Missile Shield Call-Off in Exchange for Biz Deals?

President Obama "dismayed America's allies in Europe and angered his political opponents at home today when he formally ditched plans to set up a missile defence shield in Poland and the Czech Republic." (Dismay in Europe as Obama ditches missile defence, 9/17/09 Times Online UK)

The administration's move is clearly designed to placate Russia, whose cooperation is sought by the administration "on everything from nuclear weapons cuts to efforts to curb Iranian and North Korean weapons programmes" (9/17/09 Reuters).

What did Messrs Putin and Medvedev give to President Obama in exchange? Agreed to further sanctions on Iran and North Korea? Agreed to stay out of any potential armed conflict? I have a feeling Russia could care less on those.

Whatever the real "quid pro quo" was, what appeared in the news was that Putin will meet U.S. businessmen on Friday (9/17/09 Reuters).

"MOSCOW, Sept 17 (Reuters) - Russian Prime Minister Vladimir Putin will meet several top U.S. executives on Friday, including General Electric Co and Morgan Stanley, the Russian government said on Thursday.

"Putin's meetings with top Western executives are usually a precursor of major business deals."

Halting the missile shield to give U.S. businesses good deals in Russia? Reuter's article hints as much:

"Talks with the U.S. firms follow a U.S. government decision to halt the deployment of a missile shield defence system in Europe, a move received positively by the Russian government."

Mr. Putin will meet:

• David Bonderman, founding partner of one of the world's largest private equity firms, TPG
• Jeff Immelt, CEO of General Electric
• John Mack, CEO of Morgan Stanley who is stepping down in 2010

Washington Examiner is more sarcastic than Reuters:

"General Electric may be the company with the closest ties to the Obama administration (if not, GE is second only to Goldman Sachs), and here we see the company benefiting from an abrupt foreign policy change made by President Obama."

As Examiner's article points out, Immelt is President Obama's economic advisor. GE owns CNBC (the stock market cheerleader/greenshooter) and MSNBC, which Washington Examiner says is "the network famously friendly to Obama".

A free-market version of capitalism is just about dead, but another version of capitalism seems alive and well, as it always has been: crony capitalism.

(Has the House banned the word yet?)

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Student Loans Get Nationalized

Everyday, I wish the power grab by the federal government and/or this administration would miraculously stop. No such luck.

The government is already the biggest mortgage lender (FHA, Fannie Mae, Freddie Mac, Ginnie Mae); it owns two of the three domestic auto companies (GM and Chrysler); it owns a diversified insurance company (AIG); it still owns a significant chunk of nation's financial firms (including Citigroup, whose share price plummeted earlier this week on a rumor that the government is planning to dump 1/3 of Citi holdings as early as October).

Now it is set to own the student loan industry.

House Passes Sweeping Student-Loan-Market Overhaul
(7/17/09 Wall Street Journal) [emphasis is mine]

"WASHINGTON -- The House of Representatives approved legislation Thursday that would effectively end private-lender involvement in the student-loan market, establishing the federal government as the sole provider of college loans.

"The bill introduces sweeping changes to the U.S. higher-education system and serves as the third central plank of President Barack Obama's domestic agenda.

[The third central plank of Obama's agenda? HOW MANY PLANKS ARE THERE?]

"Similar to the continuing efforts at overhauling health care, the changes to the federal government's higher-education policies would have a serious effect on the bottom line for private-sector players currently serving the marketplace.

"The House vote was 253-to-171, largely along party lines.

"Under the legislation, all lenders would be cut out of the market for originating loans. There would still be a role for private banks and lenders to bid for a limited number of contracts to service the loans after they are made by the government."

Goodbye, Sallie Mae (SLM). Effective nationalization of the student loan market is ostensibly to save money by cutting the fees that the government pays to private lenders. Private lenders will be allowed bid to service a small portion of loans after the government originate them.

"The nonpartisan Congressional Budget Office said that ending fees paid to private lenders would save the taxpayer $87 billion over the next decade.

"An alternative proposal floated by a group of lenders including Sallie Mae would realize the same level of savings, the CBO said."

$87 billion in fees saved over a decade. $8.7 billion a year. This government is issuing debt to the tune of $1 trillion a year. $8.7 billion is a scant 0.87% of new debt each year. Would you call this a saving?

In order to function as the sole lender of college loans, the government will need to hire a lot of people, put in the IT infra that actually works. But the government is confident that it can handle:

"Having lined up additional contractors to handle the anticipated increase in direct-loan volume, federal officials say they are prepared. Absent an unanticipated breakdown in the system, industry observers say borrowers are unlikely to notice the shift."

We recently witnessed how efficient the government system was when the government played a role of one gigantic dealership to the whole nation. The computer system for the cash for clunkers program suffered numerous system breakdowns, and dealers still haven't gotten all their money due from the government.

I have this feeling that the so-called saving will be used for setting up a new federal student loan agency. The burden will be on the schools who will be forced to change their system to accommodate this federal college loan behemoth.

Under the House bill, the savings "would use the anticipated savings to increase grants for low-income students and boost funding for minority students." (From my limited experience with the local community college and state university, that's where most of the money is going already anyway.)

The government has taken over huge part of housing, banking, transportation, and insurance. And now, if you need a loan to send your kids to college, you will go to the federal government.

Soon, they will own the health care industry entirely (they already own a huge chunk) or at least they will try to, with the threat of "racism" and "civil unrest" against anyone who dare opposes.

If the government get their hands on the consumer staples industry somehow, then all the life's needs will be provided by the government. (Oh wait, what country is this? North Korea?) You can be assured that one of the consumer staples, food, will be more heavily controlled sooner or later by the government under Obama's Food Czar who happens to be an ex-executive of Monsanto, of genetically modified crop fame.

We will also find out soon enough if they will successfully grab the Internet and radio stations. (They are already trying.)

Brave new world.

