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Don’t Fear the Taper

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You can’t avoid reading about it.  The stock market is sinking  . . .  Treasury bond yields are spiking   .  .  .  The TAPER is coming!

The panic began in the wake of Jon Hilsenrath’s May 10 Wall Street Journal  report (after the markets closed on that Friday afternoon) concerning a new strategy by the Federal Reserve to “wind down” its quantitative easing program.  The disclosure was carefully timed to give investors an opportunity to process the information and get used to the idea before the next opening bell of the stock market.

By the time the stock market reopened on Monday, May 13 – the first trading day after Jon Hilsenrath’s article – there was a surprising report on April Retail Sales from the Commerce Department’s Census Bureau.  The report disclosed that retail sales had unexpectedly increased by 0.1 percent in April, despite economists’ expectations of a 0.3 percent decline.  As a result, the Taper report had no significant impact on stock prices – at least on that day.

The Wall Street Journal report carried plenty of weight because of Jon Hilsenrath’s role as de facto “press secretary” for Ben Bernanke, as I discussed in my last posting.  Since the WSJ article’s publication, there has been a steady stream of commentary about the threats posed by the Taper.  Nevertheless, the word “taper” was never used in Hilsenrath’s article.  In fact, the article included an explanation by Philly FedHead (and FOMC member) Charles Plosser, that the Fed has “a dial that can move either way”.  The dial could be set to a particular level with either an increase or a decrease.

Regardless of whatever the Fed may have planned, the flow of commentary has focused on the notion that the Fed is about to taper back on its bond buying.  The current incarnation of quantitative easing (QE 4) involves the Fed’s purchase of $45 billion in bonds and $40 billion in mortgage-backed securities every month.  We are supposed to believe that the Fed will gradually ease back on the bond purchases – whether it might begin with a reduction to $40 billion or $35 billion in monthly purchases  . . .  the Fed will gradually taper the amount down to zero.

Despite what you may have read or heard about the taper, it’s not going to work that way.  Beyond that, taper is not really an appropriate way to describe the Fed’s plan.  In other words:

Don’t fear the taper.

Josh Brown interviewed Jon Hilsenrath for CNBC on May 22.  Here is what Josh Brown had to say about the interview:

There was one thing Jon Hilsenrath did say in my interview with him on TV last night that I think is very important and clears up a big misconception. He explained that Bernanke himself will not be using the term “taper” that everyone else is bandying about. The reason why is that the Fed does not want to create the impression that one policy move will necessarily be attached to three or four others. In other words, suppose the Fed were to drop its rate of monthly asset purchases from $85 billion to some less number in one of the next meetings. This could be a one-off action with nothing else behind it, designed to temper the market’s expectations and gauge the effects.

I’d remind you that what Bernanke, as a self-styled “student of the Depression” fears the most, is a premature tightening a la FDR in 1937-1938, just as the nation was finally on the mend. If you think that this central bank, which has just spent the last six years patiently reflating the economy, is about to yank the rug out from under it at the last moment, then you haven’t been paying attention.

The wave of panic which followed Jon Hilsenrath’s May 10 article about the Fed’s plans for its quantitative easing program has yet to be calmed by Hilsenrath’s clarification about how the Fed’s new strategy is likely to proceed.  As Napoleon once said:

“Men are Moved by two levers only: fear and self interest.”


 

Seeing Through Obama

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Obama is back giving Centrism a bad name.  His budget proposal has drawn criticism because it incorporates a mechanism for reducing Social Security Cost-of-Living benefits called the “chained CPI”, which ties those adjustments to the inflation rate.  Obama’s inclusion of the chained CPI has drawn harsh criticism from Progressives as well as the Liberal base of the Democratic Party.  Although the President and his sycophants characterize this proposal as an example of “Centrist” politics, it is actually an example of the economic neoliberalism which the Disappointer-in-Chief has advanced since taking office in 2009.

Despite its liberal slant, the FiredogLake blog has been critical of Obama since the beginning of his first term.  A recent article by Jon Walker at FDL presents an unvarnished look at Obama’s motives for including the chained CPI in his budget:

Obama didn’t put chained-CPI in for Republicans, regardless what he may claim.  While Republicans like to talk a big game on entitlements they have shown no real interest in cutting benefits for current retirees, who are the most important part of their base.

The comments to Walker’s piece give us a look at how a good number of liberals are finally seeing through the man who was advertised as an agent of Hope and Change.  I was particularly impressed by the following comment from a reader identified as “coloradoblue”:

War criminal
Mass murderer
Crimes against humanity
Crimes against the American people
Crimes against the constitution he swore to uphold
Failure to investigate, prosecute and punish the war criminals of the last administration
Failure to investigate, prosecute and punish the crimes of wall street
Destroyer of the legacy of FDR and LBJ and the dem party
Liar
Failure

Hell of legacy you’ve got there Barry. Hell of a legacy.

