Paul: Audit the Fed Bill Totally "Gutted"

by Mel Watt (D, NC). What a surprise.

Federal Reserve Policy Audit Legislation ‘Gutted,’ Paul Says
(Bob Ivry, 10/30/09 Bloomberg) [emphasis is mine]

"Oct. 30 (Bloomberg) -- Representative Ron Paul, the Texas Republican who has called for an end to the Federal Reserve, said legislation he introduced to audit monetary policy has been “gutted” while moving toward a possible vote in the Democratic-controlled House.

"The bill, with 308 co-sponsors, has been stripped of provisions that would remove Fed exemptions from audits of transactions with foreign central banks, monetary policy deliberations, transactions made under the direction of the Federal Open Market Committee and communications between the Board, the reserve banks and staff, Paul said today.

"“There’s nothing left, it’s been gutted,” he said in a telephone interview. “This is not a partisan issue. People all over the country want to know what the Fed is up to, and this legislation was supposed to help them do that.” "

"Paul, a member of the House Financial Services Committee, said Mel Watt, a Democrat from North Carolina, has eliminated “just about everything” while preparing the legislation for formal consideration. Watt is chairman of the panel’s domestic monetary policy and technology subcommittee."

"Paul said he intends to introduce an amendment to the bill when it comes to the House floor for a vote restoring the legislation’s original language."

Mr. Watt's district includes Charlotte, NC, where Bank of America, the largest lender in the U.S., is headquartered, as noted by the article.

If you are in Mr. Watt's district, or Chairman Frank's district and want to know what on earth the Federal Reserve has been doing with your money and a whole lot of others, PLEASE write to them and tell them they must restore the original bill as introduced by Ron Paul.

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Peter Schiff: Phony GDP, Phony Growth

"Stimulus is stimulating all the wrong things."

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Government's Idea of "Bang for Money"

is no bang at all, for taxpayers.

Take the cash for clunkers program. According to Edmunds.com, the program which cost $3 billion generated 125,000 additional sales. That's $24,000 per car. (See my previous post.)

Ford Fusion, one of the popular "cash for clunkers" cars, could be had for that amount. There is no "bang" in here. The government might as well have bought cars from GM, Chrysler and Ford outright. Better yet, buy them on loans so that Goldman Sachs or Morgan Stanley can securitize the loans and sell the newly created securities to pension funds and university endowments as a very safe investment. If they becomes risky in any way, the Federal Reserve will step in and buy those securities to support the market. (Now that's a bang for the money.)

One of the unintended (and totally foreseeable by many, many people) consequences of this program is the higher used car prices, as totally good, operational cars and trucks are being scrapped instead of going into the used car market. Thank you, Car Salesman in Chief.

Or take the House 1990-page bill on health care "reform" which debuted with fanfare today. According to Congressional Budget Office (which by the way is not known for over-pessimism), the "reform" will cost $1.055 trillion dollars over the 10 years to insure additional 35 million people. That's over $30,000 per person.

In exchange, the government gets to have more bureaucracy they love, get to play in more committees and round tables and working groups, have access to everyone's bank accounts and personal information, set IRS for offenders, decide who gets treatment when and how, and collect taxes on medical devices that may include Q-tip and tampons, again (I'm yet to take a peek at this monstrosity of a bill). O what fun, what fun!

Ohhh, I get it. The government will have a bang, a great time, by sucking up the money from taxpayers who don't get to participate in the fun (or whose idea of fun is totally different from the government bureaucrats and legislators).

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Cash for Clunkers: Taxpayers Cost Was $24,000 Per Car

according to Edmunds.com. The administration ridicules.

Well, my vote is for Edmunds.com.

Clunkers: Taxpayers paid $24,000 per car
( Peter Valdes-Dapena, 10/29/09 CNN)

"NEW YORK (CNNMoney.com) -- A total of 690,000 new vehicles were sold under the Cash for Clunkers program last summer, but only 125,000 of those were vehicles that would not have been sold anyway, according to an analysis released Wednesday by the automotive Web site Edmunds.com.

"Still, auto sales contributed heavily to the economy's expansion in the third quarter, adding 1.7 percentage points to the nation's gross domestic product growth.

"The Cash for Clunkers program gave car buyers rebates of up to $4,500 if they traded in less fuel-efficient vehicles for new vehicles that met certain fuel economy requirements. A total of $3 billion was allotted for those rebates.

"The average rebate was $4,000. But the overwhelming majority of sales would have taken place anyway at some time in the last half of 2009, according to Edmunds.com. That means the government ended up spending about $24,000 each for those 125,000 additional vehicle sales."

