Obama Saves Money

"Normally, it would be unusual for the secretary of defense to announce program cuts before sending the Department of Defense [DOD] budget to the White House. ... Earlier this month, InsideDefense.com reported that Secretary Gates would be making such an announcement to give the administration political distance from responsibility for weakening American security. What was surprising was Gates's incoherence on a tactical level and his failure even to acknowledge the growing funding crisis his department is facing. It is hard to see what strategic or tactical military ends his recommended cuts are designed to achieve; it is by no means certain that his decisions, even if Congress endorses them, will end up saving money; and in any event, the secretary simply ignored the elephant in the room: the fact that without a large and immediate increase in procurement funding, the [DOD] cannot buy the new generation of ships, planes, and tracked vehicles that are necessary to meet the threats America is confronting. ... But the F-22 is designed to ensure air superiority against the growing number of sophisticated Russian-built MiG and Sukhoi aircraft, and against China's advanced fighters. Strike and air-superiority fighters have differet capabilities because they are designed for different misisons. Buying a strike fighter in lieu of an air-superiority fighter is like buying artilley when the military needs tanks. ... As the [US] gradually increases the size of the Army and Marine Corps while continuing to reduce forward basing of their troops, it becomes even more nececessary to ensure adequate and reliable lift capability, so that the Pentagon can quickly move forces and equipment to where they are needed. ... The secretary also made a point of saying that he wanted procurement reform. Fair enough. But the last three secretaries have said the same thing. The current procurement system, which Mr. Gates appropriately says is broken, is itself the result of 15 years of reform, going back to Secretary William Perry. ... It is the duty of our regional combat commanders, such as General Petreus, to prosecute current conflicts sucessfully. It is the task of the Joint Chiefs to prepare our forces for future ones. Those future threats are real. ... Even the Obama administration must understand that America's military has to have the capability to deal with different kinds of threat at the same time: Russia, China, and Iran are not going to disappear just because the White House would rather not have to deal with them while also conducting its Afghanistan operations. ... His department is facing a shortfall of at least $50 billion per year in the modernization funding that is absolutely necessary to maintain America's military predominance", Jim Talent, 15 April 2009 at National Review.

Quoted without comment.

Kill the Fed?

"But the Big Kahuna escaped. The Federal Reserve. ... Already in its sixth week on the New York Times best-seller list, [Thomas Woods Meltdown] traces the Fed's role in every financial crisis since this creature was spawned on Jeykl Island in 1913. ... Because the much-maligned Warren Harding refused to intervene. He let businesses and banks fail and prices fall. Hence, the fever quickly broke, and we were off into 'the Roaring Twenties.' ... Herbert Hoover, contrary to the myth that he was a small-government conservative, renounced laissez-faire, raised taxes, launched public works projects, extended emergency loans to failing businesses and lent money to the states for relief purposes. ... Indeed, in 1932, FDR lacerated Hoover for having presided over the 'greatest spending administration in peacetime in all of history.' His running mate, John Nance Garner, accused Hoover of 'leading the country down the path to socialism.' And 'Cactus Jack' was right. FDR mistook the consequences of the Depression--falling prices--for the cause of the depression. But prices were simply returning to where they belonged in a free market, the first step in any cure. ... But how can an economy be truly growing 13 percent a year, as the economists claim, when there is rationing, shortages everywhere, declining product quality, an inability to buy homes and cars, and a longer work week? ... It was 1946, a year economists predicted would result in a postwar depression because government spending fell by two-thirds, that proved the biggest boom year in all of American history. ... Of Nicholas Biddle's Bank of the [US], the great Andrew Jackson was eloquent. 'It has tried to kill me,' he said. 'But I will kill it.' And he did", Pat Buchanan, 3 April 2009 at http://www.vdare.com/buchanan/090402_fed.htm.

Yes Pat, let's kill this monster.