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ONN: U.S. Condemned For Pre-Emptive Use of Hillary Clinton

Against Pakistan, ONN (Onion News Network) reports. (Warning: it's a joke, no matter how real it may or may not seem to you.)

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Cap and Trade = 15% Income Tax Hike

so says the Obama administration, it turns out.

Remember Cap and Trade? The House passed this controversial climate change bill H.R. 2454 (what isn't controversial these days?) back in June, with an extremely close vote (219-212).

Declan McCullagh of CBS News, who has recently written probing articles on health care "reform" and cyberspace regulation, reports that Cap and Trade would cost families $1761 a year, equivalent of 15% increase in personal income tax.

The information comes from the previously undisclosed documents by the Obama administration and Treasury, which were obtained under the Freedom of Information Act by the Competitive Enterprise Institute and released on Tuesday, according to McCullagh.

Obama Admin: Cap And Trade Could Cost Families $1,761 A Year
(Declan McCullagh, 9/15/09 CBS News)

"The Obama administration has privately concluded that a cap and trade law would cost American taxpayers up to $200 billion a year, the equivalent of hiking personal income taxes by about 15 percent.

"A previously unreleased analysis prepared by the U.S. Department of Treasury says the total in new taxes would be between $100 billion to $200 billion a year. At the upper end of the administration's estimate, the cost per American household would be an extra $1,761 a year.

"A second memorandum, which was prepared for Obama's transition team after the November election, says this about climate change policies: "Economic costs will likely be on the order of 1 percent of GDP, making them equal in scale to all existing environmental regulation." "

The article has a link to the documents obtained under FOIA, which I link here also.

GOP's estimate is about $3100 per family a year, or $366 billion a year. Democrats' number is $800 per family, or less than $100 billion a year. The Heritage Foundation says it will be $1500 per family a year by 2035.

Considering the government's track record in containing costs, we could safely jettison the lowest estimate.

""Heritage is saying publicly what the administration is saying to itself privately," says Christopher Horner, a senior fellow at the Competitive Enterprise Institute who filed the FOIA request. "It's nice to see they're not spinning each other behind closed doors."

""They're not telling you the cost -- they're not telling you the benefit," says Horner, who wrote the Politically Incorrect Guide to Global Warming. "If they don't tell you the cost, and they don't tell you the benefit, what are they telling you? They're just talking about global salvation.""

Wealth distribution within the U.S., and from the U.S. to the rest of the world, particularly poorer countries. But the one who is set to gain most is the government: 15% more tax revenue, not from the polluting industries who will get numerous subsidies, but from the consumers, rich and not so rich alike.

"Because personal income tax revenues bring in around $1.37 trillion a year, a $200 billion additional tax would be the equivalent of a 15 percent increase a year. A $100 billion additional tax would represent a 7 or 8 percent increase a year."

(But watch out, opponents of cap and trade, health care, or anything that's been proposed. According to the former president Jimmy Carter and numerous other pundits (the article linked was written by a neo-conservative), it seems you are racist and you don't even know it if you dare oppose President Obama's policies. To me as a non-native here, it is totally incomprehensible, though I've been trying to understand the rationale.)

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Lehman Brothers One Year After in London and Still Unraveling

On one-year anniversary of Lehman Brothers' bankruptcy, which many say triggered the global credit freeze and the stock market collapse, there were articles and commentaries about "what lesson we have learned (if any)". But the tone of most articles was rather muted, which I believe reflects a resilient stock market that has refused to go down since March low, and also reflects a growing consensus (right or wrong) that we're on our way to miraculous recovery with no jobs. Overall, the Lehman anniversary articles were rather pedestrian.

On the other hand, across the Atlantic, BBC Radio aired a very interesting program featuring two accountants sent to Lehman as administrators to sort out the mess and wind down the company's London-based operation. The "mess" is an understatement; as one of the accountants say near the end, "the most complex insolvency ever."

The accountants, Tony Lomas and Steven Pearson of PriceWaterhouseCoopers, speak to Steve Evans in the program Business Daily, aired on September 10. The interview is about 18 minutes long, and you can listen to the program by clicking the link (it opens in a new window).

They tell Evans that they still have over 400 Lehman people working with them. Lehman Brothers still has enormous balance sheet of over $1 trillion, loaded with very complex assets - derivatives and structured finance products, they say.

After one year, they are still in awe how complex and comprehensive the business environment is in a large financial institution like Lehman. And how unfathomable the risk is. They say they are just starting to unravel some of the complexities of the positions with some of the bigger clients.

"Almost a year on, we still have large household-name counterparties out there who have NOT reconciled their position with Lehman. They have not worked out exactly what they think Lehman owes them, or what they owe Lehman... Because of the complexities of the relationship, they still can't finalize what their position is with us, all these months on."

"All it happened here, is the market stopped believing. Suddenly this enormous organization that's been around for 100 years fell apart. It could have been a number of other market counterparties; it happened to be Lehman but it could have been a number of others. If we end up without vote of confidence again, you could have this sort of thing again..."

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The Attorney Who Read the Entire H.R. 3200 Health Care Bill

Here's the blog of a retired attorney who has read the entire H.R. 3200 The Affordable Health Care Choices Act of 2009. The author, Michael Connelly, teaches Constitutional law. (I found the link to his blog from LRC Blog entry by Thomas DiLorenzo - thank you.)

He has 3 posts on H.R. 3200 and health care "reform" (in fact there are only 3 posts in his blog as of today), and his conclusion seems to be: "It is as bad as you think."

The Truth About the Health Care Bills (8/12/09)
More About the Health Care Bills (8/21/09)
PRESIDENT OBAMA’S HEALTH CARE SPEECH (9/10/09)

In his "The Truth About the Health Care Bills", the author says [emphasis is mine]:

"Well, I have done it! I have read the entire text of proposed House Bill 3200: The Affordable Health Care Choices Act of 2009. I studied it with particular emphasis from my area of expertise, constitutional law. I was frankly concerned that parts of the proposed law that were being discussed might be unconstitutional. What I found was far worse than what I had heard or expected.