Oh, Snap!

Lest I repeat the entire batch of comments, I’ll include just one more. Reading through them provides one with the opportunity to understand the extent of disappointment in Obama, as expressed by those who voted for him.  This comment was from an individual using the name, “BearCountry”:

o was never really the “capitulator in chief.”  He has worked to destroy the safety net since he became pres.  When I voted for him in ’08 I knew he was not going to be a savior for the nation, but I didn’t realize how bad he would be.  He is worse than w because he knows full well what he is doing.  Those that defend him or blame the repugs are simply deluding themselves.

Progressive Democrats chose Obama over Hillary Clinton because they wanted to avoid electing a President who would advance the same neoliberalism we saw from Bill Clinton, the man who signed the Commodity Futures Modernization Act of 2000 into law.  Bill Clinton’s enactment of that legislation completely deregulated derivatives trading, eventually giving rise to such “financial weapons of mass destruction” as naked credit default swaps, which brought us the 2008 financial crisis.

When Hillary begins her run for the 2016 Democratic Nomination, it will be interesting to see whether any of her opponents exploit the photo of Bubba and Blankfein in Boca.  On February 19 of 2012, The Business Insider published this photo of Bill Clinton having lunch with Goldman Sachs CEO, Lloyd Blankfein at the Boca Raton Resort and Country Club.  Obama’s function as a tool of the Wall Street megabanks will provide an ongoing reminder to anyone entertaining the thought of supporting Hillary, as to what they could expect from another Clinton administration.

Meanwhile Barry O. Tool is gonna’ have some ’splianin’ to do about his chained CPI proposal.  His angry former supporters will want some answers.


 

Davos X Factors

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On January 23-27 the World Economic Forum held its tres chic annual meeting in Davos, Switzerland.  Admission was by invitation only.  Nick Paumgarten of The New Yorker offered the following explanation of how different segments of society view the annual Davos event:

People like to project onto Davos their fears and fantasies about the way the world works. Right-wingers see insidious, delusional liberalism, in its stakeholder ethos and its pretense of world improvement.  They picture a bunch of Keynesians, Continentals, and self-dealing do-gooders participating in some kind of off-the-books top-down command-control charade.  Left-wingers conjure a plutocratic cabal, a Star Chamber of master puppeteers, the one per cent – or .01 per cent, really – deciding the world’s fate behind a curtain of heavy security and utopian doublespeak.  The uninvited, the refuseniks, and even many of the participants see a colossal discharge of hot air, a peacock strut.  They all deploy, with a sneer, the term Davos Man, coined by the late political scientist Samuel Huntington, who decried a post-national wealthy globe-trotting élite.  Davos Man can be either a capitalist oppressor or a Commie conspirator.  Either way, he is a windbag, a pedant, and a hypocrite. Businesspeople who have never been to Davos find many ways to be dismissive of it: “I can’t do business there.”  “It’s too political.”  “It’s not what it used to be.”  The translation may be that that person has not been invited.

The World Economic Forum’s website explained the role of its official communities:

A key part of the Forum’s activities is the creation of distinctive communities of Member and Partner companies as well as leaders from civil society for more informal opportunities for interaction.

I would assume that at this year’s meeting, one of the most popular topics must have been risk management – including risk aversion.  Ever since the financial crisis, the world has been on the verge of economic chaos.  The possibility that Silvio Berlusconi could return to power in Italy has heightened concerns that the European sovereign debt crisis could reverse course from its current recovery trajectory and head into oblivion.

One of the World Economic Forum’s communities is the Risk Response Network.  The RRN “was launched to provide private and public sector leaders with an independent, impartial platform to map, monitor and mitigate global risks.”  It is comprised of individual representatives of leading global corporations, research institutions, media outlets, governments and NGOs.  The Risk Response Network released a 78-page report for this year’s annual meeting entitled, Global Risks 2013 — Eighth Edition.  The report’s topics included:  Testing Economic and Environmental Resilience, Digital Wildfires in a Hyperconnected World, The Dangers of Hubris on Human Health and Building National Resilience to Global Risks.

I found Section 5 of Global Risks 2013 to be particularly interesting.  It begins on page 55 of the report and is entitled, “X Factors”.  The report described this section in the following terms:

In this section, developed in collaboration with Nature, a leading science journal, the Risk Response Network asks readers to look beyond our high-risk concerns of the moment to consider a set of five X factors and reflect on what countries or companies should be doing to anticipate them.

*   *   *

X factors are serious issues, grounded in the latest scientific findings, but somewhat remote from what are generally seen as more immediate concerns such as failed states, extreme weather events, famine, macroeconomic instability or armed conflict. They capture broad and vaguely understood issues that could be hatching grounds for potential future risks (or opportunities).

