Tuesday, September 30, 2008

Have we found an honest politician?

From the Herald website news -
"We're all worried about losing our jobs," Rep. Paul Ryan, a Republican, declared in an impassioned speech in support of the bill before the vote. "Most of us say, 'I want this thing to pass, but I want you to vote for it - not me.' "

Mr Ryan, thank you for your honesty!

Monday, September 29, 2008

Miscellaneous thought for the day...

Is there any whole number with last digit = "7" which is a square of a whole number.


aaaaaaa^2 = nnnnnnnn7


Politicising stupidity -

Well, TF didn't seem to like my idea but since I am pig-headed I'll repeat it here.

It stems from TF's "How do I become an illegal alien?" post, a reprint of one of "those" letters that react with me the same way as the crumbs the Djinn of All Deserts sprinkled onto the rhinoscerous' skin while said rather grumpy beastie was taking a dip in the wadi.

I am not going to repeat Mr Ruppert's letter here (mainly for that reason).

This is what I wrote for TF -
There are times when I just can do no more than wonder at how some people's heads work.

Don't worry, TF, we have this kind in NZ as well.

OK, so the premise is -

Pay $2,000 fine.

Pay three years taxes.

Collect free citizenship card.

I think that if I were this jolly roger's political representative I might reply in the following terms...


First, Mr Ruppert, you might like to refund to your employer the difference between what you actually earned in the past 5 years as a presumably legal US citizen, and what might be paid to an illegal immigrant.

Right, got that?

Now sell your home, donate the proceeds to charity (along with any tax credits that might be due), and live in low income rental housing for the two years that you want tax free.

Still feeling keen?

Now remember that for the past five years you have been an illegal. You know the stress that you feel when you see that policeman shake his finger at you for exceeding the speed limit? Live like that for the whole 5 years, 24/7, the next police is going to stop you with intent and ask for your cards...

Finally, bear in mind that you could, in that 5 years, be one of the 5% that are caught and deported (in NZ it is closer to 50%). Like in snakes and ladders or monopoly - return to go, do not collect anything, and miss your next 5 turns...

Still want to join in?

Yours truly...

Perhaps too, Mr Ruppert might like to take employment in one of those (unwanted) jobs that are more often than not performed by the (unwanted) illegals. You know the kind of thing - fruit-picking, sewer fixing, house cleaning, gardening... And, Mr Ruppert, don't start getting on your high "taking jobs from the poor" horse with me either because even here in NZ we have to import labour to do some of these tasks. Admittedly, the unemployment level is currently still under 4% so the "legal" people can to some extent afford to pick and choose what they want to do for a crust.

The truth, Mr Ruppert, is that whatever way you measure it those "illegals" have been allowed to stay in America simply because America needs them as much as they want to escape Mexico or Vietnam or China or where-ever they might have come from.

And it is because of where they might have come from that I get mighty suspicious of the true motives behind these letters. Words like "red-neck" start to float to the top of the word-cloud, justified or not. The fact that they seem to surface when-ever there are elections in the offing does not give me any consolation either.

Having said all of that, America does have a problem. There are a great number of people who want to live there. Some are more "desirable" than others.

I do not fall into either camp.

Sunday, September 28, 2008

The "Global Financial Meltdown" explained...

Full credit to yesterday's Business section of the Herald. They have given one of the most cogent, and hence rational, explanations of the liquidity crisis within the global (not just American) banking systems.

Included in the main article was this graphic which I have had to scan as it does not seem to appear anywhere on the digital version of the articles...

To fully understand, and to make it clear -

75% of global liquidity is made up of "Derivatives". The value of this portion of the pyramid is over 8 times the global GDP. The importance of this "top of the pyramid" will become apparent when we look at what it is made from.

13% is "Securitised Debt". The value of these "securitised debts" is just under 1.5 times the global GDP.

11% is made up of "Broad Money". The value of this part is just short of 1.25 times global GDP.

1% is in the form of "Power Money" - what you and I carry in our pockets.

So we can say, with a little simple addition, that the total global liquidity is somewhere in the vicinity of 10.8 times the total world income. How much of a worry should that be? At this stage I am far more worried about the top end of the pyramid.

