Jan 31, 2010

Ron Paul: "The country is broke" (2003)

Since the national debt is increasing at a rate greater than a half-trillion dollars per year, the debt limit was recently increased by an astounding $984 billion dollars. Total U.S. government obligations are $43 trillion, while total net worth of U.S. households is just over $40 trillion. The country is broke, but no one in Washington seems to notice or care.

~ Congressman Ron Paul, "We've Been Neo-Conned," LewRockwell.com, July 10, 2003

Jan 29, 2010

Sen. Judd Gregg on the Fed/Bernanke to the rescue

Gregg: If you're going to start blaming people, you should also credit people for the things they did right. Now, we were on the verge of a cataclysmic event in late 19-... er, 2008, and it didn't look good for us as a country as we were heading towards what looked like a massive financial meltdown of all our institutions. And it would've had a HUGE impact on Main Street. Yes, we've been through a very serious recession. But you're talking about something that could've been on a depression-type of level, and it didn't happen.

Why didn't it happen?

It didn't happen because the chairman of the Fed, along with the Treasury secretaries, both Paulson and Geithner, stepped in and did some really original things. And sure, they pushed the envelope, but if they hadn't pushed the envelope the disaster which would've occured would've been cataclysmic for us as an economy, and for Main Street specifically.

The way I describe it is this: it's like you're driving over a bridge and the bridge is about to collapse, and there's no way it's not going to collapse, except that a guy comes along and fixes it before you drive over it. You keep going, you don't even know the bridge got fixed. That's what happened here. Ben Bernanke came in, with the Fed, put significant resources into the economy and basically the financial structure, and stabilized the bridge so that the economy continued on.

Granted, we've still had a recession, but I think you have to give him a lot of credit for doing a very great job in really an extraordinarily difficult time.

CNBC: Well, I know you've heard the metaphor, 'The arsonist puts out the fire...'

Gregg: Well, he's not the arsonist.

~ Sen. Judd Gregg, Banking Committee Member, CNBC.com Video, "Late Rally for Bernanke", Mon. Jan 25th, 2009, 7:43AM ET

Kevin Duffy on the two-party system and its power-grabbing ploys

Have you noticed how the Dems overwhelmingly support Bernanke’s reappointment, yet the Reps are split and providing decent opposition? It follows the rule that the party in power acts to preserve the status quo (big government) while the party out of power “acts” responsibly in order to regain power.

~ Kevin Duffy, Bearing Asset Management, January 29, 2010

Jan 27, 2010

Wikipedia on Frederic Mishkin's blown call on Iceland

In 2006, [Frederic] Mishkin co-authored a report called "Financial Stability in Iceland". The report maintained that Iceland's economic fundamentals were strong. The report was commissioned by the Icelandic Chamber of Commerce in response to critical coverage of the Icelandic economy and certain Icelandic companies in the international business media.

Iceland subsequently experienced a spectacular collapse within a year of Mishkin's good report.

~ Wikipedia

Central bankers

Federal Reserve chairmen:
  • Bernanke, Ben (2006-, Republican, appointed by George W. Bush, 1953-, profile)
  • Greenspan, Alan (1987-2006, Republican, appointed by Ronald Reagan, Trilateral Commission, 1926-, profile)
Federal Reserve governors:
Federal Reserve regional presidents:
  • Fisher, Richard W. (2005-, Dallas Fed, 1949-, profile)
  • Geithner, Timothy (2003-2009, Democrat, New York Fed, CFR, 1961-, profile)
  • McTeer, Robert (1991-2005, Dallas Fed, profile)

Frederic S. Mishkin: "Bernanke helped save the world from depression"

My view is Chairman Bernanke helped save the world from depression. Whether you agree with every policy he’s pursued or some of the ways the bailouts were done, the outcome here, given the severity of the shock, is a good one. But that’s hard to explain to the American public when we’re sitting with 10 percent unemployment.

~ Frederic S. Mishkin, a former member of the Fed’s board of governors, economist at Columbia University, and close friend of Mr. Bernanke, "Bernanke’s Bid for a Second Term at the Fed Hits Resistance," The New York Times, January 22, 2010, by Sewell Chan and David Herszenhorn

Timothy Geithner on putting out the economic forest fire

To stand back and let it burn is irresponsible. It's what happened in the Great Depression.

~ Treasury Secretary Timothy Geithner, testifying about AIG bailout, January 27, 2010

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Jan 25, 2010

Bill Fleckenstein on clueless money managers

So much in the investment business is about marketing. I see people with horrendous strategies and horrible numbers and they're still running zillions of dollars! I mean, how can anyone have any money at all with someone who was loaded with financial stocks in 2008? If they owned financial stocks they basically have a neon sign on their forehead that says, 'I DON'T GET IT! I don't understand the financial crisis.' Or housing stocks or anything like that. If you didn't understand the biggest bubble in the history of the world, why should you be allowed to run money?