Obama and the Pirates

"It's a repeat of 1979, and the world is watching to see if Obama is going to be any more effective than Jimmy Carter was. ... Thank heavens for the pirates! Because we must know as soon as possible if the Obamites are as incompetent and foolish as they proudly claim to be--or whether they can summon up the guts to try to rescue the captain. ... The West has forty years of experience in knocking over hostage takers, as Israelis did in Entebbe. But similar methods have been perfected by now, as shown most recently in Colombia, where US forces advised the Colombian government how to deal with another hostage situation. ... If Obama fails to take action ... [that] means one of two things: either the aggressors start winning, or somebody else has to play the international cop--the role the [US] has carried for sixty years. ... And in the Middle East it will either be Israel--which can protect the Arab countries from nuclear attack by Iran--or it will be the mad mullahs of Qom. I would guess that the Israelis will bomb Iranian nuclear facilities, with the covert help of Arab Gulf states", my emphasis, James Lewis, 11 April 2009, link: http://www.americanthinker.com/2009/04/let_us_thank_the_somali_pirate.html.

Israel bomb Iran's nuclear facilities? Insha Allah!

Our Failed Drug War

"But are US vital interests more threatened by what happens in Anbar or Helmand than in the war raging along our southern border? ... For this is where the fate of our republic will be decided, as the fate of Europe will be decided by the millions streaming north from the Maghreb and the Middle East, sub-Sahara and South Asia. ... Add a collapsing global economy to a losing war with drug cartels, and Mexico is at grave risk of becoming a failed state, a narco-state, with a 2,000-mile border with the [US]. How does one win a drug war when millions of Americans who use recreational drugs are financing the cartels bribing, murdering and beheading to win the war and keep self-indulgent Americans supplied with drugs? There are two sure ways to end this war swiftly: Milton's way and Mao's way. Mao Zedong's communists killed users and suppliers alike, as social parasites. Milton Friedman's way is to decriminalize drugs and call of the war. ... Americans are never going to adopt the Maoist solution. ... Which is the greater evil? Legalized narcotics for America's young or a failed state of 110 million on our southern border", Pat Buchanan (PB), 6 March 2009 at http://www.vdare.com/buchanan/090305_mexico.htm.

"Conservatives tend to assume that, unlike dirty, treasonous liberals, they are on the side of truth, justice, liberty and the American way. This is not without reason, as most of the time, they are. However, for nearly 30 years, conservatives have been guilty of one of the greatest abuses of American liberties in American history, and have actively abetted the growth of central government by their thoughtless support for the war on drugs. ... There is nothing--absolutely nothing--conservative about the war on drugs. ... And, as everyone knows, the "coca' in Coca-Cola refers to the extract coca leaf that was once an ingredient in the popular drink. Coca-Cola was not entirely cocaine-free until 1929. ... Advocates for the drug war often hypothesize nightmare scenarios where the legalization of drugs will lead to chaos and toal social breakdown, constructing fantasies about legions of chemically addled criminals preying upon the helpless citizenry while in search of their next high. But, as has been seen in Colombia and more recently in Mexico, it is actually the illegalization of drugs that causes social devastation, as the drug war's efforts to interdict supply only increases the price of drugs and therefore the profit of the criminal gangs willing to trade in them. ... Americans should have learned their lesson from prohibition. ... Thus, I was encouraged to read Pat Buchanan's recent article on WorldNetDaily, in which one of America's leading conservatives finally recognized the stark choice that so many conservatives have sought to avoid facing for three decades. ... The fact that the Obama administration is now citing Mexico's narco war as an excuse to limit Second Amendment rights should suffice to prove to conservatives that the time has come to end the war on drugs. Yes, Mr, Buchanan, America must raise the white flag in the drug war", Vox Day, 9 March 2009, at: http://www.worldnetdaily.com/index.php?pageId=91102.

Welcome aboard PB, you're just 40 years late. America can't adopt Mao's solution? Why? With over 200 million firearms in the US, it will be open season on cops. Millions of Americans will join the Mexican cartels. Few if any drug salesmen will be taken alive by policemen if each expects to be executed. The drug war is over.

I've said this for over 40 years. We passed the Harrison Act (HA) in 1914. Was every American a drug addict in 1914? The nightmare scenarios are a cover for religious influence. Drugs, like demon rum should be outlawed. Ask Carrie Nation. Many of the same people, like the Women's Christian Temperance Union pushed the HA. The US's highest percentage of opiate addicts was in 1865, following the Civil War. Think about why. Some of our drug war resulted from anti-Chinese animus. Those of you old enough to remember Paladin on television, 1957-63, may remember where "Hey Boy" was warned not to go: his uncle's opium den! San Francsico had opium dens in 1875? Yes.