What is that "top end"? The Herald graphic defines it was "Futures, options, swaps etc". Putting into my own words, this is the world of "financial products"; of units and risk and literally gambling with other people's (read thine and mine) money. I quoted Liam Dann at some length a whiles back here and concluded (my words) -
we are seeing what happens when the economy is run by snake-oil medicine men and itinerant side-show freaks.

So, 8 times the global income has been sunk into what is little more than betting slips that are owned and traded between the snake-oil medicine men. They end up back in the open market in forms such as the "Unit Share" of a superannuation fund. They are funded (as far as it is deemed neccessary) from the term deposits and savings accounts of the simple minded people who believe (in their naivete) that bank money is secure.

Read through Brian Gaynor's analysis in full. I want to quote just this piece -
Forty years ago there were almost no investment banks, securitised debt or derivatives. The huge increase in global liquidity and credit since the early 1980s has been almost exclusively driven by investment banks through the creation of securitised debt and derivatives, which now represent nearly 90 per cent of total liquidity.

At the beginning of the year there were five major US investment banks - Goldman Sachs, with assets of US$1061 billion (or US$1.06 trillion), Morgan Stanley US$1045 billion, Merrill Lynch US$1020 billion, Lehman Brothers US$689 billion and Bear Stearns US$424 billion.

Bear Stearns and Lehman Brothers have disappeared and Merrill Lynch is being taken over by Bank of America. These companies created a huge amount of toxic securitised debt and derivatives that have plunged in value.

The conversion of the two remaining investment banks, Goldman Sachs and Morgan Stanley, into bank holding companies is significant for a number of reasons:

* As commercial banks they will be subject to regulation whereas they were almost totally unregulated as investment banks

* Their lending capabilities will be severely restricted because commercial banks have strict capital adequacy requirements. Morgan Stanley's debt to equity ratio is 30:1 and Goldman Sachs 22:1 whereas banks are generally restricted to no more than 15:1.

Now that kind of difference is the stuff that makes my blood run cold. Morgan Stanley (to take that example) has borrowed 30 times its owner equity to fund financial market operations that are no more than betting slips that they hope to validate by winning the battle to influence the value of currencies, the value of future contracts.

This is not Capitalism 101, nor is it Capitalism 201.

This is Master Degree stuff; the kind of Capitalism that was never dreamed of by the likes of Friedman, or the early designers of the principles. It is Capitalism as was never dreamed of by the politicians of the US, or any other country.


In another article, the Herald records the demise of WaMu - Washigton Mutual - in "the largest failure ever of an American bank".
The Government measures bank failures by an institution's assets; Seattle-based WaMu has roughly US$310 billion in assets.

The previous record was the failure of Continental Illinois National Bank in 1984, with US$40 billion in assets when it closed. IndyMac, seized in July, had US$32 billion.

WaMu was searching for a lifeline after piling up billions of dollars in losses because of failed mortgages. WaMu has seen its stock price plummet by 87 per cent this year, and it suffered a ratings downgrade by Standard & Poor's earlier this week that put it in danger of collapse.

The Bush Administration's proposal for a US$700 billion bailout for distressed financial institutions was believed to have given fresh impetus to a buyout and new allure to Washington Mutual. Besides JPMorgan Chase, Wells Fargo, Citigroup, HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were all mentioned as possible suitors. WaMu was also believed to be talking to private equity firms.

The FDIC was seeking a buyer willing to bear a large burden of WaMu's losses, to lessen the impact on the insurance fund.

In a statement, JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of Washington Mutual's banks, or any assets or liabilities of the holding company, Washington Mutual Inc.

JPMorgan Chase's chief executive, Jamie Dimon said in a conference call, the "only negative" related to the deal was "how to handle some of these bad assets". He did not elaborate.

WaMu had "$310 billion in assets". Right. What kind of "assets"? The article says "billions of dollars in losses because of failed mortgages". Well there goes some of the assets. How much was "owned" and recorded as "assets" in derivatives? My guess somewhat more than the thus far "failed mortgages". If I were a betting man, I would accept even odds that WaMu has 6 times the value of its total mortgage portfolio in the form of derivatives. If 50% of the mortgages failed, that means that likely 16 times that value is held in derivatives.