~ Bill Fleckenstein, interviewed on King World News, January 23rd, 2010

TheStreet.com on Goldman Sachs: "as close to capitalism incarnate as any financial institution out there"

I have followed the investment banking industry for more than 10 years, and this company stands so far apart from its competition it is scary.

The much-repeated metaphor about Goldman from Rolling Stone magazine, that bank is "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money," is actually right in a sense. Goldman may be as close to capitalism incarnate as any financial institution out there.

~ Dan Freed, "Goldman's Culture Sets It Apart," TheStreet.com, January 25, 2010

Tom Woods on the cause of the economic meltdown

But even many of those who describe themselves as supporters of the free market have failed to grasp the heart of the problem. To be sure, they have pinpointed legislation like the Community Reinvestment Act that certainly didn't help matters. In pointing fingers at specific programs, however, Republicans have diverted attention to the patient's runny nose and away from his cancer.

Almost nobody in Washington, and precious few elsewhere, has been willing to question the greatest single government intervention in the economy, and the institution whose fingerprints are all over our current mess: America's central bank, the Federal Reserve system. The Fed is hardly ever mentioned in connection with the crisis, except perhaps as our savior. Major newspapers, magazines, and websites purport to dissect the crisis and identify its causes without mentioning the Fed at all. That's nothing new: there has been no serious discussion of the Federal Reserve in public life for the nearly one hundred years since its creation. The Fed is a wonderful thing, and that's that.

... The Fed is the elephant in the living room that everyone pretends not to notice. Even many of those who blame government for the current mess leave the Fed out of the picture altogether. The free market, meanwhile, takes the blame for the destructive consequences of what it does. This charade has gone on long enough. It's time to consider the possibility that maybe the elephant, and not little Johnny, is the one breaking all the furniture.

~ Thomas E. Woods Jr., Meltdown, pp. 2-3, p. 9

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Lew Rockwell on the free market vs. state planning

One might think that it would be enough for most people to log-on to the World Wide Web, browse any major social-networking site or search engine, and gain direct experience with the results of human freedom. No government agency created Facebook and no government agency manages its day-to-day operation. It is the same with Google. Nor did a bureaucratic agency invent the miracle of the iPhone, or the utopian cornucopia of products available at the Walmart down the street.

Meanwhile, look at what the state gives us. The department of motor vehicles. The post office. Spying on our emails and phone calls. Full-body scans at the airport. Restrictions on water use. The court system. Wars. Taxes. Inflation. Business regulations. Public schools. Social Security. The CIA. And another ten thousand failed programs and bureaucracies, the reputation of which is no good no matter who you talk to.

~ Lew Rockwell, "The Misesian Vision," LewRockwell.com, January 25, 2010

Jan 21, 2010

Jim Cramer on financial regulation

This laissez faire really has killed us.

~ Jim Cramer, as appeared on CNBC interviewing Rep. Barney Frank, January 21, 2010

Jan 20, 2010

Anthony Sutton on the dangers of "experienced" men in government

The Public relations explanation for business men turned bureaucrats is that businessmen have the experience and should become involved in public service. The intent in practice has been to control industry. It should not, however, surprise us if the corporate socialists go to Washington D.C. after election of their favorite sons to take over the reins of monopoly administration.

~Anthony C. Sutton, author, Wall Street and FDR, "FDR and the Corporate Socialists", Chapter 9

Herbert Hoover on the fascist roots of Roosevelt's New Deal

Among the early Roosevelt fascist measures was the National Industry Recovery Act (NRA) of June 16, 1933. The origins of this scheme are worth repeating. These ideas were first suggested by Gerard Swope (of the General Electric Company) at a meeting of the electrical industry in the winter of 1932. Following this, they were adopted by the United States Chamber of Commerce. During the campaign of 1932, Henry I. Harriman, president of that body, urged that I agree to support these proposals, informing me that Mr. Roosevelt had agreed to do so. I tried to show him that this stuff was pure fascism; that it was merely a remaking of Mussolini's "corporate state" and refused to agree to any of it. He informed me that in view of my attitude, the business world would support Roosevelt with money and influence. That for the most part, proved true.

~Herbert Hoover, The Memoirs of Herbert Hoover: The Great Depression 1929-1941 (New York: Macmillan, 1952), p. 420

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Herbert Hoover denies laissez-faire credentials

Those who contended that during the period of my administration our economic system was one of laissez faire have little knowledge of the extent of government regulation. The economic philosophy of laissez faire, or "dog eat dog," had died in the United States forty years before, when Congress passed the Interstate Commerce Commission and the Sherman Anti-Trust Acts.

~ Herbert Hoover, The Memoirs of Herbert Hoover: The Cabinet and the Presidency 1920-1923 (London: Hollis and Carter, 1952), p. 300

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Jan 19, 2010

FDR on banking influence on government

The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the United States since the days of Andrew Jackson.

