Pax Obamicana

"History speaks of a Pax Romana, a Pax Britannica, and a Pax Americana--but no other namable eras of sustained peace, for the simple reason cited by Henry Kissinger: nothing maintains peace except hegemony and the balance of power. The balancing act always fails, though, as it did in Europe in 1914, and as it will in Central and South Asia precisely a century later. ... Those who wanted an end to US hegemony will get what they wished for. But they won't like it. ... The failure of the region's most populous state--in that case the Ottoman Empire, in this case Pakistan--makes shambles of the power balance, leaving initiative in the hands of irredentist radicals who threaten to tug their sponsors among the great powers along behind them. ... The US-sponsored frontier war amounts to Punjabis--traditonally the core of the country's military--killing Pashtuns. The default view of area defense analysts has been that army operations against the Taliban may turn into a Punjabi-Pashtun ethnic conflict. ... Pakistan is being ground between two millstones: the Afghan war and the global economic crisis. Half the country is illiterate, and half of Pakistanis live on less than US$1 a day. ... The credibility of secular government--with its promise of economic improvement--is threadbare. The alternative is an Islamist regime committed to confronting India over Kashmir and suppressing the Shi'ite minority that comprises 30% of Pakistan's population. ... Russia faces a slow demographic death, but it remains a great power in terms of military techonology: its surface-to-air-missile systems are as good as anything American [sic] can field, and its newest system, the as yet undeployed S-500, may be better. ... But Obama's budget cuts have hit military aviation hard, leaving its closest allies--including Israel and Australia--without a clear alternative to the aging F-16 force. Russia and India, meanwhile are developing a 'fifth generation' fighter, with some inputs from, France and Israel. There is widespread speculation that Russia's decision to cancel deliveries of its S-300 anti-missile system to Iran carried a price tag for the Israelis: order the latest Russian systems for their own use, and make available the entire package of Israeli avionics. ... In short, Washington appears to have driven its two closest allies in Asia--Isreal and India--into a technology alliance with Russia that may have enormous long-term consequences. ... China cannot sit by and allow India to encircle and eventually crush Pakistan--not because China has fundamental strategic interests in Pakistan, but because it cannot tolerate such a blemish to its credibility. The problem does not lie in Pakistan, but in the mutual capacity of India and China to destabilize each other. ... The implications of such an exercise in great-power politics [by the US] are in some respects ugly. ... The most dangerous undertaking of the Obama administration is not the petty failures of policy, such as the hapless effort to appease the Palestinians over West Bank settlements, or Pakistan over Kashmir. If America's technological leadership in fighter aircraft, surface-to-air missiles, and related technologies continues to erode, the [US]--like Britain in 1914--no longer will have the power and credibility to enforce an agreement among prospectively hostile players. America's self-sabotage in this regard is a unique act of abnegation in the history of world strategy", my emphasis, Spengler at Asia Times, 23 December 2009, link:

http://www.atimes.com/atimes/Central_Asia/KL24Ag01.html.

Yes Spengler. Now tell that double-Ivy League nitwit in the White House. Well Generals McCrystal and Petreus, what say you?

Paging Basil Hart

The State of Alaska sued Mercer over an actuarial error and Mercer's concealing it, Gretchen Morgenson at the NYT, 20 December 2009: http://www.nytimes.com/2009/12/20/business/20gret.html. "'Following standard Mercer policies designed to prevent clients from discovering Mercer's errors,' Alaska's lawyers contend, 'Mercer's actuaries carefully avoided creating a written record of their discussions and calculations, in order, one of them testified, to avoid creating a "trace"," my emphasis. Interesting. Did Deloitte & Touche (D&T), Mercer's CPAs know this, i.e., Mercer's records are incomplete and Mercer's policy was to have incomplete records? Did Mercer violate the Foreign Corrupt Practices Act? Should Mercer's incompete records be admitted against it in all future litigation, i.e., no Mercer record should be subject to the "books and records exception: FRE 803. Does this reflect on Mercer's management's integrity, well, D&T? As Basil Hart wrote, "pure documentary history seems to me akin to mythology", my 7 February 2008 post:

http://skepticaltexascpa.blogspot.com/2008/02/why-dont-we-learn-from-history.html.