Little wonder that JP Morgan Chase is quoted as saying -

In a statement, JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of Washington Mutual's banks, or any assets or liabilities of the holding company, Washington Mutual Inc.

JPMorgan Chase's chief executive, Jamie Dimon said in a conference call, the "only negative" related to the deal was "how to handle some of these bad assets". He did not elaborate.

Thursday, September 25, 2008

Good Grief!!!

Just how sensitive can you be -
SOUTH CHARLESTON - A West Virginia man who police said passed gas and fanned it toward a patrolman has been charged with battery on a police officer.

Jose A. Cruz, 34, of Clarksburg, was pulled over for driving without headlights, police said. According to the criminal complaint, Cruz smelled of alcohol, had slurred speech and failed three field sobriety tests before he was handcuffed and taken to a police station for a breathalyser test.

As Patrolman T.E. Parsons prepared the machine, Cruz scooted his chair toward Parsons, lifted his leg and "passed gas loudly," the complaint said.

Cruz, according to complaint, then fanned the gas toward the officer.

"The gas was very odorous and created contact of an insulting or provoking nature with Patrolman Parsons," the complaint alleged.

He was also charged with driving under the influence, driving without headlights and two counts of obstruction.

Cruz acknowledged passing gas, but said he didn't move his chair toward the officer nor aim gas at the patrolman. He said he had an upset stomach at the time, but police denied his request to go to the bathroom when he first arrived at the station.

Perhaps Patrolman T.E. Parsons might like to come share lunch with the factory workers here. A good feed of taro the night before does wonders for the digestive tract, but can make one somewhat unpopular. A few days might be enough to get him sufficiently desensitised...

It sounds more to me like Patrolman T.E. Parsons had gotten himself up on the wrong side of the bed, or perhaps his liver was acting up again... Whatever the cause, there would be a simple solution - shut the guy in an unventilated cell for a few hours then give him a cigarette and a lighter and shut the door... :)

It strikes me too, how the good old Anglo Saxon word "fart" has been euphemised to "passing gas" and similar. Come on, a fart is a fart, always has been, always will.

Monday, September 22, 2008

Get Rich Quick Scheme No.673...

I opined several times during the past few days that the only failing of any economic system is the people in it.

As an illustration (linked through header) -

Wellington City Council staff were not required to remove a large, unidentified lump of greasy substance from a south coast beach today -- locals did it for them.
The lump apparently washed up at Breaker Bay during the weekend and once word got out that it could be valuable ambergris -- an excretion from whales that is used to make perfume -- locals started pillaging it.


"We went out there this morning and there were people sort of lunging at it with spades and sharp implements trying to chop pieces off so they could make off with it and make their fortunes," he said.

"Whether people are now going to try and pass it off on TradeMe as highly valuable ambergris remains to be seen."

However, the lump was cylinder shaped as if it had been manufactured and the general consensus was that it was in fact lard or cooking fat.

'Nuff said...

Sunday, September 21, 2008

A weekend roundup...

The weekend started with Herald running a series of articles on the probablility of a "dirty election". Not that the election might be won fraudulently (in the direct sense) but the emergence of the "dirty trick brigades". Think, if you are American, of the SWIFT boat saga in the last elections or Richard Nixon and Watergate for extreme parallels.

Rochelle Rees' background with the Labour Party was revealed by bloggers yesterday after news stories she was behind a ploy to ensure Mr Key's website link was the first to appear when people searched for "clueless" on Google.

Yesterday, National leader John Key said it was another example of petty attacks on him by Labour.

Link to the Labour Party or not is not the issue here. The real issue is the denigration of the electoral process.

The second theme was run by the business pages of Sunday Star Times. The headline "Gluttons Table Set by Central Banks" was a good hook to a Gareth Morgan analysis of the weeks' crises in the international finance markets.
If you think that global financial "crises" seem to be happening with increasing frequency, congratulations - you're right.
It was back in 1996 that Fed chairman Alan Greenspan, who was really at the centre of the liquidity flood, declared the sharemarket was suffering from "irrational exuberance".

