Archive for the ‘financial’ Category

Behind the bank failures

Thursday, March 16th, 2023

I want to recommend a good piece at Conservative Tree House, which I read every day.

It is this post which connects a few dots.

This is where we need to keep the BRICS -vs- WEF dynamic in mind and consider that ideologically there is a conflict between the current agenda of the ‘western financial system’ (climate change) and the traditional energy developers. This conflict has been playing out not only in the energy sector, but also the dynamic of support for Russia (an OPEC+ member) against the western sanction regime. Ultimately supporting Russia’s battle against NATO encroachments.

The war in Ukraine, which probably would not have begun if Trump was president, led to a war of economic interests. The western democracies have invested their future in “climate change,” which used to be “global warming” before the failure to warm made that slogan obsolete. Climate change has evolved into a war on energy production. The Biden regime now has even gone after gas stoves. Since I just bought one, I have an interest. Now, they seem to be going after washing machines. Ours has failed recently so I had better be quick to replace it.

The recent Credit Suisse bank crisis is complicated by the refusal of its largest shareholder, the Saudis, to help with a bail out. Why would this be ? This brings up the topic of BRICS. This is a new financial combination made up of Russia, China, Brazil, India and South Africa.

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It is time to start the economy again.

Saturday, March 21st, 2020

UPDATE: Here is a pretty good discussion of the economy right now.

I have previously described the COVID 19 virus, which is also referred to as Wuhan virus, to the annoyance of the China friendly US Media. The consequences for the US economy have been severe. The most affected states, New York, California, Illinois and Washington, have virtually shut down their population. Arizona is less affected with 78 positives cases as of today, and no deaths.

Italy and China have had the most deaths. There are a number of factors that probably affect these cases. China is notorious for air pollution and smoking, especially men smoking. There has been a dearth, so far, of listing comorbidities but age has been a major one.

One study lists mortality at age 80+ at 15%. The overall death rate in China was listed at 2.3%, which may reflect smoking and air pollution. South Korea, which has had a big spike as testing progressed much more rapidly than in the US, has a case mortality of less than 1%

South Korea has the dubious distinction of suffering the second-highest number of Covid-19 infections after China – but can also boast the lowest death ratio among countries with significant numbers of cases.

According to the WHO on March 6, the crude mortality ratio for Covid-19 – that is, the number of reported deaths divided by the number of reported cases – is between 3-4%. In Korea, as of March 9, that figure was a mere 0.7%.

AS US testing finally gets going, after the FDA and CDC delayed matters for a month, we will see a big spike in number of cases but, I am convinced, a big drop in mortality rate.

Telephone consulting services, drive-through test centers and thermal cameras – which, set up in buildings and public places to detect fever, swiftly came online. South Korea has undertaken approximately 190,000 tests thus far, according to KCDC Deputy Director General Kwon Jun-wook, and has the capacity to undertake 20,000 per day. Turnaround times are six-24 hours.

Tests are highly affordable. “The test kit is about $130, and about half is covered by insurance the other half by individual,” Kwon said. Those who test positive get the test free, “So there is no reason for suspected cases to hide their symptoms,” he said.

We should be doing the same.

At the same time, we are risking severe economic damage to the country by shutting down business activity. I believe that much of the drastic steps taken by governors, especially in New York and California, is unnecessary. High density cities like New York City and Chicago may have more reason to fear spread of the virus. Most of the country, a source of annoyance to left wing politicians, is of low population density.

Another failure of the US response is the absence of masks, which may play a role in limiting transmission in densely populated areas, as in Asia cities. There are reports that China has controlled most of the manufacturing and resists export.

China made half the world’s masks before the coronavirus emerged there, and it has expanded production nearly 12-fold since then. But it has claimed mask factory output for itself. Purchases and donations also brought China a big chunk of the world’s supply from elsewhere.

Now, worries about mask supplies are rising. As the virus’s global spread escalates, governments around the world are restricting exports of protective gear, which experts say could worsen the pandemic.

Also, there is now evidence that treatment of the infected may not require new drugs but be available with known drugs like chloroquine and its analog, hydroxychloroquine

Israeli pharmaceutical company Teva is donating millions of doses of a malaria drug that is believed to be effective in fighting the symptoms of the coronavirus.

The Jerusalem Post reports that the six million doses of hydroxychloroquine sulfate will be shipped to US hospitals started March 31. By the end of next month, 10 million will be shipped.