Explain this to some PCAOB idiot, that's right, idiot. "You mean CPA workpapers can mean nothing"? Yes boys and girls. Hart continues, "Many are the gaps to be found in official archives, token of documents destroyed later to conceal what might impair a commander's reputation". Can you not trust a set of CPAs workpapers, even the Big 87654's, are complete? Yes. That you may not presume PCAOB inspection files are complete? You betcha.

NYT Exposes Zimbabwe Ben-Finally

"Millions of Americans are paying a high price for a safe place to put their money: extremely low interest rates on savings accounts and certificates of deposit. The elderly and other on fixed incomes have been especially hard hit. Many have seen returns on savings, CD's and government bonds drop to niggling amounts recently, often costing them money once inflation, fees and taxes are considered. ... Interest on one- and two-year Treasury notes was just 0.40 percent and 0.89 percent as of Monday. ... 'The unemployment situtation and the general downturn in the economy had an impact, but what's going to happen now as CD's mature is that retirees and the elderly are going to take anywhere from a half to three-quarters of a percent cut in their incomes,' said Joe Parks, a retired accountant in Houston on the advisory board of Better Investing, an organization that works to help people become savvier investors. 'It's a real problem.' Experts say risk-adverse investors are effectively financing a second bailout of financial institutions, many of which have also raised fees and interest rates on credit cards. ... 'What the average citizen doesn't explicitly understand is that a significant part of the government's plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,' said William H. Gross , co-chief investment officer of the Pacific Investment Mnagagement Company or Pimco. 'It's capitalism, I guess, but it's not to be applauded'," my emphasis, Stephanie Strom (SS) at the NYT, 26 December 2009, link: http://www.nytimes.com/2009/12/26/your-money/26rates.html.

Yes SS. I've said this for years. What's safe about leaving your money in a bank? Here I go again: "Got gold, get more. Got bonds? Sell immediately". Remember: Interest is what the government promises to pay to to steal your principal. Well Gross, you manage hundreds of billions. Will you close Pimco as a sham and tell your "investors", i.e., fools buy gold? Don't you have enough money Gross? Do you still need to work?

TAANSTAAFL-Stadium Style

"Years after a wave of construction brought publicly financed stadiums costing billions of dollars to cities across the country, taxpayers are once again being asked to reach into their pockets. From New Jersey to Ohio to Arizona, ther stadiums were sold as a key to redevelopment and as the only way to retain sports franchises. But the deals that were used to persuade taxpayers to finance their construction have in many cases backfired, the results of overly optimistic revenue assumptions and the recession. ... In 1996, voters in Hamilton County approved an increase of half of one percent in the sales tax that promised to build and maintain stadiums for the Bengals and the Reds, pay Cincinnati's public schools and give homeowners an annual property tax rebate. The stadiums were supposed to spur development of the city's dilapidated riverfront. ... The teams have not volunteered to rewrite their leases. So in the coming weeks, the county plans to cut back basic services, lower its legal bills and drain a bond reserve fund with no plan for paying it back. ... Mark Rosentraub, the author of the book 'Major League Losers,' said many of the stadium deals included 'revenue bombs,' with financial traps like balloon payments on debt in later years and sweetners like the Hamilton County property tax rebate to win public support", Ken Belson at the NYT, 25 December 2009, link: http://www.nytimes.com/2009/12/25/sports/25stadium.html.

No one should be surprised by this. My answer: default the muni bonds supporting these deals. Let the Bengals leave Cincinnati. Who needs 'em? Taxpayers support billionaire sports franchise owners and milionaire players with concessionary finance. Disgusting. Where are the supposed spinoffs? About 12 years ago we discussed these deals in my LA finanical group and concluded they made no sense and the projections that rationalized them were nonsense.