The market ignored his warning and it wasn't till two years later, in 1998, that it suffered its first setback. When hedge fund manager Long Term Capital made some wrong bets and was staring down the barrel at bankruptcy, the US central bank decided this institution was too big to fail and organised a consortium of investment banks to absorb its assets.

The Long Term Capital episode was the first big indication that the financial system was getting sick. If a single institution that was only four years old was too big to fail without bringing the US financial system down, then something was wrong with the system. But it would get worse.

Nice to have the 20/20 now, but let's follow a bit further...
Oh oh! Here's the problem. Central banks, and the Fed in particular, have become so addicted to the need for economic growth each year that they have sacrificed a tenet of sound central banking. It seems they no longer care whether lending by banking is within prudential bounds.

Indeed, it is their effective prudential supervision that they have sacrificed at the altar of this newfound, but ultimately false, belief - that you can have continual economic growth and low inflation. This shows a surreal confidence in the private sector's ability to constantly deliver sufficient productivity gains so that inflation isn't an issue, plus deliver more income to everyone in the economy year after year.

Not covered here, but a strong echo of the 1929 crash - which was fuelled in part by the fervor for stock - any stock - as long as it earned more than the money borrowed to buy it.
Also in the same section this morning was this news item.

Now I spoke of "derivative trading" in my last bit on the subject.
In the past two weeks billions of dollars have vanished as the shares in Australia's Macquarie Group have fallen 45 percent, America's Morgan Stanley 47%, Goldman Sachs, 35 percent.

Their plummeting stocks appear to be following other financial giants into the abyss, as Bear Stearns, Lehman Brothers, Merrill Lynch and HBOS suffered such meltdowns they were forced to sell to rivals.

Bear, which hit trouble in March, was acquired by JP Morgan Chase in May. Lehman filed for bankruptcy protection on Monday and its core businesses were acquired by British bank Barclays the following day. Merrill Lynch is now owned by Bank of America after watching its shares dive 38% in less than a week. HBOS went to fellow British bank Lloyds TSB on Thursday after its shares fell 40% in a matter of days.

The screaming headlines say these institutions were victims of a financial meltdown as their dangerous punts on speculative debts turned septic.

There's another story and it's not pretty either.

Sydney-based Macquarie Group believes it is the victim of a concerted campaign to manipulate its share price and Australia's market regulator has started an inquiry into allegations that short-sellers who profit from falling shares are spreading false rumours.

Now hang on a sec!! What's this? Spreading false rumours to create loss in value on specific stocks?
An inquiry immediately announced by the Australian Securities & Investments Commission was echoed by New York attorney-general Mario Cuomo, who announced on Thursday a probe into possible illegal short selling in financial stocks.

"This investigation will not only encompass short-selling of Lehman Brothers and AIG but also short-selling in other companies that may be occurring, like Morgan Stanley and Goldman Sachs," he said.

In Australia, short-sellers are required to report their positions to the stock exchange daily. "Clearly some haven't been doing that," said one market source.

OK, so what is "short selling"?

TO "short sell" you first borrow someone else's stock. You sell it on the open market. You then wait for the value of that stock to fall. Then you buy back the same stock - at hopefully a considerable gain. The apparent risk is that the stock does not fall - which is where the dirty tricks brigade come in to play.

But, it gets worse -
In practice, in Australia only "naked" short sales are being reported to the exchange - these are deals where the short seller has not yet borrowed stock. A legal ambiguity means "covered" shorting, where the seller has borrowed shares, is not reported to the ASX. As a result, no one knows how big those positions are.

Say WHAT? Selling stock you don't own, or haven't even borrowed yet?
Executives at Bear Stearns believe they were the victims of just such a calculated attack by short sellers. In a detailed exploration of the fall of Bear published last month, Vanity Fair journalist Bryan Burrough uncovered signs of deliberate efforts to undermine confidence in the firm.

He quotes a senior executive at a rival firm: "If I had to pick the biggest financial crime ever perpetuated, I would say, Bear Stearns."

Proving someone was behind the Bear collapse, or any other share price death spiral, is tough. The firms that are targeted are vulnerable precisely because they are highly leveraged and it may be easy for a short seller to point to evidence supporting their negative view of a stock.

