“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Monday, November 02, 2009

Where will revenue come from with increasing unemployment, increased consumer saving and government deficits?

I wish I had more confidence in the Obama Administration's ability to handle the financial mess but his obsession in picking this time to try and recreate and expand the US health care system is deeply concerning.

Obama should have no greater focus than fixing the economic engine of a mighty big ship.

Instead we have a race to fulfill an agenda to redistribute wealth to a political constituency, regardless of cost, and at a time when composite wealth is diminishing.

Obama seems tone death to the ugly rumbles coming up from the economic tectonic plates.

The filing for bankruptcy by CIT will clearly be bad for employment at the thousands of small firms served by CIT will have to trim spending, employment, and business expansion. The loss of the two billion plus TARP funds lent to CIT will be insignificant to the losses in those same firms served by CIT. This is no time for weak companies to be looking for alternative sources of funding.

Rising unemployment means less taxes and less private sector spending, greater consumer caution and increased savings and of course, greater federal deficits. The increased savings would be desirable if the savings were being recycled to domestic investment, but the fear in the banking sector is not allowing that to happen.

Obama and almost no one around him has ever run a business or worked for one. Biden has been in congress since he had first growth hair. When they talk about saving jobs they talk about an industry they understand and that is government. Obama talks about saving government jobs, municipal workers and teachers, important but not revenue producers from the private sector.

Unemployment numbers for this week will be telling. On Sunday, Timmy Boy Geithner, Treasury Secretary, said, "unemployment is worse than almost everybody expected, but growth is back a little more quickly."

Reassuring isn't it?


Mother of all carry trades faces an inevitable bust
By Nouriel Roubini
Published: November 1 2009
From the Financial Times:

...while the US and global economy have begun a modest recovery, asset prices have gone through the roof since March in a major and synchronised rally. While asset prices were falling sharply in 2008, when the dollar was rallying, they have recovered sharply since March while the dollar is tanking. Risky asset prices have risen too much, too soon and too fast compared with macroeconomic fundamentals.

So what is behind this massive rally? Certainly it has been helped by a wave of liquidity from near-zero interest rates and quantitative easing. But a more important factor fuelling this asset bubble is the weakness of the US dollar, driven by the mother of all carry trades. The US dollar has become the major funding currency of carry trades as the Fed has kept interest rates on hold and is expected to do so for a long time. Investors who are shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates – as low as negative 10 or 20 per cent annualised – as the fall in the US dollar leads to massive capital gains on short dollar positions.

Let us sum up: traders are borrowing at negative 20 per cent rates to invest on a highly leveraged basis on a mass of risky global assets that are rising in price due to excess liquidity and a massive carry trade. Every investor who plays this risky game looks like a genius – even if they are just riding a huge bubble financed by a large negative cost of borrowing – as the total returns have been in the 50-70 per cent range since March.


  1. According to the red light camera expert tonite on C 2 C, many a municipality across the land are installing cameras, (a dubious ploy legally) and other gimmickery, as revenue raising devices, as local taxes fall. Our county is cutting back on road plowing. And praying for a mild winter I should imagine. Fees at the land fill have gone up. Traffic tickets have gone up. License fees, up. All over the land local governments are hurting. Arizona seems about the top of the list on red light cameras. Florida and some other states have outlawed them. These local governments got to get creative. One solution here, raise the fees on the developers. Nobody bitches about that much. Except me. And two or three others. Or, try to raise taxes on platted lots, which are still being farmed, against state law. That attempt is being made here, being fought off right now. Cutting the budgets, well, there go some more jobs.

    Cut federal and state taxes, which might actually spur some growth? Hell, no!

    We need some more rounds of stimulii!

  2. By the way, the expert said those red light cameras have raised the injury accidents a lot, as people slam on their brakes when they become aware of the trap, causing a big increase in rear end collisions.

    That's what the studies he cited showed.

    But, what the hell, it's all about the money.

  3. "In America, we tax everything that moves, and doesn't move."

    Hillary Clinton

    We got to get creative about this.

    What is there that is outside of those two categories? Must be something. Come on, get creative. The American people have an infinite capacity to pay, we all know that.

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  6. First off, if you're "shorting the dollar" you're not "borrowing." You're "Gambling."

    If you're using those "winnings" to buy assets in emerging markets (or, "stocks" in emerging markets) you're "parlaying."

