest number since at least 1971, when Freddie Mac started keeping these records, 5.14%, though there is the caveat that you can get these only if the banks are willing to lend at all.

Note that this is for the "conforming" mortgage, which is packaged and resold by the GSEs, which now have an explicit guarantee from the government, and, as noted earlier, "non-conforming" mortgages are at about 2% more, an all time high.

Oil was up a bit on announcements by suppliers of production cuts by the UAE and House of Saud.

Nothing much happened with currency. The 26th is a day off for most American traders, and Boxing Day in the UK, so there was not much activity.

26 December 2008

Afghan Erection Update

Not a typo. They CIA is using Viagra to win friends and influence tribal leaders in Afthanistan:
The Afghan chieftain looked older than his 60-odd years, and his bearded face bore the creases of a man burdened with duties as tribal patriarch and husband to four younger women. His visitor, a CIA officer, saw an opportunity, and reached into his bag for a small gift.

Four blue pills. Viagra.

"Take one of these. You'll love it," the officer said. Compliments of Uncle Sam.

The enticement worked. The officer, who described the encounter, returned four days later to an enthusiastic reception. The grinning chief offered up a bonanza of information about Taliban movements and supply routes -- followed by a request for more pills.
At least this cannot be turned into an IED.

No, this is not the Onion.

25 December 2008

Three Heads, All of Them Firmly Planted Up Their Ass

I am referring to, of course, Cerberus Capital Management LLC, which is now showing signs of distress.

It appears that their plan to buy Chrysler for some beans, and then flip it for a profit has run into some snags, so the good folks named after the 3-headed dog that guards the gates of hell are experiencing some cash flow issues.

So, they are
placing limits on redemptions their hedge fund, because they had been forcing them to liquidate assets at bargain basement prices to generate the cash.

Additionally, one of the big roadblocks in the now completed transition of GMAC into a bank holding company was the feeling that bond holders were being asked to take a haircut while Cerberus wasn't.

While that has now been resolved, it is unclear what, if anything Cerberus put into the transition.

Additionally, it now appears that they are attempting to cut a deal that will allow them to simply walk away from Chrysler.

There are increasing indications that Cerberus would like to simply dump Chrysler on its creditors, because with flipping an increasing distant option, they simply want to flee.

The Quintessential Jewish-American Experience

It's Christmas, so we went to a Hanukkah fair at the JCC, and then we had went to David Chu's Chinese Bistro, a Baltimore Kosher Chinese restaurant, and had dinner, and experienced Chinese food on Christmas.

It was absolutely packed, by the way. Lots of other Jews make a habit of Chinese cuisine on Christmas too.

A Christmas Card from a Hedge Fund Manager

Courtesy of The Big Picture

24 December 2008

It's Official: GMAC to Become Bank Holding Company

This is good news for GM, as much of the auto sales decline is due to problems getting auto loans, so the ability of the auto finance company to access both TARP funds and the dozen or so the new Federal Reserve lending programs.

One of the things that must happen now is that Cerberus and GM must both reduce their stakes in GMAC to conform with banking regulations.

Rumbles Against Kennedy Koronation

Well, it appears that as time goes on, we are beginning to see real push-back against Caroline Kennedy's appointment to the US Senate to replace Hillary Clinton.

Among the concerns:
  • That she is too close to Michael Bloomberg, who was a Republican until recently, and might support him running for a 3rd term as mayor.
  • Governor Patterson feels that his openness to her presenting his case to him has been turned into a steamroller by her people.
  • Moves by Kennedy's people and Bloomberg's people to announce a replacement immediately, even though Patterson has clearly stated that he will not announce an appointment until Clinton resigns to become Secretary of State.
Something to realize here is that whoever Patterson appoints, they are likely to face a spirited challenge in the general, and based on what I've seen so far, Kennedy is a weak campaigner.

Truth be told, a lot of this comes down to Bloomberg, whose strident support for her is not helping with New York Democrats, and the fact that she's really not making herself particularly available which has drawn Palin analogies from her opponents.

Fair or not, in a post Palin world, she needs to do an interview to show that she has a real clue.

We Will See More of This

We are now starting to see the breakdown of customs in the financial community that would have been unthinkable only a year ago.

Case in point, Deutsche Bank refusing to execute a call option on €1 of subordinated debt, which has the Bank of China ready to cut off all contact with them.

Here is the short version of what just happened:
  • The bank has been offering a bond of relatively low quality which has a maturity date at some point in the future.
  • Typically, at some portion of that maturity date, the bank can call in the bond, i.e. pay off the loan and roll over the loan by selling new loans.
  • Deutsche Bank has decided that money is too expensive right now, and is refusing to call in the bonds.
  • This means people who, for example, bought a 5 year bond with a 1 year call option, now cannot get their money back at the 1 year mark, and have to wait to the 5 year mark.
  • Thus, the investors are very are pissed off.
The thing is that while Deutsche is under no legal obligation to call in the bonds, this sort of rollover has been a routine way of doing business for a very long time.