The administration tries to paint it as if Edmunds.com is a "naysayer" (a new dirty word these days for this administration):

""It is unfortunate that Edmunds.com has had nothing but negative things to say about a wildly successful program that sold nearly 250,000 cars in its first four days alone," said Bill Adams, spokesman for the Department of Transportation. "There can be no doubt that CARS drummed up more business for car dealers at a time when they needed help the most."" [emphasis is mine]

I thought the cash for clunkers program was all about "fuel efficiency" and "environment". (At least it was sold as such.) So now they are openly saying it was to prop up car dealers. And remember this cash for clunkers program was announced right after a boatload of GM and Chrysler dealers got axed under allegations that the dealers who donated to Republican party were targeted.

(That actually reminded me of Bear Stearns under severe liquidity crisis being forced to sell itself to J.P. Morgan Chase for $2, only to have the Federal Reserve open the discount window to investment banks after the fire sale was official. Nice job, Tim [Geithner].)

Anecdotal evidence suggests that the dealers marked up the cars eligible for the rebate, sometimes even higher than MSRP, then they gave a token discount if at all.

So who got the short end? Taxpayers who had the honor to fund the program to the tune of $24000 per car. But if you take a look at this chart from St. Louis Fed, you'll see it's Edmunds.com who is right. The vehicle purchase collapsed back after the program. All it did was to bring forward the demand that existed anyway without the program.




Auto sales heavily aided by the cash for clunkers program contributed 1.66% to the total GDP growth of 3.5% for the 3rd Quarter. If you subtract this 1.66% and other government spending from the 3rd Quarter GDP, it would have been flat at best.

I personally would have liked to see the GDP flat to ever so slightly positive without the government intervention that distorted the picture so much to render it worthless.

The CNN link above also contains a video interview of ex-Car Czar Steve Rattner, of Quadrangle fame. (What an insult it must have been for Rick Wagoner to be fired by a person like this.)

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Economist Allan Meltzer: Bernanke Is Dead Wrong

It looks like an open rebellion at the Fed...

Allan Melzer is an economist who wrote the definitive history of the Federal Reserve. He was interviewed in the BBC World Service radio program Business Daily (first 9 minutes) and spoke about the Fed policies and internal strife regarding those policies. In his own words, he is still very well connected to people inside the Fed.

Melzer claims that the current rescue measures of the Fed will have unintended consequences, and the U.S. is heading for another financial disaster. To avoid it, he says the government should implement the policies of cutting the budget deficit, and slowing the future money growth so that we have a fighting chance.

As to the Chinese continuing to fund the U.S. deficit, he replies it is basically a wishful thinking. The U.S. government projects $1 trillion to 1.5 trillion a year deficit, which would suck up most or all the savings in the world. Is it sensible for the world to fund the consumption in the United States, is it the sensible policy for the U.S.? he asks.

But the bulk of his interview focuses on the Federal Reserve. He is emphatically critical of the Fed chairman Ben Bernanke as highly political (i.e. doing the bidding of the administration), contrary to his public remarks of the Fed "independence". Melzer says his connections, including the governors at the Federal Reserve tell him that they disagree with Bernanke and are encouraging Meltzer to "keep talking".

The Federal Reserve's balance sheet is full of the administration's fiscal policies - buying up agency bonds/MBS to prop up the housing market, direct loans to financial institutions to prop them up, special investment vehicles to manage the assets of the failed investment bank (Bear Stearns) and failed insurance company (AIG) that have been decreasing in value. These have nothing to do with the monetary policy, which is one of the two mandates of the Fed.

Is the Fed interfering in places where it shouldn't be?

Absolutely, he answers, and he is not alone in thinking that way.

Meltzer even says the Fed policies jeopardize the democracy. "Democracy works best when you have the legislature involved in resolving the crisis, not by taking a quasi-independent agency and giving them the power."

He says he hates to see the country go where it's going: high unemployment, inflation, dollar's fall, hurting the rest of the world; Americans will have high unemployment, stagnant or lower wages, and inflation that will decrease their bank accounts.

His final message: Economy IS recovering, but the recovery will be short-lived unless we do something. Now is the time to slowly restore the stability (i.e. getting out of fiscal policies). We shouldn't wait until the next crisis hit, and we have to act in a draconian fashion. Do it now, slowly, deliberately, firmly.

His choice of venue (BBC) is interesting to me. His comments are not for the domestic (U.S.) consumption but an appeal to the international community, i.e. Europeans and Chinese who are increasingly uneasy about wanton spending by the U.S. government and the Fed's monetization. Meltzer seems to be trying to win them over by presenting the opposings view to Bernanke's within the U.S. central bank, promising restraint.