You betcha it would be. Super tough.

The article concludes -

UNITED STATES: September 18 - New York attorney-general Mario Cuomo announces probe into alleged illegal short selling of shares in giant investment banks Lehman Brothers, Goldman Sachs, Morgan Stanley and insurer AIG. Short selling is a share trading strategy where a trader borrows shares and sells them on market in the hope they can be bought back more cheaply later. September 17 - Securities & Exchange Commission bans "naked" short selling, in which traders sell stock without first arranging to borrow it.

UNITED KINGDOM: September 18 - The Financial Services Authority bans all short selling in financial companies until January 16. It said anyone creating a net short position in a financial sector company is "engaging in behaviour that is market abuse [misleading behaviour]."

AUSTRALIA: September 17 - Australian Securities & Investments Commission announces extension of inquiry into market manipulation and false rumours, citing specific alleged false rumours against Macquarie Group.

Anyone hearing stable doors being slammed on empty stalls?

And Roundup? Very popular here in the agricultural community for some years. There was a bit I caught during the the week on the use of glyphosphate on roses imported from India to stop their propagation in this country, and just how easy it was to do just that.

Thursday, September 18, 2008

Inflating thoughts on economy...

I posted this on Dave Justus' thoughts on McCain and the economy -
… and as yet not one commentator (that I have heard or read) has pointed out the long term effect of these multi-billion bail-outs.

Not that anyone wants to know, but until those funds are retrieved the rate of inflation is going to increase. How do I define inflation? It is the decline in the buying power of the dollar; my dollar, US dollar, Aus dollar, British pound whatever.

How can the handouts be retrieved? Well economically it is quite simple, but politically it is very difficult.

You can regain the hand-outs from the direct beneficiaries in exactly the same way as any other loan. The difficulty is that this will impact directly the amount of money available for lending - ostensibly to businesses to make new business but just as likely to the worker down the road so that he can buy that $5000 flat screen tv… The effect is a slow burn on the fuse that the handouts tried to extinguish.

You can regain repayment of the handouts (let’s be honest, that is what they are) by balancing the government’s fiscal budget. To achieve that requires two very bitter political pills - either a cut in government expenditure, or an increase in taxes.

Now, where do Mr McCain and Mr Obama stand on those two matters? I doubt that either will ever say the truth - it would be political suicide.

I have repeated it here because there are thoughts in that which do not apply solely to the McCain (or Obama for that matter) political approach.

Dave and I had a good discussion on the line of thought here with Dave concluding that I was "talking of micro-economic effects".

I did, and still, disagree with him on that point.

In any capitalist (no, make that ANY) economy, the fundamental drivers are the people; he tangata, he tangata, he tangata! Without people to buy goods, what would the economy comprise? Robot driven factories producing very cheap widgets with no one to buy them?

The point is, anything that impacts upon the disposable income of the ordinary Joe has an immediate effect on the economy. That, for one reason, should give great favour to tax cuts from the political wing. There are other counter-vailing impacts from that direction which are not politically acceptable - and so it goes.

What makes me so hot about the likes of these political bailouts is not the use of tax-payers money, or the cause of the bailout.

Effectively, there has been some $180 billion (globally, so I am not nit-picking America here) injected into the money markets. We could rattle off all of the immediate impacts that justify the move. We could prattle all of the political rationale from here to the bank and back.

I have already lived through a period where the international monetary system got itself out of whack. It led to the agreement to drop the gold standard. Most importantly it created an international climate of inflation that ran for some eight or ten years from about 1972. In NZ, we had inflation then "stagflation" (which had nothing to do with the genesis of the deer farming industry) of up to 18% p.a., averaging about 10.5% over the period as I recall the numbers.

What did that mean to me?

Well, my income increase by about 300%. Prices for everything increased by 300%. I was no worse off, right?


The $1,000 I had in savings is now worth something like $300 in "old money".

That is the effect of these "rescue packages" that the politicans are not going to tell you.

Someone is going to pay.

That someone is you and me.

An educated NZ view...

Liam Dann is Business Editor to Granny Herald.