In some ways these conventions are at least as important in international finance as the actual laws and regulations under which these institutions operate, and we are seeing them break down in significant ways.

One of the Consequences of the Financial Meltdown

Is that it has shown to the world that the Neoliberal economic policies of the IMF and world bank are not applied to Europe and the US.

As such, the parties in power in many parts of the world are becoming far less receptive to "soak the poor" policies that have been foisted upon them by international institutions like the IMF and World Bank.

We are the fruits of that revalation going on in South Africa right now, where South African labor unions have extracted changes in policies from the ruling ANC.

The Congress of South African Trade Unions (COSATU) is getting commitments to poverty reduction in exchange for their support of Jacob Zuma in his confrontation with Thabo Mbeki, and now they want a change in focus for the next government.

Of course, moneyed interests are not amused:
Investors fear the left has gained influence over the African National Congress in the past year and believe it might pressure the government to ditch policies that helped spur nearly a decade of growth in Africa's biggest economy.
Of course those policies haven't benefited a majority of the population. The argument is that by keeping social programs sparse, and any minimum wage low, that growth would eventually trickle down.

It hasn't in South Africa, or anywhere else.

In fact, what is arguably the best example of a formerly poor society becoming well off, Singapore.

Its leader in its formative years, Lee Kwan Yoo, made it clear to its capital class, that it would be unacceptable to take it all, that some of the profits had to find its way to everyone.

Fundamentally, if South Africa wants to follow this path, we aren't talking going Sweden. Simply by raising the minimum wage, improving the access to health care, and making sure that public school is free, available, and universal, you can improve the lot of everyone.

Chinese Say it's THEIR Turn to Torture Their Uighurs

Remember the Uighurs who were detainees at Guantanamo?

Our military has already tortured them at Chinese request, but it appears that the state security apparatus of the Peoples Republic of China wants in on some of the fun, because they are demanding that they be repatriated to China if they are ever released.

That sound you hear is Kafka rotating at 9700 RPM.

Economics Update

Ouch. Initial jobless claims for last week hit 586,000, the highest number since Nov. 27, 1982. The 4 week rolling average, which is a better metric, rose as well, to 558,000, though continuing claims declined to 4.370 million.

Even if you do have a job, it's likely that you are seeing wages and or hour cut....And that 401(k) match, fuggedaboudit.

It's no wonder that consumer spending fell in November, though it was less than expected, and when adjusted for inflation....OK, adjusted for deflation....It was actually up.

As Calculated Risk notes even as record low mortgage rates are boosting demand, a lot of that ReFi, the spread between "conforming" and "jumbo" 30 year fixed mortgages remain at an all time high of about 2%, which means that in expensive areas, the cheap mortgages are simply not available.

CRE is tumbling too, as we can see from the fact that Manhattan office vacancies hit a two-year high.

In currency, the dollar was down again today, and the Russian central bank devalued the Ruble...again.

I still think that a run on the dollar is a possibility when traders start to realize that the Treasury and Fed are printing money and dropping it from the proverbial helicopter.

In energy, increases in inventory, drove oil to $35.35/bbl.

Election Update

Two rulings from the Minnesota Supreme Court.

In the first they granted an extension on the consideration of absentee ballots, some of whom had been improperly rejected, along with approving the plan for review, which is that both sides still have to agree on a ballot before it is counted.

It's not a great plan, you could be sure that Coleman and His Evil Minions would object to anything with a pulse, but their second ruling, denying Coleman's request to reset votes in about a dozen precincts to election night totals, pretty much means that Franken is very likely to hold onto his 50 some odd vote lead.

It appears that, based on an interview Coleman gave last night, Norm Coleman thinks so too.

The Genius of John Maynard Keynes

As noted by FT columnist Martin Wolfe
I see three broad lessons.

The first, which was taken forward by Minsky, is that we should not take the pretensions of financiers seriously. “A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him.” Not for him, then, was the notion of “efficient markets”.

The second lesson is that the economy cannot be analyzed in the same way as an individual business. For an individual company, it makes sense to cut costs. If the world tries to do so, it will merely shrink demand. An individual may not spend all his income. But the world must do so.

The third and most important lesson is that one should not treat the economy as a morality tale. In the 1930s, two opposing ideological visions were on offer: the Austrian; and the socialist. The Austrians – Ludwig von Mises and Friedrich von Hayek – argued that a purging of the excesses of the 1920s was required. Socialists argued that socialism needed to replace failed capitalism, outright. These views were grounded in alternative secular religions: the former in the view that individual self-seeking behaviour guaranteed a stable economic order; the latter in the idea that the identical motivation could lead only to exploitation, instability and crisis.