Russian Justice

"The sackings marked a rare public admission of responsibility by Russian authorities. But they fell short of the broader inquiry into alleged police and judicial corruption that Mr. [Sergei] Magnitsky's former colleagues have called for. ... Mr. Magnitsky, 37 years old, died suddenly in Moscow's Butyrskaya jail, where he was being held before trial on tax-evasion charges. ... His death shocked Russia's business and legal communities and highlighted the frequent use of pretrial detention in white-collar cases. Business groups say jail is often used as a pressure tactic, an allegation Russian authorities deny. ... Mr. Magnitsky suffered from a pancreatic ailment diagnosed in the year he was in jail, and his lawyer and former colleagues say lack of treatment likely led to his death. ... [William] Browder, ... said he and Mr. Magnitsky exposed a $230 million fraud against the Russian government perpetrated by some of the same Interior Ministry officials who are investigating their tax case. Ministry officials deny those charges", Gregory White at the WSJ, 12 December 2009, link: http://online.wsj.com/article/SB126055372837887579.html.

Does anyone remember Irv Rubin who supposedly died accidentally in November 2002 at the Los Angeles Federal Detention Center? If you believe that, I've got a bridge to sell you. Over the East River. The Russian Interior Ministry may be taken over by its Vampire Squid.

Schizophrenia Experts

"It is nothing short of an 'epidemic', say the authors of a major study that has found that members of the African Caribbean community are nine times more likely to suffer from schizophrenia than people in the white community. The study has had a major influence on the thinking behind the Department of Health's (DH) New Horizons in Mental Health strategy document, unveiled on Monday, which has moved away from the aim of having specialist services for ethnic minorities, and towards dealing with controversial social issues that lie behind the very high rates of psychosis. ... The researchers ruled out genetic issues as the cause, and the previously held suspicions that psychiatrists were more inclined to diagnose schizophrenia when dealing with black males in particular. They concluded instead that the root causes lay in a whole range of social factors that lead to severe social isolation", my emphasis, Matthew Lewin at the Guardian (UK), 9 December 2009, link:

http://www.guardian.co.uk/society/2009/dec/09/african-caribbean-schizophrenia-policy.

The "researchers" ruled out genetic factors. How? Did you know US black males are 8-10 times as likely as whites to commit violent crimes? Coincidence, we don't think so. "Root causes", means "we want to push a 45-year anti-poverty program like in the US". I wish the UK's DH good luck.

Plea Bargains, No Bargain

"A surprise twist in the criminal case against Broadcom Corp. co-founder Henry Samueli again raises questions about plea bargains, one of the most important and controversial aspects of the justice system. In a Santa Ana, Calif., court last week, federal Judge Cormac Carney dismissed the criminal complaint charging Mr. Samueli with lying to the [SEC] in its investigation of whether Broadcom misstated its earnings by improperly accounting for executive stock options. Judge Carney's dismissal came even though Mr. Samueli had stood before him in 2008 and pleaded guilty to that very crime. ... These defendants often end up choosing that route because they feel trapped in a corner, or fear getting stuck with a long prison sentence if they go to trial and lose. The evolution of the criminal-justice system in recent decades has put many defendants 'under all but impossible pressure to plead guilty, even if they're not,' said Yale law Prof. John Langbein, a critic of the plea-bargain system. 'The government put incredible pressure on' Mr. Samueli, [Gordon Greenberg, his attorney] said. The US attorney's office declined to comment. ... One reason for false pleas is that potential prison sentences, particularly on the federal level, have increased for many crimes. This has helped put more power into the hands of prosecutors, who decide what charges and how many counts to levy against a defendant. Generally, the more charges and counts, the more the potential prison time. If a defendant exercises his right to a trial, he or she faces all those counts. ... And plea bargains are an essential part of the system, accounting for some 95% of all federal convictions, according to recent statistics", John Emshwiller and Nathan Koppel at the WSJ, 19 December 2009, link: http://online.wsj.com/article/SB126118028408697753.html.

