Holiday Gifts for Americans: Lumps of Coal

It looks like Americans got the proverbial lump of coal for the holiday gift from their government.

It started in the week before the Christmas week, but the news quietly spread on the Internet during the Christmas week.

Did Obama exempt Interpol from same legal constraints as American law-enforcement? (12/23/09 Hot Air)

The president of the United States did that on December 16 by amending Executive Order 12425 signed by President Reagan and removing the exceptions in the original Order. Mainstream media didn't report. It was bloggers who caught it.

"In Executive Order 12425, Reagan made two exceptions to that status. The first had to do with taxation, but the second was to make sure that Interpol had the same accountability for its actions as American law enforcement — namely, they had to produce records when demanded by courts and could not have immunity for their actions."

Now that's gone, thanks to the presidential signature. Interpol can do whatever it wants in the U.S., and they don't have to tell anyone why they are doing what they are doing.

Then, on Christmas Eve, we were greeted with two pieces of joyful news. First, in the very early morning,

Senate Passes Health Bill (12/24/09 Politico Live Pulse)

So now we have a new "right" - a right to health care insurance. And we don't have a right not to have health care insurance. And the right will be forced upon us with penalties and taxes and jail-time. (Much like spreading "democracy" at gunpoint.)

Then, after the holiday-shortened stock market was closed, Treasury Secretary Timmy Geithner announced that the government was going to remove the $400 billion cap on aid to Fannie Mae and Freddie Mac, two of the three wards of the state (the third one being AIG):

A Lump of Coal from Treasury (Mark A. Calabria, 12/29/09 Cato Institute)

The existing limit was $200 billion each, total $400 billion. Now the federal government will backstop the entire balance sheets of Fannie and Freddie, and that's over $5.5 trillion dollars. Cato Institute's article speculates that it is not for the support of the U.S. mortgage market but to support large holders (foreign and domestic) of Fannie and Freddie debt instruments.

On Christmas Day, a hilarity and ensuing dismay: a panty bomber struck and failed, and airline passengers get the punishment.

A son of a rich Nigerian banker was assisted by a sharply-dressed man at Schiphol airport in Amsterdam and boarded the plane without passport. Then, just before landing on Detroit, he tried to ignite explosives hidden in his underpants and failed.

As the result, all around the world, people are being subjected to lengthy and probably totally unnecessary pre-boarding checks and other potential intrusions into privacy like whole-body scan and behavioral profiling (whatever that means by this towering intellectual), and a bracelet that can zap you immobile if you are bad ("bad" defined by the panicky flight attendants?).

Then on December 30, a Bloomberg article revealed that Barney Frank's bill for financial overhaul (H.R. 4173) which passed the House include a generous help package for the too-big-to-fail banks: $4 trillion. U.S. taxpayers will have the privilege to pay for it one way (tax) or the other (inflation):

Bankers Get $4 Trillion Gift From Barney Frank (David Reilly, 12/29/09 Bloomberg)


Happy New Year.

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Geopolitical Zigsaw Puzzle You May Not Want to Solve

The U.S. was bombing Yemen at the express order from the U.S. president prior to the failed Christmas Day bomb attack.

The so-called Christmas Day panty bomber says there are more like him in Yemen. The Yemeni government says 300.

That bomber may have been aided by an Indian to board the plane in Amsterdam without a passport.

Another Indian was detained after the plane landed in Detroit.

A U.S. analyst contends that the American who aided the Mumbay bombing terrorists in November last year was a double agent of CIA.

Pakistan has arrested 5 Americans who allegedly tried to blow up a nuke plant in Pakistan.

The U.S. is probably fighting in the Central Asia "-stans" - Tajikistan, Uzbekistan and Kyrgyzstan as Afghan refugees flee to these countries.

On the Caspian Sea, Azerbaijan is threatening Armenia with war. To the north of these countries sits a U.S. ally, Georgia. To the south, Iran. North of Georgia is Russia.

Information that Iran was developing "neutron initiater" was determined by the U.S. intelligence to be a forgery concocted probably by the Israeli intelligence agency.

Israel is having the first-ever meeting of all Israeli envoys to discuss the country's options.

By the way, Yemen has been in a civil war between northern Shi'ites and southern Sunnis. In other words, it's a proxy war. (Iran is Shia. Saudi Arabia is Sunni. Mostly, that is.)

Iran is said to be getting (or trying to get) uranium from Kazakhstan.

Russia says it will develop a new set of nuclear weapons, in response to the sea-based missle shield by the U.S.. It also says it needs more weapons to deter the U.S. from doing whatever it wants in the world.

All these commotions - where are they being directed? I don't think the president of the U.S. has a clue. Vladimir Putin and Hu Jintao may.

Only 29% of Americans think the country is going in the right direction, and this newsletter writer says that's a real good sign of a prolonged bull market in the stocks.

I can't shake off the unsettling feeling that something bad and wicked is coming our way. Maybe it's just Mercury Retrograde.

There were two events which I thought would never happen in my lifetime. One was a severe stock market crash that would trigger a severe recession. The other was a world war. The first one happened.

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Bloomberg: French Constitutional Court Rejects Carbon Tax

After the disaster in Copenhagen, global warmers seem to have gone awfully quiet around the world. Now, the French constitutional court rejected a carbon emission tax as inequitable.

French Constitutional Court Rejects Carbon Tax
(12/30/09 Bloomberg)

"France’s constitutional court rejected a proposed tax on carbon emissions, saying a web of exemptions violated the principal of equality and rendered efforts to cut greenhouse gas emissions ineffective.

"The government said it will make new proposals on Jan. 20.

"The tax, which would have started on Jan. 1, was set at 17 euros ($24.38) per ton of carbon-dioxide emissions, President Nicolas Sarkozy said in September. To make the tax more palatable, he partially or fully exempted power plants, public transport, airlines, farming and fishing, as well as 1,018 older cement, steel and glass factories.

"In all, 93 percent of all industrial carbon emissions in France would have avoided paying the full tax, the constitutional court said in a decision published on its Web site. The tax would have fallen disproportionately on fuel for heating and cars, it said.

"“The court ruled that the system of exemptions, due to their extensive nature, were contrary to the objective of fighting global warming and contravene the principle of equality before the tax system,” the court said.

"The court rejected all the articles relating to the carbon tax in the government’s 2010 budget."

According to the article, it is the Socialist-led opposition who opposes the carbon tax in France, as hurting the poor and handicap employers.

The cap and trade scheme advocated by the U.S. administration and Democratic Congress is even worse. Polluting industries get to pass the cost of carbon credit to the consumers almost entirely, and the middleman (i.e. the government) get to skim off of the consumers by taking from some and giving it to others as subsidies and credits.

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Ben Stein's New Definition of Anti-Semitism

Anyone who opposes the U.S. government's interventionist foreign policy is anti-Semitic, according to Ben Stein, who appeared in CNN's Larry King Live. He did his best to smear the word over Ron Paul, who has always opposed the U.S. government's interventionist foreign policy.

Ben Stein Says Ron Paul Uses “Anti-Semitic Arguments”
(Thomas R. Eddlem, 12/29/09 New American)

The video of the show's segment is here:

Now, if being against the U.S. government foreign policy is anti-Semitic, as Mr. Stein says, does that mean the U.S. government is ... Semitic?

(Remember also, if you are against the government's domestic policies now, you are a racist.)

Or maybe Mr. Stein doesn't know what he's talking about. The last I remember seeing him was on a video from August 2007. He was one of the merry crew ridiculing Peter Schiff's "gloomy" view that the housing bubble was about to burst and investing in the financial firms would be a disaster. He was recommending buying Merrill Lynch at $76, such a bargain for such a well-run company.

By the way, there's a Facebook page set up to demand apology from Ben Stein.

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Bernanke's Exit Stragegy: Term Deposits

The Federal Reserve wants to create a term deposit facility as part of so-called "exit strategies" as outlined by the chairman Ben Bernanke.