Keynes’s genius – a very English one – was to insist we should approach an economic system not as a morality play but as a technical challenge. He wished to preserve as much liberty as possible, while recognising that the minimum state was unacceptable to a democratic society with an urbanised economy. He wished to preserve a market economy, without believing that laisser faire makes everything for the best in the best of all possible worlds.
(emphasis mine)

In fact, this may be the best message to economics professors out there: that reality matters more than your philosophy.


You have to love this:

If you go back about 20 years, you come across a bank regulator known as Darrel W. Dochow who overrode the recommendation of bank examiners in the matter of Lincoln Savings and Loan, of Keating 5 fame, that the institution be seized because it was insolvent.

Of course, a little while after that, it collapsed, at far greater cost to the taxpayers than had they acted earlier.

So, where is Mr. Dochow now? He's the western regional director for the Office of Thrift Supervision (OTS), and he figures prominently in the failure of IndyMax.

It seems that he signed off on a back-dated transfer of money to the now failed thrift:
The Office of Thrift Supervision’s western regional director, Darrel W. Dochow, allowed IndyMac Bank to receive $18 million from its parent company on May 9 but to book the money as having arrived on March 31, according to the Treasury Department’s inspector general, Eric M. Thorson. The backdated capital infusion allowed IndyMac to plug a hole that its auditors had belatedly found in the bank’s financial results for the first quarter. If IndyMac had not been able to plug that hole retroactively, its reserves would have slipped below the minimum level that regulators require for classifying banks as well capitalized.

Though the $18 million transaction was minuscule in comparison to IndyMac’s $32 billion in assets, it had tremendous significance. If IndyMac had lost its well-capitalized status it would not have been allowed to accept “brokered deposits” from other financial institutions. Brokered deposits are typically high-yielding certificates of deposit arranged by brokers and sold to savings and loans. IndyMac relied heavily on brokered deposits, which amounted to $6.8 billion or 37 percent of its total deposits last spring.

“This is very significant in terms of whether IndyMac was over or under the O.T.S.’s thresholds for capital,” said Bert Ely, a veteran banking analysts in Alexandria, Va. “But what’s really troubling is that it seems to have been going on elsewhere.”
What is even more troubling is that this guy still had a job in bank regulations, and what's more, he had a senior position.

Why this man was allowed to do anything that did not involve asking, "Do you want fries with that?" Is the real question here.

I don't know if Darrel Dochow ever took a dime, or a dinner, or even something as inconsequential as a calendar or a pen, from anyone related to the industries that he regulated, but it's clear that even if he broke no laws, he is corrupt, and he should be kept away from balance sheets and regulation for the rest of his natural life.

Cheney Admits to Engineering Outing of CIA Operative to FBI


Legally, it may be a gray zone, because there is no evidence that he actually explicitly gave the order to out Valerie Plame, but Murray Waas, one of the better investigative journalist of my generation has gotten his hands on the notes from FBI interview with dick Cheney, and it's very clear that he rewrote the talking points on the push-back on Joe Wilson's OP/ED debunking the Niger-Iraq-Uranium claim in such a way as to make it nearly inevitable that Plame would be outed:
Vice President Dick Cheney, according to a still-highly confidential FBI report, admitted to federal investigators that he rewrote talking points for the press in July 2003 that made it much more likely that the role of then-covert CIA-officer Valerie Plame in sending her husband on a CIA-sponsored mission to Africa would come to light.

Cheney conceded during his interview with federal investigators that in drawing attention to Plame’s role in arranging her husband’s Africa trip reporters might also unmask her role as CIA officer.
(emphasis mine)

Of course, I expect Cheney to be among those pardoned between January 15 and January 20, so it will amount to nothing.

Sooner or Later, He Just Might Have to Stand for Something.

On the reliably wankeriffic Washington Post editorial page, Richard Cohen is generally one of the more reliably wankeriffic. He's not up to the truly delusional level of Krauthammer, but he consistently shows a lack of ability to think and even to understand what he just said. I have noted this in the past.

That being said, Richard Cohen gets one right today, because, unlike most of the time, he actually knows the people who are effected by a political event.

In this case, it is his sister, who is a lesbian and in a 19 year committed relationship, and a supporter of Barack Obama who traveled to volunteered for the campaign, has canceled her inauguration party because of his invitation to for bigot preacher Rick Warren to give the invocation.

It's amazing how much more sane and thoughtful the pundits are when it's them and theirs that are effected by an action...Kind of funny huh?

Cohen rightly castigates Obama on this, though, with typical aplomb, he buries his lede:
The conventional thing to say is that Obama has a preacher problem -- first the volcanic Jeremiah Wright and now the transparently anti-gay Warren. But the real problem has nothing to do with ministers and everything to do with Obama's inability or unwillingness to be a moral leader. Sooner or later, he just might have to stand for something.
Of course his point on Wright was that Barack Obama needed to leave his church because a publication edited by Wright's daughter gave an award to Farrakhan, because black politicians are in lock step with everything done by their church....Something he would never suggest of a white politician.

That being said, this is a case of a stopped clock being right twice a day: Sooner or later Barack Obama has to stand for something.