It is uncertain how effective the malaria treatment will be against coronavirus, but research is currently ongoing.

In fact, there is good evidence that it is effective.

The in vitro antiviral activity of chloroquine has been identified since the late 1960’s (Inglot, 1969; Miller and Lenard, 1981; Shimizu et al., 1972) and the growth of many different viruses can be inhibited in cell culture by both chloroquine and hydroxychloroquine, including the SARS coronavirus (Keyaerts et al., 2004). Some evidence for activity in mice has been found for a variety of viruses, including human coronavirus OC43 (Keyaerts et al., 2009), enterovirus EV-A71 (Tan et al., 2018), Zika virus (Li et al., 2017) and influenza A H5N1 (Yan et al., 2013). However, chloroquine did not prevent influenza infection in a randomized, double-blind, placebo-controlled clinical trial (Paton et al., 2011), and had no effect on dengue-infecteds patient in a randomized controlled trial in Vietnam.

I had speculated that they might be effective in Influenza but this appears to not be the case.

Clinical trials have already shown effectiveness.

According to Sun, patients treated with chloroquine demonstrated a better drop in fever, improvement of lung CT images, and required a shorter time to recover compared to parallel groups.

The percentage of patients with negative viral nucleic acid tests was also higher with the anti-malarial drug.

Chloroquine has so far showed no obvious serious adverse reactions in the more than 100 participants in the trials.

The first case report using remdesivir was dramatic.

The drug is now in clinical trial but the chloroquine evidence reduces the urgency of the study.

What do we do now ?

My wife and I are at high risk but it is easy for us to self isolate. The mortality rate for those under age 50 is about equal to that of influenza. For those between 50 and 70, only those with pre-existing morbidities have a serious risk.

It is time to reopen the economy certainly by next week. The damage done by unemployment and bankruptcy will far exceed that of the disease.

Government: the things we do together.

Wednesday, April 6th, 2016

cal

Barack Obama is fond of describing government this way.

As President Obama said the other day, those who start businesses succeed because of their individual initiative – their drive, hard work, and creativity. But there are critical actions we must take to support businesses and encourage new ones – that means we need the best infrastructure, a good education system, and affordable, domestic sources of clean energy. Those are investments we make not as individuals, but as Americans, and our nation benefits from them.

That was a reaction to Romney’s criticism of his silly comment.

I prefer the quote attributed to Washington.

“Government is not reason, it is not eloquence,—it is force! Like fire, it is a dangerous servant, and a fearful master; never for a moment should it be left to irresponsible action.”

Now, we see a new imposition.

The Department of Labor says its so-called fiduciary rule will make financial advisers act in the best interests of clients. What Labor doesn’t say is that the rule carries such enormous potential legal liability and demands such a high standard of care that many advisers will shun non-affluent accounts. Middle-income investors may be forced to look elsewhere for financial advice even as Team Obama is enabling a raft of new government-run competitors for retirement savings. This is no coincidence.

Labor’s new rule will start biting in January as the President is leaving office. Under the rule, financial firms advising workers moving money out of company 401(k) plans into Individual Retirement Accounts will have to follow the new higher standards. But Labor has already proposed waivers from the federal Erisa law so new state-run retirement plans don’t have the same regulatory burden as private employers do.

State run retirement plans. What could go wrong ? Well, we saw one version in Cyprus in 2013.

European leaders reached an agreement with Cyprus early on Monday morning that closes down the island’s second-largest bank and inflicts huge losses on wealthy savers.

Those with deposits of less than €100,000 (£85,000) will be spared, but those with more than €100,000 – many of them Russian – will lose billions of euros under draconian terms aimed at preventing the Mediterranean tax haven becoming the first country forced out of the single currency.

The deal is expected to wreak lasting damage on the Cypriot economy, which has grown reliant on offshore banking and Russian money. Analysts said Cyprus could see its economy contract by 10% or more in the years ahead.

Well, those Russian oligarchs deserved it. Maybe American companies attempting “inversion” deserve it too.

CEOs have learned to keep mum in the Obama era, lest their companies be punished like J.P. Morgan after Jamie Dimon criticized some parts of Dodd-Frank. So it’s worth noting the candid reaction after a new Treasury rule scuttled the merger between Pfizer Inc. and Allergan PLC.