As an indication of the kind of report that he produces, take a look at today's editorial -

He starts -
It is an age old question. As budding economists we all ask it of our parents some time around the age of 7 or 8. Why don't they just print some more money?

We are quickly told why that doesn't work. Money is worthless unless backed by something of real value.

Unfortunately this childhood lesson is one that Wall Street seems to forget every few years.

He then takes on the "greed" aspect, with the idea that speculation in "bubbles" can earn considerable profit but at the same time the dangers imposed by the bubble can be isolated and controlled.

The difference this time around is, as he expresses it -
When the product which is the focus of the speculative bubble is cash itself - as it is in this case - then the problem is far more serious.

Ironically it is the fallout from the collapse of the tech sector at the start of the decade that contained the seeds of the current meltdown.

As a response to the dot.com bust - and the additional panic caused by the World Trade Centre attacks of 2001 - the US and other central banks around the world slashed interest rates.

The aim was to give the wobbly economy a boost.

But as time wore on the cost of borrowing cash remained low. A global property boom created demand which was happily met by all manner of lenders.

As one astute commentator put it - they started lending to people like the characters from the TV show My Name is Earl

So he follows that trail to its logical end -
As debt was increasingly transferred and sold around financial institutions it became a commodity.

Then some smart cookie investment bankers took it a step further.

They packaged up a parcels of debt that were supposed to have a fixed rate of return and traded them as products in their own right.

Because these were new, they were unregulated. And despite the risks everyone and their grandmother's dog got in on them - including banks like ANZ in New Zealand who sold them to unsuspecting mum and dad investors as sensible investment products.

And it is at that point that, regrettably, he stops and follows the banking and business line -
Banks began facing up to that reality by writing down the value of the debt products they owned. In other words they admitted these products weren't worth what they thought.

Billions disappeared from their balance sheets. Every time one bank wrote down the value it affected the value for other banks.

Suddenly the investment banks that were in trouble because of the amount of worthless debt product they owned started running out of cash. They had been spending more than they had - because they thought they had a lot more than it turned out they really did.

Banks like Bear Stearns and Lehman Bros needed to borrow more just to survive.

But as the crisis grew those who still had cash to lend became risk averse. The cost of borrowing sky rocketed.

And so on...

The final accounting in this has yet to come.

The Fed has "rescued" AIG in much the same way as the NZ Government bailed out BNZ some years back. The interesting connections between the two are very direct -

First, both were "too big to be allowed to fail".

Second, both succumbed to the same disease; chasing high risk products for the purpose of gaining increased profit. AIG through providing an insurance instrument against the future failure of high risk debt and BNZ through enthusiastically lending on high geared property ventures that in the the short term at least failed to show the required security backing.

But, as I say, the final accounting has yet to come.

Let's just go back a moment or three to the "mum and dad investors"; those simple people who want to protect their life savings - small as that might be - while at the same time earning a reasonable return from them. A reasonable return? Recognition of the use of that money by another "person", to recognise the potential risk, and enough to cover the ravages of current and future inflation.

Now there is an "inescapable fact" that drops out here - we are not talking about people who are financial wizards, nor would they understand the true nature of a "derivative product". They would not appreciate the need to understand the backing investment, the nature and size of the risk, and assessing the adequacy of the return in the light of those facts would be an impossibility. Well, let's face it; that is why there is a market for "investment analysts" and "investment advisers" and "investment brokers".

When the last trump sounds, they are the people to whom the bankers, and all, will have to answer.
In a healthy system confidence and reasonably priced credit is vital to keep business humming.

Business needs credit to grow, to develop new and exciting products which in turn boost economic output and create jobs and wealth for ordinary people.

Well, there is one section of the community that has benefitted from that wealth. It is not the mum and dad investors, the ordinary people. It is the community that has earned multi-million dollar bonuses and stock options; the hangers-on who pimp worthless product to an unsuspecting and ignorant market.

In other words, we are seeing what happens when the economy is run by snake-oil medicine men and itinerant side-show freaks.

Wednesday, September 17, 2008

It just gets sadder and sadder...