  7. What is it that's wrong with
    exploiting something successfully, or to transform one thing into something of much greater value?

  8. Seems the gamblers are betting on the certainty of the stupidity of this administration.
    What a lock!

  9. Doug, Inc.
    is fully vested in shorts on the dollar, btw.

  10. Jeez, shitty recording.
    Here's a better one:
    Werewolves Of London

  11. Nothing wrong with a little "Gamble," Doug, but don't shit yourself that it's any better than a 50/50 (minus commissions) bet.

  12. Up til now it's been a LOT better than 50%.
    Just sayin.
    ...not predictin.

  13. WARNING!

    Doug,Inc. has been investigated by the SEC and found to be under indictment in 17 states.

    This message brought to you as a public service by the SEC.

    Thank you.

  14. After my facetious comment yesterday about finding a GOOD place to go to war, this old WaPo article (linked by Tyler Cowen at Marginal Revolution) is pretty funny:

    Raiding the Icebox
    Behind Its Warm Front, the United States Made Cold Calculations to Subdue Canada

    By Peter Carlson
    Washington Post Staff Writer
    Friday, December 30, 2005

    Invading Canada won't be like invading Iraq: When we invade Canada, nobody will be able to grumble that we didn't have a plan.

    The United States government does have a plan to invade Canada. It's a 94-page document called "Joint Army and Navy Basic War Plan -- Red," with the word SECRET stamped on the cover. It's a bold plan, a bodacious plan, a step-by-step plan to invade, seize and annex our neighbor to the north. It goes like this:

    First, we send a joint Army-Navy overseas force to capture the port city of Halifax, cutting the Canadians off from their British allies.

    Then we seize Canadian power plants near Niagara Falls, so they freeze in the dark.

    Then the U.S. Army invades on three fronts -- marching from Vermont to take Montreal and Quebec, charging out of North Dakota to grab the railroad center at Winnipeg, and storming out of the Midwest to capture the strategic nickel mines of Ontario.

    Meanwhile, the U.S. Navy seizes the Great Lakes and blockades Canada's Atlantic and Pacific ports.

    At that point, it's only a matter of time before we bring these Molson-swigging, maple-mongering Zamboni drivers to their knees! Or, as the official planners wrote, stating their objective in bold capital letters: "ULTIMATELY TO GAIN COMPLETE CONTROL."

    * * *

    It sounds like a joke but it's not. War Plan Red is real. It was drawn up and approved by the War Department in 1930, then updated in 1934 and 1935. It was declassified in 1974 and the word "SECRET" crossed out with a heavy pencil. Now it sits in a little gray box in the National Archives in College Park, available to anybody, even Canadian spies. They can photocopy it for 15 cents a page.

    War Plan Red was actually designed for a war with England. In the late 1920s, American military strategists developed plans for a war with Japan (code name Orange), Germany (Black), Mexico (Green) and England (Red). The Americans imagined a conflict between the United States (Blue) and England over international trade: "The war aim of RED in a war with BLUE is conceived to be the definite elimination of BLUE as an important economic and commercial rival."

    In the event of war, the American planners figured that England would use Canada (Crimson) -- then a quasi-pseudo-semi-independent British dominion -- as a launching pad for "a direct invasion of BLUE territory." That invasion might come overland, with British and Canadian troops attacking Buffalo, Detroit and Albany. Or it might come by sea, with amphibious landings on various American beaches -- including Rehoboth and Ocean City, both of which were identified by the planners as "excellent" sites for a Brit beachhead.

    The planners anticipated a war "of long duration" because "the RED race" is "more or less phlegmatic" but "noted for its ability to fight to a finish." Also, the Brits could be reinforced by "colored" troops from their colonies: "Some of the colored races however come of good fighting stock, and, under white leadership, can be made into very efficient troops."

    The stakes were high: If the British and Canadians won the war, the planners predicted, "CRIMSON will demand that Alaska be awarded to her."


    There are a number of merits to fighting in Canada: Not far to go; plethora of English speakers; none of this tribal shit; oil (because rufus wouldn't okay it otherwise).

    The downsides: They have an actual army that actually fights and that shows up on time at most major events; inevitable traumatic encounters with poutine. Okay, and the weather's not ideal.