"To begin with, much of what has been said about the law and its implications is in fact true, despite what the Democrats and the media are saying. The law does provide for rationing of health care, particularly where senior citizens and other classes of citizens are involved, free health care for illegal immigrants, free abortion services, and probably forced participation in abortions by members of the medical profession.

"However, as scary as all of that it, it just scratches the surface. In fact, I have concluded that this legislation really has no intention of providing affordable health care choices. Instead it is a convenient cover for the most massive transfer of power to the Executive Branch of government that has ever occurred, or even been contemplated. If this law or a similar one is adopted, major portions of the Constitution of the United States will effectively have been destroyed."

In his posts he cites several examples which have been also covered by this blog. Nice to know my understanding coincides with the constitutional attorney :) He cites:

Heath Choices Commissioner: Obama appointee who will have access to personal, financial, and other information as he/she deems necessary; clear violation of the 4th Amendment

National health care ID card: whether you have a government plan or private plan. Backdoor national ID cards

Health care provided to illegal aliens (Section 246): all the section says is "that affordability credits to help them get insurance are not available to illegals. It does not say that they can’t participate in the overall program and get reduced cost insurance under the so-called “public option”. Nor is there anything in the bill that requires someone to verify their citizenship to get benefits from the Insurance Exchange in the program."

The last one is the issue that so irked Representative Joe Wilson that he shouted "You lie!" during the unusual Presidential address on health care "reform" on September 9. (U.S. presidents do not normally address the Congress other than at the state of the union address.)

But it doesn't really matter, as one of my friends remarked the other day. She used to volunteer at a local hospital, and said they (illegal aliens, undocumented immigrants, however you want to call them) don't pay a dime anyway. They already enjoy a free health care.

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Wag the Dog (and Pass Health Care Bills?)

Last Friday we had a boat-load of headlines screaming an imminent trade war between the U.S. and China. Over the weekend China's counter-attack started, accusing the U.S. of subsidizing the exporters.

Then the president this morning was speaking about how they (he and his team) saved the world from financial catastrophe. It is 1-year anniversary of Lehman Brothers' bankruptcy that many say triggered the global credit freeze which led to the global collapse of financial markets and trades.

But what's going on behind these headlines? While people's attention is being diverted, the Senate Finance Committee has been fast working on the health care bill. The chairman of the Committee (Max Baucus, D-Mont.) says his Committee's bill could be released as early as Tuesday (that's tomorrow).

Senate Finance Panel To Release Health Care Reform Plan This Week
(9/14/09 California Healthline) [emphasis is mine]

"On Friday, Senate Finance Committee Chair Max Baucus (D-Mont.) announced that his committee's health reform bill could be released as early as Tuesday, Politico reports (Budoff Brown, Politico, 9/11).

"Emerging from a meeting with the panel's so-called "Gang of Six" negotiators, Baucus suggested that it is time to proceed on completing a reform bill with or without Republican support.

"Baucus noted that a bipartisan deal still could be possible during the mark-up stage, slated to begin the week of Sept. 21, Roll Call reports.

"Baucus said, "We had a very good meeting today," adding, "Monday we'll meet in the hopes of reaching resolution. But again it's understood that we have to start making some decisions" (Drucker, Roll Call, 9/11)."

I didn't catch this news on Friday (the linked article below says the news was on Friday 9/11 on Politico and Roll Call), until I saw the headline today on C-Span.

Note the chairman Baucus's comment hinting that Democrats are ready to proceed without GOP's support. Normally it needs 60 votes to pass a bill in the 100-member Senate. There are 59 Democrats, 40 Republicans, one seat vacant in Massachusetts. There are a few Republican Senators who often vote with Democrats (Olympia Snowe of Maine, for one), so Democrats may indeed have the votes. To be sure of the passage, though, a procedure is more likely that allows them to pass the bill with simple majority and without filibuster.

That's called "reconciliation". This blog reported on the possibility back in June.

Reconciliation is a legislative process of the U.S. Congress (enacted by the Congressional Budget Act of 1974) intended to allow a contentious budget bill to be considered without being subject to filibuster. Reconciliation is the process more relevant to the Senate, as the House can pass rules to restrain debate.

Under reconciliation instruction, the debate is restricted to 20 hours, and the Senate can pass the bill with simple majority, instead of 60.

Now, you may ask "How come a procedure for a budget bill is used for the health care bill?" That what I asked myself. It turns out that since 1996 reconciliation can be applied to any legislation that could affect the budget (positively - reducing the deficit or negatively - increasing the deficit). In the case of the administration's health care bill, it is likely to impact the budget negatively (flip-flopping CBO notwithstanding) and therefore it's a fair game for reconciliation. (Wikipedia entry lacks citation though.)

Democratic leaders have already hinted at going it alone. President Obama himself said as much in his speeches last week, in which he berated the opponents as playing politics [and he isn't playing politics?] and tried to portray opposition as usual bickering in Washington. He is apparently oblivious to the townhall meetings across the country against health care "reform" as laid out by him and his party, and maybe didn't see the huge demonstration in Washington DC on September 12 as he flew over them in his Marine One helicopter. Just like his predecessor, he doesn't seem to care about poll numbers suggesting the majority of voters oppose his health care reform.

It's like the arcade game Whack a Mole. So many gophers are popping up at the same time and even if you are super-sharp and attentive one or two are bound to get away.

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What's in Glaxo's H1N1 (Swine Flu) Vaccine?

A list of components of GlaxoSmithKline H1N1 vaccine is making the rounds on the Internet, which seems to have originated at the blog "Case About Bird Flu". The original article is actually about Glaxo's H5N1 bird flu vaccine Prepandrix, but it has been disseminated as about H1N1 swine flu vaccine.