This actually appeared as a small para side-page in Granny Herald on Saturday. This is the first mention I have found on the net...
U.S. to Sell Bunker-Busting Bombs to Israel

by Nissan Ratzlav-Katz

(IsraelNN.com) The U.S. government has agreed to sell 1,000 satellite-guided "mini-bunker-buster" bombs to Israel. Meanwhile, a U.S. Defense Department official on Friday hinted at informal nuclear defense arrangements with Israel.

Boeing's Guided Bomb Unit (GBU)-39 bomb, weighing in at just 113 kilograms (250 pounds), was developed for penetrating fortified targets located underground. The U.S. decision to sell the munitions to Israel was somewhat of a retreat from a refusal last week to supply the IDF with the more powerful two-ton GBU-29 bunker-busters, despite earlier commitments to do so. In 2005, the Bush administration authorized the sale of 100 GBU-29s to Israel in a proposed deal worth around $30 million. The currently approved deal will be worth a total of $77 million.

Hey, now let's just measure these two deals up.

Deal 1 - 100 2000lb bombs for $30M = $150 per lb
Deal 2 - 1000 250lb bombs for $77M = $308 per lb

Hey, Israel!!!! You is getting done! Like a dinner!!

And let us not forget the reason for the sale either...

"On Wall Street..."

(Sung to the tune of "On Broadway"...
From Dave the Justus

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.
Adam Smith

Extreme valuation of ’service’ and a denigration of the private sector is something that bothers me about both McCain and Obama.
The is, of course, nothing wrong with charitable acts and serving one’s fellow man. It is extremely laudatory and certainly we should encourage it. However, it is capitalism and the free market, not public charity that it the engine for generating growth, raising living standards and yes, increasing equality. Both McCain and Obama lack experience in the private sector, which isn’t necessarily disqualifing, but when it contributes to the distain of the private sector that I have seen from both camps this campaign season it is troubling.
I wish that both McCain and Obama would take a little time to read Adam Smith and Milton Friedman.
The problem of social organization is how to set up an arrangement under which greed will do the least harm, capitalism is that kind of a system.
Milton Friedman

Dave the Justus posted this up Monday. His extremely efficient spam filter has been “fixed” yet again or so he informs another making comment on a different post.

But, given the impossibilities, I shall post here (what I can remember) of my comment made Tuesday perhaps brought up to date in the light of the events of Tuesday on Wall St.

I have little time for Friedman. His purity of Capitalism has no consideration of the fact that to operate the system must have human participation, and that that brings with it the weaknesses that saw the failure of so many economic, and political, systems in the past (going right back here to the Greeks, the Romans and beyond.).

So, Tuesday’s comment ran along these lines –
Let us just suppose for the moment that Friedman is right.

If the current “meltdown” of the US economy is the result of greed, what was capitalism doing to countervail?

If the current “meltdown” of the US economy is the failure of capitalism, what might replace it?

There was a bit more, but my recall does not do the original words justus.

What is becoming apparent, in the commentaries coming out of NY and Washington over the news down this way at least (and it seems the FT and others read it the same way) is that “greed is good” as the foundation for the global economy is about as sustainable as the war in Iraq. It might sputter on for another twenty years without really solving the problem. Then like the old worn-out Vespa, it will have to be pushed to the top of the hill so that it can be given a suitable farewell as it is pushed off the cliff.

Now, before you get in to me for being “anti-capitalist” consider this. I am not proposing any solutions. As I intimated when I responded to Al’s “greed is good” post some months back there is some truth to that sentiment. It does not, any more than Rand or like true communism (not the American hate word but the actual system), make a sound basis for an honest and fruitful economic system. So I can not promote either of those as a replacement. As I have said, the fundamental capitalist system is sound. It is in the nature of humans to exploit systemic weaknesses and opportunities to maximise their individual wealth – and that can only happen at the expense of others.

That of itself creates a conflict between those who promote American Capitalism as the global economic wonderland, and those who do not believe it to be the “God-given freedom”. For some, that is their justification for protesting (in some cases violently) at meetings of G8, WTO, and other fora.

But can I leave you with this thought -

Is there any difference between the failure of Enron, Globaldotcom, and the rest when compared with the strife of Freddie Mac, Fannie Mae, Lehman, Merrill Lynch, and all...