The companies ended their $150 billion tie-up after Treasury Secretary Jack Lew issued new rules that made it harder for companies like Pfizer to move to Ireland to legally lower their taxes. Pfizer will have to pay Allergan a breakup fee of $150 million, though Allergan shares are still down more than $10 billion since the Treasury ambush.

I am not a slavish advocate of corporate tax avoidance but we are in an era of confiscation.

“If the rules can be changed arbitrarily and applied retroactively, how can any U.S. company engage in the long-term investment planning necessary to compete,” Mr. Read writes. “The new ‘rules’ show that there are no set rules. Political dogma is the only rule.”

He’s right, as every CEO we know will admit privately. This politicization has spread across most of the economy during the Obama years, as regulators rewrite longstanding interpretations of longstanding laws in order to achieve the policy goals they can’t or won’t negotiate with Congress. Telecoms, consumer finance, for-profit education, carbon energy, auto lending, auto-fuel economy, truck emissions, home mortgages, health care and so much more.

Now, they want everypne to “invest” in state run “retirement programs.” CalPERS has not distinguished itself, except perhaps in corruption.

After spending years dogged by unpaid debts, California labor leader Charles Valdes filed for bankruptcy in the 1990s—twice. At the same time, he held one of the most influential positions in the American financial system: chair of the investment committee for the California Public Employees’ Retirement System, or CalPERS, the nation’s largest pension fund for government workers. Valdes left the board in 2010 and now faces scrutiny for accepting gifts from another former board member, Alfred Villalobos—who, the state alleges, spent tens of thousands of dollars trying to influence how the fund invested its assets. Questioned by investigators about his dealings with Villalobos, Valdes invoked the Fifth Amendment 126 times.

Well, it is California where Hispanics, especially illegals, run the state.

Last month the board of California’s new “Secure Choice” retirement plan wrote to state legislators about their “exciting win” in Washington. They reported that employers enrolling workers in the new government-run plan “would have no liability or fiduciary duty for the plan.” Score! The California bureaucrats added that “we have been given the green light to auto-enroll workers into an Individual Retirement Account (IRA).”

What could go wrong ?

The Coming Financial Armageddon.

Thursday, January 7th, 2016

An interesting piece in New York magazine describes the opinions of the man who wrote the book, The Big Short.

He is not optimistic.

Dodd-Frank really worked, and they kind of disagreed with the end of the movie, which implies that this is all going to happen again.
It sort of worked. One thing it has not changed is the sheer size of these institutions, they’ve gotten bigger rather than smaller. And I don’t understand that , I would have thought that from Too Big To Fail we would have found a way to make them small enough so that it was ok for them to fail. And know there’s all this complicated language about how you can resolve them in bankruptcy but I don’t believe it, and the markets don’t believe it. The bigger thing is — I regarded this crisis at bottom as a problem of incentives. People behaved badly because they were incentivized to behave badly, and the incentives haven’t really changed that much.

No, they haven’t and ZIRP is one reason. ZIRP is “Zero Interest Rate Program.”

I think they should have broken up the banks.

And in your opinion, why didn’t that happen?
It didn’t happen because the Obama administration decided that it was worse than the course of action they took. They considered it, kind of. If you asked Tim Geithner why it didn’t happen, he would say how am I going to do that? I am going to have to nationalize these banks, and then break them up. Well, we’re really not equipped to run the entire financial system out of the Treasury. And the system is in such disarray and chaos that we are more likely to create more crisis, than resolve the crisis if we do that. Which is not a terrible argument.

Geithner is, of course, the villain of Sheila Bair’s book, “Bull by the Horns.” My review of her book points out this statement.

Her tenure was stress filled and some of that stress came from the actions of soon-to-be Treasury Secretary Tim Geithner. The story opens in the crisis of late 2008 when the TARP legislation was first defeated by the House, then finally passed. She notes that the purpose proposed for the bill was immediately abandoned after it was signed. It was supposed to fund purchase of the toxic assets held by banks and by investors but quickly became a bailout for the big banks, judged too big to fail. Much of her time was spent fending off Geithner as he seemed to be obsessed with the welfare of CITIBank, a huge and weak international player. She is very critical of his efforts and of the CITIBank management.

Soon after this he became Treasury Secretary for Obama. Like a lot of people, he was thinking this.

