Welcome to the New Germany
After Sunday’s election, Germany’s political landscape has been shaken up, perhaps for ever. Angela Merkel‘s conservatives will be able to form a coalition government with the business-friendly FDP, but the balance of power between the two parties has fundamentally shifted. And the once-powerful Social Democrats may never recover from their defeat.
Oct 032009
Incredible. A phenomenon that is still not fully understood. Maybe, someday, scientists/physicians will uncover the mystery of these beautiful minds.
Oct 032009
“In the past week, U.S. officials have announced charges in five terrorism probes in five states . . . a confluence of cases unlike anything the country has seen since [9/11],” but CNN’s Peter Bergen and Mike Brooks insist it’s all coincidence. In the most recent cases, “there is a severe absence of an orderly process towards the final desired act of violence,” John Duffey assesses in The Examiner. As for the primary plot, “Najibullah Zazi was no brooding outcast, but prosecutors say he was just as furtive an operative as the Sept. 11 hijackers when he received terrorism training,” The New York Times’ Michael Wilson profiles. The feds also say Zazi was intent on attacking on 9/11, a New York Daily News team notes — while NBC News has the suspect’s lawyer pointing to a “missing key element: explosives or the chemicals allegedly used to make them.”
Oct 032009
Church Signs in England…
The English have always had a
way with words!
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I just want to thank all of you for your educational e-mails over the past year. I am totally screwed up now and have little chance of recovery.
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> I no longer open a public bathroom door without using a paper towel or have them put lemon slices in my ice water without worrying about the bacteria on the lemon peel.
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> I can’t use the remote in a hotel room because I don’t know what the last person was doing while flipping through the adult movie channels.
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> I can’t sit down on the hotel bedspread because I can only imagine what has happened on it since it was last washed.
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> I have trouble shaking hands with someone who has been driving because the number one pastime while driving alone is picking ones nose (although cell phone usage may be taking the number one spot).
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> Eating a little snack sends me on a guilt tripbecause I can only imagine how many gallons of Trans fats I have consumed over the years.
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> I can’t touch any woman’s purse for fear she has placed it on the floor of a public bathroom.
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> I MUST SEND MY SPECIAL THANKS to whoever sent me the one about poop in the glue on envelopes because I now have to use a wet sponge with every envelope that needs sealing.
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> ALSO, now I have to scrub the top of every can I open for the same reason.
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> I no longer have any savings because I gave it to a sick girl (Penny Brown) who is about to die in the hospital for the 1,387,258th time.
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> I no longer have any money at all, but that will change once I receive the $15,000 that Bill Gates/Microsoft and AOL are sending me for participating in their special e-mail program.
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> I no longer worry about my soul because I have 363,214 angels looking out for me, and St. Theresa’s Novena has granted my every wish.
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> I no longer eat KFC because their chickens are actually horrible mutant freaks with no eyes or feathers..
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> I no longer use cancer-causing deodorants even though I smell like a water buffalo on a hot day.
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> THANKS TO YOU I have learned that my prayers only get answered if I forward an e-mail to seven of my friends and make a wish within five minutes.
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> BECAUSE OF YOUR CONCERN, I no longer drink Coca Cola because it can remove toilet stains.
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> I no longer can buy gasoline without taking someone along to watch the car so a serial killer won’t crawl in my back seat when I’m pumping gas.
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> I no longer drink Pepsi or Dr. Pepper since the people who make these products are atheists who refuse to put ‘Under God’ on their cans.
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> I no longer use Saran Wrap in the microwave because it causes cancer.
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> AND THANKS FOR LETTING ME KNOW I can’t boil a cup of water in the microwave anymore because it will blow up in my face.. Disfiguring me for life.
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> I no longer check the coin return on pay phonesbecause I could be pricked with a needle infected with AIDS.
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> I no longer go to shopping malls because someone will drug me with a perfume sample and rob me.
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> I no longer receive packages from UPS or Fed Ex since they are actually Al Qaeda in disguise.
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> I no longer shop at Target since they are French and don’t support our American troops or the Salvation Army.
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> I no longer answer the phone because someone will ask me to dial a number for which I will get a phone bill with calls to Jamaica , Uganda , Singapore , and Uzbekistan …
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> I no longer buy expensive cookies from Neiman Marcus since I now have their recipe.
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> THANKS TO YOU I can’t use anyone’s toilet but mine because a big brown African spider is lurking under the seat to cause me instant death when it bites my butt.
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> AND THANKS TO YOUR GREAT ADVICE I can’t ever pick up $5.00 dropped in the parking lot because it probably was placed there by a sex molester waiting underneath my car to grab my leg.