The five X Factors discussed in the report were these:

Runaway climate change:  Is it possible that we have already passed a point of no return and that Earth’s atmosphere is tipping rapidly into an inhospitable state?

Significant cognitive enhancement:  Ethical dilemmas akin to doping in sports could start to extend into daily working life; an arms race in the neural “enhancement” of combat troops could also ensue.

Rogue deployment of geoengineering:  Technology is now being developed to manipulate the climate; a state or private individual could use it unilaterally.

Costs of living longer:  Medical advances are prolonging life, but long-term palliative care is expensive.  Covering the costs associated with old age could be a struggle.

Discovery of alien life:  Proof of life’s existence elsewhere in the universe could have profound psychological implications for human belief systems.

My favorite was the last X Factor:  Discovery of alien life.  Although the report focused on the notion that astronomers involved in the study of exoplanets could find spectral information revealing chemical signs of life, the last paragraph of the section provided some insights on the fear which has been keeping this subject under wraps for years:

Through basic education and awareness campaigns the general public can achieve a higher science and space literacy and cognitive resilience that would prepare them and prevent undesired social consequences of such a profound discovery and paradigm shift concerning mankind’s position in the universe.

So The Powers That Be are worried about “undesired social consequences” and “paradigm shift”.  Why is that not a surprise?

Those in search of “the right stuff” on this subject might be interested in what the late astronaut, Gordon Cooper had to say about it.

A good “basic education and awareness campaign” should begin with that video clip.


 

Obstruction of Justice

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Two years ago, I was inspired to write a piece entitled, “Justice Denied” after seeing hedge fund manager, David Einhorn interviewed by Charlie Rose.  I also discussed an essay Jesse Eisenger wrote for the DealBook blog at The New York Times entitled, “The Feds Stage a Sideshow While the Big Tent Sits Empty”.  The piece reinforced my suspicion that the “insider trading” investigation which received so much publicity in December of 2010 was simply a diversionary tactic to direct public attention away from the crimes which caused the financial crisis.

Since that time, a good deal of commentary has been written, lamenting the fact that no criminal charges have been brought against the miscreants who caused the financial crisis.  Unfortunately, Attorney General Eric Hold-Harmless has taken no action against those responsible, while the time for bringing those charges within the applicable Statutes of Limitations was allowed to tick away.

With the expiration of the relevant Statutes of Limitations, the next question becomes:  Does the failure to prosecute those cases rise to the level of obstruction of justice?  Although President Obama has repeatedly insisted that “no crimes were committed” which could have caused the financial crisis, we are now learning that such was not the case.

Jesse Eisenger recently wrote another piece for the Deal Book blog at the New York Times entitled, “Financial Crisis Lawsuit Suggests Bad Behavior at Morgan Stanley” which appeared on January 23.  In that essay, Eisenger discussed how the discovery process in civil lawsuits against the Wall Street Banks involved in the creation of the collateralized debt obligations (CDOs) based on subprime mortgages, revealed that those CDOs were known to be toxic at the time they were marketed.

The Naked Capitalism website has provided and excellent roadmap to the skulduggery involving the role CDOs played in causing the financial crisis.

Matt Taibbi has written another magnum opus on the financial crisis, this time focusing on sleazy conduct which took place after the meltdown.  In his article for Rolling Stone entitled, “Secrets and Lies of the Bailout”, we were reminded how the bank bailouts not only unjustly enriched the culprits who caused the problem – but they also provided the opportunity for those too-big-to-fail institutions to become even bigger while facilitating the cover-up of how the original mess occurred:

The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in, official feature of the financial rescue.  Money wasn’t the only thing the government gave Wall Street – it also conferred the right to hide the truth from the rest of us.  And it was all done in the name of helping regular people and creating jobs.  “It is,” says former bailout Inspector General Neil Barofsky, “the ultimate bait-and-switch.”

Despite so many efforts to hide the truth from “the little people”, the truth is slowly leaking out as a result of the dogged investigation by journalists and bloggers.  As discovery proceeds in the civil lawsuits against the megabanks, revealing the extent of criminal activity which brought about the most catastrophic economic disaster since the Great Depression, people will begin to ask:  “How did they get away with this?”  Perhaps the best way to answer that question would be to bring criminal charges against those who allowed the perpetrators to get away with it.


 

2012 Jackass of the Year Award

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It’s already time to announce the winner of TheCenterLane.com’s fifth annual Jackass of the Year Award.  This was another one of those years when we had a last-minute contestant, who tried to his best to snatch the award away from those who had been working all year for the honor.