Before dismissing it as disinformation or hoax (the original article is neither, as it is talking about bird flu vaccine), let's take a look at the ingredients OTHER THAN FLU VIRUS itself. Glaxo may use the same or similar ingredients to create H1N1 vaccine that they used in H5N1 vaccine.

GlaxoSmithKline's press release says the H1N1 flu vaccine will use Glaxo's proprietary AS03 adjuvant system. Adjuvant formulation is used in order to boost higher immune response when using a smaller amount of antigen (i.e. H1N1 virus). This is important for drug companies like Glaxo and the governments who want to prepare a large number of doses as quickly as possible. Glaxo's press release describes the benefit as follows: "The vaccine containing the adjuvant system therefore helps to substantially increase the number of vaccine doses that can be provided for mass vaccination."

It goes on to say that the same adjuvant system AS03 is used in H5N1 pre-pandemic and pandemic bird flu vaccine, and shown to have "an acceptable safety and reactogenicity [capacity to cause adverse reaction] profile". Emphasis is mine. Note the word "acceptable".

So, it may still be useful to look at the ingredients of Glaxo bird flu vaccine to guess what may be in their swine flu vaccine. We know now for sure that AS03 adjuvant system is used. Let's start with AS03.

AS03: (Aka. "Adjuvant System 03") is a trade name for a Squalene based Immunologic adjuvant used in various vaccine product by GlaxoSmithKline (GSK). It may also be used in the A/H1N1 pandemic flu vaccine. (wikipedia.org)

So now, what is Squalene?

According to Dr. Russell Blaylock [emphasis is mine];

"Novartis, the second contender, also has an agreement with WHO for a pandemic vaccine. Novartis appears to have won the contract, since their vaccine is near completion. What is terrifying is that these pandemic vaccines contain ingredients, called immune adjuvants that a number of studies have shown cause devastating autoimmune disorders, including rheumatoid arthritis, multiple sclerosis and lupus.

"Animal studies using this adjuvant have found them to be deadly. A study using 14 guinea pigs found that when they were injected with the special adjuvant, only one animal survived. A repeat of the study found the same deadly outcome.

"So, what is this deadly ingredient? It is called squalene, a type of oil. The Chiron company, maker of the deadly anthrax vaccine, makes an adjuvant called MF-59 which contains an ingredient of serious concern--squalene. A number of studies have shown that squalene can trigger all of the above-mentioned autoimmune diseases when injected."

Squalene's property to stimulate and boost immune reaction, the very reason why it is used as adjuvant, is the problem itself, it seems:

"Because squalene, the main ingredient in MF-59, can induce hyperimmune responses and induce autoimmunity, a real danger exists for prolonged activation of the brain’s immune cells, the microglia. This type of prolonged activation has been strongly associated with such diseases as multiple sclerosis, Alzheimer’s disease, Parkinson’s disease, ALS and possibly vaccine-related encephalitis. It has been shown that activation of the systemic immune system, as occurs with vaccination, rapidly activates the brain’s microglia at the same time, and this brain inflammation can persist for long periods."

The danger is the prolonged brain inflammation caused by activation of brain's immune cells by squalene. In other words, your immune system may go overdrive and start attacking your own body due to artificially heightened stimulation by squalene.

Novartis's adjuvant MF59, Sanofi-Pasteur's AF03 are also squalene-based.

The rest of the ingredients for Glaxo's H5N1 bird flu vaccine, as listed in "Case About Bird Flu" blog, are as follows. Ingredients with possible adverse effects are in green:

alpha-tocopherol (a type of vitamin E)
aluminum adjuvant
disodium phosphate: food additive
formaldehyde
magnesium chloride
octoxynol 10: detergent
polysorbate 80 (Tween 80): food additive; part of AS03 adjuvant system
potassium chloride: it is used in executions by lethal injection.
potassium dihydrogen phosphate: used in fertilizer, food additive, fungicide
sodium chloride
sodium deoxycholate
thiomersal (thimerosol): this is MERCURY
vitamin E

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How Many Attended the 9/12 Washington DC Tea Party?

New York Times thinks it's in thousands: "Thousands Rally in Capital to Protest Big Government". Washington Post ups the number to tens of thousands: "Anti-Government Protests Draws Tens of Thousands to D.C."

Some Youtube videos of the event claim 1 to 2 million, and U.K.'s Daily Mail Online says up to 2 million. 2 million?? That's got to be a mistake, as the discrepancy in numbers (thousands to 2 million) is just too huge. Even if this 2 million number is a mistake, what I've seen in videos and photographs is pretty impressive. (Watch the time lapse video at the end of this post.)

Up to two million march to US Capitol to protest against Obama's spending in 'tea-party' demonstration (9/12/09 Mail Online) [photographs are from this article.]

"Up to two million people marched to the U.S. Capitol today, carrying signs with slogans such as "Obamacare makes me sick" as they protested the president's health care plan and what they say is out-of-control spending.

"The line of protesters spread across Pennsylvania Avenue for blocks, all the way to the capitol, according to the Washington Homeland Security and Emergency Management Agency. "

A lot of signs look to be hand-made. According to the ABC News, "As he left Washington this morning aboard the Marine One helicopter, President Obama flew over the crowds forming near the Capitol."

That's kind of "Nixonian" moment. (Nixon flew over the protesters to go play golf.)

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Cui Bono? Trade War With China Over Tires and Pipes

Obama to impose tariffs on Chinese tires (9/11/09 AP)

"WASHINGTON (AP) -- President Barack Obama on Friday slapped punitive tariffs on all car and light truck tires entering the United States from China in a decision that could anger the strategically important Asian powerhouse but placate union supporters important to his health care push at home.

"The federal trade panel recommended a 55 percent tariff in the first year, 45 percent in the second year and 35 percent in the third year. Obama settled on slightly lower penalties -- an extra 35 percent in the first year, 30 percent in the second, and 25 percent in the third, White House press secretary Robert Gibbs said."