~ President Franklin Roosevelt, November 21, 1933

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Tim Kelly on the Japan Airlines bankruptcy

Yet the biggest winner in JAL's collapse may be Japan's domestic travelers. The recession felled the biggest tree in the forest and is giving sapling discount carriers their first real chance to crack the comfortable JAL-ANA duopoly that has kept airfares high for decades. It can cost more to fly between Japanese cities than to fly from Japan to New York. That JAL couldn't survive even with a cushy home market is testament to the sloppy management of an airline stuck in an era of high-cost elegant travel that disappeared most everywhere else years ago. A myriad of militant pilot and cabin attendant unions ready to strike at any hint of cost cutting helped keep that air castle afloat.

~ Tim Kelly, "The Joy In JAL's Nightmare," Forbes.com, January 17, 2010

Jan 16, 2010

Abby Cohen sees S&P 500 at 1250-1300

Barron's: Abby, do you have a price target for the S&P 500 this year?

: We see a range of 1250 to 1300, and the market might not be at the high end at the end of the year if economic growth starts to slow in the second half. We might not see multiple expansion. Instead, stocks will move higher on the basis of profit and revenue improvement. We're forecasting S&P 500 earnings of $75 to $76 this year, and $90 next year. But it is too soon to be paying for 2011 earnings. Importantly, revenue will increase this year, by about 10% to 12%. Another thing that will distinguish 2010 is a decline in volatility.

~ Abby Cohen, "New Strategies for a New Era," Barron's, January 18, 2010

Felix Zulauf: "China is in a dangerous situation"

China is in a dangerous situation. Credit growth is the one factor that all the bubbles that burst had in common. Because China isn't an open economy, the bubble there can probably keep inflating longer than it otherwise would have. But the Chinese can't escape the laws of economics. If China's bubble bursts, it would cause a second hit to the world economy, and that would be terrible...

Where would China be without the huge fiscal programs its government put in place? The numbers already are beginning to come down. Export statistics show diminished growth. China's net exports -- exports minus imports -- are at 8% of GDP. But gross exports are one-third of GDP, so the dependence on exports is much higher than economists say. You can keep the engine running for a while, if you have the finances. If you can't sell the products, you fill up inventories. But that is not a policy for the long term.

~ Felix Zulauf, "New Strategies for a New Era," Barron's, January 18, 2010

Jan 15, 2010

David Boaz on the Clinton years

Suddenly, I find myself nostalgic for Bill Clinton. Back in 1996, I denounced his “breathtaking view of the ability and obligation of government to plan the economy” and his “profoundly anti-individualist ideas.”

But now I have a hazy memory of the Clinton years as a sort of Golden Age. Government spending was growing only slowly, the bad ideas were mostly small and we bombed a lot of countries but didn’t put American troops at risk.

~ David Boaz, "Save America — Bring back Bill," Financial Post, January 12, 2010

Jan 13, 2010

Lloyd Blankfein: "A strong Goldman Sachs is good for the country"

I’m charged with managing and preserving the franchise for the good of shareholders, and while I don’t want to sound highfalutin, it is also for the good of America. I’m up-front about that. I think a strong Goldman Sachs is good for the country.

~ Lloyd Blankfein, CEO, Goldman Sachs, "The Bank Job," Vanity Fair, January 2010, by Bethany McLean

Jan 12, 2010

Shaun Rein on the non-bubble Chinese economy

Betting against China in 2010 is a bad mistake for investors and companies alike... The Chinese government also has no qualms about overseeing the market and has not been run by Ayn-Rand-loving free marketers like Alan Greenspan, who seemed to believe that no government intervention at all was best.... China is not in imminent threat of collapse, and investors and companies are wise to stay involved with it, as [Jim] Rogers argues.

~Shaun Rein, Harvard graduate and founder and managing director of China Market Research Group, "Jim Chanos Is Wrong: There Is No China Bubble," Forbes.com, January 11, 2010

Jan 10, 2010

Thomas G. Donlan: "Contrary optimism" about the economy

Looking ahead, a compelling reason to expect a strong recovery is bull-headed contrarianism: Few experts expect one.

Most experts on the left believe the economy won't expand without more commands and more controls and more borrowed stimulus money from Washington. Most experts on the right say the command, controls and stimuli are so overwhelming that they have made business leaders afraid to take risks.

Both are wrong. The U.S. economy is still a powerful engine of productivity. Growth will come despite the heavy burdens of health care, climate control and regulation.

Business has survived vigorous enforcement of old antitrust rules, old securities regulations, old labor laws and old restraints on banking. It can survive the creation of new ones. Indeed, entrepreneurs can invent around the subsidies and penalties imposed by those who claim to know exactly what we need to build a new era.