Another kind of reform, which would eventually cause them to shrink a lot, would be vastly increasing the capital requirements, which has been floated by people, require them to hold not just about 7 percent or 6 percent but 20 percent, and what happens is they’d become a lot less profitable, they can’t take big big bets and no one would want to invest in them or work for them. But that has been roundly defeated at the regulatory level. I think, beneath that, the bigger problem is, virtually everybody at the table, even well-meaning government employees, when they are talking about what to do about these places, have — even if they aren’t thinking about it consciously, cannot help but consider the likelihood that the way they are going to make a living, a very good living, when they get done with government work, is to go work for one of these places.

That is called Moral Hazard and it has defeated any attempt at reform. And it may now be too late to fix it.

Analysts also point to concerns over Chinese market regulators, who they believe do not appear to have a good grasp of the market, even with the introduction of the circuit breakers. In an attempt to stabilize markets, China’s securities regulator has issued new rules to restrict the number of shares major shareholders in listed companies can sell every three months to 1 percent.
Marc Ostwald, a strategist at ADM Investor Services, believes that Soros’ comments — alongside a gloomy report Wednesday from the World Bank — only serve to cast a “long shadow” over global markets.
“It should be noted that the current turmoil distinguishes itself from 2008, when reckless lending, willful blindness to a mountain of credit sector risks and feckless and irresponsible regulation and supervision of markets were the causes of the crash, given that central bank policies have been encouraged and been wholly responsible for the current protracted bout of gross capital misallocation,” he said in a morning note.

Why is this different from 2008 ? It isn’t.

people didn’t want to know there was a bubble in the housing market, even though everyone knew something bad was going on.
It was really true, I remember coming across this phenomenon, on the wrong side of things: People were just thinking, “This doesn’t have to last very long for me to do well. And if it all goes down it’s not going to affect me. So why think about it too much?” There’s a great line in the movie: “You tell me the difference between corrupt and stupid and I’ll have my wife’s brother arrested.”

This explanation is still relevant.

For five years, Li’s formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels.
His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched—and was making people so much money—that warnings about its limitations were largely ignored.
Then the model fell apart. Cracks started appearing early on, when financial markets began behaving in ways that users of Li’s formula hadn’t expected. The cracks became full-fledged canyons in 2008—when ruptures in the financial system’s foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril.

That was part of it. The rest was the corrupt bargain that Democrats had with lobby groups for minorities.

I wrote about this in 2008 as it was happening.

Things did not begin to heat up again until the end of the Clinton Administration. The internet stock bubble left a lot of people with money to invest but few good opportunities. Many had taken their money out of the stock market after making plenty of money. Secondly, after 9/11, the Bush Administration was determined to avoid a recession brought on by the huge capital loss of the WTC collapse. The Panic of 1907 was precipitated by the San Francisco Earthquake and the huge losses to insurance companies. The Great Depression was partly a reaction to the default of war loans from World War I and the reparations demanded of Germany. There was fear that another severe financial panic would follow 9/11. In fact, that may have been a large part of the plan by Osama bin Laden. As a result, the banks had a lot of money to lend and they soon ran out of worthy borrowers. What to do ? Lend it to people with less than sterling credit. After all, houses were going to keep going up in price, weren’t they ?

Enter the chislers and scammers. Some of whom were former Clinton Administration members who got themselves appointed to the boards of the two big mortgage lenders. Did they have a broad background in mortgage banking ? No. They were politicians, like Jim Johnson who recently left the Obama campaign where he had been serving as the co-chair to vet potential VP nominees. What was his background ? Politics, not finance.

James A. Johnson is a United States Democratic Party political figure. He was the campaign manager for Walter Mondale’s failed 1984 presidential bid and chaired the vice presidential selection process for the presidential campaign of John Kerry. In the 2008 election, he is a member of the vice-presidential selection process for the presumptive Democratic nominee, Senator Barack Obama.

From 1991 to 1998, he served as chairman and chief executive officer of the Federal National Mortgage Association (Fannie Mae), the quasi-public organization that guarantees mortgages for millions of American homeowners. Previously, he was vice chairman of Fannie Mae (1990-1991) and a managing director with Lehman Brothers (1985-1990).

The rest is history but much of it is at that link.

Greece is going glimmering.

Sunday, July 5th, 2015

Greeks

I’ve been planning trip to Greece for months. Back in January, I decided to wait until the Greek monetary crisis was closer to resolution. Finally in May, I made reservations for September. I even posted my plans here.

Well, today it may be all going glimmering. The Greeks have apparently voted NO to the EU deal.