Lying to the SEC? Was any SEC employee charged with obstructing the operations of Congress, 18 USC 1505? The prosecutors control the charging system, which is what our federal system is 95% of the time. The AUSA says in effect, "I can charge you with 76 counts of X. For serving six years, I'll charge you with three counts of Y. Deal? If you decline I will make you pay $2 million in legal fees. Got it"? An AUSA faced with a billionaire has a problem. Joe Schmoe has little choice. Your typical AUSA could no more try a case than I can do neurosurgery. Being exposed to the California Central District US attorney's office, I conclude it's not the US worst. Only second worst. What's the real crime in going to trial? Making the AUSA work. Oh the sacrifices AUSAs make for you. Many times the defense lawyer pressures his client into a plea which suits both attorneys. Why? Suppose the defense lawyer is paid $250,000 to represent the defendant. Many times that's the fee, whether the case is tried or pled out. You figure out where the defense lawyer's economic interest is. Further, when the AUSA becomes a defense lawyer, he knows how his fees will be structured. Net result: both lawyers angle to avoid trial, whether the defendant is guilty or not. My suggestion: a revision of federal criminal procedure. Henceforth, any government witness or the AUSA can be questioned by the defendant with no right to object! if he chooses not to answer, fine. Let the jurors draw adverse inferences! Lawyers regulating the legal system doesn't work. Except for the lawyers.

DOJ Slammed!

"Citing misconduct by prosecutors, a federal judge dismissed criminal charges in a stock-options backdating case against two former Broadcom Corp. executives. ... Backdating involves retroactively setting the price of a stock option to a low point in the stock's value, allowing employees to reap higher profits if the stock is later sold. Rampant backdating in the earlier part of the decade led to a government crackdown. ... In dismissing the charges in the Broadcom case Tuesday, US District Judge Cormac Carney said the government behaved improperly by pressuring witnesses to testify in a manner favorable to prosecutors. ... In a related development, Judge Carney last week voiced concern that Andrew Stolper, a prosecutor in the case, had committed misconduct in February 2007 by leaking information to the press, including the Wall Street Journal, as a way to exert pressure on another defendant, Broadcom co-founder Henry Samueli", Nathan Koppel at the WSJ, 16 December 2009, link: http://online.wsj.com/article/SB10001424052748704398304574598163860146796.html.

What, "say it ain't so Joe", prosecutorial misconduct? AUSAs intimidate witnesses, violating 18 USC 1512? Can't be. No. This is standard operating procedure at the (misnamed) DOJ. Here the DOJ crossed swords with defendants who have enough money to fight. And the DOJ got a black eye. Tough. Blago for Attorney General, he's qualified, the DOJ said he did this, my 6 November 2009 post: http://skepticaltexascpa.blogspot.com/2009/11/turnabout.html.

No Hate Crimes in Russia

"Throughout the totalitarian West, the Marxist international elites, while busily flooding their countries with tens of millions of third worlders, have introduced specific measures to keep the native populations down and in check. ... Thus the Lords of Humanity have given themselves the power of God to know what is inside the hearts of men. ... If the local jury trial is considered to [sic] lenient, then those globalist elites of the West can try the person again for 'hate' or rather in actuality for the same crime twice. Again, an insult to justice that Western serfs bow, grin and bear. ... In America, anti white violence is exploding, an average of 12 people per day are killed by their illegals and three times more whites and Asians are killed by blacks than vice versa. The same can be found in England. ... Luckily, in Russia, Ukraine, Serbia and all none [sic] EU, none [sic] West Christian nations, this idiocy does not exist. Murder is murder, regardless of what is felt by the killer and defense of the local culture is paramount", Stanislav Mishin at Pravda, 10 December 2009, link: http://english.pravda.ru/print/opinion/columnists/111032-hate_crime-0.

Quoted without comment. Lamont Cranston, aka "The Shadow" knew.

Vampire Squid's CDOs

"'The simultaneous selling of securities to customers and shorting them because they believed they were going into default is the most cynical use of credit information that I have ever seen,' said Sylvan R. Raines, an expert in structured finance at R&R Consulting in New York. 'When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else's house and then committing arson'," Gretchen Morgenson and Louise Story at the NYT, 24 December 2009, link:

http://www.nytimes.com/2009/12/24/business/24trading.html.

Yves Smith (YS) comments on this article at her Naked Capitalism, 24 December 2009, are well worth reading, link: http://www.nakedcapitalism.com/2009/12/goldman-deutsche-and-the-destructive-use-of-synthetic-cdos-comes-into-focus.html.