So how big is this Chinese "threat" that warrants 35% tariff? According to AP article above,

"...from 2004 to 2008 and China's market share in the U.S. went from 4.7 percent of tires purchased in 2004 to 16.7 percent in 2008."

Wow I'm scared.

This is on top of the tariffs on Chinese steel pipes that were announced on September 9. The U.S. Commerce Department decided to slap as much as 31% tariffs on Chinese-made steel pipes for oil rigs, again under the strong pressure from the United Steelworkers Union, who also pushed for the tire tariffs.

China Strongly Opposes U.S. Duties on Steel Oil Pipes (Update1)
(9/10/09 Bloomberg) [emphasis is mine]

"Sept. 10 (Bloomberg) -- China “strongly opposes” a ruling by the U.S. Commerce Department to impose duties of as much as 31 percent on steel pipes, the Ministry of Commerce said today.
The U.S. decision doesn’t comply with rules set by the World Trade Organization, the ministry said on its Web site.

"The average duties on $2.8 billion in annual imports of the pipe, used in oil and gas wells, will be 21.3 percent, the Commerce Department said yesterday in a preliminary decision. The ruling agreed with American producers led by U.S. Steel Corp. that the imports were supported by unfair subsidies.

"The tariffs may help U.S. Steel and other domestic producers weather a drop in pipe demand following last year’s collapse in oil prices."

Hmmm. The pipe demand dropped because price of oil (and natural gas) collapsed last summer, hurting the U.S. producers. So they want to impose tariffs on the Chinese imports so their higher-priced pipes would be just as competitive as the Chinese pipes. Higher prices in low demand period, however, may discourage the users (oil/nat gas companies) from using these pipes. The users may simply source from different countries, instead of paying extra 21-30%.

When demand is low, what do you do to move your product? Cut price, not raise it.

When the demand was high due to higher oil price, the business was booming both for Chinese and American steel pipe manufacturers. Americans clearly didn't have any complaint while the boom was on. Chinese allege that the U.S. exporters receive fuel subsidies.

The U.S. move on Chinese steel pipes follows EU, who already slapped 17-40% tariff on Chinese steel pipes pre-emptively (i.e. they took the word of steel makers at face value that they are suffering, without actual proof of injury).

Who loses? Chinese companies, and the U.S. end-users - companies who use these pipes and tires - and the U.S. consumers as the extra high cost (up to 35%) will be passed on to them. Instead of the demand coming back, extra high cost due to tariffs will drive away the demand. In case of Chinese tires that are used as low-end replacement tires, it will hit people with limited income who can't afford pricier tires.

Cui bono? [Who benefits?] Union members? I doubt it. Jobs are unlikely to come back to them unless the demand comes back. But the perception of jobs returning to the U.S. at a high pay that union members expect may be enough to secure the votes for Democrats. So the beneficiaries are Democratic Congressmen and Senators in those districts where the United Steelworkers Union is strong. Who else? I can't think of anyone else.

A trade war with China is the last thing the U.S. needs. Particularly right before the G20 summit meeting in Pittsburgh on September 24/25. During the week of G20 summit, the U.S. Treasury Department will have to sell a lot of Treasury securities. China is the largest holder of the U.S. government debt. You would think we don't want to piss them off unnecessarily, wouldn't you?

But on this particular administration, common sense doesn't seem to register. Or they have a very different set of common sense from the rest of us. Placating the labor union (in these two cases, the United Steelworkers Union) and securing the union votes for Democrats for the mid-term election next year apparently trampled not angering one of the most important buyers of the U.S. debt, which the administration will continue to issue in greater quantities to fund their grandiose projects on top of what's already an unsustainable amount of debt. Obama is also counting on union support/pressure to pass the health care "reform" bills, as he is set to speak at a convention of the AFL-CIO, the nation’s largest labor federation, next week.

That China may renege on the derivative contracts on commodities seems more certain now.

It has started to smell more and more like we're in a "Herbert Hoover" era. Smoot-Hawley anyone? We are not in the "recovery phase" at all. We are just starting. Good grief, as Charlie Brown would say.

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Which Derivatives Will China Renege?

News hit the wire late August-early September that China may renege on their commodity derivative contracts with unnamed six foreign banks.

Derivative deals hit a rough patch (9/1/09, People's Daily Online)

"Chinese State-owned enterprises (SOEs) may unilaterally terminate derivative contracts with six foreign banks that provide over-the-counter commodity hedging services, Chinese business magazine Caijing reported, citing unnamed sources.

"The report said that the State-owned Assets Supervision and Administration Commission (SASAC), China's SOE watchdog, has informed the financial institutions in written letters that SOEs reserved the right to default on those derivative contracts."

The derivatives in question are reported in the U.S. to be oil hedges. They certainly could include oil derivatives, but consider this peculiar phenomenon: it was gold, silver, and gold/silver miners that jumped big on the news.

Further checking this article, I found this paragraph [emphasis is mine]:

"The Caijing report, quoting an unidentified SASAC official, said that almost every SOE involved in foreign exchange or trade had some exposure to derivatives such as crude oil, non-ferrous metals, agricultural commodities, iron ore and coal, although only 31 SOEs were licensed to do so."

What are "non-ferrous metals"? According to GlobalSpec, "Nonferrous metals and nonferrous alloys are not based on iron and include alloys of aluminum, copper, titanium, zinc, nickel, cobalt, tungsten, precious metals, and refractory metals."

Long positions in oil, if they entered near high must be painful (as U.S. university endowments should know very well); also painful would be short positions in gold and silver, which they may have entered into to hedge their domestic operation (China is a large gold producer).

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University Endowments Are Back Into Commodities

I couldn't believe that the article was written yesterday, not a year ago.