In the aftermath of the tragic mass-murder of 26 young children at the Sandy Hook Elementary School, the National Rifle Association’s vice-president, Wayne LaPierre, held his infamous press conference on December 21, wherein he blamed everything except guns for the killings.  LaPierre blamed television violence, video games, hurricanes, “other natural or man-made disaster(s)”, terrorist attacks, and numerous other scapegoats.  Did he blame porn?  I can’t remember.  After the press conference, even Rupert Murcoch’s New York Post saw fit to trash the guy with its headline:  “Gun Nut: NRA Loon In Bizarre Rant Over Newtown”.  The New York Daily News ran a headline describing LaPierre as a “vile NRA nut”, and the “Craziest Man on Earth”.  Although I lack the professional credentials to render a diagnosis on the sanity of any individual, I do know a jackass when I see one.  Wayne LaPierre is such a severe jackass that he deserves serious consideration as our 2012 Jackass of the Year.

Every year I have to resist the temptation to nominate Stuart Varney of Fox News.  Varney is the senior business commentator for the Fox News Network.  It seems as though Jon Stewart runs at least one video clip per week of Varney making a fool of himself.  Varney is an unabashed hater of solar power and most other sources of “green energy”.  He frequently refers to advocates of green energy as “greenies”, as though such an approach were something shameful.  Nevertheless, Varney was able to dodge the award this year with his recent interview with Tommy Chong.  The interview wasn’t that great, but it was good enough to warrant sparing Varney the indignity of this award.

Unfortunately, there is no single individual whom we can blame for the December 21 hysteria.  The Vancouver Sun ran an interesting article about a local author named Brad Carrigan, who did his part to promote a good bit of the December 21 foolishness through a website where he sold books, videos, his own seminars and sessions at his “spiritual retreat centre in the mountains”.  Unfortunately, Carrigan did not become prominent enough to earn our Jackass of the Year Award.

In an election year, the candidates are usually too easy to single out for this award.  Nevertheless, the 2012 Presidential Campaign brought us this year’s Jackass of the Year Award winner:  Donald Trump.  His idiotic “birther-ism” served no other purpose than to motivate 400,000 people to sign a petition, requesting Macy’s to abandon its relationship with Trump.  A good place to find a handy list of reasons why Trump deserves this award can be found at the New York Daily News website.  There you will find a link to Penn Jillette’s book excerpt at Salon about Trump and what it was like to appear on Celebrity Apprentice.  According to Jillette, Trump really cares about the things insignificant bloggers have to say about him.  As one such insignificant blogger, all I can say is:  Congratulations, Jackass!


 

Real-Time Fact Checking for Political Debates

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Note:  This posting was published before the second 2012 Presidential debate at Hoftsra University

After the Vice-Presidential debate, many of Team Obama’s surrogates were referring to both Paul Ryan and Mitt Romney as liars.  Obviously, most Republicans were upset by this.  What I found amusing about the entire dust-up was that at no time did anyone from Team Obama support their aspersions with a reference to a fact-checking website.  It would have been easy enough.  Directing people to a fact-checking website would have been even more helpful because the site would inform the reader that the candidate in question told a number of lies.  Upon visiting one of the fact-checking websites, Team Obama’s aversion to using such a site to support those nasty allegations becomes obvious:  there are a number of untrue statements from Obama and Biden which are also exposed.

The two most widely-used fact-checking websites are PolitiFact.com and FactCheck.org.

The PolitiFact page concerning the Denver Obama – Romney debate can be found here.  The FactCheck analysis of that first Obama – Romney debate can be found here.

As for the Vice-Presidential debate, the PolitiFact page is here and the FactCheck Veep debate page is here.

After learning the truth about what was said during the debates, I immediately imagined a political debate in which three meters – similar to PolitiFact’s Truth-O-Meter – appear at the bottom of the screen.  The meters would provide readings from three independent fact-checking services.  When a candidate would finish making a factual assertion, the meters would indicate the degree of veracity for that statement.  Upon further consideration, it quickly became obvious that a delay of as much as twenty minutes might be necessary between the time of the statement and the broadcast.  If seven-second delays are used to censor obscene words, why not use a twenty-minute delay to expose lies?  If a twenty-second delay was used to avoid broadcast of a grizzly mishap during Felix Baumgartner’s supersonic skydive, why not use a twenty-minute delay to open a window to the truth?  If the networks can provide audience response meters to the candidates’ statements, they should be able to provide fact-checking readouts in real time.  It might be necessary to delay the broadcast version of the debate as much as twenty minutes later than “live”, and it could get bogged down by delays between questions so that the meter reading from one candidate’s previous statement would not remain on the screen while the opposing candidate would begin speaking in response to the next question. Nevertheless, it would be more interesting and the candidates would have no reason to resort to calling each other liars.

If such a debate format were actually suggested, it would be amusing to watch the responses to the proposal.  I would be willing to bet that all candidates and political parties would oppose it.  Lies are politicians’ tools.  Exposing candidates’ lies during a political debate would be compared to requiring a magician to expose the secrets behind each trick during the course of a performance.