Buy, Sell?

"'Sell the S&P 500!' I recommended this on November 5, 2007. I actually recommended selling it short. Morgan Stanley [MS] did not know what hit it in 2008. ... I wonder what it must be like for a [MS] portfolio manager to call his clients, who have lost half the value of their recommended stock market portfolios since Ocotber 2007, and who followed his advice to buy more stocks all they way down--dollar cost averaging--to tell them that the company now recommends thay they sell the S&P 500. ... The G-20 meeting begins this week in England. Here, political leaders from 20 major nations meet to share ideas on how to solve an international financial crisis that their central banks created, following the lead of Alan Greenspan's FED. They never saw it coming. Not any of them--not the central bankers, not the politicians, not the regulators. They were all caught flat-footed. ... These press releases are designed to assure the investing public that they, the creators of this crisis, know what went wrong--they don't--and that by discussing the causes of the crisis, which they don't understand, they will be able to come up with a joint solution that does not involve either (1) mass inflation or (2) a worldwide depression that lasts for years. ... These people don't know what to do. If they did, there would be two or three well-defined, fully documented proposals out there, each with national co-sponsors. All of them would have major flaws. They would be mutually exclusive. Economists of various schools of opinion would be mobilizing behind one or another program. ... They refuse to adopt the only system that ever brought unity to governments and central banks:" an international gold coin standard. The politicians and central banks could not control the movements of gold out of inflating nations and into non-inflating nations, 1815-1914. ... They are trapped by the dollar standard. They have told their voters that their nations can get rich by exporting to the United States", Gary North, 1 April 2009 at: http://www.lewrockwell.com/north/north700.html.

I agree with North. How interesting. The Napoleonic Wars ended in 1815 and World War I began in 1914. Coincidence? I don't think so. Paper money facilitates war. MS says sell. I say buy, all except for financials.

Tax Day Follies

"US prosecutors won their first guilty plea from an American client of UBS AG's Swiss banking services, part of the government's efforts to crack down on citizens who evade taxes through offshore accounts. Robert Moran, of Lighthouse Point, Fla., pleaded guilty in a Florida federal court to filing a false tax return. Mr. Moran, a Fort Lauderdale yacht broker, admitted to concealing more than $3 million in a secret UBS account", Brent Kendall at the WSJ, 15 April 2009.

The IRS and DOJ like to settle these cases around tax time to intimidate the public into paying more taxes.

Allan Sloan Advises China

"Someday, though, that's all going to stop. And the rest of the world, which finances our budget and trade deficits, will catch on that owning low-yielding Treasury securities is a sucker's game. ... In fact, if I were advising the Chinese government, I'd suggest that it dump most of its Treasuries onto the [Fed], which is buying them in the open market to drive down interest rates. Then I'd take the dollars from the sale and use them to buy natural resources like oil or coal reserves", Allan Sloan at Fortune, 27 April 2009.

Isn't this what China is doing? See my 18 March 2009 post: http://skepticaltexascpa.blogspot.com/2009/03/china-and-gold.html.

Goldman, Goldman Goldman

"The question taxpayers might still ask, however, is whether Goldie is also willing to forswear a bailout when it next gets into trouble. Is it still 'too big to fail'? ... The Washington crowd wants to hide its own role in the financial crackup--supereasy money, Fannie and Freddie--so it has taken to blaming the bankers, and the Troubled Asset Relief Program is its velvet truncheon. The sooner every bank can safely escape Barney Frank and Chris Dodd, the faster we can restore a capitalist financial system. ... [Goldman] has benefited enormously from the federal bailout, and many of our sources believe that Goldman would have failed without it. ... There's no denying, however, that Goldman has been among the largest recipients of AIG cash since the bailout. Goldman is getting the same terms as AIG's other counterparties, but the partnership of AIG and the Federal Reserve has been a lot nicer to Goldman than AIG was as an independent firm. ... But the underlying assets of the CDS contracts continued to decline. Would a bankrupt AIG have made Goldman whole? All we know for sure is that taxpayer-funded AIG and the Fed kept on paying Goldman. ... By way of comparison, a similar resolution in 2008 involving Merrill Lynch and XL Capital Assurance resulted in Merrill receiving 13 cents on the dollar, not the 100 cents Goldman received. ... The point is that Goldman and other banks can't have it both ways. If they want taxpayers to save them, then they have to take fewer risks and become smaller", my emphasis, Editorial at the WSJ, 15 April 2009.