Fed proposes term deposits to drain excess bank reserves
(12/28/09 AFP via Google)

"WASHINGTON — The US Federal Reserve proposed Monday the creation of a term-deposit facility for banks to drain some of the more than 1.0 trillion dollars in excess reserves from the banking system.

"The Fed said it was seeking public comment on proposed amendments to the reserve requirements for institutions eligible to receive earnings on their accounts at Federal Reserve Banks.

""Under the proposal, the Federal Reserve banks would offer interest-bearing term deposits to eligible institutions through an auction mechanism," the central bank said in a statement.

""Term deposits would be one of several tools that the Federal Reserve could employ to drain reserves to support the effective implementation of monetary policy," it said.

"Institutions holding term deposits would "receive earnings at a rate that would not exceed the general level of short-term interest rates," according to the Fed proposal." [The article continues.]

Offering financial institutions interest-bearing term deposits is one of Ben Bernanke's "exit strategies". (For more, please read my post from July, when Bernanke outlined his thinking in Wall Street Journal.)

The Federal Reserve has been paying interest on the banks' excess reserves since October last year. All this term deposit facility will do is to lock up the excess reserves for a period of time, instead of having them as excess reserves (which is good as cash, a demand deposit).

According to the attachment to the Federal Reserve's press release today,

• Term deposits will be made available by auctions.
• No early withdrawal allowed.
• Term deposits will be open to the branches and agencies of foreign banks.
• Maturities will not exceed 1 year, with majority from 1 month to 6 months.
• Institutions can use term deposits as collateral for the Fed discount window.
• Term deposits would receive a zero risk-weight for risk-based capital purposes.

The facility may temporarily transfer the excess reserves into the term deposits at the Federal Reserve, but that will do nothing to shrink the size of the Fed's balance sheet. The term deposits will sit on the Liabilities side of the balance sheet, the same side as the excess reserves.

I find it ironic that the term deposits would receive a zero risk-weight when the Federal Reserve is loaded with agency bonds and mortgage backed securities. That's one advantage of being a central bank, who can print money and who is effectively backstopped by the government (i.e. taxpayers).

What if the financial institutions decline the offer and would rather take the money out of the excess reserves or keep the money in the excess reserves? I suppose that's why the Federal Reserve is seeking comments from the very institutions whom it wants to use this facility and help manage the excess reserves lest they spill over into the real economy (aka Main Street). It is asking the financial institutions what it will take for them to continue to park their money (excess reserves) with the Fed.

Well I have to say, regardless of whether this can be considered as an "exit strategy" (I personally think this should be called "kicking the can further down the road"), the existence of the excess reserves at the Fed is real, not fictional, and the Fed is scared enough of its inflationary implications.

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And in Another Corner of Middle East...

I came across this curious bit of news. The website reporting this is an Iranian news site.

Israel summons envoys from all over the world (12/26/09 Presstv.ir)

"Israel's ambassadors and consuls generals from all over the world have been summoned to attend a conference to be held over global challenges facing Israel.

"The meeting to be attended in Jerusalem Al-Quds on December 27-31 is hosted by the Ministry of Foreign Affairs, headed by Deputy Prime Minister and Foreign Minister Avigdor Lieberman, the ministry reported on its website.

""The idea is to facilitate direct dialogue with the country's leaders, mutual updates on major diplomatic issues, and a discussion of action plans to deal with the challenges awaiting Israel in the international arena in the coming year, including the Iranian threat," it said." [The article continues.]

The Ministry of Foreign Affairs of Israel does indeed have such an announcement. The Ministry says this will be the "first-ever" conference of this nature.

(I will hold on to my call options on a double-long crude oil ETF, just in case.)

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Wag the Dog, for the Nth Time?

Yemen...., where did I read about the country just recently? In an obscure piece of news that got little publicity at that time (about 10 days ago, I believe), but it struck me as odd. Yemen? The news was that the U.S. military was bombing Yemen by the direct order from the U.S. president, killing civilians (but claiming the bombing killed a dozen Al-Quada leader, as usual).

This is what was reported in the semi-official White House PR organ, aka ABC News:

Obama Ordered U.S. Military Strike on Yemen Terrorists (undated, my best guess is 12/18/09, The Blotter from Brian Ross, ABC News)

"On orders from President Barack Obama, the U.S. military launched cruise missiles early Thursday against two suspected al-Qaeda sites in Yemen, administration officials told ABC News in a report broadcast on ABC World News with Charles Gibson.

"One of the targeted sites was a suspected al Qaeda training camp north of the capitol, Sanaa, and the second target was a location where officials said "an imminent attack against a U.S. asset was being planned."

"The Yemen attacks by the U.S. military represent a major escalation of the Obama administration's campaign against al Qaeda."

Reporter Brian Ross, in a video clip on the linked article, emphasizes the order came directly from Oval Office.

(Perhaps President Obama is getting ready for the next year's Nobel Peace Prize by further expanding the war on terror.)

Then, right on cue, the Christmas Day bomber, a son of a wealthy Nigerian banker, materializes, and says there are more like him coming from Yemen.

Curiously, two attorneys (husband and wife) who were on board the plane the Nigerian was trying to blow up claim they witnessed the bomber being assisted by a sharp-dressed man at the boarding gate in Amsterdam so that he could board the plane without a passport.

Something doesn't quite add up.

I'm not yet sure who benefits from all this or what agenda is being promoted while they wag this dog, but it is very clear who the immediate losers are: air travelers worldwide who are now being subjected to ridiculously lengthy and probably unnecessary pre-boarding screenings to prevent them from lighting up a firecracker or two in their pants.

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Short-Term Treasury Bills Lacking Interest Among Foreigners

if 13-week bill auction is any indication.

The U.S. Treasury Department will auction away the last big batch of Treasury bills and notes in the final week of this year. The total amount will probably exceed $200 billion (4-week bill amount yet to be announced), of which $118 billion will be Treasury notes of various durations.

I was making a mental note as I went through the recent auction results, and something felt disturbing (from Treasury Department's point of view, I suppose). So I checked the numbers. And here's the chart of 13-week bill auctions since October, plotting the Indirect Bidder (foreign buyers) Percentage and Bid to Cover Ratio.



13-week bill is a run-of-the-mill Treasury bill. The Treasury Department auctions this bill every single week along with 26-week bill and 4-week bill, to the tune of $30 billion in each auction. No one pays particular attention to the auction results of these short-duration bills. They are continuously rolled over to fund the operation of the federal government.

What I noticed was a rather steep, consecutive decline of the Indirect Bidder Percentage in 13-week bill auctions. Bid to Cover Ratio has also started to decline. Now, both Indirect Bidder Percentage and Bid to Cover Ratio sit below their respective 2-plus month support (dotted lines).

Foreign buyers of Treasuries have shifted to the shorter end, or so we have been told. They now seem to be also deserting the short maturity bills. Treasury Secretary Timmy Geithner has announced the Treasury's intention to increase the average maturity of all Treasuries from the current 49 months to 72 months. That means 7-year note, 10-year note, and 30-year bond issues will be significantly increased. The prices will be pressured. Will foreign buyers increase buying the longer-dated notes and bonds for better yields? Or, seeing that there may be no end in sight for the U.S. deficit spending, will they further decrease the long-term Treasuries holdings?

In the worst case, there will be few foreign buyers to be found for both short-term and long-term Treasuries. The vice chairman of the Chinese central bank has recently said, in no uncertain terms, that the world does not have money to continue to buy the U.S. debt.

Who is going to absorb the avalanche of long-term Treasuries, by the way? This immediately comes to my mind. I hope I'm wrong, but I have this sinking feeling that my hope is ill-founded.

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Merry Free-Market, Hard-Money, Libertarian Christmas!

and don't trust the government.

There are lessons to be learned from Christmas some two thousand-plus years ago, according to a merry (and heart-warming) piece written by Lew Rockwell eight years ago.

The Economic Lessons of Bethlehem (or Who Was the Inn Keeper?)
(Llewellyn H. Rockwell, Jr., 12/22/01 Lewrockwell.com) [emphasis is mine]

There's no room at the inn so they had to stay in a stable. (Cruel inn keeper!)