You can listen to the entire interview here.

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OT: "Moon Rock" at Dutch Museum Was a Fake

...so who perpetrated this hoax?

This is a link posted on Lewrockwell.com.

Fake Dutch 'moon rock' revealed (8/28/09 BBC News)

"A treasured piece at the Dutch national museum - a supposed moon rock from the first manned lunar landing - is nothing more than petrified wood, curators say.

"It was given to former Prime Minister Willem Drees during a goodwill tour by the three Apollo-11 astronauts shortly after their moon mission in 1969.

"When Mr Drees died, the rock went on display at the Amsterdam museum.

"At one point it was insured for around $500,000 (£308,000), but tests have proved it was not the genuine article."

The Dutch are laughing about it, and the U.S. officials has no explanation. You can read the whole article by clicking on the link above.

(Was the lunar landing a hoax after all?)

(Oh wait, I have a better theory: the moon once had a lush forest. I wonder if the Dutch determined what kind of wood this "moon rock" was.)

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Technical Analysis of Presidential Approval Rating Chart

If I am to apply technical analysis of stocks to Presidential Job Approval number of likely voters as published by Rasmussen Report, here's what I see.

A declining trend line and inability of the index to recapture the trend line:

A steady decline from the January high. Almost a inverse correlation to the stock market move so far, and in sync with the decline of U.S. dollar. In late May, there were a few attempts to regain and surpass this trend line, but they were unsuccessful. But those failures were to be expected, because, as you can see just prior to those attempts, there was a rising wedge formation in the downtrend (bearish). So, sure enough, after failed attempts, the index resumed the downward trend.

After impulsive low (dipping to 45%) sometime in late August-early September, the index has found the range between 48% and 52%. But again, a weak attempt to regain and surpass the downward trend line was unsuccessful (red arrow in the chart), and the index has recently dropped down below 50% and is oscillating in a very tight range. If I could superimpose the bollinger band, the band would be very narrow, indicating a very low volatility.

A break seems imminent. It could be up, it could be down. We have to keep an open mind. If it is up, the first target is the trend line at 52% or so. If that happens, and if it is to be a trend change, the index has to break above it in a convincing manner. If it is down from here and now, it can threaten to break 40%. If it first goes up near the trend line and then goes down, the drop may still be to the low 40s if the previous two downtrends are any indication. Trend is your friend until it isn't, as many swing traders would say.

Potential trigger for the move: passage of House health care "reform" bill. (The decline in June may have been triggered by the passsage of House climate bill.)

Also, if the stock market declines sharply from here (trigger: 3rd Quarter GDP number tomorrow) and U.S. dollar appreciates sharply from here, the job approval index may recapture the trend line and surpass it, marking a definite trend change.


Some of you may get indignant, even offended, to analyze the presidential poll number as if it were a stock. But come to think about it, it's all about sentiment, poll and stock.

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Barack Obama is the Most Powerful Writer Since Julius Caesar

says Rocco Landesman, chairman of National Endowment for the Arts (NEA).

I saw the headline on Drudge Report, and I had to see the original to believe it. So here it is, from NEA's own web site. The paragraph that compares Obama with Julius Caesar appears about half-way into the piece:

We Know Art Works: Rocco Landesman Addresses Grantmakers in the Arts (10/21/09, NEA)

"My answer is pretty simple. There is a new president and a new NEA. The president first. This is the first president that actually writes his own books since Teddy Roosevelt and arguably the first to write them really well since Lincoln. If you accept the premise, and I do, that the United States is the most powerful country in the world, then Barack Obama is the most powerful writer since Julius Caesar. That has to be good for American artists."

That has to be good for American artists?? Was Julius Caesar writing war memoirs good for Roman artists?

Mr. Landesman is a theater producer on Broadway whose appointment by Obama as chairman of NEA was confirmed in August 2009.

Here are some snippets from the speech:

"Our conference title, “Navigating the Art of Change” refers, with some subtlety, to our present circumstances, and since I’m always reading about how blunt I am, I will go along and translate that as “The news is bad.”" [He's using the "change" theme, overused by this administration. What the bad news? That the money is steering away from the arts, according to him.]

"I’m a theatrical producer. Fewer than 20% of the shows that open on Broadway earn back their investment, it is an absolutely terrible business and the people who invest in it know that. So why do they do it? Because they’re optimistic." [Sure they're optimistic. Probably that 20% of the shows more than make up for the bombs.]