    I'd prefer, say, Turks and Caicos but there's really no challenge there at all and we have standards to uphold.

  15. Re tribal shit: There IS the French (I use the word loosely because Canadian French is an incoherent put-on to the rest of world's French speakers) sovereignist movement but that can probably be used to our advantage.

  16. Oh, shit no, not "Canada." What if we "Won?"

    Would we have to pretend to like "Ice Hockey?" Molsons? Would we have to end every sentence with, "Eh?" Go ice-fishing? Station troops is Saskatchewan? Where in the hell IS Saskatchewan, anyway.

    Have you ever seen a pin-up calendar of "Saskatchewan Beauties?"

    Ever wonder "Why?"

    Lord, God, No. Maybe we could "do" Wyoming, instead. Or, hell, Idaho. At least they have football. Kinda, Sorta.

  17. "What if we 'Won?'"

    AFRC Montreal. Lovely (taxpayer subsidized) winter holidays. Even nicer than Garmisch or Bertchesgaden. Need I say more?

    When was the last time we got a decent resort out of a war? Hm?

    And Halifax, I hear, is gorgeous. We can put one there, too.

    Vancouver is supposed to be spectacular.

    Really, Canada offers any number of postwar vacation payoffs.

    We can't invade Idaho. Those people are crazier than shithouse rats. Aren't they, bob? Sucking in the nation's fruitcakes since...oh, whenever.

    Leave well enough alone.

  18. And speaking of war (of days past) my daughter and her 500 shipmates sail into Vietnam tomorrow.

    Among other things, she's doing an overnight down the Mekong Delta.

    I'm sure my dad wishes he was with her.

  19. This comment has been removed by the author.

  20. He can have my billet.

    Tell her to watch out for the snakes. Out of their 100 indigenous species, 99 are Deadly Poisonous, and the other fucker just Eats you Alive.

  21. MLD, Inc. is a very attractive stock, not under indictment in 17 states like Doug, Inc. MLD, Inc. is not a common stock, and is offered on an invitation only basis, so the slick brochure says. Its rewards are ever increasing, the dividends high, the emotional support strong. If you are invited to buy this stock, go all in, hard and long.

  22. You'd don't want to invade Idaho. There's nothing to eat here but potatoes. You'd starve.

  23. So the series is 3 to 1 with a game tonight. This game is in Phillie. Phillie makes a comeback win tonight.

  24. The answer to all things economic can be found here--

    Prepare for Hyperinflation
    Or Go Broke

    Dear Fellow American,

    You may recall that, in one of my recent columns, I coined the term "depressflation" to describe the inevitable result of the Democrats' plans to "rescue" the economy.

    A "depressflation," I explained, would be like the "stagflation" of the 1970s, only worse: massive inflation, even hyper-inflation, together with Depression-like economic stagnation.

    Why is this inevitable? Because with a bi-partisan consensus that deficits are vital in fighting the crisis (or easing the pain) there is no constraint on Obama and his party. The sky is the limit on spending, to the tune of a trillion-plus dollars over the next two years alone.

    And there are only two ways to pay for it: (1) printing more money, which causes inflation, and (2) hiking taxes, which kills investment, businesses and jobs.

    Then the question will be: When will we realize that government intervention is magnifying, not solving the problems that caused the crisis? When will the patience of the public with Obama's remedies run out?

    My guess is that it won't be until 2012 -- or after.

    In the meantime, however, there are ways to protect yourself and your family from the coming "depressflation."

    It's crucial to understand: Hard times for America does not necessarily mean hard times for you. As a very wise investment expert of my acquaintance, Nicholas Vardy, likes to say, "No matter what the state of financial markets, there is always a strategy out there that can make you money."

    The key, Vardy explains, is to recognize opportunities wherever they may be and, more importantly, detach yourself from old investment themes that no longer work.

    Vardy himself, an American based in London, is a master at crafting such cutting-edge investment strategies -- which he then passes on to subscribers to his Global Stock Investor investment newsletter.

    I follow Vardy's advice closely and admire his economic and investment insights. Full disclosure: I receive a percentage of each Global Stock Investor subscription sold, but I wouldn't if I did not believe in his abilities.