Far from being cruel, the inn keeper offered what he could to satisfy a customer. As a money-making private businessman, he would have no reason to turn away "this man of royal lineage and his beautiful, expecting bride."

"In any case, the second chapter of St. Luke doesn’t say that they were continually rejected at place after place. It tells of the charity of a single inn owner, perhaps the first person they encountered, who, after all, was a businessman. His inn was full, but he offered them what he had: the stable. There is no mention that the innkeeper charged the couple even one copper coin, though given his rights as a property owner, he certainly could have.

"It’s remarkable, then, to think that when the Word was made flesh with the birth of Jesus, it was through the intercessory work of a private businessman. Without his assistance, the story would have been very different indeed. People complain about the "commercialization" of Christmas, but clearly commerce was there from the beginning, playing an essential and laudable role."

Why were they in Bethlehem to begin with?

Because of the Roman emperor's decree that everyone be counted and taxed.

"It was because of a government decree that Mary and Joseph, and so many others like them, were traveling in the first place. They had to be uprooted for fear of the emperor’s census workers and tax collectors. And consider the costs of slogging all the way "from Galilee, out of the city of Nazareth, into Judea, unto the city of David," not to speak of the opportunity costs Joseph endured having to leave his own business. Thus we have another lesson: government’s use of coercive dictates distort the market."

What did Three Kings (or Three Wise Men, and Lew points out they are usually mutually exclusive) give?

Did they give the new parents some debased Roman coins? No. They gave them frankincense, gold, and myrrh. They give them hard assets of high value.

"These were the most rare items obtainable in that world in those times, and they must have commanded a very high market price.

"Far from rejecting them as extravagant, the Holy Family accepted them as gifts worthy of the Divine Messiah. Neither is there a record that suggests that the Holy Family paid any capital gains tax on them, though such gifts vastly increased their net wealth. Hence, another lesson: there is nothing immoral about wealth; wealth is something to be valued, owned privately, given and exchanged."

Herod wanted to know where Jesus was so that he could come and adore him.

Was that true? Not really. He wanted to kill him.

"...Roman Emperor's local enforcer, Herod. Not only did he order people to leave their homes and foot the bill for travel so that they could be taxed. Herod was also a liar: he told the Wise Men that he wanted to find Jesus so that he could "come and adore Him." In fact, Herod wanted to kill Him. Hence, another lesson: you can’t trust a political hack to tell the truth."

When they learned of Herod's plan to kill the newborn, what did Wise Men and the Holy Family do?

Were they resigned to the reality that the government did whatever it wanted anyway and there was no point in resisting? Hell no. Three Wise Men went home without telling Herod, and the Family fled.

"The Wise Men, being wise, snubbed Herod and "went back another way" – taking their lives in their hands (Herod conducted a furious search for them later). As for Mary and Joseph, an angel advised Joseph to "take the child and his mother, and fly into Egypt." In short, they resisted. Lesson number four: the angels are on the side of those who resist government."

"In the Gospel narratives, the role of private enterprise, and the evil of government power, only begin there. Jesus used commercial examples in his parables (e.g., laborers in the vineyard, the parable of the talents) and made it clear that he had come to save even such reviled sinners as tax collectors.

"And just as His birth was facilitated by the owner of an "inn," the same Greek word "kataluma" is employed to describe the location of the Last Supper before Jesus was crucified by the government. Thus, private enterprise was there from birth, through life, and to death, providing a refuge of safety and productivity, just as it has in ours."

Amen.

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Merry Christmas!

Wolfgang Amadeus Mozart "Regina Coeli" (KV276)

Despite the dismal news and commentary I post on this blog, I believe in human aspiration - aspire to achieve, to become, something higher than lowly, earth-bound self. I am not a Christian, but when I hear the music like this I believe in the ultimate goodness and nobleness of human beings, along with the composer who wrote the music and the performers throughout the ages who have sung the explosively joyous opening chord to praise the "Queen of Heaven".

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Supreme Court Guts Due Process Protection

while our attention is diverted to anything but this.

Supreme Court Guts Due Process Protection
(12/20/09 naked capitalism)

"Reader Walter passed along this distressing sighting from Chris Floyd’s blog. American civil liberties were gutted last week, and the media failed to take note of it.

"The development? If the president or one of his subordinates declares someone to be an “enemy combatant” (the 21st century version of “enemy of the state”) he is denied any protection of the law. So any trouble-maker (which means anyone) can be whisked away, incarcerated, tortured, “disappeared,” you name it. Floyd’s commentary:

"After hearing passionate arguments from the Obama Administration, the Supreme Court acquiesced to the president’s fervent request and, in a one-line ruling, let stand a lower court decision that declared torture an ordinary, expected consequence of military detention, while introducing a shocking new precedent for all future courts to follow: anyone who is arbitrarily declared a “suspected enemy combatant” by the president or his designated minions is no longer a “person.” They will simply cease to exist as a legal entity. They will have no inherent rights, no human rights, no legal standing whatsoever — save whatever modicum of process the government arbitrarily deigns to grant them from time to time, with its ever-shifting tribunals and show trials.

"It is hard to overstate the significance of this horrid decision. The fact that the Supreme Court authorized this land grab says we no longer have an independent judiciary, that the Supreme Court itself is gutting the protections supposedly provided by the legal system. Per Floyd:

"In fact, our most august defenders of the Constitution did not have to exert themselves in the slightest to eviscerate not merely 220 years of Constitutional jurisprudence but also centuries of agonizing effort to lift civilization a few inches out of the blood-soaked mire that is our common human legacy. They just had to write a single sentence."

It is not just about torture or indefinite detention of "enemy combatant". As the article says at the end, ANYONE can be deemed "enemy combatant" if a President of the United States and/or his underlings so declare:

"Yves here. The implications are FAR worse. Anyone can be stripped, with NO RECOURSE, of all their legal rights on a Presidential say so. Readers in the US no longer have any security under the law.

"Roman citizens enjoyed a right to a trial, a right of appeal, and could not be tortured, whipped, or executed except if found guilty of treason, and anyone charged with treason could demand a trial in Rome. We have regressed more than 2000 years with this appalling ruling. "

On the December 14, 2009 Order List of the U.S. Supreme Court, this is the one line that says the court has declined to hear the case and will let the prior ruling stand:

CERTIORARI DENIED

09-227 RASUL, SHAFIQ, ET AL. V. MYERS, RICHARD, ET AL.

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Rozeff: A 400 percent (and Higher) Excise Tax

America on the verge of mass insanity, says Professor Rozeff. The professor is talking about that stupid plan in Congress to tax all stock, option, futures transactions, which I have discussed on this blog here.

A 400 Percent (and Higher) Excise Tax
(Michael S. Rozeff, 12/21/09 Lewrockwell.com) [emphasis is mine]

"The Wall Street Journal brings more bad news. A headline reads "Lawmakers Weigh a Wall Street Tax." The first mention of this was in October. The proposal has not died as Congress seeks new ways to finance its profligate spending. Both houses are considering legislation.

"The tax would fall on financial exchanges of all kinds. It is not a tax on Wall Street. It is a tax on anyone who buys and sells securities.

"James Tobin originated the notion in the 1970s. Larry Summers supported it. Robert Kuttner supports it. That’s three Keynesian economists right there. It must be a bad idea."

The bill that has been introduced in the House would tax stock trading at 0.25% of transaction amount, and 0.02% on options, futures and other derivatives. I(it's not hard to guess who lobbied for lower tax for derivatives - Vampire Squid anyone?) The government's argument is that the tax is so small that ordinary investors won't be affected by it. I strongly disagree, as I've written in my previous posts, and Professor Rozeff also shows how costly this tax actually is:

"A well-known broker charges $7 a trade in any size and provides a more than satisfactory complement of other services. If a 0.25 percent tax goes in, the cost of a $10,000 trade becomes $32. The tax is 3.57 times the brokerage cost of $7. This is an excise tax of 357 percent on this size trade. For a $100,000 trade, the cost is $257. The tax is 35.7 times the cost of $7. The excise tax rate is 3,570 percent."