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> I can no longer drive my car because I can’t buy gas from certain gas companies!
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> I can’t do any gardening because I’m afraid I’ll get bitten by the brown recluse and my hand will fall off.
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> And I now keep my toothbrush in the living room, because water splashes over 6 ft. out of the commode.
> If you don’t send this e-mail to at least 144,000 people in the next 70 minutes, a large dove with diarrhea will land on your head at 5:00 p.m. Tomorrow afternoon and the fleas from 12 camels will infest your back, causing you to grow a hairy hump. I know this will occur because it actually happened to a friend of my next door neighbors’ ex-mother-in-law’s second husband’s cousin’s beautician . . .
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> Oh, by the way…..
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> A German scientist from Argentina , after a lengthy study, has discovered that people with insufficient brain activity read their e-mail with their hand on the mouse..
> Don’t bother taking it off now, it’s too late.
Oct 032009
| Christie Has the Lead, Corzine Has the Cash in NJ’s Governor Race Politics Daily (blog) But the race is about more than just cash, a phrase you rarely hear in money-talks New Jersey where more than 150 state and local officials have been … See all stories on this topic |
| SPECIAL REPORT: Property taxes are stealing our way of life Vineland Daily Journal New Jersey’s tax system is dysfunctional because it deters job growth and long-term economic planning, said Joseph Henchman, director of state programs for … See all stories on this topic |
| Possibility of Guns on Amtrak Causes Concern The Collegian In a letter to congressional leaders, New Jersey Governor Jon Corzine said he was “outraged” that the US Senate, by a 68-30 vote, agreed last week to permit … See all stories on this topic |
| Fleeing the Tax Man Barron’s As taxes surge in states such as California, New York and New Jersey, more and more wealthy folks like Andrews are pulling up stakes. … See all stories on this topic |
| The needy struggle in civil court cases The Star-Ledger – NJ.com The report, by Legal Services of New Jersey, a nonprofit that gives legal aid to low-income residents, says the tough economy is making matters worse as … See all stories on this topic |
| New Research Shows Couples in Pa & NJ Stay Married KYW1060.com by kyw’s John mcdevitt Recent Census bureau data shows more couples in New Jersey and Pennsylvania are staying married than those in most other states. … See all stories on this topic |
| Key election contests Gulf Daily News New Jersey’s voters can be quite volatile and appear extremely frustrated both by the sagging economy, which has hit the state hard, and also by wide-spread … See all stories on this topic |
| Risky business: States tax the rich at their peril The Associated Press The concern about millionaire flight has prompted some states, including New York, New Jersey and California, to increase the highest tax rates only … See all stories on this topic |
| Slow recovery hurts NJ stocks Asbury Park Press … the economy isn’t recovering quickly. The index, made up of 75 companies either headquartered at the Shore or with significant operations in New Jersey, … See all stories on this topic |
Musings from Bill Bonner:
A few years ago, it looked to us as though the world financial system had gone to war. We cheerfully awaited the victory parade. We figured Mr. Market would whup the feds good and hard. It hasn’t happened so far.
On one side, are the forces of a natural market correction…following a long, long period of expansion. The easier money gets, the more people tend to misspend and mis-invest it. Then, inevitably, their mistakes must be corrected. That’s what bear markets and recessions are for.
But the feds don’t like bear markets or recessions. And at least since the Keynes outlined his general theory back in the early 20th century, they’ve believed that they don’t have to put up with them. Keynes took a page from the Old Testament. Government should act like an enlightened Egyptian Pharaoh, he didn’t say, but should have. It should run surpluses in the fat years and deficits in the lean years…thus flattening out the pattern of boom and bust.
Pharaoh was no dope. He stored up grain for seven years, when the harvests were bountiful. Then, when the seven lean years came, he released the grain to the people. Problem solved.
Keynes believed that modern government could do the same thing. But Pharaoh was not running a democracy. He had no voters to answer to. So, if he wanted to store grain in the fat years, he could do so.
In theory, the US government could do the same. But, in fact, it never runs significant surpluses. There are too many people who want too much bread and too many circuses. And you don’t win votes by denying the voters what they want. So, in practice, the feds run deficits even in the fat years! Last year, before the downturn really started to bite, the US federal government ran the biggest deficit in history – nearly half a trillion dollars.
Now, let’s imagine how that would work for a bad Pharaoh. He would give out grain in the fat years. This would encourage farmers to produce less grain. Then, when the lean years came, Pharaoh would have no grain to give out…and the farmers would have less grain stored up themselves, since they grew less during the boom years. The famine would be worse than ever.