Greece has overwhelmingly rejected Europe’s latest bailout package, plunging the country’s future in the Eurozone into jeopardy.

With most of the votes counted in a referendum that will shape the future of the continent, the ‘No’ campaign has a staggering 61 per cent of the vote – 22 points ahead.
German Chancellor Angela Merkel and French President Francois Hollande called for an EU crisis summit to find a ‘solution’ for Greece, with leaders set to meet in Brussels on Tuesday.
Thousands of anti-austerity voters took to the streets in celebration as the leader of the pro-EU ‘Yes’ campaign resigned, with an official announcement of the final result imminent.
But German politicians warned of ‘disaster’ as they accused Greek Prime Minister Alexis Tsipras of ‘tearing down bridges’ between Greece and Europe.

Now what ?

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Planning a trip to Greece

Saturday, June 20th, 2015

I have been a student of Greek history for many years. When I was a medical student and later a surgery resident, I kept a copy of J.B.Bury’s “History of Greece to the Death of Alexander on my bedside table as reading material for relaxation. I have read it several times.

Another source of pleasure has been the novels of Mary Renault, the pen name of Eileen Mary Challans. Sh wrote a series of historical novels which won awards and which provided a more intimate view of Greek society in the classical era. Some of her novels provide a more sympathetic view of homosexuality than I have found anywhere else but that is not the attraction. Her history sounded like something written by one who lived it.

Another favorite novelist is Helen MacInnes who wrote novels of adventure set in and after World War II. Two of them were about places in Greece and one of those, Mykonos, is a favorite spot.

Mykonos harbor

Her novel describes this harbor and, while a new cruise ship terminal has replaced some of her story, the harbor looks just as she described it.

Mykonos square

The story, titled “The Double Image” describes a tiny square in the town that sounds exactly like this one looks.

We are looking forward to this trip with some trepidation, however. Why ? Because Greece may be heading into serious trouble.

Since December, Greeks have been preparing for a weekend such as this, pulling more than 30 billion euros out of banks. Week after week, the Bank of Greece borrowed banknotes from the rest of the continent to replenish this hoarding of the one asset Greeks still trust — cold, hard cash. Its liabilities to the rest of the euro area for the excess physical cash it has to put into circulation quadrupled between December and April, the last month for which there’s available data.

In November of 2012, there was rioting in Athens and it was about proposed austerity.

On the same day that Greece’s parliament passed harsh new austerity measures as part of a multi-billion euro rescue package, workers cleared wreckage from burned-out buildings damaged during a round of intense riots the day before.

The unpopular bailout deal requires dramatic cuts in wages, pensions and jobs, according to Reuters, and Sunday’s protests saw the worst violence in Athens in years.

Since those riots, a new radical leftist government has been elected that has vowed to defy the EU and austerity.

Greece’s new leftist government opened talks on its bailout with European partners on Friday by flatly refusing to extend the program or to cooperate with the international inspectors overseeing it.

Prime Minister Alexis Tsipras’ government also sacked the heads of the state privatization agency after halting a series of state asset sales.

The politically unpopular policy of privatization to help cut debt is one of the conditions of Greece’s 240-billion-euro bailout that has imposed years of harsh austerity on Greece.

Now, the moment of truth approaches and what will happen ?

Everything comes together on Monday [Monday June 22 !]. Greek Prime Minister Alexis Tsipras, back from a visit with Vladimir Putin in St. Petersburg, will spend his weekend coming up with a proposal to take to a Monday showdown with euro-area leaders.
A deal there is key. The bailout agreement that’s kept Greece from defaulting expires June 30. That’s the day Greece owes about 1.5 billion euros to the International Monetary Fund.
In an interview published Saturday in Brussels-based l’Echo newspaper, Greek Finance Minister Yanis Varoufakis warned that the ruling Syriza party could be replaced by neo-Nazis if Greece ends up defaulting and leaving the euro.

This may be standard leftist scare tactics but what will happen ? We have planned the trip to anticipate potential trouble in Athens. I have been to Athens before and have been to the Acropolis and the Parthenon.

Annie in Athens

Annie much more photogenic than I am and this was taken when she was 14 and standing on the Acropolis.

The plan is to fly to Athens and then spend only two nights there. I have planned a side trip to another place described in one of Helen MacInnes’ novels, Decision at Delphi, which is set soon after World War II and describes Sicily as well as Athens and Delphi. Delphi is quite high in the mountains north of Athens and involves some climbing so we will spend most of that time in the Delphi Museum.