He notes that in the 1960s the cost to trade was very high, with commissions making up a large part of the cost (1%). After a few decades of efforts by industry participants, the cost to trade has come down significantly. But now the government wants to turn back the clock 40 years so that they can grab more from citizens.

The first $100,000 worth of transaction would be tax-exempt, according to the House bill. But guess what? Even a small-time investors/speculator can use up that exemption in one day, if not in one hour. How? Just by buying, say 100 shares of Google at $594, selling it the next day when it pops up to $620. Roundtrip transaction of $121,400 to net $2600 profit. Now you will have already exceeded your annual tax exemption allowance in just one roundtrip trade.

More importantly, though, Professor Rozeff points out the detrimental effect of the tax on stabilizing the financial markets:

"This tax is as bad as a capital gains tax. The latter discourages investors from moving capital around freely. It discourages risk-taking. It discourages moving out of less and into more productive projects. The tax on financial transactions does the same.

"This tax makes markets far less liquid. There will be fewer buyers and sellers. Bid-ask spreads will rise steeply."

"Lawmakers probably do not realize that a large fraction of the capital stock of corporations is carried by short-term speculators, due to the uncertainties of business. Turnover is high on many stocks because of unwillingness to hold long-term positions under conditions of high uncertainty. If short-term speculators are driven from the market, as this tax will do, then long-term speculators will have to take and hold the stock. They will demand a higher risk premium as they are made to depart from their preferred portfolio holdings. This will drive up capital costs to corporations. This will slow down capital accumulation and growth. This will lower employment and wages.

"Low transactions costs bring both uninformed and informed investors into the market. But the uninformed tend to be weeded out because they lose money. With a transactions tax in place of this size, the informed traders will also be far more reluctant to trade. The bounds within which prices trade will become that much larger. They will become all the worse as signals of value to corporate managers. Investors who attempt to buy and sell in quantity or rapidly will find prices changing due to their own trades, even if they possess no special information."

The professor then quotes a passage in the Wall Street Journal article which quotes the trading tax's advocates and calls it baloney and claptrap:

"The Journal article dutifully reports a mass of lies and totally erroneous ideas of the advocates of the tax:

"Congressional advocates describe the new tax as a matter of fairness: Taxpayers bailed out Wall Street, so Wall Street must help rebuild the economy and shore up the government’s shaky finances. Some experts say the tax also might help reduce market volatility."

"Is it fair to tax innocent investors and brokers who have worked to bring down costs? Is it fair to label them as "Wall Street?" Is it fair for the government to have paid off big banks and the likes of Goldman Sachs in the first place? Is it fair to turn around and then tax investors as if they were the ones who were responsible for doing something wrong? Can such a tax rebuild the economy?"

The answers are no, no, no, no, and big NO.

The article ends with these sentences:

"America seems to be on the verge of mass insanity as Congress comes up with increasingly bad legislation. Can nothing stem the irrationality of American society and government?"

I don't know, Professor. It's not just Congress either. The president wins Nobel Peace Prize for expanding a war, the Federal Reserve chairman is "the man of the year" for bailing out big banks around the world at the expense of the U.S. taxpayers.

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Judge Napolitano: Is Health Care a Right?

Answer is No.

The Senate now apparently has 60 votes to pass the government health care [deform] bill, now that Senator Nelson of Nebraska is happily bought at the expense of taxpayers in other states.

The 2,000 plus-page Senate bill, which is tacked on to H.R. 3590 Service Members Home Ownership Tax Act of 2009, is even worse than the House bill for small businesses and taxpayers. It contains just about everything that people across the country have been protesting against since this summer: so-called monthly abortion premium, monthly penalty fee for not having insurance, so-called "death panel", tax on medical device, tax on prescription drugs, new tax on PBMs (Pharmacy Benefit Management, third party administrators of prescription drug programs), not to mention gigantic new power for IRS and effective national ID scheme which were already in the House bill.

The government and the supporters of the government's plan call health care "a right". And this bill will force us to participate, whether we like it or not, with the threat of penalty and jail time. One heck of a right, I say. (Or one heck of a Newspeak, I should say.)

But is health care a right? Judge Napolitano doesn't think so.

What Is a Right? (Andrew P. Napolitano, 12/18/09 Lewrockwell.com)
[emphasis is mine]

In the continually harsh public discourse over the President’s proposals for federally-managed healthcare, the Big Government progressives in both the Democratic and the Republican parties have been trying to trick us. These folks, who really want the government to care for us from cradle to grave, have been promoting the idea that health care is a right. In promoting that false premise, they have succeeded in moving the debate from WHETHER the feds should micro-manage health care to HOW the feds should micro-manage health care. This is a false premise, and we should reject it. Health care is not a right; it is a good, like food, like shelter, and like clothing.

What is a right? A right is a gift from God that extends from our humanity. Thinkers from St. Thomas Aquinas, to Thomas Jefferson, to the Rev. Dr. Martin Luther King, Jr., to Pope John Paul II have all argued that our rights are a natural part of our humanity. We own our bodies, thus we own the gifts that emanate from our bodies. So, our right to life, our right to develop our personalities, our right to think as we wish, to say what we think, to publish what we say, our right to worship or not worship, our right to travel, to defend ourselves, to use our own property as we see fit, our right to due process – fairness – from the government, and our right to be left alone, are all rights that stem from our humanity. These are natural rights that we are born with. The government doesn’t give them to us and the government doesn’t pay for them and the government can’t take them away, unless a jury finds that we have violated someone else’s rights.

What is a good? A good is something we want or need. In a sense, it is the opposite of a right. We have our rights from birth, but we need our parents when we are children and we need ourselves as adults to purchase the goods we require for existence. So, food is a good, shelter is a good, clothing is a good, education is a good, a car is a good, legal representation is a good, working out at a gym is a good, and access to health care is a good. Does the government give us goods? Well, sometimes it takes money from some of us and gives that money to others. You can call that taxation or you can call it theft; but you cannot call it a right.

A right stems from our humanity. A good is something you buy or someone else buys for you.

Now, when you look at health care for what it is, when you look at the US Constitution, when you look at the history of human freedom, when you accept the American value of the primacy of the individual over the fleeting wishes of the government, it becomes apparent that those who claim that healthcare is a right simply want to extend a form of government welfare.

When I make this argument to my Big Government friends, they come back at me with…well, if people don’t have health insurance, they will just go to hospitals and we will end up paying for them anyway. Why should that be? We don’t let people steal food from a supermarket or an apartment from a landlord or clothing from a local shop. Why do we let them take healthcare from a hospital without paying for it? Well, my Big Government friends contend, that’s charity.

They are wrong again. It is impossible to be charitable with someone else’s money. Charity comes from your own heart, not from the government spending your money. When we pay our taxes to the government and it gives that money away, that’s not charity, that’s welfare. When the government takes more from us than it needs to secure our freedoms, so it can have money to give away, that’s not charity, that’s theft. And when the government forces hospitals to provide free health care to those who can’t or won’t care for themselves, that’s not charity, that’s slavery. That’s why we now have constitutional chaos, because the government steals and enslaves, and we outlawed that a long time ago.

Andrew P. Napolitano [send him mail], a former judge of the Superior Court of New Jersey, is the senior judicial analyst at the Fox News Channel. His next book is Lies the Government Told You: Myth, Power, and Deception in American History, (Nelson, 2010).

(Copyright © 2009 by LewRockwell.com.)

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Chinese Snub Obama in Copenhagen

not once but twice in the same day.

Obama must have pissed off Chinese very badly. I don't think this is a typical Chinese antic, for, after all, they are face- and protocol-conscious East Asians. The president had better hope Chinese will not stop buying Treasuries.

China's delaying tactics threaten climate deal
(Chris Green, 12/18/09 The Independent)

"China is attempting to scupper chances of a comprehenive agreement at the Copenhagen climate summit by using delaying tactics, sources inside the negotiations have told The Independent.