George Washington Fund Adds Commodities as Inflation Protection
(9/9/09 Bloomberg)

"Sept. 9 (Bloomberg) -- George Washington University is increasing holdings of commodities such as oil and natural gas out of concern that a return to inflation rates last seen in the 1970s may ravage the value of its $1 billion endowment.

"U.S. consumer prices may rise 8 percent annually within three to five years because of unprecedented government spending and deficits, said Donald Lindsey, the Washington school’s chief investment officer. Growth in the consumer price index averaged 7.4 percent from 1970 through 1979, a period remembered for economic stagnation and eroding values of fixed-income investments, compared with 0.1 percent in 2008."

George Washington University is hardly alone. The article also cites Pepperdine University and Notre Dame University, all intending to increase their holdings of real assets (and equivalents) as a hedge against inflation that they all see coming, due to massive government spending and resultant deficit set to grow even bigger.

Last year when these university endowments crowded the commodities market with their long-only positions, that was on conviction that commodities, particularly crude oil, would continue to rise because of increasing demand from BRIC (particularly C) countries. The commodity bubble spectacularly started to collapse in July, a harbinger for the stock market collapse 2 months later. As the result, the endowments lost huge chunks of their investment. Harvard University endowment lost 30%, as of June 2009. On the west coast, Stanford University endowment probably lost as much if not more.

(By the way, PIMCO's Mohamed Al-Erian was the president and CEO of Harvard Management Company until 2008. Lucky he got out in time.)

This time, the reason has changed to a fear of 1970s-style "inflation" or "stagflation". No matter the reason, what counts is their investment behavior/style which may not have changed: long-only, and buy and hold. And they weren't quite nimble traders last year when the collapse started in July; they had to hold a meeting first and decide what to do, and.... it was too late.

Let's see if there's a repeat, or if they get lucky this time and they get what they want - inflation.

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Obama to Give Speech on Financial Crisis Monday

Almost one year after the bankruptcy of Lehman Brothers that triggered the global credit crisis which in turn plunged the world into simultaneous recession.

Yet another chance for the president to blame his predecessor and claim "we saved the world".

I wonder if anyone screams "You lie!" again.

(I personally don't understand what's the big deal. South Korean and Taiwanese parliaments break into fist fights; Japanese used to do that. Backbenchers of the British parliament have been heckling and shouting down the prime minister for several hundred years now.)

Obama to give speech on financial crisis Monday (9/10/09 Reuters)

"WASHINGTON, Sept 10 (Reuters) - U.S. President Barack Obama will give a speech about the financial crisis on Monday, marking the anniversary of the collapse of Lehman Brothers, the White House said.

""He will discuss the aggressive steps the Administration has taken to bring the economy back from the brink (and) the commitment to winding down the government's role in the financial sector," the White House said in a statement."

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Democratic Party of Japan = Obama II

Democratic Party of Japan (DPJ), which won the Lower House election in a landslide at the end of August, may be turning out to be almost an exact copy of the U.S. administration under President Obama.

Right before the election when I checked what's in their "manifest" (policies) and found some special legal consideration to help "transgenders" and the words like "community renewal" (no this is not ACORN, it's DPJ), I had a feeling that Japanese would regret their choice sooner than later. (After all, a significant number of voters voted against LDP, just like a significant voters here voted against GOP (Bush/Cheney).)

Right after their win, almost the first thing that their leadership did was to announce the creation by a cabinet order of a bureau directly under the control of the Prime Minister that is intended to be the center for devising and implementing the core national policies and directing bureaucrats in the ministries and agencies. Much like President Obama's use of presidential appointees, popularly known as Czars, whose functions overlap almost all aspects of the formal government departments and agencies.

I thought, "If this DPJ is Obama II, then the next thing they'll do will be to announce that they are going to tackle some dire problem head-on, and it will not be the economy."

Sure enough. I was right. Yukio Hatoyama, the leader of DPJ who's slated to become Prime Minister, wants to tackle green house gas effect. Oh boy.

25% Reduction Target [of Green House Gas] Will Damage the Economy, Ministers and Industries Worry (9/8/09 Yomiuri Shinbun, original in Japanese)

"Democratic Party of Japan leader Yukio Hatoyama on September 7th announced Japan's target for reducing the green house gas in 2020 as "25% reduction from 1990 level". In response, ministers and industry leaders have expressed fear that the economy will be damaged by enormous cost that would be incurred in achieving such a target.

"Mr. Nikai, Minister of Economy,Trade and Industry, said in the press conference after the cabinet meeting, "To achieve such a target will be extremely difficult. It is not enough to simply express his hope. He needs to come up with the detailed process in order to achieve the target." Mr. Hayashi, Minister of Economy and Finance, also suggested that more deliberation and discussion is needed. "Environmental issues should not be at the expense of economy. We need more discussion within Japan before we proclaim it as a national policy."

"Cabinet Secretary Kawamura sounded skeptical in the press conference. "I am not sure we would be willing to proceed with the understanding that we won't be able to drive any car powered by gasoline."

"Industry leaders strongly fear that the heavy burden of new energy initiatives will fall on their companies, reducing their international competitiveness. Mr. Ito, president of Honda Motors wasn't too happy when he spoke in a conference on new technologies. "The target vastly exceed our plan. Extremely difficult to achieve." Toyota's president urged DPJ to reconsider. "Difficult target. We would urge [DPJ] to proceed cautiously."

"Environmental Minister Saito, who is from Komei Party which has the same reduction target as DPJ, was the only one who welcomed the DPJ's target. He said his party would be willing to cooperate with DPJ."

Komei Party, who was a junior coalition partner to LDP, is jockeying for a better position in the DPJ-led Diet.

Did Japan's economy take the gravest hit ever since World War II last fall, because of global warming? Japan's machinery orders dipped more than 9% in July, and the unemployment is all-time high (5.7% in July, which is measured differently from the U.S.). The current global recession revealed the same structural problems that Japan has had but were masked during the bubble years. It's the economy, Mr. Hatoyama!