Important finds included sculptures from the Temple of Zeus, the Nike of Paeonius, the Hermes of Praxiteles and many bronzes. In total 14,000 objects were recorded. The finds were displayed in a museum on the site.

Today, the Museum contains treasures from those excavations.

olympia-museum-greece

The museum itself.

museum7

And the interior with the exhibits. The trip can be made in a day and I have made arrangements.

640px-Chaironeia_lion

On the way to Delphi, I want to make a short side trip to see the Lion of Chaeronea. This statue was erected over the common grave of the Sacred Band of Thebes. This was a unit of sworn lovers, probably all homosexual but in the fashion of classical Greece in which women were closely held in harem-like seclusion and men tended to adopt a pattern of an older man with a younger boy which might be merely sexual or it might be a sort of apprenticeship in arms. The Sacred Band had never been defeated in battle until that day, August 2, 338 BC. On that day, the Sacred Band was annihilated by the army of Philip II of Macedon, the father of Alexander the Great. The Band was buried in common grave and the lion statue erected over their grave. It was found by British tourists around 1900 and excavated and restored. Beneath the site were found the skeletons of nearly 300 men.

Battle_of_Chaeronea,_338_BC_en.svg

The battle,according to accounts which survived, was won when the Macedonians’ right flank conducted a sudden retreat, drawing the Athenians out of line. The Sacred Band was destroyed holding the line. I want to see their grave.

After that day trip, we plan to fly to Thessaloniki, a city east and north of Athens to visit the tomb of Philip II, the father of Alexander and winner of the battle of Chaeronea.

philip-woman-warrior-greaves_as_found

The remains in the tomb have recently been confirmed as those of Philip II

The tomb, itself, is well preserved and restored. The town of Vergina is near Thessaloniki and too far from Athens to drive in a day.

From Thessaloniki, we will fly to Crete and spend a few days near the Palace of Knossos and its museum.

knossos

The museum and the palace ruins should keep us busy for five days, then we fly back to Athens for one night and catch our flight to London and home the next day.

Or so the plan goes.

Is War Coming ?

Wednesday, February 11th, 2015

There are three, possibly four, major areas of international strife and all are getting worse as we watch.

Europe is trying to deal with Vladimir Putin and the new Russia. It is not doing well.

There was a palpable tone shift in U.S. policy toward Ukraine this week, when the Obama administration signaled that it was ready to consider sending the country lethal military aid. A confluence of factors is pushing President Obama toward this decision. The fragile ceasefire brokered in September between Ukraine and Russian-backed separatists has failed, manifested in the series of recent and high-profile separatist advances against the Ukrainian military this week. Bipartisan congressional support for sending weapons to Ukraine, championed by Sens. John McCain (R-Ariz.) and Robert Menendez (D-N.J.), as well as a newly released report by former senior U.S. and European officials recommending lethal military aid for the embattled country, have also contributed to Obama and his tight inner circle of foreign policy advisers reconsidering the lethal aid option.

Will this happen ? I doubt it.

As Kadri Liik of the European Council on Foreign Relations pointed out recently , many Western leaders persist in seeing the Ukraine invasion as a hiccup in relations with Russia that can be smoothed over, rather than as a demonstration that Mr. Putin’s agenda is fundamentally at odds with Europe’s security interests and its values. Because of their attachment to the hiccup theory, governments — including the Obama administration — have refused to take steps, such as providing the Ukrainian government with defensive weapons, that could help stop Mr. Putin’s aggression. Instead, they concoct futile schemes for “reengaging” the Russian ruler.

The next crisis will be the end of NATO.

Late this week, the Obama administration unveiled its new National Security Strategy, amid less than fanfare, with the execrable Susan Rice explaining in “remain calm, all is well!” fashion that things are really much better globally than they look. This White House’s new foreign policy mantra is Strategic Patience, which seems to be the been-to-grad-school version of “don’t do stupid shit.” Since nobody inside the Beltway is taking this eleventh-hour effort to articulate Obama’s security strategy seriously, it’s doubtful anyone abroad, much less in Moscow, will either.

Soon, Putin will turn his gaze on the Baltics.

Jaws dropped this week when Anders Fogh Rasmussen, who until recently was NATO’s civilian head, stated that it is highly likely that Russia will soon stage a violent provocation against a Baltic state, which being NATO countries, will cause a crisis over the Alliance’s Article 5 provision for collective self-defense. Rasmussen merely said what all defense experts who understand Putin already know, but this was not the sort of reality-based assessment that Western politicians are used to hearing.