"Which brings me to President Obama, our Optimist in Chief." [That Optimist in Chief has been threatening catastrophe and dire consequences unless people don't do his bidding. But clearly since Mr. Landesman is quite willing to do his bidding, NEA is all set for optimism.]

In conclusion, he says this:

"We are grantmakers, not a regulatory or enforcement agency. And will we “advocate” for the President’s agenda as well? If it’s a particular program – e.g. health care reform – no, of course not. But the President picked me for a reason and I decided to go to Washington and sign on with a federal bureaucracy – ugh! – for a reason. And that reason is that within the ethos of this White House, where words like change and hope and aspiration have real meaning, the arts can play a starring role. Whatever might be said on television, radio or blog sites, I have no intention of walking away from the compelling themes of this presidency and a historic opportunity in arts policy."

"Will we realize our hopes? Hey, I’m an optimist. I produced “The Producers,” so I’m sure Mel Brooks would give me permission to appropriate and butcher some lines from that show. We are optimistic, irrational, unrealistic and delusional. But we can’t help it. We’re grantmakers in the arts."

He says NEA does not advocate a particular program of this president, but quite willing and enthusiastic about promoting his agendas in general.

Rrriiiggghhhttt.

You can read his entire speech by clicking on the link above.

For your information, Julius Caesar (13 July 100 BC – 15 March 44 BC) was Roman military and political leader. He played a critical role in the transformation of the Roman Republic into the Roman Empire (Wikipedia.org).

His literary works entirely consist of memoirs from his military campaigns.

To match Julius Caesar, President Obama would have to fight in Iraq, Afghanistan, Pakistan, etc., as the commander on the front line, and come back to Washington D.C. to reminisce about his exploits, along with astute observation on geography, economy and the peoples.

Not so much about talking (or reading the teleprompter).

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A New (Toxic) Asset Class to Be Created By FDIC?

FT Alphaville cites this from Structured Finance News (10/27/2009):

"The Federal Deposit Insurance Corp. (FDIC) has seen a growing volume of assets acquired from failed banks in its role as receiver of these institutions.

"Michael Krimminger, special advisor for policy, office of chairman at the FDIC, spoke at Information Management Network’s 15th annual ABS East conference in Miami.

"As part of his speech, Krimminger said that the FDIC has acquired more than 100 failed banks and it is likely that the agency might consider securitizing the assets from these financial institutions."

The conference was from October 25 to 27, and Mr. Krimminger was a panelist on an October 26 event.

A security created out of assets held by failed banks that FDIC couldn't sell. If someone can somehow manage to slap on even an "A" rating, it should sell like hot cakes among savvy investors (pension funds, university endowments, money market funds...). That should boost the confidence and morale in the financial markets, no doubt.

After all, with the reputation of the rating agencies (Moody's, Standard & Poor, Fitch) in tatters, it may not matter much anyway whether the security is rated AAA or BBB.

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Dodd Pushes Bill to Freeze Credit-Card Interest Rates

Has Chris Dodd heard about "an unintended consequence"?

According to Bloomberg,

"Senate Banking Committee Chairman Christopher Dodd said he will introduce a bill today to freeze interest rates on existing credit-card balances before a federal law takes full force."

Credit card issuers across the board have already jacked up the rates to stratosphere in anticipation for a new federal law (CREDIT CARD ACCOUNTABILITY RESPONSIBILITY AND DISCLOSURE ACT OF 2009, signed into law on May 22, 2009) which is supposed to regulate the credit card industry to "protect consumers".

So now Chairman Dodd wants to freeze these higher rates in order to protect consumers? How would that constitute a protection? Is this some kind of cruel joke? Or doublespeak, where "protection" means "extortion"?

The damage is already done for consumers by passing this Act. Now Dodd's bill will probably make things worse, as the recent government actions are any indication. So much for "protecting consumers", which is the mantra for every government legislation.

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What Does U.N. Have to Do with U.S. Housing Crisis?

According to New York Times, the United Nations has assigned an official to investigate the U.S. housing crisis. Ms. Raquel Rolink, UN Rapporteur on Housing, is to make sure people have "adequate" housing in the on-going crisis, particularly in places like New York City.

Affordable? U.N. Puts a Questioning Eye on New York’s Housing
(10/23/09 New York Times)

"Everybody knows New York City is an expensive place to live. But the United Nations wants to know if affordable housing is so tough to come by that it actually violates human rights.

"The United Nations has assigned an official, “a special rapporteur on the right to adequate housing,” to check the city’s affordable housing. The rapporteur, Raquel Rolnik, is to tour the city for the next three days with housing advocates and city officials to “hear the voices of those who are suffering on the ground,” she said.