~ Thomas G. Donlan, "All Gone for Nought?," Barron's, January 11, 2010

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Jim Grant on the economic recovery

To the shock and consternation of not a few of our readers, this publication has been pushing the line that prosperity is just around the corner...

We built our case for a growth spurt in hiring and GDP on the long-established tendency for strong recoveries to issue from deep recessions and weak recoveries to follow mild ones. In this country, the business-cycle record of the postwar era, and, indeed, of the past 100 years, seems to admit no exception to this rule (if rule it be). No matter what the nature of the economy, no matter how big or intrusive the government, no matter the level of real interest rates prevailing at cyclical low ebb or how high the top marginal tax rate, a steep decline in business activity has presaged a sharp rebound, while a shallow decline has foretold weakness.

~ Jim Grant, "The case of the reluctant recovery," Grant's Interest Rate Observer, December 11, 2009

Bill Laggner and Kevin Duffy on the coming political backlash

Barron's: Speaking of a backlash, we now have Goldman managers toting guns to protect themselves from populist rage. At what point will society demand some sort of change from the government?

Laggner: A client sent me an e-mail the other day in which the tea-party demonstrators are getting a higher approval rating than the Democrats or Republicans. There is a backlash building, and that's a very good thing. But it's a process. As the arrogance level of central bankers or the money-center banks continues to grow, 2010 and the mid-term elections will be very exciting.

Duffy: Last year, 70% of the people were opposed to the bailout. And so far, through these massive interventions, government has been able to stabilize the financial system. But you have this divergence between the real economy and the political economy. People are still hurting. Consumer confidence has not rebounded like investor confidence has. If we are right, and we are heading for the next leg down, that's when I think all bets are off. If the political economy and some of those who got bailed out are back asking for another bailout, that's when the backlash really starts to heat up.

~ Bill Laggner and Kevin Duffy, "Shorting the Economic Recovery," Barron's, December 28, 2009, by Robin Blumenthal

Kevin Duffy on the most redeeming feature of capitalism: failure

Any healthy system needs a way to correct error and remove waste. Nature has extinction, the economy has loss, bankruptcy, liquidation. Interfering in this process lengthens feedback loops. Error and waste are allowed to accumulate, and you ultimately get a massive collapse.

Capitalism is primarily attacked by two groups: utopians who wish to impose a more "compassionate" system, and political capitalists who want to enjoy the fruits of success without bearing the pain of failure. They use the coercion of the state to gain privileges, at the expense of everyone else.

As a country we've become less tolerant of economic failure. The result has been a series of interventions, such as meddling in the credit markets, promoting homeownership and creating a variety of safety nets for investors. Each crisis leads to an even greater crisis. The solution is always greater doses of intervention. So the system becomes increasingly unstable. The interventionists never see the bust coming, then blame it on "capitalism."

~ Kevin Duffy, "Shorting the Economic Recovery," Barron's, December 28, 2009, by Robin Blumenthal

Steve Chapman on chewing tobacco vs. cigarettes

Any smoker who gives up cigarettes for snuff is clearly doing his or her body a favor. That’s because most of the danger from tobacco actually comes from setting it afire and inhaling the smoke. Omitting that step makes a huge difference. A 2002 report by Britain’s Royal College of Physicians found that “the consumption of non-combustible tobacco is of the order of 10-1,000 times less hazardous than smoking, depending on the product.” The American Council on Science and Health puts the overall health risk at about 2 percent of that from sucking on a cancer stick.

~ Steve Chapman, "Tobacco Truth Gets Smoke," Townhall.com, January 10, 2010

Jan 7, 2010

Marc Faber: $1100/oz. gold is cheap

"Gold remains the best bet as a currency these days because of the fact that the yellow metal supply is extremely limited. Gold at the current price of $1110 per ounce is less expensive than when it was sold for less than $300 per ounce years back..."

~ Marc Faber, "Marc Faber: Gold Is Cheap at $1100 Per Ounce," LewRockwell.com, January 7, 2009

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Mark Cuban on gold

Forbes: Gold: Buy, hold or sell?

Cuban: Gold is a religion; it's not an asset class. It is always a bubble, so I am a sell.

~ Mark Cuban, "Billionaire Predictions 2010," Forbes, January 4, 2010, by Keren Blankfield

Jan 3, 2010

Mike Shedlock on credit vs. capital

We have a total misunderstanding of what credit is vs. capital. Capital can't come from the thin air creation by the Federal Reserve System; capital has to come from savings. We have to work hard, produce, live within our means and what is left over is called capital. This whole idea that we can re-capitalize markets by merely turning on the printing presses and increasing credit is a total fallacy; so the sooner we wake up to realize that a new system has to be devised, the better.

~ Mike Shedlock, "Case Against the Fed and Fractional Reserve Lending," LewRockwell.com, May 7, 2009