    So, for instance, Vardy was among the first to see the coming profit waves in soft (agricultural) commodities, emerging market telecom, and other hot new trends -- enabling his subscribers to bank hefty profits like these:
    83% profit on Canadian fertilizer giant Potash (POT)
    22% profit on iShares MSCI Brazil Index (EWZ)
    14% profit on steel producer ArcelorMittal (MT)
    23% profit on international cellular giant Millicom (MICC)
    Even more remarkable, all these trades were made in 2008 -- a year when most global markets were down 50% or more.

    While the major stock indexes were down as much as 20% during "Black October" last year, Vardy's subscribers were actually enjoying double-digit gains.

    And that's nothing compared to the magic Vardy performed for his subscribers during these past few months.

    Consider this: Vardy's Global Stock Investor portfolio open positions are up 18%... with six stocks up more than 20%. That's incredible!

    How does Nicholas Vardy do it? If I knew, I'd be in his business, not mine. But I'm sure those countless hours he spends sharing investment ideas with Europe's top money managers has something to do with it -- not to mention his graduate degrees from Stanford and Harvard.

    Don't get me wrong: Nicholas Vardy is no elitist snob. Though he makes his "real" money managing money for a few wealthy clients, he also likes to "spread the wealth" -- not through higher taxes (sorry, Obama), but by helping people like you and me make profitable investments.

    Let's face it, the next few years will be tough ones for America. But, to repeat, they don't have to be tough ones for you -- if you find and follow sound investment advice like the brilliant investment strategies in Nicholas Vardy's Global Stock Investor. I urge you to give it a try.

    Click here to learn more.


    Dick Morris

  25. Phillie makes a comeback win tonight.

    Mon Nov 02, 03:15:00 PM EST


    If you are thinking of joining What Is and rooting for the Phillies, you'd best be aware that you will be doing so while a certain lifelong Yankees fan is out in a certain place - hot, sweaty, and World Series-deprived. Serving his country. On his birthday. And that's just plain mean. You should be aware, also, that in the entire United States Army there is not a single Phillies fan; and so rooting for the Phillies is, for all intents and purposes, rooting against the finest institution ever created by the Free World. Which is, essentially, rooting against the Free World. Making you eligible for a watch list, mister.

    So I just hope that you don't have to fly anywhere anytime soon.

  26. Cliff Lee, Phillie Ace, is on the mound tonight, to stave off imminent defeat.

    jeez, I'm thinking over my loyalties....

    Can I hope for a Yankee win in Game 7, so we can have some fun with this? I don't want it to end in 5 games.

    Not good for the economy.

  27. MLD, Inc. is a very unique stock....

  28. I think the economy is getting worse here because the Casino has cancelled out the Wampum Days (some free money) 'until further notice'.

    Further, their drawings have been cut back too, to the point that all that's left is T-Shirt Friday, and the prize for that, every two hours, has been scaled back from $400 to %250.

    Just reading the birch bark twists here...

  29. MLD, Inc. is a "preferred stock."

  30. As long as the Yankees win, bob. As long as they win.

    (Kinda funny: I'm a Yankees fan by proxy.)

    They'll probably get the low-down on the snakes in tonight's Know Before You Go, rufus.

    She's really looking forward to this stop in particular. Her favorite thus far having been South Africa.

    Apropos of nothing:

    We've gotten about a gazillion calls from Bob McDonnell For Governor. We'll get a thousand more before the polls close tomorrow.

    One downside to having a Vonage line. You can move to another continent but you can't escape the charity telemarketers, political fundraisers, and campaign robocalls

  31. anonobob,

    You just got your marching orders and you have to "think" about your loyalties?

    Shape up, man!

  32. Robber to Jack Benny--

    "Your money, or your life."

    Benny, procrastinating---

    "I'm thinking about it."

  33. In Iowa, Second Thoughts on Obama

    The president’s standing has fallen in the state that jump-started his campaign...

  34. anonobob!

    better yet:

    al-Anono Bob

  35. A man without a name is a terrible thing. Nameless, almost as bad as homeless, stateless. On the other hand no one can practice bad magic on me, you got to have a name for that. If my daughter ever gets here to fix this thing, I might get my identity back. The wife monkeyed with the computer, lost my e-mails, letters, dang near everything.

    Meanwhile, in a little noticed item, the Russians are holding military maneuvers around Poland, including simulated air nuclear attacks.This is making the Poles nervous.

  36. preferred stock...unique stock...I sound like a God damn cow.