It is up to the voters to insist that political campaigns are not magic.  Some politicians may have a supernatural ability for making enormous amounts of money appear in their campaign accounts, but the truth of what these candidates say should not be shrouded in mystery.  Beyond that, viewers should not be required to take notes and then look up each fact on a website to determine whether a politician is lying.  The use of three different, independent fact-checking services would provide a more objective measure of truth-telling.

Here’s hoping that the 2016 election campaign will involve the use of real-time fact checking during the debates.  We might find ourselves watching candidates who have more integrity than the characters we have been watching during the current campaign cycle.


 

Talking To The Money

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By now, you’ve heard about it dozens of times.  Mitt Romney is taking heat for remarks he made at a private fundraiser in Boca about the 47 percent of Americans who won’t vote for him because they enjoy taking handouts from the government.  In response to the dustup, the Romney camp has focused on remarks made by Barack Obama during the 2008 campaign about people who “cling to their guns and religion”.  Obama’s discussion with “Joe the Plumber” about “spreading the wealth around” has been cited as another example of Obama’s favoritism of one population segment over another.  Nevertheless, as Brit Hume explained to Greta on Fox News, the Republicans’ focus on those remarks did not work during the 2008 campaign and there is no reason to believe that it will gain any more traction during the current election cycle.

Actually, there is a better example of Obama’s expression of contempt for a bloc of voters during a fundraiser, which is somewhat analogous the situation involving Romney in Boca.  During the mid-term election campaign in September of 2010, Obama managed to alienate a good number of his own supporters during an event at the home of the appropriately-named Rich Richman.  The event demonstrated how politicians – from either party – will speak more candidly and cynically about the “little people” when talking to their fat cat contributors.  Nevertheless, the Republicans will not likely exploit Obama’s remarks at the Rich-man event.  Of course, Obama supporters would be reminded that their candidate is not a significantly different alternative to Romney.  However, by the same token, Romney supporters would be reminded that their candidate does not offer a significantly distinct alternative to Obama.  As a result, the Republicans will never use it.

Let’s jump into the time machine and look back at how I discussed the Richman event on September 20, 2010:

President Obama recently spoke at a $30,000-per-plate fundraising event for the Democratic National Committee at the home of Richard and Ellen Richman.  (Think about that name for a second:  Rich Richman.)  Mr. Richman lives up to his surname and resides in the impressive Conyers Farm development in Greenwich, Connecticut.  Christopher Keating of the Capitolwatch blog at courant.com provided us with the President’s remarks, addressed to the well-heeled attendees:

.   .   .   Democrats, just congenitally, tend to get – to see the glass as half empty.   (Laughter.)  If we get an historic health care bill passed – oh, well, the public option wasn’t there.  If you get the financial reform bill passed –  then, well, I don’t know about this particularly derivatives rule, I’m not sure that I’m satisfied with that.  And gosh, we haven’t yet brought about world peace and – (laughter.)  I thought that was going to happen quicker.  (Laughter.) You know who you are.  (Laughter.)

The tactlessness of those remarks was not lost on Glenn Greenwald of Salon.com.  Mr. Greenwald transcended the perspective of an offended liberal to question what could possibly have been going on in the mind of the speaker:

What’s most striking about Obama’s comments is that there is no acceptance whatsoever of responsibility (I’ve failed in some critical areas; we could have/should have done better).  There’s not even any base-motivating vow to fight to fix these particular failures (we’ll keep fighting for a public option/to curb executive power abuses/to reduce lobbyist and corporate control of our political process).  Instead, he wants you to know that if you criticize him — or even question what he’s done (“well, I don’t know about this particular derivatives rule, I’m not sure that I’m satisfied with that”) – it’s your fault:  for being some sort of naive, fringe-leftist idiot who thought he would eliminate the Pentagon and bring about world peace in 18 months, and/or because you simply don’t sufficiently appreciate everything he’s done for you because you’re congenitally dissatisfied.

*    *    *

Sitting at a $30,000 per plate fundraising dinner and mocking liberal critics as irrational ingrates while wealthy Party donors laugh probably does wonders for bruised presidential egos, but it doesn’t seem to be a particularly effective way to motivate those who are so unmotivated.  Then again, Barack Obama isn’t actually up for election in November, so perhaps the former goal is more important to him than the latter.  It certainly seems that way from these comments.

Of course, liberals weren’t the only Obama supporters who felt betrayed by the President’s abandonment of his campaign promises.  In fact, Obama owed his 2008 victory to those independent voters who drank the “Hope and Change” Kool-Aid.

Glenn Greenwald devoted some space from his Salon piece to illustrate how President Obama seems to be continuing the agenda of President Bush.  I was reminded of the quote from former Attorney General John Ashcroft in an article written by Jane Mayer for The New Yorker.  When discussing how he expected the Obama Presidency would differ from the Presidency of his former boss, George W. Bush, Ashcroft said:

“How will he be different?  The main difference is going to be that he spells his name ‘O-b-a-m-a,’ not ‘B-u-s-h.’ ”

One important difference that Ashcroft failed to anticipate was that Bush knew better than to disparage his own base.