Then, if we can imagine that Egypt was trading with China at the time, perhaps Pharaoh could borrow grain from the Zhou dynasty to help ease the peoples’ pain. Perhaps he could mortgage the pyramids. Whatever, he – and the Egyptian people – would have been in much better position if he had done as Joseph told him in the first place…lay up stores in good times, draw then down in bad times. How difficult is that?
But Bernanke didn’t see the famine coming. Neither did Geithner. Or Greenspan. Or any of the other savants Pharaoh interpret his dreams. None of them expected hard times. None of them warned the public. None of them encouraged the government to save money for the recession. Nassim Taleb asks why Bernanke was reappointed after he clearly failed the most critical test. But heck…the federal government is an equal opportunity employer. Employees aren’t let go just become they’re incompetent.
Oct 032009
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Australian Theoretical Price of Gold
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| M3 growth in Australia for 2009/10 has got off to a sluggish start. The Theoretical price of gold remains largely steady as a result. The actual price of gold has fallen just over 2% this financial year as the Aussie dollar rallies again.
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Oct 032009
In Asset Allocation, Rick Bookstaber takes issue with the notion of being able to construct an all-weather portfolio and argues that there is “no magic asset allocation that protects you from the buffetings of financial storms without it also trimming your sails during fair weather.”
Goldman’s Pre-emptive Influence
Coup d'etat in America, Integrity and Responsibility, Is Goldman Sachs Evil?, It Is Nice To Be Part of the Elite!, IT'S ALL ABOUT POWER AND MONEY, Obama's Hypocrisy, Our phony middle class, Political Implications, Regulatory Failures, TARP fruit loops, The Arrogance of Power, The Democrats Blew It Again, The Financial Elite, The Geithner Resignation Watch, The Suffering Poor, Time For A New Third Party, Truth In Charity, Unemployment Catastrophe, Unindicted Co-Conspiritors, We Are All Cooked, We Are All Guilty, We Have Become Beggars To The World, Who Guarantees the Guarantor?-You Do!, Who owns Congress-Still!
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Oct 032009
An Inside Look at How Goldman Sachs Lobbies the Senate, by Matt Taibbi: …Later on this week I have a story coming out in Rolling Stone that looks at the history of the Bear Stearns and Lehman Brothers collapses. The story ends up being more about naked short-selling and the role it played in those incidents than I had originally planned…, but it turns out that there’s no way to talk about Bear and Lehman without going into the weeds of naked short-selling…
It’s the conspicuousness … that is the issue here, and the degree to which the SEC and the other financial regulators have proven themselves completely incapable of addressing the issue seriously, constantly giving in to the demands of the major banks to pare back (or shelf altogether) planned regulatory actions. There probably isn’t a better example of “regulatory capture” … than this issue.
In that vein, starting tomorrow, the SEC is holding a public “round table” on the naked short-selling issue. What’s interesting about this round table is that virtually none of the invited speakers represent shareholders or companies that might be targets of naked short-selling, or indeed any activists of any kind in favor of tougher rules against the practice. Instead, all of the invitees are either banks, financial firms, or companies that sell stuff to the first two groups.
In particular, there are very few panelists — in fact only one, from what I understand — who are in favor of a simple reform called “pre-borrowing.” Pre-borrowing is what it sounds like; it forces short-sellers to actually possess shares before they sell them.
It’s been proven to work, as last summer the SEC, concerned about predatory naked short-selling of big companies in the wake of the Bear Stearns wipeout, instituted a temporary pre-borrow requirement…
The lack of pre-borrow voices invited to this panel is analogous to the Max Baucus health care round table last spring, when no single-payer advocates were invited. So who will get to speak? Two guys from Goldman Sachs, plus reps from Citigroup, Citadel (a hedge fund that has done the occasional short sale, to put it gently), Credit Suisse, NYSE Euronext, and so on.
In advance of this panel and in advance of proposed changes to the financial regulatory system, these players have been stepping up their lobbying efforts… Goldman Sachs in particular has been making its presence felt.
Last Friday I got a call from a Senate staffer who said that Goldman had just been in his boss’s office, lobbying against restrictions on naked short-selling. The aide said Goldman had passed out a fact sheet about the issue that was so ridiculous that one of the other staffers immediately thought to send it to me. When I went to actually get the document, though, the aide had had a change of heart.
Which was weird, and I thought the matter had ended there. But the exact same situation then repeated itself with another congressional staffer, who then actually passed me Goldman’s fact sheet.