"The United Nations Human Rights Council appoints a rapporteur, or independent experts, to investigate human rights conditions around the world. In the case of Ms. Rolnik, a professor of urban planning at the University of Sao Paulo in Brazil, her “mission” is to tour New York City and six other places in the United States and to report back to the United Nations General Assembly about housing rights violations and advances.

"After that, “We send off letters to governments to ask, ‘Is this true? What’s going on?’ and to please intervene,” she said."

(You can read the entire incredible article by clicking on the link above.)

The United Nations, after her reportage, will formally declare housing as a basic human right in the United States and elsewhere (Ms. Rolink is already saying that, as you see in the video below). That's my guess. Just like health care is a basic human right, as some people claim. Therefore, the state has to step in to ensure everyone has the equal right to housing and punish the violators, regardless of the economic situation.

What I want to know is: Who invites these people like her?

You can see Ms. Rolink in this video clip. She seems to have a bubbly personality (or her meds are conflicting with each other).

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OT: Microsoft's Founding Members

I found this picture in the article by Times Online (U.K.). The article is about how Bill Gate's Gates Foundation is funding "think-outside-the-box" projects by young researchers.

But the picture... "Would you have invested?" Good question.

Someone did, and many others invested in countless other start-ups cropping up in the late 1970s. Apple started back then. I personally know people who started their PC and/or software businesses around that same time period in Silicon Valley and got their businesses funded by angel investors and venture capitals. Any of them could have been a Steve Jobs or a Bill Gates, if things had turned out slightly differently.

Despite all the economic (political, social, you name it) doom and gloom, I'm hopeful, when I look at this picture, that somewhere some crazy people will start creating something new and disruptive. Just when everyone writes the U.S. off.

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Borrowings from Fed Down, Reserves Way Up

...so what gives?

The Federal Reserve chairman Ben Bernanke, when he outlined his so-called "exit strategy" back in July, said that the bank reserves at the Fed would naturally decrease as the various loan programs winded down. (If you want to review his strategy, here's my post from July.)

Well, the Fed's various loan programs have been winding down. At their peak, the total borrowings by depository institutions (=banks) exceeded $400 billion. They have been flat about $100 billion since April this year. Have the bank reserves come down?

Answer: Not at all.

I created the graph using St. Louis Fed's FRED. The red line is the bank reserves. The blue line is the total borrowings by the banks from the Fed. As you can see, the bank reserves recently spiked to a new high to $1 trillion. In the latest Federal Reserve Statistical Release H.4.1 Factors Affecting Reserve Balances (10/22/09), the bank reserves are recorded at: $1,034,078 million, up $52,459 million from last week.

$1 trillion minus $100 billion equals $900 billion. How has this $900 billion in the bank reserves been earned? What securities could the banks have given to the Fed in exchange for the credit to their reserves, outside those lending programs that are winding down?

Scanning the Fed's Statistical Release, my eyes stopped at these line items:

Federal agency debt securities (2) 137,866 + 3,320
Mortgage-backed securities (4) 766,543 + 63,970

The first column is the total, the second column is the change from last week. If you add the two numbers in the first column, you get: $904,409 million. Rounding it up, $904 billion.

Oh what a coincidence.

Is it possible that, as the lending programs wind down and the banks takes the collateral back, the banks are selling them back to the Fed as part of the Fed's permanent open market operations (POMO)? So now it's not a loan any more, the sale has been made. The banks have sold the agency bonds and agency-backed MBS that hardly anyone in the world wants to the Federal Reserve, and in exchange they got their bank reserves credited. Probably at the face value, good as cash.

I may be missing some important things and I could be totally wrong and it is just a coincidence, but if this is what has happened, then all the Fed has done is to shift temporary assets (loan collateral) to permanent assets backed by the government.

At least, we now know that Bernanke's "exit strategy" No.1 didn't work. According to Zero Hedge, the New York Fed experimented on another of his strategy to use reverse repo with the primary dealers and the experiment reportedly ended in disaster.

The only way to effectively shrink the balance sheet would be to sell long-term securities in the open market. Treasuries, agency bonds and MBS, which account for $1.678 trillion of the Fed's $2.230 trillion balance sheet.

Why was Mr. Bernanke so eager to be reappointed to be the Fed chairman, given this practically impossible task?

Unless the Fed's interest is not to save the system or the economy, but save its credibility... (One Fed board member said as much, remember?)

Or, unless someone has decided that the proverbial "bad bank" is to be the Federal Reserve, never to fail...