By the onset of the 2012 Presidential Campaign, many of Obama’s 2008 supporters had become ambivalent about their former hero.  As I pointed out on August 13, once Romney had named Paul “Marathon Man” Ryan as his running mate (rather than Ohio Senator Rob Portman), he provided Democrats with a bogeyman to portray a Romney Presidency as a threat  to middle-class Americans:

As the Democratic Party struggled to resurrect a fraction of the voter enthusiasm seen during the 2008 campaign, Mitt Romney came along and gave the Democrats exactly what they needed:  a bogeyman from the far-right wing of the Republican Party.  The 2012 campaign suddenly changed from a battle against an outsourcing, horse ballet elitist to a battle against a blue-eyed devil who wants to take away Medicare.  The Republican team of  White and Whiter had suddenly solved the problem of Democratic voter apathy.

Nevertheless, some degree of disillusionment experienced by Obama’s supporters continues.  Consider the final paragraph from a September 20 essay by Robert Reich:

And even if Obama is reelected, more hard work begins after Inauguration Day – when we must push him to be tougher on the Republicans than he was in his first term, and do what the nation needs.

In other words, it will be up to the voters  to make sure they aren’t betrayed by Obama as they were during his first term.

The Republican insistence on attempting to portray Obama as a “Socialist” rather than a disingenuous poseur has served no other purpose than to invite an eloquent smackdown from the namesake of the GOP’s Patron Saint.

Romney’s failure to win the Presidential Election will be more the result of ignored opportunities than the result of gaffes.


 

Magic Show Returns to Wall Street

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Quantitative easing is back.  For those of you who still aren’t familiar with what quantitative easing is, I have provided a link to this short, funny cartoon, which explains everything.

The first two phases of quantitative easing brought enormous gains to the stock market.  In fact, that was probably all they accomplished.  Nevertheless, if there had been no QE or QE 2, most people’s 401(k) plans would be worth only a fraction of what they are worth today.  The idea was that the “wealth effect” provided by an inflated stock market would both enable and encourage people to buy houses, new cars and other “big ticket” items – thus bringing demand back to the economy.  Since the American economy is 70 percent consumer-drivendemand is the engine that creates new jobs.

It took a while for most of us to understand quantitative easing’s impact on the stock market.  After the Fed began its program to buy $600 billion in mortgage-backed securities in November of 2008, some suspicious trading patterns began to emerge.  I voiced my own “conspiracy theory” back on December 18, 2008:

I have a pet theory concerning the almost-daily spate of “late-day rallies” in the equities markets.  I’ve discussed it with some knowledgeable investors.  I suspect that some of the bailout money squandered by Treasury Secretary Paulson has found its way into the hands of some miscreants who are using this money to manipulate the stock markets.  I have a hunch that their plan is to run up stock prices at the end of the day before those numbers have a chance to settle back down to the level where the market would normally have them.  The inflated “closing price” for the day is then perceived as the market value of the stock.  This plan would be an effort to con investors into believing that the market has pulled out of its slump.  Eventually the victims would find themselves hosed once again at the next “market correction”.

Felix Salmon eventually provided this critique of the obsession with closing levels and – beyond that – the performance of a stock on one particular day:

Or, most invidiously, the idea that the most interesting and important time period when looking at the stock market is one day.  The single most reported statistic with regard to the stock market is where it closed, today, compared to where it closed yesterday.  It’s an utterly random and pointless number, but because the media treats it with such reverence, the public inevitably gets the impression that it matters.

In March of 2009, those suspicious “late day rallies” returned and by August of that year, the process was explained as the “POMO effect” in a paper by Precision Capital Management entitled, “A Grand Unified Theory of Market Manipulation”.

By the time QE 2 actually started on November 12, 2010 – most investors were familiar with how the game would be played:  The New York Fed would conduct POMO auctions, wherein it would purchase Treasury securities – worth billions of dollars – on an almost-daily basis.  After the auctions, the Primary Dealers would take the sales proceeds to their proprietary trading desks, where the funds would be leveraged and used to purchase stocks.  Thanks to QE 2, the stock market enjoyed another nice run.

This time around, QE 3 will involve the purchase of mortgage-backed securities, as did QE 1.  Unfortunately, the New York Fed’s  new POMO schedule is not nearly as informative as it was during QE1 and QE 2, when we were provided with a list of the dates and times when the POMO auctions would take place.  Back then, the FRBNY made it relatively easy to anticipate when you might see some of those good-old, late-day rallies.  The new POMO schedule simply informs us that  “(t)he Desk plans to purchase $23 billion in additional agency MBS through the end of September.”  We are also advised that with respect to the September 14 – October 11 time frame,  “(t)he Desk plans to purchase approximately $37 billion in its reinvestment purchase operations over the noted monthly period.”