"At an emergency meeting convened at the Bella Center this morning, Barack Obama and Gordon Brown assembled 26 heads of state in an attempt to revive a deal. But China's Premier Wen Jiabao did not attend and was replaced by vice foreign minister He Yafei.

"This afternoon, the US president and his secretary of state Hillary Clinton called another meeting with China, but were snubbed again when only three low-level Chinese delegates arrived."

[Not even the foreign minister himself. Ouch.]

"According to a high level source, the US president clearly regarded Premier Wen’s absence as a major diplomatic insult, and snapped: “It would be nice to negotiate with somebody who can make political decisions.”

It looks like the U.S. president has made things worse by going to Copenhagen. His speech had a frigid reception, leaving Venezuela's Hugo Chavez to continue to smell "sulpher". Bullying Chinese clearly backfired and now the Chinese are pissed, and he is on the way back to Washington D.C. before the final vote, because of blizzard in D.C..

Copenhagen seems to have a bad juju for Obama. In retrospect, his trip to Copenhagen for Chicago's Olympic bid may have been a dry-run for the latest snub.

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Reid Plans Christmas Eve Vote on Health Care Bill

What a hard-working Congress. After passing $1.1 trillion spending bill on Sunday, the Senate Majority Leader Harry Reid is planning the vote on the Senate health care bill on Christmas Eve. Makes you proud, doesn't it?

Reid plans Christmas Eve passage of health bill
(12/17/09 MSNBC via Newsvine)

"WASHINGTON - Senate Democratic leaders have laid out an ambitious timetable for passing the health care bill on Christmas Eve. But if they're successful with their strategy, the vote that matters most and sets the stage for final passage would happen on Monday.

"To be successful, the plan assumes Majority Leader Harry Reid, D-Nev., will have three key elements before the weekend: the bill's cost estimate from the Congressional Budget Office, the legislation completely written and available to the public, and assurance from all 60 members of his caucus that they will vote for the package.

"As of this writing, none of those things has materialized."

If they manage to pass this piece of you know what, what a wonderful Christmas present for the health care lobby! For taxpayers, let's forget Christmas, there's nothing to be cheerful about.

According to Rasmussen Report on December 14, 56% of U.S. voters are now against the health care reform plan being crafted by the Obama administration and congressional Democrats. 40% of the voters are in favor. More importantly, however, 46% now strongly oppose the plan, compared to just 19% who strongly favor the plan. Also, according to Scott Rasmussen, "63% of senior citizens oppose the plan, including 52% who strongly oppose it."

Rasmussen Report also reports that unprecedented 71% of the U.S. voters are angry at the federal government, including 46% who are very angry.

But no matter how much the voters are against the government's health care reform, how angry they are at the government, they don't get to express their displeasure until 2010 election.

Besides, I still remember what happened in September/October 2008: people were dead-set against the $700 billion bank bailout bill (something like 99 to 1 against), but the Democratic Congress passed it anyway (those who opposed were Republicans). And what happened to those Democrats in November election? Nothing. Almost all of them got elected back.

99% of poll respondents at Fox News are against the government raising debt ceiling, Zero Hedge reports. They will raise it anyway, and give themselves a nice raise as an aside.

As long as 1% of population is for it, Congress will pass any and everything. Health care bill, debt ceiling bill, defense bill, what have you.

To add insult to injury, the overburdened taxpayers were lectured by President Obama the other day that unless the health care bill gets passed, the federal government will go bankrupt. (I also remember how he threatened the general public with "catastrophe" unless Congress passed his so-called stimulus bill.)

First, your government is already broke, Mr. President, as you already admitted back in May. Second, in case you don't know yet, an increasing number of Americans (voters, not the political class) will cheer if your government goes broke and stops spending. It would make a very nice Christmas present if you stop spending, for a change.

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War Bonds Proposed to Pay for Iraq, Af-Pak

So we are indeed in a depression like the last big one, when people struggled to survive and at the same time did the patriotic duty by buying war bonds from the government.

War bonds proposed to pay for Afghanistan, Iraq conflicts
(Lesley Clark, 12/16/09 McClatchy)

"WASHINGTON — Lawmakers in both houses of Congress have introduced legislation to pay for the wars in Afghanistan and Iraq by using a method that's a throwback to prior U.S. conflicts: war bonds.

"Saying that it would "promote national shared sacrifice and responsibility," Rep. Kendrick Meek, D-Fla., introduced a bill Wednesday in the House of Representatives that would authorize the treasury secretary to issue and sell war bonds to Americans to fund the wars.

"Sen. Ben Nelson, D-Neb., filed companion legislation in the Senate earlier this week.

""At a time of tremendous sacrifice for our military families, we need to promote shared sacrifice and shoulder collective responsibility as a nation as we fight two wars halfway across the globe," Meek said, calling war bonds a "cost-effective way" to reduce dependence on foreign creditors.
He also said the bonds would "create an outlet for Americans to express their patriotism and support for our service members as well as the security mission for which they are deployed."

"The legislation comes as Congress debates ways to pay for the wars, including a tax on the wealthy. Critics note that the bonds must be repaid eventually, merely postponing the debt.

"The United States last issued war bonds during World War II."

(The article continues.)

I'm wondering why these lawmakers think such war bonds sell. Who would buy them? Oh I forgot, a great number of Democrats are now for these necessary wars, now that their guy is at the White House.

Or just like the health care bill that's currently stuck in the Senate, would they force people to buy them somehow? Have ACORN push the bonds to patriotic low-income working class people?

I suggest they make it mandatory for any member of Congress who voted for the $634 billion defense appropriation bill (which doesn't include the cost for the surge announced by Obama) today to buy them. And allocate to each one of them certain number of bonds so that they can sell them to their friends, family and relatives.

Better yet, just let the Federal Reserve do what a central bank was set up for: to fund the war by accepting the government debts and print out money. War bonds would suck up the money from people who would have used it in productive ways. Then when the wars are over (if ever), the government would have to pay off. How would it do that? Either by raising taxes or printing more money and pay off through inflation. Who would be the sore losers? American people who bought war bonds.

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Fake Gold Bars in Central Bank's Vault

No, I am not talking about the recent rumor about gold-plated tungsten bars allegedly shipped from the U.S. and found in Hong Kong. This one actually happened. Ethiopia's central bank found out that some of the gold they thought they had was nothing but gold-plated steel.

I got the link below from an article on Lewrockwell.com, "How to Make Convincing Fake-Gold Bars" (Theo Gray, originally appeared in Popular Science magazine).

Fake fears over Ethiopia's gold (Elizabeth Blunt, 3/13/08, BBC News)

"Ethiopia's national bank has been told to inspect all the gold in its vaults to determine its authenticity.

"It follows the discovery that some of the "gold" it had bought for millions of dollars was gold-plated steel.

"The first hint that something was wrong reportedly came when the Ethiopian central bank exported a consignment of gold bars to South Africa.

"The South Africans sent them back, complaining that they had been sold gilded steel.

"An investigation revealed that the bank had bought a consignment of fake gold from a supplier, who is now under arrest.

"Other arrests followed, including business associates of the main accused; national bank officials; and chemists from the Geological Survey of Ethiopia, whose job it is to assay the bank's purchases of gold and certify that they are real.

"But what has clearly now got the government even more worried is that another different batch of gold in the bank's vaults has also been found to be fake, and this time it was gold which had been there for several years, after being seized from smugglers trying to take it to Djibouti.
Mining

"The Ethiopian parliament's budget and finance committee ordered the inspection of all gold in the national bank's vaults.

"A report from the auditor-general on the affair is expected to be presented to parliament during its current session.

"Gold is mined in Ethiopia in considerable quantities, and a trader selling gold to the central bank has to have it tested and certified by the Geological Survey.

"Whether the bank bought fake gold in the first place, or whether real gold from the vaults has been swapped for gilded steel, the fraud has cost the bank many millions of dollars, and it must have involved collusion on a considerable scale. "

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Dylan Radigan: Fraudulent Financial Reform

You tell him (Rep. Perlmutter), Radigan!