"It used to be the most respected investment bank in the world. Now it seems to be part of more conspiracy theories than the Central Intelligence Agency. ... Unlike many of them, it appears to have had effective risk-management systems. It says it spent $100 million buying protection against something that seemed ridiculously unlikely at the time--a default of [AIG]. Yet its denial that it profited from the government's bailout of the insurance giant is greeted with scorn. ... David A. Viniar, [GSG's] chief financial officer, sounded bewildered when I asaked him that. 'We are so careful in what we try to do. We are so careful about compliance and following rules, and doing all the things we should do,' he said. 'I read the stories and I scratch my head.' ... [GSG's] explanations sometimes do not ring true, even if they are. ... Viniar says that [GSG] was fully protected if AIG did default, and that AIG's bailout had little if any effect on [GSG's] earnings. When I talked to Mr. Viniar, he conceded to me, as he had to others, the obvious fact that [GSG] would have been affected in an AIG collapse had led to a systemic failure. ... [GSG's] aura goes back at least a generation. When I was in business school in the early 1980s, getting a job there was viewed as the ultimate accomplishment. It should be no surprise that a firm that often got first choice in hiring ended upo with some very good people. ... The belief that [GSG] has a pipeline to the administration in Washington--whichever administration that might be--has been around for a long time. ... Once again, [GSG] people seem shellshocked. 'I've read the "Government Sachs' articles.' Mr. Viniar told me, adding that he thought public service was to be encouraged, not rebuked. 'For people to write stories that they were there to help [GSG] is offensive.' ... Unfortunately for [GSG] and other banks, the public has decided TARP is welfare", Floyd Norris, 17 April 2009 at the NYT, link: http://www.nytimes.com/2009/04/17/business/economy/17norris.html.

Suppose GSG forswears? Then what? Assume it's just GSG "takiwa" and when the time comes, GSG will accept the next federal bailout "for the good of the country". Oh, the sacrifices GSG makes for its 304 million fellow Americans. GSG executives should receive Presidential Medals of Freedom. Restore a "capitalist financial system", while the Fed exists? Is the WSJ serious? Yes, suppose AIG went bankrupt. See my 18 December 2008 post: http://skepticaltexascpa.blogspot.com/2008/12/deprizio-doctrine-and-aig.html. Of course GSG and the other banks can "have it both ways". Kill the Fed!

Viniar slays me. He should leave GSG and become a stand-up comic. His routine is that good. Besides we in the US need a new Rodney Dangerfield who got "no repect". More "effective risk-management systems"? Of course, Robert Rubin, Henry Paulson, Robert Steel, Neel Kashkari ... Scorn? Had GSG not profited from the AIG bailout, it would not have happened. So careful? Hmm, see Graffam v Burgess, my 24 October 2007 post: http://skepticaltexascpa.blogspot.com/2007/10/call-out-cops.html. . Viniar, feel free to be offended. I'm sure I've offended you dozens of times. Tough.

Prosecutorial Immunity-2

"The [DOJ] recently got a black eye when its corruption case against Sen. Ted Stevens of Alaska collapsed amid allegations of misconduct by federal prosecutors. ... The Stevens case marks a rare example where prosecutors have been targeted for a type of misconduct that some legal experts say is widespread. The problem, they say, is that the rules governing evidence disclosure are subject to interpretation, and that even when questionable practices are discovered, the revelation can come too late to change the outome of a case. ... While the Supreme Court ruled decades ago, in Brady v. Maryland, that prosecutors generally must give defendants evidence that might raise doubts about their guilt at the start of the trial, prosecutors have few incentives to do so. They often don't get caught if they fail to turn over what is known as material exculpatory evidence. What's more, if the omission is discovered, prosecutors don't have much to fear. Prosecutorial misconduct often goes unpunished, and prosecutors have immunity from lawsuits by wrongly convicted defendants. Defense attorneys routinely claim that prosecutors violate the rules, but judges dismiss the vast majority of complaints as baseless. ... The Brady decision asks prosecutors to bring all relevant evidence to light, even if that means sabotaging their own case. But prosecutors are often judged by one standard: winning cases. 'Prosecutors can't police themselves,' says Stephan Bibas, a law professor at the University of Pennsylvania and a former federal prosecutor. ... Lawyers say punishment is most likely to come in high-profile cases, where public scrutiny is brought to bear. ... Research indicates that many prosecutors evade punishment for serious mistakes", my emphasis, Amir Efrati at the WSJ, 16 April 2009.