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OT: Bug Is Fixed on Comment Section

For those of you who got frustrated with the comment section, I've fixed the underlying HTML code so that you can now scroll down to get the word verification and "Post Comment" button. It should work now.

It turns out to be a very common Blogger bug, but Google hasn't bothered to fix it. If you have the same problem on your blog, here's the site I went to.

The Real Blooger Status - What Blogger won't tell you

(Thank you for the fix, guys.)

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They've Lost Control Part 2

President's man Robert Gates loses it in Japan.

U.S. pressures Japan on military package
(John Pomfret and Blaine Harden, 10/22/09 Washington Post)

"Worried about a new direction in Japan's foreign policy, the Obama administration warned the Tokyo government Wednesday of serious consequences if it reneges on a military realignment plan formulated to deal with a rising China.

"The comments from Defense Secretary Robert M. Gates underscored increasing concern among U.S. officials as Japan moves to redefine its alliance with the United States and its place in Asia. In August, the opposition Democratic Party of Japan (DPJ) won an overwhelming victory in elections, ending more than 50 years of one-party rule.

"For a U.S. administration burdened with challenges in Pakistan, Afghanistan, Iraq, Iran, North Korea and China, troubles with its closest ally in Asia constitute a new complication.

"A senior State Department official said the United States had "grown comfortable" thinking about Japan as a constant in U.S. relations in Asia. It no longer is, he said, adding that "the hardest thing right now is not China, it's Japan." "

(You can read the entire article by clicking on the link above.)

If the U.S. considers Japan as its closest ally in Asia, it sure hasn't treated it as such. To the U.S., Japan is not an "ally"; it is just a vassal state to do its bidding, whether it is an economic policy or foreign policy. The U.S. has "grown comfortable", so much so that it dispatched the new ambassador to Tokyo who is a virtual "nobody" in the eyes of Japanese, many of whom took it as an insult.

Then, in comes DPJ (Democratic Party of Japan, many of whose members are ex-LDP politicians after all) and says it wants to reconsider the alliance with the U.S., including its military assistance to the U.S. (refueling operation for the U.S. on Indian Ocean, relocation of the Marines helicopter base). The new ministers of the Hatoyama administration, o horror of horror and indignation to the American counterparts, dare talk back.

Flipped out, the Obama administration, through Mr. Gates, tells Japanese of "serious consequence". Like what? Invade Japan?

Let's think about the logic here. The Obama administration clearly considers China as "threat", and demands that Japan, a country sitting right across from China whose trade with China and the rest of Asia is bigger than that with the U.S., be part of the U.S. instead of Asia.

There may be more to this news, as can be inferred from Mr. Gates' behavior in Tokyo. According to the article, he skipped dining with defense officials there, and skipped the welcoming ceremony at the Defense Ministry. What looks like a childish snub to protocol-conscious Japanese coming from an experienced player like Mr. Gates makes me wonder if Japanese are finally kicking the U.S. troops out of Japan. (That would be extremely popular with Japanese people.)

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They've Lost Control

All President's men (and women).

Obama's Pay Czar will cut the salaries of top executives of the firms that have received the government bailout fund by whopping 90%. Can someone tell me why anyone should listen to him? He is not an elected official, only appointed by the President. What if you don't obey his orders? Is it a crime not to obey an appointed official? What would be the penalty?

• Pay Czar to Slash Compensation at Seven Firms (10/21/09 Wall Street Journal)

And the stock market tanked on the news, led by (hold your breath) financials.

U.S. dollar continued the descent, hit the 52-week low against Euro before it reversed hard upward as the stock market tanked. Not a peep from Geithner or Bernanke or their boss.

• Euro breaches $1.50 for first time in 14 months (10/21/09 AP)

Not surprisingly, crude oil and gold went higher.

• Oil hits $82 per barrel as dollar plunges (10/21/09 AP)


• Gold ends higher as dollar falls to new low versus euro (10/21/09 Market Watch)

House Democrats are calling "public option" "Medicare for Everyone" and hope everyone agrees that it's a good thing.

• House Dems want Medicare for everyone (10/21/09 The Hill)

And in Nancy Pelosi's mind, $900 billion is a chump change, and that is somehow supposed to reduce the deficit. (Hello, anybody up there?)

• House healthcare bill under $900 billion: Pelosi (10/20/09 Reuters)

In Iraq, U.S. soldiers are getting so bored they've started a book club. (Why can't they come back home?)

• U.S. troops in Iraq have time on hands (10/21/09 USA Today)

But over Afghanistan, even the Defense Secretary is getting impatient for Obama's slow decision. (No, Mr. Gates, President can't be bothered now. He's busy having a grand time partying at the White House.)