NATO has disarmed and is in panic mode now if they have to face Russia, weak as it is in the long term. As Keynes said, “In the long term we are all dead.” We are partly responsible for this state of affairs.

Not all the fault for this sorry state of affairs lies in Europe. Here America has played an insidious role too, encouraging spending on niche missions for the Alliance at the expense of traditional defense. Hence the fact that Baltic navies have considerable counter-mine capabilities — this being an unsexy mission that the U.S. Navy hates to do — yet hardly any ability to police their maritime borders against intruding Russians. To make matters worse, since 2001 the Americans have encouraged NATO partners to spend considerable amounts of their limited defense budgets on America’s losing war in Afghanistan.

We should have gotten out in 2009. The absurd Rules of Engagement are only part of it.

Now, we face another major threat in the Middle East, Theater Two.

For the situation with Iran, I have long relied on the writing of Spengler.

Dying civilizations are the most dangerous, and Iran is dying. Its total fertility rate probably stands at just 1.6 children per female, the same level as Western Europe, a catastrophic decline from 7 children per female in the early 1980s. Iran’s present youth bulge will turn into an elderly dependent problem worse than Europe’s in the next generation and the country will collapse. That is why war is likely, if not entirely inevitable.

The rulers of Iran have shown no moderation of their messianic beliefs and their willingness to destroy themselves to bring about the coming of the Twelfth Imam.

Twelver Shi‘a believe that al-Mahdi was born in 869 (15 Sha‘bin 255 AH) and assumed Imamate at 5 years of age following the death of his father Hasan al-Askari. In the early years of his Imamate he would only contact his followers through The Four Deputies. After a 72-year period, known as Minor Occultation, a few days before the death of his fourth deputy Abul Hasan Ali ibn Muhammad al-Samarri in 941, he is believed to have sent his followers a letter. In that letter that was transmitted by al-Samarri he declared the beginning of Major Occultation during which Mahdi is not in contact with his followers.

The coming of the Imam is part of the end of the world and the rulers of Iran are “Twelvers.”

Shi’as believe that Imam al-Mahdi will reappear when the world has fallen into chaos and civil war emerges between the human race for no reason. At this time, it is believed, half of the true believers will ride from Yemen carrying white flags to Makkah, while the other half will ride from Karbalaa’, in the `Iraq, carrying black flags to Makkah. At this time, Imam al-Mahdi will come wielding `Ali’s Sword, Zulfiqar , the Double-Bladed Sword. He will also come and reveal the texts in his possession, such as al-Jafr and al-Jamia.

The Shi’ites have this belief as part of their religion and the rulers of Iran seem to be sincere in their beliefs, which is why Obama is insane to consider them rational.

The Sunni equivalent is the new group called Islamic State in Syria and various other names.

The recent rise in terrorist attacks is only one part of the problem. We also see the collapse of Iraq after Obama removed all US troops.

What are we going to do about all this? Probably nothing as Obama has a master plan that will solve all our problems. He will make friends with our worst enemies.

What about China ? We were going to “pivot to Asia.”

One question is whether China is stable. There are questions about China’s economic future.

Beijing can manage a rapidly declining pace of credit creation, which must inevitably result in much slower although healthier GDP growth. Or Beijing can allow enough credit growth to prevent a further slowdown but, once the perpetual rolling-over of bad loans absorbs most of the country’s loan creation capacity, it will lose control of growth altogether and growth will collapse.

The choice, in other words, is not between hard landing and soft landing. China will either choose a “long landing”, in which growth rates drop sharply but in a controlled way such that unemployment remains reasonable even as GDP growth drops to 3% or less, or it will choose what analysts will at first hail as a soft landing – a few years of continued growth of 6-7% – followed by a collapse in growth and soaring unemployment.

What would happen then ? I just don’t see a war with China in our future, partly because neither of us can afford it. China is threatening its neighbors, like Japan and the Philippines, but we are unlikely to intervene. Our former allies in the east are now seeking help from each other as Obama destroys the US influence.

The disgrace of the IRS

Tuesday, November 25th, 2014

The IRS scandal has forever discredited the Internal Revenue Service. The scandal is going on two years in length. It began with the notorious Lois Lerner, who headed a division called “The Exempt Organizations Unit.” This was supposed to evaluate applications for tax exemption.