So the Obama Administration is selling this "one heck of a piece" as "the biggest and best package since the New Deal"? (So are we in a depression after all, no matter what Obama declared the other day?)

One of the things that particularly irked me was that Congressman Perlmutter tried to spin 0.25% tax on trading transaction as "windfall tax" on government-supported (i.e. ill-gotten) gains by big Wall Street banks. 0.25% tax would apply to every investor, large and small. It would punish small retail investors trying to recoup losses from the market crash that was practically caused by the Federal Reserve (loose monetary policy), Wall Street banks (reckless speculation on easy money), and the government (lack of enforcement of whatever regulations that they actually had, as well as dismantling others). And this Congressman proclaims they have the best package since the New Deal.

Well, the New Deal legislations included one that hired a lot of people to come up with 350 different recipes for cooking spinach. One heck of a legislation indeed.

I would say this is the most monstrous piece of you know what since the Glass-Owen Act, aka the Federal Reserve Act.

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No Wonder Big Banks Make Money

An interesting thing I've noticed on my past few visits to the local branches of big national banks like Wells Fargo, Bank of America, and Chase.

All these branches are staffed with people who look barely out of college if not high school. Nowhere can I find someone who looks over 30. And it's not just tellers at the windows. So-called bankers, with own cubicles and talking to customers sitting at their desks, look no older than 30. I have no idea how it is in other cities, but where I am, that's what I see these days.

One such banker in one of the branches not only looked and talked as if he hadn't quite finished his community college courses but also kept chewing gum all the time we were talking. I went to another bank, and walked up to a teller and told him I needed to pay my credit card bill. "Excellent choice!" he exclaimed.

Ummm, do I have any choice? Probably his most recent job was an waiter in a family restaurant.

While I am happy that these young people getting their careers started as bankers, I'm just wondering what happened to those people whom I used to see at those branches who looked over 30 and who seemed to know what they were doing? Were they fired?

These young bankers cannot be earning a lot more above the minimum wage. (They shouldn't, judging by the way they interact, or cannot interact I should say, with their customers.) No wonder these big national banks make profits. They hire cheapest people, they've received practically free money from the government (i.e. taxpayers), they cut off credit limit (or worse, simply close the accounts) for millions of card holders just when they need extra help, they refuse to lend to businesses and turn down mortgage applications in the last minute.

The irony is that all the 'money' for card loans and home mortgages have been created by these banks out of thin air. Fractional banking at its best for them, worst for the rest of us. It's a myth that banks make loans out of deposits or out of excess reserves that they keep at the Federal Reserve. They do no such thing. (Read this paper by the New York Fed: excess reserves have nothing to do with banks' making loans.) It cost banks absolutely nothing to create new money. As long as they get to collect interest on those loans, it's an infinite profit for them without risking any real assets.

Returning TARP money won't earn them praise from anyone but themselves and their sycophants and apologists in the media.

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Obama Jawboning Bankers: Lend!

O Horror! What's gonna happen if they actually start lending?

Obama implores top bankers to increase lending
(Tom Raum, 12/14/09 AP via Yahoo Finance)

"WASHINGTON (AP) -- President Barack Obama implored top bankers Monday to help keep the fragile recovery from faltering by boosting lending to small businesses and getting behind an overhaul of financial regulation. "We rise and fall together," Obama declared.

"In response to the president's burst of populist jawboning, some banks pledged to increase loans and exercise more self-control over outsized compensation. But the full impact of Obama's intervention was hard to gauge: The government is losing leverage as major banks repay bailout loans.

"Obama's lecture to the bankers was also part of a broader election-season Democratic effort to tie sluggish bank lending to continued high joblessness -- and to try to tie the banking industry to Republican efforts against Obama's financial overhaul legislation.

"It's a tough balancing act, given past contributions of big banks to Democratic as well as Republican candidates."

You're not kidding.

"We rise and fall together," Mr. President? Who are "we"? Wall Street and Main Street? Or Bankers and the president?

After having criticized the nation's large banks for causing the financial meltdown last year by years of risky lending and speculation, the president is demanding that the same banks to do the same, for the sake of the economy.

"The meeting came amid growing friction between the president and the banking industry, a day after Obama denounced "fat cat bankers on Wall Street" who enjoy big bonuses but "just don't get it.""

Get what? How can he denounce "fat cat bankers on Wall Street" who bankrolled his campaign? Easy. Because this is a political grand-standing to appeal to American voters who are increasingly disillusioned with his presidency. His own B+ assessment doesn't seem to agree with what Americans are thinking about his performance.

Obama shouldn't push too much on compensation for those "fat cats", when the average pay for federal workers are 76% higher than the average pay for private workers, i.e. Main Street. Scrawny cats on Main Street still can read the news. (See my post from yesterday, about the middle.)

I just wonder if Obama is aware of what will happen if banks take his words too seriously and start lending out of the excess reserves that they hold at the Federal Reserve. $1 trillion of them. The Federal Reserve, to compensate for the drain on the liability side of the balance sheet, would be forced to sell assets at a market price. The assets include agency bonds (current holding $156 billion) that no one else in the world buys but the Fed (and some risk-taking hedge funds, I suppose), and mortgage-backed securities ($854 billion) that no one wants at par. After that, they will have to sell some Treasuries ($777 billion), or do the fire sale of the holdings at Maiden Lane SIVs (65 billion). They could sell gold (the Fed owns 13 million troy ounce, mostly at NY Fed), which they account at $43 per troy ounce. (Treasury Department's gold holdings are separate from the Fed's, but they are combined and the combined amount shows up on the Fed's balance sheet.)

(The amounts of the Fed's holdings are taken from the latest Fed balance sheet, 12/10/09. The mount of gold held by the Fed is from Treasury Department data.)

In short, if the banks actually start lending out of the excess reserves, the Fed will be forced to dump the assets, thereby causing lower prices for those assets in the market. Treasury prices go down, the rates and yields will go up. Foreign creditors will be furious, and U.S. dollar will go down. There's your exit strategy, Chairman Bernanke. You will have no choice but exit, if the banks start draining the excess reserves. You'd better hope you have a very tight control over your member banks.

So my guess is what I already said above: this is just a grand-standing on Obama's part. He demands that the banks lend, and the banks say oh yes Mr. President. But the banks know, and Obama knows, they cannot lend, so they won't. Then Obama gets to blame banks even more loudly as the economy continues to stagnate or contract, appealing to the ignorant (or so he thinks) American voters. It's all those bad bankers' fault!

But where can the new money go in a stagnating economy with all the excesses that caused the bubble and the crash still there? More misallocation of resources won't solve any problem. About the only thing that has improved this year is the stock market.

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Rumor of Civil War in the U.S.? Can't Be, Right?

I've encountered this rumor elsewhere on the net recently: that Obama is deploying a huge number of U.S. troops back to USNORTHCOM to prepare for the civil war in the U.S.

These two articles that appeared on the European Union Times seem to be the source:

Obama Orders 1 Million US Troops to Prepare for Civil War (11/28/09)
U.S. Forces Plan Direct Action Against American Citizens (12/11/09)

Dismiss it as a pure fiction, lie, whatever, as you like. I am not endorsing nor disputing the articles, the publisher, or the rumor. I am just linking. If there's a shread of truth in this rumor, however, it is going to be really very ugly.

The following is the article in its entirety concerning this rumor, written by an Army veteran for Lewrockwell.com:

A Critical Decision (Michael Gaddy, 12/7/09 Lewrockwell.com)

"Members of all branches of the United States Military will soon be facing a most critical decision. A report emerged that Obama is using the deployment of additional troops to Afghanistan to cover for the movement of some 200,000 troops, presently on duty in countries other than Iraq and Afghanistan, to USNORTHCOM to prepare for the "expected outbreak of Civil War within the United States before the end of winter."

"It would appear those who call themselves "public servants" believe the people they supposedly serve have become dissatisfied with their job performance and will resort to some form of civil disobedience, which will necessitate military intervention. According to the article, Obama believes the reason for this civil unrest to be an expected "implosion" of this country’s financial systems. Should these events occur, members of the military would be forced to decide whether they would support their government, which gave hundreds of billions to government cronies in the financial sector, or their country.