Now, the mere fact that two different congressional aides were so disgusted by Goldman’s performance that they both called me on the same day — and I don’t have a relationship with either of these people — tells you how nauseated they were.
I would later hear that Senate aides between themselves had discussed Goldman’s lobbying efforts and concluded that it was one of the most shameless performances they’d ever seen from any group of lobbyists, and that the “fact sheet” … was, to quote one person familiar with the situation, “disgraceful” and “hilarious.” …
Oct 032009
We have seen the folly in this policy, euphemistically known as ‘the Greenspan Put’ as gigantic asset bubbles ballooned out of control following cuts in 1998-1999 and 2002-2003. Fisher, a well-known inflation hawk, might be speaking for himself. Or he might be signaling there will be no Bernanke Put.
Source
Fisher Sees Limit to Fed’s ‘Life Support’ for Housing
– Bloomberg
Prof. Jim Hamilton at Econbrowser (thanks Mark Thoma for the link) addresses one of the Fed’s standard methods of draining liquidity from the banking system: reverse repurchase agreements. Basically, the Fed will transfer some of its assets to the banking system via short-term loans taken out with its Primary Dealers, presumably offering standard (Treasuries) and less standard (MBS or agency bonds) assets as collateral.
Reverse repurchase agreements simply slosh around the assets (MBS, agencies, and Treasuries) between the Fed and the Primary Dealers, rather than removing the assets from the Fed’s balance sheet permanently. Eventually, though, the Fed must sell the securities outright onto the open market – we are far, far from that!
This is all hot air for now. How can the Fed soak up the expansionary liquidity, let alone unwind $1 trillion in assets, when the banking system is still shedding pounds?
The Fed is considering another route, too: conducting the same repurchase agreements with the money-market mutual fund industry in tandem. An excerpt from the FT:
The Federal Reserve is looking to team up with the money-market mutual fund industry as part of its strategy to ensure that its unconventional policies to stimulate the economy do not produce a bout of post-crisis inflation.
The central bank envisages eventually draining liquidity from the financial system by engaging in trades called “reverse repos” with the deep-pocketed money-market funds. In these, the Fed would pledge mortgage-backed securities and Treasuries acquired during the crisis as collateral for short-term loans from the funds.
The obvious counterparties for reverse repo deals are the Wall Street primary dealers. However, the Fed thinks they would only have balance sheet capacity to refinance about $100bn of assets. By contrast, the money-market funds have $2,500bn in assets, which means they could plausibly refinance as much as $500bn in Fed assets. Officials think there would be appetite on the part of the funds, which are under pressure from regulators and investors to stick to low-risk liquid investments.
The Fed is solely attempting to assuage inflation angst at this time; it’s still very premature to talk about an exit of expansionary policies when credit markets still crimp the stimulus that the Fed so desperately wants to get into the open market (much of the base, roughly $855 billion on September 23, 2009 and up from $2 billion in August 2008, remains on balance with the Fed in the form of “excess reserves). Just look at the crunch in the consumer credit space (chart to left).
As Prof. Hamilton suggests, the mechanisms of the reverse repos should successfully sterilize the base before it starts to become inflationary (with either the Primary Dealers and/or the Mutual Funds industry). However, one of the programs through which the Fed utilized previously to sterilize its liquidity, and to which Prof. Hamilton refers, – the Supplementary Financing Program – is unlikely to be an avenue for removing liquidity.
In fact, it’s quite the opposite. The Treasury already announced its imminent plan to liquidate the bulk of its $200 billion account with the Fed. There’s another $200 billion in excess reserves with which the Fed must contend (see my previous post here).
It’s easy to get the liquidity into the financial system. But getting it out without collapsing the economy or allowing inflation pressures to build? Well, that’s a different story.
While the G20 leaders make reassuring noises about international trade, I think the risk of rising trade tensions have not abated at all. As I see it, everything depends on whether or not domestic Chinese polices had any role in creating the global imbalances, and if they did, then we are still in the early stages of a difficult process of assigning the costs of the global adjustment through trade.
Beijing hates when anyone suggests that Chinese policies were partly at fault for the current global imbalances, and doesn’t even like people to use the phrase “global imbalances,” but like it or not, we have to figure out whether in fact Chinese policies mattered. As I see it, China’s consumption rate, the lowest ever recorded, and it’s trade surplus, the largest as a share of global GDP ever recorded, could not help but have been caused by policies – such as an undervalued currency regime, excessively low interest rates, sluggish wage growth, unraveling social safety nets, and manufacturing subsidies – that were almost wholly under domestic control.