It is pretty obvious that the New York Fed does not want the “little people” partaking in the windfalls enjoyed by the prop traders for the Primary Dealers as was the case during QE 1 and QE 2.  This probably explains the choice of language used at the top of the website’s POMO schedule page:

In order to ensure the transparency of its agency mortgage-backed securities (MBS) transactions, the Open Market Trading Desk (the Desk) at the New York Fed will publish historical operational results, including information on the transaction prices in individual operations, at the end of each monthly period shown in the table below.

In other words, the New York Fed’s idea of transparency does not involve disclosure of the scheduling of its agency MBS transactions before they occur.  That information is none of your damned business!

Lie-orama

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We have never experienced a Presidential campaign with more fact-checking than what we are seeing during the current cycle.  The well-timed release of a popular new book by Janine Driver entitled, You Can’t Lie to Me might be one of the reasons why this is happening.  Fact-checking websites such as PolitiFact and FactCheck have been overflowing with reports of exaggerations, half-truths and flat-out lies by the candidates and their surrogates.

PolitiFact’s roots at the Tampa Bay Times made it particularly well-situated to expose the false claims made during speeches at the Republican Convention.  One good example was the “Pants on Fire” rating given to a remark by South Dakota Senator John Thune, who claimed that the Obama administration proposed banning farm kids from doing basic chores.

Paul Ryan’s acceptance speech drew instant criticism from a number of news outlets.  I quickly felt vindicated for my last posting, which asserted that Romney made a mistake by selecting Ryan, rather than Ohio Senator Rob Portman, as his running mate.  FactCheck provided this breakdown of the misrepresentations in Ryan’s speech:

Paul Ryan’s acceptance speech at the Republican convention contained several false claims and misleading statements.  Delegates cheered as the vice presidential nominee:

  • Accused President Obama’s health care law of funneling money away from Medicare “at the expense of the elderly.”  In fact, Medicare’s chief actuary says the law “substantially improves” the system’s finances, and Ryan himself has embraced the same savings.
  • Accused Obama of doing “exactly nothing” about recommendations of a bipartisan deficit commission — which Ryan himself helped scuttle.
  • Claimed the American people were “cut out” of stimulus spending.  Actually, more than a quarter of all stimulus dollars went for tax relief for workers.
  • Faulted Obama for failing to deliver a 2008 campaign promise to keep a Wisconsin plant open.  It closed less than a month before Obama took office.
  • Blamed Obama for the loss of a AAA credit rating for the U.S.  Actually, Standard & Poor’s blamed the downgrade on the uncompromising stands of both Republicans and Democrats.

If the widespread criticism of the veracity of Ryan’s speech had not been bad enough, Runner’s World saw fit to bust Ryan for making a false claim that he once ran a marathon in less than three hours.  In reality, it took him just over four hours.

At the conclusion of FoxNewsapalooza, the Media Matters website posted an analysis of how Mitt Romney’s acceptance speech was a smorgasbord of falsehoods concocted by bloviators from the right-wing media.

Glenn Kessler, who writes The Fact Checker blog for The Washington Post, suggested that the Left has been overreacting to the rhetoric from the Republican Convention:

Ultimately, convention speeches are about making the argument for your team.  We should fully expect politicians to make their case using facts and figures that either tilt positive about their accomplishment – or negative about their opponents.  As the fact-checking business has blossomed in the news media, it has been increasingly hard for politicians to get away with such truth-shading without someone noticing.

Both political parties will stretch the truth if they believe it will advance their political interests.  It’s been a rough campaign so far, but the GOP convention that just ended was strictly in the mainstream for such party celebrations.

As the Democratic Convention approaches, a good deal of attention has been focused on PolitiFact’s Obameter, which measures how well Obama has delivered on his campaign promises.  PolitiFact’s most recent status report offered this analysis:

Our scorecard shows Obama kept 37 percent of his promises.  He brought the war in Iraq to a close and finally achieved the Democratic dream of a universal health care program.  When the United States had Osama bin Laden in its sights, Obama issued the order to kill.

Sixteen percent are rated Broken, often because they hit a brick wall in Congress.  Global warming legislation passed the House but died in the Senate.  He didn’t even push for comprehensive immigration reform.  His program to help homeowners facing foreclosure didn’t even meet its own benchmarks. (PolitiFact rates campaign promises based on outcomes, not intentions.)

With four months left in Obama’s term, PolitiFact has rated Obama’s remaining promises Compromise (14 percent), Stalled (10 percent) or In the Works (22 percent).