"A prudent man would speculate if the government so fears coming civil unrest, will they move to seize firearms throughout the country and use these military forces along with law enforcement to do so? I believe the answer can be found in the events surrounding the aftermath of Hurricane Katrina. Government forces there not only seized firearms from private citizens but also relocated many citizens against their will.

"Millions of Americans have prayed for the safety of the military as they fight the government’s wars all over the planet. Many believe the military to be defending the country from enemies that would take our weapons and our freedoms. What will their actions be when the US military becomes that enemy? Will the military willingly participate in such acts? Such are questions the future holds.

"The government has spent decades defining those who oppose its unlawful exploits as enemies of the state. Those who can or will not differentiate between the government and the country have fallen hook, line and sinker for this demonization of those who demand the government operate within the constraints of the Constitution and moral law. Most of those who blindly support the illegal actions of the government have been bought and paid for with the taxes of those who actually produce something. Unfortunately, primary among those bought-and-paid-for entities are law enforcement and the military.

"Both political parties have conducted this demonization of true Patriots. While the democrats have been traditionally anti-gun and liberty, the republicans bought into the program with the fascist Patriot Act and the illegal, unconstitutional War on Terror. The two dominant political parties in this country are two wings of the same vulture: blatant in-your-face socialism. There are no answers to our problems to be found in either political party.

"Many on the right have bought into the ideas expressed by leaders of the military that all who oppose the state and its illegal agenda should be treated no differently than the "insurgents" the military has been facing in Iraq and Afghanistan. Nowhere is that better illustrated than here where a law enforcement publication is advocating military tactics promoted by General David Petraeus be used against those whom the state defines as its enemies. While the article in Guns and Weapons for Law Enforcement speaks specifically of gangs and drug activity, don’t forget the Department of Homeland Security has defined millions of patriotic Americans and veterans as possible domestic terrorists in its report sent to LE agencies on April 7th of 2009. If you wonder if you fit the definition of possible domestic terrorist, you should check here.

"If the report is correct and Obama is moving to strengthen USNORTHCOM with anywhere near the numbers mentioned, indicates the fedgov fears its own citizens much more than it fears al Qaeda. Either the government is anticipating a total financial breakdown, there are plans to confiscate firearms, a new false flag event is in the works, or any combination of the three. Either way, they plan on this event occurring before spring of 2010.

"On the minds of many Americans and politicians is exactly how will the military and law enforcement react if told to confiscate firearms or move American citizens to FEMA camps.

"Consideration must be given to the militarization of law enforcement entities in this country over the past few decades and our gradual decline into a police state, thanks to the bogus War on Terror. That being said, some police blogs such as this one indicate not all law enforcement personnel are on board with these illegal and corrupt practices. When considering possible actions of military personnel one must be aware of the felons and gang members who became part of the military when recruiters were falling short of their goals. Nothing could be better for a felon or a gang-banger than to actually be ordered to commit crimes with impunity. At some point in time, any true American serving in the military will be forced to ask themselves exactly what and whom they are defending and exactly what became of the "home of the free?"

"What will be the reaction of the soldier from Colorado who is confiscating guns and placing so-called domestic terrorists in detention camps in Ohio when he gets word other soldiers are doing the same to his family and friends back home? Who will soldiers and law enforcement officers side with when push comes to shove: the government who has given over a trillion dollars to their cronies in the financial industry, failed to provide their brother/sister veterans competent medical care, denied disability benefits, denied compensation for treatment as prisoners of war, placed single parents in confinement and taken their children, or their family and friends who have lost their jobs and are seeing their homes and farms foreclosed by the same bankers who received huge bonuses from the bailout money? If military and law enforcement personnel begin to side with the citizens, will the fedgov call in United Nations forces to subdue those who cherish personal freedom and will fight to retain it?

"Regardless of which series of events occur, Americans will be the losers. Brace yourselves and prepare, this is going to get real ugly."

Michael Gaddy [send him mail], an Army veteran of Vietnam, Grenada, and Beirut, lives in the Four Corners area of the American Southwest.

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Senate Passes $1.1 Trillion Spending Bill

on Sunday. Since when have they been this hard-working?

On the 57-35 vote, the U.S. Senate approved $1.1 trillion spending bill on Sunday and sent the bill to Obama to sign.

Senate sends $1.1 trillion spending bill to Obama
(12/13/09 AP via Yahoo Finance)

"WASHINGTON (AP) -- The Senate on Sunday passed a $1.1 trillion spending bill with increased budgets for vast areas of the federal government, including health, education, law enforcement and veterans' programs.

"The more-than-1,000-page package, one of the last essential chores of Congress this year, passed 57-35 and now goes to President Barack Obama for his signature.

"The weekend action underlined the legislative crush faced by Congress as it tries to wind up the year. After the vote, the Senate immediately returned to the debate on health care legislation that has consumed its time and energy for weeks. Senate Democrats hope to reach a consensus in the coming days on Obama's chief domestic priority.

"The spending bill combines six of the 12 annual appropriation bills for the 2010 budget year that began Oct. 1. Obama has signed into law five others.

"The final one, a $626 billion defense bill, will be used as the base bill for another catch-all package of measures that Congress must deal with in the coming days. Those include action to raise the $12.1 trillion debt ceiling and proposals to stimulate the job market."

Here are some items in the bill I gleaned out of the article:

• $447 billion for departmental operating budgets(the departments are part of the Executive Branch of the government) - 10% increase over last year;
• $640 billion for federal benefit programs (Medicare, Medicaid);
• 2 % pay raise for federal workers.

The average pay of the federal workers is $71,206, with those workers receiving 6-figure compensations dramatically increasing. In contrast, the average pay of the private sector is $40,331. (Read this article on USA Today, on 12/11/09.) That means federal workers earn, on average, 76.6% more than private sector workers.

So, with $1.1 trillion just for federal government spending, and $626 billion defense bill still to come, the total is already $1.726 trillion. And the Congressional Democrats want to raise the debt limit by $1.8 trillion so that they can avoid an embarrassing situation of having to raise that again in the election year. Good luck with that.

Here's an interesting chart I created by changing parameters from the original chart at usgovernmentspending.com. It is a chart of the government's deficit spending as percentage of national GDP, since 1792. Notice four sharp spikes; they correspond to war-time spending - Civil War, World War I, and World War II, except the current one. The current deficit spending binge has already surpassed the Civil War level, and approaching the World War I level. It looks it would take a gargantuan effort for the President to match FDR, but never say never, particularly when he has a self-proclaimed expert on the Great Depression as the Federal Reserve chairman.



Well I guess you could say the current one is also a war-time spending. The U.S. are indeed still fighting a war in Iraq, another one in Afghanistan, another covert one in Pakistan, and may set to embark on yet another (Iran, anyone?). You could say also that the government is waging war against its own citizens by rapidly eroding what remains of civil liberty and free market.

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Matt Taibbi Still Does't Get It.

I stand corrected. Matt Taibbi is nowhere near swallowing the red pill of the reality-based world.

I've read his entire article "Obama's Big Sellout" which I linked in my last post, and my conclusion is that he still doesn't get it, or I should say he refuses to get it for one reason or another. (One good reason could be that his career as a widely-read liberal journalist would be in jeopardy.)

There are some curious omissions and unconnected dots in the article.

In discussing the financial reform, Taibbi mentions the Federal Reserve only once. And when he does, it is to say the Federal Reserve is left exposed to future Citi losses, as if the Federal Reserve is one of the victims of Citi. The Federal Reserve has been the enabler of its member banks who took on huge risks with the secure knowledge that the Fed would be there to backstop them anyway. Taibbi completely ignores this aspect of the financial crisis that we have had.

He doesn't even mention the name Ben Bernanke at all, while he names everybody else - Bush, Obama, McCain, Greenspan, Geithner, Paulson, Rubin, Summers, etc. No reference to the architect of the unprecedented rescue of the nation's (and the world's) biggest banks at the expense of the U.S. taxpayers.