According to my understanding of Chinese growth, it was policies that systematically forced households implicitly and explicitly to subsidize often-otherwise-unprofitable investment and manufacturing that led to wide and divergent growth rates between production and consumption, and of course the gap between the two is the savings rate. If that is true, the stimulus package is only likely to exacerbate the domestic imbalance.
This matters because as the US begins the too-slow but irresistible process of raising its savings rate, something else must change too. At the global level savings must of course balance with investment, and with general expectations that investment will at best remain steady and probably actually decline over the next few, a rising US savings rate must result in one or more of three outcomes:
1. Total US savings do not rise – which means US GDP must contract as the savings rate rises
2. The savings rate in the rest of the world declines, or at least grows much more slowly than in the past. Since China is the country with the highest savings rate and the largest trade surplus, this means China’s savings rate will decline, and this is just another way of saying that consumption growth will surge.
3. China’s GDP grows much more slowly.
So we are left with the almost inescapable fact that if the US savings rate increases, either China (and the rest of the world, technically, but in practice mainly China) must see much faster consumption growth or the world must experience a slowdown in GDP growth.
Don’t miss More Trade Tensions, and the Very Limited Advantage of Relative Poverty.
Background
According to statistics from the Ministry of Defense (SEDENA), between January 2002 and December 2006, more than 140,000 soldiers deserted the Mexican army. Although to a lesser degree, this trend has continued into the Calderon era with at least 48,000 soldiers deserting between in 2007-2009, despite improvements in salaries and fringe benefits during this era. While the majority of desertion has taken place among low-ranking troops, the number of army specialists deserting is on the rise—a previously unseen phenomenon.
The first part of this report looks into the causes of desertion and the impact this might have on the army’s capabilities for traditional responses as well as in the war against drug cartels. The second part of this report takes a broad view of the army’s structural problems and other emerging factors, which will be obstacles for the army’s performance in the long run.
Voters in Germany gave a substantial plurality to Chancellor Angela Merkel’s right-of-center Christian Democratic Union (CDU) and its Bavarian counterpart, the Christian Social Union (CSU), in a general election held last Sunday to choose members of the Bundestag, the lower house of Germany’s bicameral legislature. Moreover, Chancellor Merkel – who has ruled for the past four years in a grand coalition with its main adversary, the center-left Social Democratic Party of Germany (SPD), following an inconclusive federal election in 2005 – will be able to form a government with its preferred coalition partner, the liberal Free Democratic Party (FDP), which scored its best election result ever.
The upcoming government will also have a majority in the Bundesrat – the indirectly-elected federal upper chamber – following elections in the Länder (federal states) of Schleswig-Holstein and Brandenburg, which were held concurrently with the Bundestag poll.
Meanwhile, the Social Democrats sustained heavy losses and polled their worst result since the establishment of the Federal Republic of Germany in 1949. However, both the Left Party (an amalgam of leftist SPD dissidents and ex-Communists from the former East Germany) and the environmentalist Alliance ’90/The Greens made inroads at the expense of SPD; both parties scored nationwide vote percentages in the double digits for the first time ever.
Members of the Bundestag are elected by a Mixed Member Proportional (MMP) electoral system, under which half the chamber’s seats are filled in single-member constituencies by plurality or first-past-the-post voting, while the remaining half come from closed party lists; voters cast a first vote for a constituency candidate, and a second vote for a party list. All Bundestag seats (constituency and party list alike) are distributed by proportional representation among parties that win at least five percent of the nationwide second (that is, list) vote, or secure no fewer than three direct (constituency) mandates. Bundestag seats are subsequently apportioned among state-level lists on a party-by-party basis, and constituency mandates won by a party are subtracted from its corresponding seat total, with the remaining seats coming from the party’s list.
However, if a party obtains direct mandates in excess of its assigned seat total in any given state, it is allowed to keep the additional seats – known as overhang mandates – and the Bundestag is expanded accordingly. In Sunday’s election, CDU and CSU won a total of 24 overhang mandates – which did not change the election outcome (contrary to what had been feared in the days preceding the vote), but nonetheless will increase the upcoming CDU/CSU-FDP coalition government’s Bundestag majority from eighteen to forty-two.
Germany’s 2009 Bundestag election: a political realignment in progress?
by Manuel Alvarez-Rivera, Puerto Rico
How the recovery might unfold
How the Recovery Might Unfold
With economists estimating that the recession is drawing to a close, the question is what type of recovery will follow. Hear from our vice president of market analysis.
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