• Gates: U.S. Can't Wait on Afghan Election (10/20/09 CBS News)

Senator Lamar Alexander is fed up with the White House's "street-brawling" tactics against critics and opponents. (What else do you expect from Chicagoland?)

• Lamar Alexander to Barack Obama: No 'enemies list' (10/21/09 Politico)

Rasmussen's Daily Presidential Tracking Poll: Obama's ratings sink again, approval index nearing all-time low.

• Daily Presidential Tracking Poll (10/21/09 Rasmussen Report)

Republicans in House Committee of Ways and Means have this to say about Obama's $787 billion stimulus package (remember that one?). Let's just blame it on George Bush, shall we? To be fair, the administration has said the bulk of money will go out next year (just in time for the mid-term election, what a coincidence). Then I'm sure 6 million new jobs will be created to make up for the 7-month loss of 2.7 million jobs. (Not.)

• 7 Months After Stimulus 49 of 50 States Have Lost Jobs

Well, we just have to have another bigger and better stimulus. How about $1 trillion every quarter?

Or is it time to "wag the dog"?

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Obama's Pay Czar Working the Market

The stock market collapsed in the last hour of trading Wednesday when this news came:

3:26 PM The government will reportedly order deep pay cuts from the biggest bailout recipients in a plan the Treasury will announce in the next few days. The seven companies that got the most assistance will have to cut cash payouts to their top 25 execs by an average of 90% - to be replaced by stock that they'll be restricted from immediately selling - and cut their total compensation by 50%. [from Seeking Alpha Market Currents]

Dow Jones Industrial Average went from 20 points gain to 80 points loss (100 points reversal) in less than 20 minutes on a heavy volume.

If this isn't the blatant government intervention in the market, I don't know what is. Good job, Mr. Feinberg. Lucky you are not accountable to anyone but your President.

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Showdown in Chicago, to Counter "Tea Party" Goers?

Counter or co-opt...

This is a curious site I ran into on an online message board.

Showdown in Chicago - Put People First!

The home page has this to say:

"The same financial institutions that caused the economic crisis and took billions in taxpayer bailouts are back to earning incredible profits. Meanwhile, Americans face shrinking pensions, rising foreclosures and unemployment, state budget cuts, predatory lending, outrageous overdraft fees, and sky-high credit card interest rates.

"The American people want oversight, accountability and common-sense financial reform NOW. This is the classic David vs. Goliath fight, with Wall Street spending millions and millions on lobbying to defeat reforms that would protect the American people and our economy.

"JOIN US on October 25-27 for a series of demonstrations when thousands of Americans - retirees, farmers, workers, homeowners, renters, students, clergy, and small business owners - come together on the streets of Chicago to demand a banking system that puts the American people first and a Congress that makes it happen! Take a look at the Showdown schedule of events, stay informed about event details and join our mailing list, and fill out the Showdown inquiry form to tell us when and where you want to plug into the fight!"


It sort of sounds like it has borrowed a page from Tea Party movement that the left-leaning sites and blogs have attacked. So I clicked on "About Us" page, and I found this list as their "allies":

My eyes were drawn to AFL-CIO and SEIU. Hmmm.

Then I looked at "Our Solution" page. Top of the list is "Modernize the Community Reinvestment Act (CRA)". They have now removed the link to their detailed solution proposal, but when I first looked at the page it had such a link and I copied it:

http://www.ntic-us.org/images/cra%20policy%20paper%20ii.pdf

The paper has this as the title:


The site turns out to be National Training and Information Center (NTIC), based in Chicago. It is "a national organizing, policy, research, and training center for grassroots community organizations dedicated to building power to reclaim our democracy and advance racial and economic justice." In other words, a community organizer.

Among their "Successes", they proudly list:

• Spearheaded efforts to pass the Community Reinvestment Act and the Home Mortgage Disclosure Act in the 1970s – often referred to as the most important economic justice public policy for neighborhoods.
  
• Lead a successful and productive partnership with Fannie Mae to develop mortgage products to meet the home mortgage needs of underserved neighborhoods. To date, this 8-city partnership has resulted in $4 billion in loans to families.

In other words, they are responsible, along with the government regulators/agencies and banks, for the subprime debackle that triggered the worldwide financial crisis that tanked the stock markets and economies into recession.

And "National People's Action (NPA)" turns out to be another community organizer.

Hmmmm.

Showdown in Chicago "Our Solution" page had another link, which they later removed. It was about "Modernize Home Mortgage Disclosure Act (HMDA)", and it had the same red header with red stars. I suspect that "Solution" was also a NPA paper.