He is also completely silent about the Audit the Fed amendment that was attached to the financial reform bill. The amendment's (and the original bill's) author, Ron Paul, is not mentioned at all.

Toward the end of the piece, Taibbi takes a swipe at "Republican teabaggers" he snicker at and disparages, as "idiots". For one, I am not so sure they are all "Republicans" with a capital R. Taibbi despises those who descended on Washington D.C in September to protest against a wide array of Obama's policies - from Af-Pak war and Gitmo, gun control, immigration, health care "reform", to bankster bailout and Chrysler/GM bailout.

But no matter. He chooses to box it as anti-health care reform demonstration. And one of the reason why he thinks these "teabaggers" are stupid is really stupid on its own, showing his complete inability to connect the dots.

He says, "They are here to protest Obama's "socialist" health care bill — you know, the one that even a bloodsucking capitalist interest group like Big Pharma spent $150 million to get passed."

Hey Matt, why do you think the bloodsucking capitalist interest group like Big Pharma spent mega bucks like that? Because they stand to benefit greatly from the passage of this so-called reform! Duh. Haven't you read about a secret White House meeting between the administration and Big Pharma? It was reported on Huffington Post. Or is that another thing you can't admit you've read?

The financial reform bill which just past the House is very likely to have been written by outside interests, and Taibbi seems to admit as much. But so is this government's health care bill, so is the climate bill. And those outside interests are not the U.S. taxpayers, Democrat or Republican, or Independent.

He then describes a chat he had with one of the "teabaggers" who, according to him, knew nothing about financial reform (I'm not so sure about that). But do his fellow Democratic supporters of health care reform by the government know anything about financial reform? Does he himself know about health care reform, by the way? Did he talk to people who carried the placard condemning the government bailout of Wall Street? If he did, he chose not to tell us, because that would negate his whole thesis that "teabaggers" are ignorant and idiotic.

He depicts "teabaggers" as Republicans, middle-aged whites who can't stand a black guy in the White House. Excuse me, Matt, but did you not know, or did you choose to ignore, exactly whose votes were instrumental in electing your idol? It was whites, more likely to be middle-age, middle-class (i.e. taxpayers) and seniors, who thought voting for Obama would redress the past injuries and injustice done to African Americans in the past.

Now who's the idiot here? I don't think it's the "teabaggers".

It gets worse toward the end of the article. Instead of placing the blame squarely on Obama, he, like many left-leaning pundits (like her, but at least she gets the health care "reform" issues right), makes excuse for Obama by saying "Oh it's his advisers who are to blame, and Obama should fire them as soon as possible." Ummm, Obama specifically put "sniveling, low-rent shitheads" (as Taibbi describes them in the article) in their respective positions, because he wants them there. And he keeps them there because he likes the results he's getting. Then, Taibbi comes up with the ultimate blame. He blames "us": "Maybe it's our fault, for thinking he was different".

Don't blame more than half the country who didn't even vote for your idol, Matt. They are not your "we".

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Matt Taibbi: Obama's Big Sellout (Or Bait and Switch)

Matt Taibbi is slowly waking up from kool-aid he drank...

Obama's Big Sellout (Matt Taibbi, 12/9/09 Rolling Stones)

"Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers "at the expense of hardworking Americans." Obama may not have run to the left of Samuel Gompers or Cesar Chavez, but it's not like you saw him on the campaign trail flanked by bankers from Citigroup and Goldman Sachs. What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.

"Then he got elected.

"What's taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.

"How could Obama let this happen? Is he just a rookie in the political big leagues, hoodwinked by Beltway old-timers? Or is the vacillating, ineffectual servant of banking interests we've been seeing on TV this fall who Obama really is?

Taibbi's naïveté is almost painful to see. He tries his best to forget that Obama was a strong supporter of the $700 billion bank bailout bill of 2008. He doesn't mention that Wall Street bankers, including those at Vampire Squid (aka Goldman Sachs), were big campaign contributors for Obama. He even calls Candidate Obama a "genuine outsider". Obama was a first-term U.S. Senator when he was nominated as the Democratic candidate. Before that, he was an Illinois state senator. I wouldn't call him a "genuine outsider". Obama has been immersed in left liberal politics all his adult life, from community organizing level all the way to the presidency. Taibbi fails to mention also that this "outsider" is a multi-millionaire for having written, supposedly, an autobiographical memoir before the age of 34. That's one "man of the people". What kind of people Taibbi is talking about, I haven't a clue.

The article continues:

"Whatever the president's real motives are, the extensive series of loophole-rich financial "reforms" that the Democrats are currently pushing may ultimately do more harm than good. In fact, some parts of the new reforms border on insanity, threatening to vastly amplify Wall Street's political power by institutionalizing the taxpayer's role as a welfare provider for the financial-services industry. At one point in the debate, Obama's top economic advisers demanded the power to award future bailouts without even going to Congress for approval — and without providing taxpayers a single dime in equity on the deals.

"How did we get here? It started just moments after the election — and almost nobody noticed."

Well, I think I can guess what it was without further reading the article. I noticed. Many traders noticed. It's the special bailout of Citigroup, announced on November 23, 2008. The rumor of it must have leaked on November 21 Friday, because that's the day another collapse of the stock market since Obama's election (more than 2000 points slide on Dow Jones Industrial Average in 12 trading days) was finally arrested. Now am I right?

"'Just look at the timeline of the Citigroup deal," says one leading Democratic consultant. "Just look at it. It's fucking amazing. Amazing! And nobody said a thing about it."

"Barack Obama was still just the president-elect when it happened, but the revolting and inexcusable $306 billion bailout that Citigroup received was the first major act of his presidency."

Yup. I was right. It is very telling, isn't it? Equally telling as the first major act of his presidency after the inauguration, which was to bomb Pakistan with killer drones. (And he was awarded Nobel Peace Prize.)

The entire article is about 10 pages long, and available as a convenient printer-friendly version by following the link above.

Welcome, Matt, to the real world. Take your red pill. Better late than never.

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Ron Paul Votes Against His Own Amendment

to be exact, against the bill that contains his own amendment.

Ron Paul votes against his own amendment
(Robert Rule, 12/11/09 Examiner.com San Francisco) [emphasis is mine]

"Congressman Ron Paul (R Texas) is the last true statesman. Want proof, the Congressman and 2008 Presidential candidate fought more than twenty years to finally create an amendment to fully audit the Federal Reserve, which is the main cause of the present financial crisis.

"The Audit the Fed bill was accepted as an amendment to a larger bill, the Wall Street Regulatory Overhaul. Even though the congressman’s bill was attached he could not in good faith vote for the larger legislation. Imagine a country full of men like that. Imagine just having 100 representatives like that.

"The legislation will now go to the Senate for a vote. Ron Paul said “I have no clout in Congress, it was the people (grass roots) who made this happen.” A good guess would be that the Senate will try to take this amendment out. Reportedly, Senator’s are a little closer to those at the Fed than Congressman. It will be up to the people once again to make sure this amendment sticks if the larger bill is passed." (The article continues.)

I had suspected that Dr. Paul would do exactly what he just did. In good conscience he couldn't have voted for the larger bill, H.R. 4173 "The Wall Street Reform and Consumer Protection Act of 2009", which will create another federal bureaucratic monstrosity called Consumer Financial Protection Agency and will give the federal government unprecedented authority to seize a private entity which it deems to be of a threat to the greater economy, even before the threat becomes real. And of course that "threat" is defined by the government.

Sound familiar to you? It should, because that's the Bush doctrine of preemptive strike even if the threat is not there. All this government needs is a possibility of a threat that it may jeopardize the system sometime in the indeterminate future.

Are we entering the Greater Depression, contrary to what Obama said ("we avoided the depression" he averred the other day), where the government is set to control every single aspect of our economic life to "save us from ourselves", so to speak? From our capitalist mentality that a free market gives us prosperity, from our (dwindling majority, maybe) deeply ingrained belief that we can pull ourselves up by our bootstraps?

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