    As for the world series, I don't give a fuck who wins all I know is, it's interfering with my show.

    Although, it would be nice to see them win two years in a row. Lord knows the other teams can't do it.

  37. Well then a Preferred Triple A high yield bond, if you prefer.

    By the way, listening to Lars Larsen interview Dinesh D'Souza right now, I should have mentioned he was on C 2 C last night, after the red light camera guy. He seems to have got most of it right. He's a Christian fellow, here's his

    New Book

    He's got it figured out that the mind and the brain aren't the same thing.

    Good read.

  38. Book even has a blurb by Christopher Hitchens on the back he says!

  39. Charlie Rangel gets knighted in Jamaica.

    Sir Charlie

    Posted by: mames
    Nov 02, 06:33 AM

    Dey be smokin some fine @#$%& down der in da 'Maka, Mon. 'Make every damn thing look fine.

    Well, it's about game time.

  40. The Idiot Twins of American idealism.

    Spengler is rolling.

    # America's strategic priorities are:
    # Speeding economic recovery;
    # Maintaining the integrity of the reserve role of the dollar;
    # Preventing rogue states from acquiring nuclear weapons or prospectively rogue states from using them - I refer to Pakistan;
    # Fostering the stability of key countries, especially China and India, and, above all,
    # Maintaining a technological edge of American weaponry so great as to give America strategic flexibility in all theaters.

    It has no strategic interest in tilting at such windmills as:
    # Iraqi or Afghani democracy;
    # Palestinian nationhood;
    # Georgian independence;
    # North Atlantic Treaty Organization membership for Ukraine.

  41. 6-2 Phillies. Looks like you will get your wish, bob: Another night of World Series goodness.

    Foreign Policy Passport:

    Just six months ago, the Kremlin declared "mission accomplished" in settling the restive, largely-Muslim region of Chechnya, and pledged to withdraw at least half its troops stationed there. Russian soldiers have allegedly resorted to brutal tactics in the decade-long effort to subdue the region, including the systematic beating and raping of Chechen civilians, widespread detention and torture, and the murder of human rights and opposition activists.

    But the Kremlin has claimed victory in the regional struggle time and time again, and the most recent claims of success seem as wrong as ever; yesterday the Georgian Daily reported that "Moscow is planning to increase the number of units in the North Caucasus military district by a factor of four, according to officers there..." The plans come amidst an escalating Islamic insurgency in Ingushetia, the region bordering Chechnya to the west.

    There's no doubt that the Kremlin is facing a protracted struggle. Doku Umarov, one of the most prominent members of the insurgency (who has been reported dead on a number of occasions) released a lengthy statement in 2007 on the Al-Qaeda affiliated website Kavkaz Center, in which he declared Muslim rule:

    I reject all laws and systems established by infidels in the land of Caucasus.

    I reject and declare outlawed all names used by infidels to divide Muslims.

    I declare outlawed ethnic, territorial and colonial zones carrying names of "North-Caucasian republics", "Trans-Caucasian republics" and such like.

    I am officially declaring of creation of the Caucasus Emirate...

    We will relentlessly wage war on everyone who will oppose the establishment of the Sharia, Inshaallah. And those who openly violate that which was established by Allah and scorn the Islamic religion should not think that we will leave it unpunished. That is a serious delusion."

    "...who has been reported dead on a number of occasions." I like that.

    Are the most recent claims as wrong as ever? Beats me. The Russians may be intending to cement what gains they have made. The FUCKING Russians, as it were.


    I like the song.

    The fetching wallpaper is for the rest of you.

  43. 8 - 4, change of pitchers.

    New York shoulda pulled their guy out in the second inning. Maybe they wanted to lose, get that revenue machine back to New York.

    Between the Russians and the muzzies it's hard to choose. If forced, I'd take the Russians.

  44. That Johnny Damon, like the way he hangs in there.

  45. "If forced..."

    You'd do the smart thing and call in the B1 to get the fucking Russians out of your hair *first*. They're a goddamned pox on everything.

    Well. At least it wasn't a wipe out, bob.

    Your tomorrow evening is open to fill by other means.

  46. He's the clutch-man. bob.

    Smart acquisition by the Yankees.

    And he's an Army brat. Making him an extra-special human being.

  47. HAPPY BIRTHDAY, SPORT!!!!!!!!!!