Then I saw Michael Moore as one of their "Allies".

Hmmmm.

My tentative conclusion: This may be an answer from the administration's supporters - labor unions, community organizers (if not the administration itself) to "right-wing" "racist" people of all ages who descended on Washington DC in September to hold a gigantic "Tea Party", protesting all sorts of government policies from healthcare reform to gun control to war in Afganistan.

I don't know whether all these "Allies" of Showdown in Chicago are aware of their affiliation.

Lastly, why October 25-27 for "series of demonstrations"? That's when the American Bankers Association holds its annual meeting in Chicago Sheraton Hotel. So this organization (Showdown in Chicago) could be just a one-time setup for the occasion.

But when I saw that paper's header in red, with words like "People's Action" and two red stars, and recalling one of the White House communication director's favorite philosophers (Mao Zedong), I have to say it made me feel uneasy.

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US Dollar to 50 Yen, Says Sumitomo Strategist

and the U.S. economy to double-dip in 2010.

Somehow I missed this cheerful news when it hit the wire, but here it is:

Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says
(Shigeki Nozawa, 10/15/09 Bloomberg)

"Oct. 15 (Bloomberg) -- The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

"“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

" “We can no longer stop the big wave of dollar weakness,” said Uno, who correctly predicted the dollar would fall under 100 yen and the Dow Jones Industrial Average would sink below 7,000 after the bankruptcy of Lehman Brothers Holdings Inc. last year. If the U.S. currency breaks through record levels, “there will be no downside limit, and even coordinated intervention won’t work,” he said." [emphasis is mine.]

If anyone in the world knows about the futility of currency intervention, it must be Japanese. Bank of Japan's massive intervention to stem the rise of yen against U.S. dollar only profitted the currency traders.

According to the article, Mr. Uno bases his prediction on the Elliott Wave theory that tells him the dollar is heading for the trough of a 40-year super-cycle that started in 1971:

"The dollar is now at wave five of the 40-year cycle, Uno said. It dropped to 92 yen during wave one that ended in March 1973. The dollar will target 50 yen during the current wave, based on multiplying 92 with 0.764, a number in the Fibonacci sequence, and subtracting from the 123.17 yen level seen in the second quarter of 2007, according to Uno."

(You can read the entire article by clicking on the link above.)

I don't profess to know enough about the Elliott Wave theory, but I think "wave five" is the last wave before the new cycle begins. What's interesting to me is that Robert Prechter, president of Elliott Wave International called for a multi-year rally of the dollar back in August, looking at the same wave five. Mr. Prechter thinks wave five is already over, and Mr. Uno thinks it continues.

If you look at the long-term monthly chart of the U.S. dollar index, the target price seems to be even lower than Mr. Uno's. The chart is from the post I wrote back in May. It looks to me like a massive "head and shoulders" formation with neckline at 80, with the "right shoulder" already formed from 2004 to 2007 and the neckline is already broken once in 2008. A technical rebound from that low of 72 was to be expected, and it did happen. The neckline was broken again in July, and the index has never regained 80 since.




The price target of this head and shoulders pattern would be the neckline minus the height of the head: 80 - (120-80) = 40

By the way, the U.S. dollar index's current decline, which started in early March, coincides with the stock market rally. Almost a mirror image. Also, the dollar index decline (and stock market advance) seems to coincide with the unwinding of the Fed's central bank liquidity swaps. (See my post.)

Today, U.S. dollar is having a sharp rebound, as the stock market is dropping fast. Currently, Dow Jones Industrial Average is down 87 points, threatening to break 10,000-mark. Nasdaq is down 17 points to 2,158, S&P 500 down 9 points to 1,088. The U.S. dollar index is up 0.235 point to 75.745.

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Senate Health Care Bill (S.1796) Is 1,502-Page Long

as posted by Senate Finance Committee.

Finance Committee bill has been filed (10/19/09 Politico)

Who is going to read this monstrosity? Just like there were people who read the House bill (H.R. 3200) and post the summary on the Internet, I'm sure someone's already on it.

This bill is being merged with the Health Committee's bill, apparently in behind the scene negotiation, as Politico's UPDATE 3 indicates [emphasis is mine]:

"UPDATE 3: It's important to remember that the bill won't exist in this form for long. Senate Majority Leader Reid and Sens. Max Baucus and Chris Dodd along with senior White House aides are merging the Finance and Health Committee legislation into one bill that will be considered on the floor of the Senate. The behind-closed-doors dealings have drawn criticism from Republicans, particularly because President Obama had promised a transparent process and pledged to negotiate the health care bill on C-SPAN."

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