And the first thing that this Prime Minister-to-be wants to do is to combat global warming. He also wants to make Japan more livable for foreigners, and wants to give the voting right to foreigners who live in Japan long enough. And help transgenders. And Cap and Trade.

Mr. Hatoyama's nickname is "space alien". Maybe he is. With the wacky wife of his, he may have been to Venus himself in a UFO to see the effect of green house gas. Good luck Japan, you'll need it.

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Maestro Speaks: Gold Is Real Money

Gold Rally Signals Move Away From Currencies, Greenspan Says
(9/9/09 Bloomberg) [emphasis is mine]

"Sept. 9 (Bloomberg) -- Gold prices that jumped above $1,000 an ounce this week are signaling that investors are buying metals to hedge against declines in currencies, former Federal Reserve Chairman Alan Greenspan said.

"The gains are “strictly a monetary phenomenon,” Greenspan said today at an investment conference in New York. Rising prices of precious metals and other commodities are “an indication of a very early stage of an endeavor to move away from paper currencies,” he said."

Mr. Greenspan seems to be back to his roots ("Gold and Economic Freedom", 1966). Not only that, he seems to speak English that we the commoners can easily understand. That's refreshing.

His "very early stage" should be encouraging to gold investors, and to CEO of Barrick Gold Corp. who just announced that the company plans to eliminate all the gold hedges.

Greenspan also observes:

"“What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment,” Greenspan said.

"China, the world’s fastest-growing major economy, will continue to be a “large consumer” of commodities, including energy and metals, Greenspan said.

"“China is turning out to be the 900-pound gorilla in the energy and commodity market,” Greenspan said. “The increase in oil consumption in China has been quite extraordinary.”"

And China may be turning out to be that in precious metals, too.

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Health Care "Reform": They Will Own It

House Speaker "un-American" Nancy Pelosi and Senate Majority Leader "evil-monger" Harry Reid think they have the votes on health care "reform" that has so divided the country.

Pelosi and Reid Tell President: We Have the Votes; President Wants Bill Passed Soon (9/8/09 ABC News)

"While White House spokesman Robert Gibbs today refrained from telling reporters whether President Obama in his speech Wednesday night will set a deadline for passing health care reform, sources tell ABC News that in his private meeting with Democratic congressional leaders this afternoon the key word was urgency.

"The president told House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., that it is important for them to pass health care reform bills soon, the sources said.
"Both leaders told the president that despite the difficult rough and tumble of the legislative process in the last few weeks, they are optimistic that both the House and Senate can pass health care reform legislation.

"What will be in the bill remains an open question, though after the meeting, Reid told reporters that “we're going to do our very best to have a public option or something like a public option before we finish this work.”

The key word is urgency? The president wants to have these "reform" bills passed urgently for... what? Why because I say so! (If there is a reason, no one is saying.)

That probably means Democrats will pass the health care "reform" bills on their own, a strict partisan vote. As Reid indicated, the bill will probably include all the contentious sections - public option, extensive power to IRS (Section 141 , Section 245, Section 431, Section 453 of H.R. 3200), extensive power to an unelected Presidential appointee (Health Choices Commissioner, Section 141 of H.R. 3200), end-of-life care (Section 1233 of H.R. 3200), penalty/surtax for people without insurance (Section 401 of H.R. 3200); big pharma companies will be happy with their deal with the White House, no doubt. Oh, one more thing: Congress will be exempt from the "reform".

And one last thing: intrusive health care information technology (computerizing everything), the bulk of which was already signed into law with hardly any restraint (because it sneaked in in the stimulus bill in February), will no doubt be spearheaded by a dynamic Indian duo of Information Czar and Technology Czar. If the cash for clunkers program is any indication of the government idea of information technology in the 21st century, good luck to all of us. We will need it aplenty.

Democrats and the president will own it, if they ram the health care "reform" through Congress.

(Did "health care crisis" crash the stock market and plunge the whole world into a severe recession last fall? Maybe it did... Oh wait, it was "global warming" that did it, didn't it? Or was it "school crisis"?)

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It All Happened One Year Ago - September 8

One year ago on September 8, Fannie Mae and Freddie Mac were effectively taken over by the U.S. government.

These were the headlines on Investors Business Daily on the next day, describing the events on September 8, 2008:

• U.S. Takeover of Fannie, Freddie Still Doesn't End Troubled Saga
• Builders And Banks Rally Over Seizure of Freddie, Fannie
• Fannie's stock tumbled 90%, Freddie 83%
• Picture of anxious specialists on NYSE floor
• Lehman Brothers Down On Uncertainty: the stock lost 13%
• Delivery Firms Reduce Speed To Save Fuel: UPS eliminates left turn
• S&P cuts Wamu to junk
• Russian troops were still in Georgia

Lehman Brothers and Washington Mutual were still with us. Not just homebuilders and banks but the general market rallied on the Fannie/Freddie news.

For more on what happened one year ago, read my posts (Part I, Part II, Part III, Part IV).

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White House Releases Obama's Speech for September 8 Back to School Event

as promised. It's on the White House website.

After reading it, what I don't quite understand is:

1. What's the point of the speech? He is supposed to be speaking to toddlers still in kindergartens all the way up to surly high school seniors. For kindergartners the speech would mostly be gibberish, and probably the same for the high school seniors who would be bored to death.
2. Why does the Department of Education need such a detailed lesson plan for a mundane speech like this?

Let's look at the point 1 above. WHO IS THE TARGET AUDIENCE?

Kindergartners (and probably high school seniors) do not have an attention span of 20 minutes. They would either not understand the speech or couldn't care less about the speech (high schoolers). So who is the president speaking to? Who's left?