Lerner served for a time on Federal Election Commission, which suggested her interest in electoral politics.

Lerner began her IRS service in 2001 as Director Rulings and Agreements in the Exempt Organizations function of TEGE. [2] In January 2006, she was selected as Director Exempt Organizations. In this capacity, Lerner led an organization of 900 employees responsible for a broad range of compliance activities, including examining the operational and financial activities of exempt organizations, processing applications for tax exemption, providing direction through private letter rulings and technical guidance and providing customer education and outreach to the exempt community.

Here it is apparent that she was promoted by the Bush Administration and was not a political appointee of the Obama people. Why was she involved in this scandal ? The Treasury Department is run by a career Civil Service bureaucracy. Career federal agents and employees are prevented from political partisan activity by The Hatch Act of 1939. Does this work ?

No.

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Medicine is coming to be a government benefit.

Sunday, August 3rd, 2014

Obamacare is having serious trouble as I have discussed. The success stories, like California, are an example of what I have called Medicaid for All.

“It’s a total contradiction in terms to spend your public time castigating Medicaid as something that never should have been expanded for poor people and as a broken, problem-riddled system, and then turn around and complain about the length of time to enroll people,” said Sara Rosenbaum, a member of the Medicaid and CHIP Payment and Access Commission, which advises Congress.

Most of the new enrollees are Medicaid members and those enrolled in “private insurance” learn that they have severely restricted choice of doctor or hospital.

Now we have a new development.

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Where is housing going ?

Sunday, March 9th, 2014

UPDATE: Megan McArdle has some doubts about house prices.

housing

The housing inflation seems to be limited to certain cities. How will this last in the poor (except District of Columbia) economy ?

I live in south Orange County and have noticed a huge amount of rental construction going on. This area has been mostly single family homes and condos since 1972 when I moved here. Now, we see big projects like this and others nearby that I don’t know the name of. These are big projects including hundreds and perhaps thousands of units. The builder is the Irvine Company which, in my previous experience, has built mostly homes and condos. Recently, I began to notice more rental projects in Irvine.

The Irvine Company Apartment Communities is dedicated to making it easy to find a home you’ll love with unsurpassed services meeting your every need. With approximately 122 exceptional apartment communities located throughout the prime California regions of Orange County, West Los Angeles, San Diego and Silicon Valley, we offer choices to fit every lifestyle and budget.

They seem to be going to rental property in a big way. Maybe this is the reason.

From reading the mainstream press all you hear are glorious signs of housing resurrection! Come one come all into the house of real estate where the almighty Fed will allow no harm to occur. Just sign and pray and the next thing you know you’ll be the next Donald Trump. The flipping, rehabbing, and housing shows are once again filling the space on a cable station near you. The perception of the Fed being this almighty protector of housing makes a bit of sense but where was the Fed in 2007?

I see lots of housing flips in southern California, not in Orange County so far.

foreclosure-completions

Even in 2013 we had 1.4 million properties with notice of defaults, scheduled auctions, and full on REOs taken on. Early in the crisis these stories were common since they were a novelty to the press. Now however, many of these properties are shifting over to large investors pushing inventory up. A clear consequence of this is a large pool of potential buyers that are unable to buy.

These may be the renters.

first-time-home-buyer

Yup. The would-be first time buyers have student loans and bad credit. They are renting.

The number of first time buyers is pathetic because household formation is weak and many young Americans are living at home with mom and dad. Forget about buying, they are having a tough time paying higher rents to the new feudal landlords. You would expect with the rapid rise in prices that existing home sales are off the charts but they are not.

Housing prices do NOT mean buyers who will be occupants. Look at mortgage applications !

mortgage-apps-for-purchase

Wow ! We are back to levels last seen nearly 20 years ago! Only difference is that we have 50,000,000 more people today walking the streets of the U.S. of A. than we did back then. Since access to middle class living is getting tougher thanks to weak income growth, more people are opting to rent:

rentals-vs-households

This is what I am seeing in Orange County. I have been looking in San Pedro for a small house near the ocean. I can no longer afford Orange County except condos. I sold my house four years ago and bought a house in the mountains. That was a bad move. I found that I could not tolerate the altitude. I had to sell into the bad market of 2012. That cost me a lot. Now, I have to lower my sights and may just stay a renter for a while. At my age, it may make better sense.