In about 1959 I was watching Perry Mason on television with my father, an attorney. He saw one of Hamilton Burger's assistant DAs, before Brady, voluntarily disclose exculpatory evidence. My father said, see that? That's what's supposed to happen, but rarely does. Omission is discovered? Are these guys rating agencies claiming First Amendment protection or Big 87654 firms trying to avoid lawsuits? "Can't police themselves"? My answer: peer review for prosecutors! It's cleaned up the CPA business, the DOJ should adopt it.

America's Crisis

"One might ask, 'Where do you want your country to be--in three years, five years, or ten years?' Will you have a country in three years? And if you don't have a country, will you have work? Will you have food? Will you have security? To paraphrase Cato the Younger, 'If you want to keep all your fancy furniture, perhaps now is the time to do something for the Republic.' Life in consumer society has been about self-gratification. The most important questions have hedonistic assumptions built-in. Such are not questions at all. They are ready-made answers, in fact. ... The question that is missed, that is left out by the self-help gurus, is that of fundamental identity: Who are you? We've been told for many years that we can be anything we want. And it isn't true. We cannot all be rich. We cannot all be the King of England. ... Today's ideological gurus and demogogues talk of a 'great society' or eliminating poverty. We have our 'war against drugs' and all that nonsense about educating everybody. Oh yes, we would like to be a nation of aristocrats. Americans pick crops? No way. ... Russian President Dmitri Medvedev is one of America's enemies. This week he gave a speech that glistened with self-knowledge. He announced a 'large-scale' rearmament, what he called 'a qualitative modernization of our Armed Forces to give them a new, forward-looking perspective.' ... Most Americans do not know who they are. Instead, they have goals. ... For the Russians, however, 2011 is the year that Russia's military will be thoroughly 'buff.' To their way of thinking, the economic crisis will not be over. Rather, the Americans will be ripe", my emphasis, JR Nyquist (JRN), 20 March 2009, link:

http://www.financialsense.com/stormwatch/geo/pastanalysis/2009/0320.html.

"The integrity of Diogenes has much to do with his independence. He was not interested in advancing his career, winning the favor of princes, or making money. He didn't flatter his teachers or the public. When he spoke, there was no reason to distrust what he said. ... In today's world we have become very comfortable buying and selling things. It is also our habit to say what is pleasing to our superiors. More and more, our culture emphasizes the necessity of having a career, of promoting oneself, of making money and impressing other people. To be wise, to love wisdom, requires a different emphasis than that of today's culture. It requires an emphasis on truth and clarity. ... And when rank and privilege are abused, when truth is disregarded, what is the underling to do? ... The crisis of our time is a crisis of intellectual integrity. We are suffering a deluge, in which, common sense is drowned by the career logic of millions of nonentities. They are nonentites because they are careerists, because they have our something trivial above what is non-trivial. Their indifference to truth is seen in their daily compromises, their evasions, their manipulations of each other. ... But the salvation of a country--of any country--usually boils down to the wilingness of one respected figure taking an unpopular stand, or of one subordinate risking the wrath of his superior. ... To hide what we think, and disguise our true thoughts, is to act the part of a slave or an underling who serves his master by fooling him. This is not a position of self respect. It is a position of retreat and compromise. Isn't it better to speak the truth?," JRN, 27 March 2009, link: http://www.financialsense.com/stormwatch/geo/pastanalysis/2009/0327.html.

Excepting the belief Russia is an enemy, I agree with JRN. Yes, we act as if we can do anything, even send 85 IQ kids to Caltech to major in physics. Well maybe not that; Harvard to major in philosophy.

It's not better to speak the truth as a Big 87654 CPA, that's for sure.