It's elementary school and middle school students. That could be inferred from his reference to the author of Harry Potter series, quite popular with, guess who?: elementary school kids and middle school kids. They would understand the level of English the president would be using, and they are also malleable enough to listen to their teachers and follow instructions.

Equally mystifying to me is the point 2: Why elaborate lesson plan for a plain enough speech? It almost looks like the lesson plan is the main purpose, rather than the speech itself.

Sure, after her lesson plan (created by the "Teaching Ambassador Fellows" at DOE) drew much criticism, the Secretary of Education Duncan changed part of the plan on Sunday:

"On Sunday, the secretary acknowledged that a section about writing to the president on how students can help him meet education goals was poorly worded. It has been changed.

""We just clarified that to say write a letter about your own goals and what you're going to do to achieve those goals," Duncan said on CBS' "Face the Nation."

I'm looking for the actual revised text of the lesson plan, and I'll post it if I find one. I have already posted the old plan, and I suspect the revision is more semantic.

After looking at the speech itself and the lesson plan, my conclusion is that this is an exercise in branding - just like a ad firm on Madison Avenue would do - to sell this particular brand of "President of the United States" in the person of Barak Obama.

Other nitpicking:

• He mentions Apple's iPhone. But he is a Blackberry addict.
• He also mentions XBox. That's Microsoft. Is he doing the product/brand placement?
• Whoever wrote the speech clearly decided to completely ignore his white grandparents who raised him. Rather, Obama is depicted as having a childhood in poverty being raised by a single mother on food stamps.
• His mother's second husband was a well-to-do Indonesian. To say he couldn't go to the school that American kids went because his mother didn't have money doesn't ring true. Besides, his mother's extra lessons were likely to have been English language, as his first school (St. Francis of Assisi school, a private Catholic school in Jakarta's up-scale Menteng district) was taught in Bahasa Indonesia.
• The career choices he offers in the speech are rather uninspiring, wouldn't you say? Writer (book or newspaper articles), inventor (who could invent things like iPhone), doctor, teacher, police officer, nurse, architect, lawyer, member of the military.
• Google, Twitter, Facebook. Three more brand placements.

Lastly, why education is important, according to the president:

"You’ll need the knowledge and problem-solving skills you learn in science and math to cure diseases like cancer and AIDS, and to develop new energy technologies and protect our environment. You’ll need the insights and critical thinking skills you gain in history and social studies to fight poverty and homelessness, crime and discrimination, and make our nation more fair and more free. You’ll need the creativity and ingenuity you develop in all your classes to build new companies that will create new jobs and boost our economy."

Cure disease like cancer and AIDS (health care)
Develop new energy technology (climate policy)
Protect our environment (climate policy)
Fight poverty and homelessness, crime, discrimination (wealth redistribution)
Make our nation more fair and more free (whatever that means)
Build new companies that will create new jobs and boost our economy. (economic policy)

Except for the last one, these are this administration's agendas.

The last one would be tough to do with ever-increasing government oversight, intervention, and tax burden (both corporate and individual) set to increase even more. How about stop spending borrowed money so that you don't take away capital from the private sector that actually create jobs, Mr. President?

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OT: Chicken Techno Remix

Today's gem from Youtube video.

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Call for Crisis to Pass Health Care "Reform" Bill

Just like the $780 billion stimulus bill was pushed through amid plunging stock indices and rising unemployment (at 7%) in February this year, as the President openly threatened "catastrophe" unless the stimulus bill was passed. (Remember the talk of "mushroom cloud"?)

Despite (I think it was more like "because of") the stimulus bill passage, the U.S. stock indices (Dow Jones Industrial Average, S&P 500, Nasdaq) accelerated the plunge into March 6 low, and the unemployment rate continues to rise to this day (latest 9.7%).

But no matter. A number of scholars, analysts, pollsters, pundits (however you call them) say that the health care issues haven't reached a crisis point yet to sell to the public. One of them says in fact that we need a crisis for that purpose.

Obama May Need Sense of Crisis to Revive Health-Care Overhaul
(By Julianna Goldman and Nicholas Johnston, 9/4/09 Bloomberg) [emphasis is mine]

"Sept. 4 (Bloomberg) -- President Barack Obama returns to Washington next week in search of one thing that can revive his health-care overhaul: a sense of crisis.

"Facing polls showing a drop in his approval, diminished support from independents, factions within his Democratic Party and a united Republican opposition, Obama must recapture the sense of urgency that led to passage of the economic rescue package in February, analysts said.

"“At the moment, except for the people without insurance, we’re not in a health-care crisis,” said Stephen Wayne, a professor of government at Georgetown University in Washington. “You do need a crisis to generate movement in Congress and to help build a consensus.” "

Where could that crisis conveniently come from, I wonder? (Could it be over the swine flu panic or riots to get or avoid swine flu vaccine? At least the government seems well-prepared for the civil disturbance part.)

President Obama is set to speak with labor leaders on September 7, with school children nationwide on September 8, and in Congress on September 9. Effectiveness of such presidential speeches to promote a policy or sway the public opinion, however, is doubtful according to one expert quoted in the article:

"Presidential speeches historically do little to move public opinion significantly, said George Edwards, author of “The Strategic President: Persuasion and Opportunity in Presidential Leadership.”

"“This is almost like a Hail Mary, because they know that they’re substantially behind and the trajectory is negative for them,” Edwards said.

"Unlike the financial crisis he inherited, the health-care debate is of Obama’s making and places a different burden on him, Edwards said.

"“The best thing in presidential leadership is to recognize and exploit opportunities,” said Edwards. “The White House overestimated the nature of the opportunity.” "

Polls after polls, the public opinion shows the support dropping on the health care "reform". The recession is taking a toll on the household sentiment; health care "reform" seen more as hurtful rather than helping. Approval rating for the president himself is also dropping.

Let's see what kind of "Hail Mary" that the president may be able to pull off this week. It is hoped that he will be well-rested from his back-to-back vacations.

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