One of the Obama campaign’s negative ads concerning Romney’s economic record as Governor of Massachusetts drew some criticism from FactCheck:

The ad claims that Romney raised taxes on the middle class.  It’s true that Romney imposed a number of fees, but none of them targeted middle-income persons.  Also, Romney proposed cutting the state income tax three times – a measure that would have resulted in tax cuts for all taxpayers – but he was rebuffed every time by the state’s Democratic Legislature.

I suspect that the Obama campaign has a secret plan in the works to avoid the scrutiny of fact-checkers during their convention.  Their plan to have John Kerry speak is actually part of a plot to cause the fact-checkers to fall asleep.  Once “Operation Snoozeboat” is complete, the speakers who follow Kerry will be able to make the wildest claims imaginable – and get away with it!



 

Wisconsin Bogeyman Will Help Obama

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Mitt Romney’s choice of Paul Ryan as his running mate will do more so solve President Obama’s voter apathy problem than it will do to boost the enthusiasm of Republican voters.  While the Tea Party branch of the Republican Party complains that “Massachusetts moderate” Romney is not a significant alternative to Barack Obama, the Democratic Party’s base complains the bank-centric Obama administration is indistinguishable from a Romney administration.  Criticism of the Obama administration’s domestic surveillance program comes from across the political spectrum.  One need look no further than the Business Insider to find disappointment resulting from the Obama administration’s efforts to turn America into a police state.

As the Democratic Party struggled to resurrect a fraction of the voter enthusiasm seen during the 2008 campaign, Mitt Romney came along and gave the Democrats exactly what they needed:  a bogeyman from the far-right wing of the Republican Party.  The 2012 campaign suddenly changed from a battle against an outsourcing, horse ballet elitist to a battle against a blue-eyed devil who wants to take away Medicare.  The Republican team of White and Whiter had suddenly solved the problem of Democratic voter apathy.

I recently expressed the opinion that the only logical candidate for Romney to select as his running mate would have been Ohio Senator Rob Portman.  In the wake of Romney’s selection of Paul Ryan, a number of commentators have emphasized that Portman would have been a smarter choice.  Polling wiz Nate Silver recently voiced a similar opinion:

Politics 101 suggests that you play toward the center of the electorate.  Although this rule has more frequently been violated when it comes to vice-presidential picks, there is evidence that presidential candidates who have more “extreme” ideologies (closer to the left wing or the right wing than the electoral center) underperform relative to the economic fundamentals.

Various statistical measures of Mr. Ryan peg him as being quite conservative.  Based on his Congressional voting record, for instance, the statistical system DW-Nominate evaluates him as being roughly as conservative as Representative Michele Bachmann of Minnesota.

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Because of these factors, a recent analysis I performed placed Mr. Ryan 10th from among 14 potential vice-presidential picks in terms of his immediate impact on the Electoral College.  If Mr. Romney wanted to make the best pick by this criterion, he would have been better off to choose an alternative like Senator Rob Portman of Ohio, or Gov. Bob McDonnell of Virginia.

Nate Silver was not alone with his premise that Romney’s choice of Ryan was made out of desperation.  At the Right Condition blog, Arkady Kamenetsky not only emphasized that the Ryan candidacy will help galvanize Obama’s liberal base – he went a step further to demonstrate that the Ryan budget is a “smoke and mirrors” pretext for preserving the status quo.  After highlighting Ryan’s support of TARP, Medicare Part D and No Child Left Behind, Arkady Kamenetsky performed a detailed comparison of the Ryan budget with the Obama budget to demonstrate a relatively insignificant difference between the two.  Kamenetsky concluded the piece with these observations:

So this of course begs the question, why did Romney do this?  Why select a VP that will provide such easy ammunition for the Left with virtually no reward?  The answer is quite simple.  Romney and Ryan represent exactly the same problem even if one appears to be a moderate and the other appears to be an epic fiscal warrior.  The Republican party fights for and pushes through the status-quo.  The images you see up above and the Ryan record is the status-quo.  No doubt about it.

Yet Romney is counting on the ignorance of Republican base to run with the facade of Ryan’s conservatism.  If that illusion holds then Ryan’s image will invariably boost Romney’s own image as many will view Romney’s decision as courageous and bold despite Obama’s willingness to distort Ryan’s budget.  In other words, you are witnessing a most fantastic and glamorous circus.  A bad Hollywood movie, except that ending will be quite real and not something you can pause or turn off.

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Romney and Ryan will lose in November and the image of the heartless Conservative killing granny will resonate with America, the tragedy of course is that neither Ryan or Romney are willing to actually cut anything!  The tragedy will become even more amusing as we will witness a nasty and partisan fight further dividing Americans as they fight and defend differing policies with the exact same results.

During the coming weeks, watch for efforts by the mainstream news media to portray this election as a close contest – in their own desperate attempts to retain an audience for what will probably turn out to be the least exciting Presidential campaign since Reagan vs. Carter.