Tuesday, September 16, 2008

It is official - I support McCain...

My decision is not based on his choice of VP.

My decision is not based on his war record.

There is one reason only for supporting McCain.

I want to watch him and the Republicans undertake Heracles' Fifth Labour.

America, say farewell to your "tax cuts".

America, welcome to the now overdue accounting.

And for those who don't know, the Fifth Labour was to clean the Augean Stables in one day. Look to Wikipedia for the full story. Very briefly the job comprised cleaning all of the shit from the stables, a task Heracles achieved by diverting two rivers.

How many of you listened to Alan Greenspan's commentary on the collapse of Lehman? How many times has he said much the same thing since he retired? How many listened?

Bloomberg again.

Wednesday, September 10, 2008

The Rise and Fall of the Winston Empire...

In some respects the decline and fall of Winnie the Pooh is quite sad. There is no question that, whether you like his politic or not, he is (and has always been) one of the more colourful characters on the local political scene since (perhaps) John A Lee. Not that Winnie would be any kind of a match for JAL. The latter would have been just too straight and strong with his left.

I have made no secret of my opinion of Winnie, but in these last few days of his political career (I don’t imagine that there is any kind of Lazarus Effect that will resurrect him now) I do want to place on record my admiration of the durability of the man.

Kicked from his right wing nest (after being touted for “higher things” by the Nats) for being just too much of a maverick, he established his own political force. The foundations for the NZF were personality and popularism, of both of which Winnie is the master.

His first involvement in coalition government was as prop to the Nat government led by Jim Bolger and then Jenny Shipley which folded in fairly spectacular style after Winnie’s demands became too much to be borne.

It is (as many commentators have already said) a matter of some note that he and Auntie Helen have been able to share the same (political) bed for so long. Even more so when you consider that Winnie is probably more right wing than most Nats and Helen stands further to the left than most Labs.

The question as of tonight and tomorrow will be –

Will Winnie falling on his sword (however that might occur) be sufficient to break the links between NZF and the Labs.

If that link does break, it will take the Nats no more than 5 minutes to get a Notice of Motion of No Confidence into the House with the wolves baying “Gone by lunchtime” echoing in the Ayes lobby. Auntie Helen is a sufficiently canny politician to prevent that from ever happening and so, I suspect, the PMLimo will be hot-footing to the GG’s place at a speed that will put the old records (set in that helter-skelter dash from Timaru to Chch for a rugby test match) a long way into the shadows.

That is where the sadness begins. As I said earlier, I can not imagine the possibility of Winnie rising from the grave yet again. He has made too many powerful enemies this time around.

After this debacle there will be few if any major funders who will be prepared to support him. He might get enough from his flax-root supporters and from taxpayer’s funding to run a campaign, but there is very unlikely to be the fireworks of the past. Mention of the taxpayer’s funding leads to another very interesting question. Auntie Helen has been promoting the principle of government funding for election campaigns, with no legal permit for public contribution. I wonder how that albatross hangs now given that Winnie is likely to be rewarded for bringing down her government with a nice bonus from the public purse - OUR money, Auntie.

The Nats have already said very clearly that Winnie will “No way, no when, no how, be part of the next government.” I suspect that the same, if not slightly more carefully worded, sentiment is likely to come from the Labs within hours, if not sooner, of the Privileges Committee decision.

It might be a hard lesson for him to learn, but there is need for a little bit more in politik real than mere personality and popularity. What you can guarantee is that every cent of the taxpayers contribution to his election (or is it war-) chest will be spent on ensuring everyone knows how Winnie was lynched by Parliament, lynched by the media, lynched by unnamed political opponents, hung out to dry by a biased and predetermined enquiry by the Privileges Committee, the conspiracies of big business against the “ordinary guy”, the conspiracies of big business with the major parties, the race card, the immigration card… Every little button that might just attract another vote will be pushed. That is the kind of show that Winnie is.

There is a very good story in this morning’s Herald giving the history of the current to-do.

I suspect that the best tv tonight is going to be Channel95 (I think that is the right one for Parliament) if they are going to broadcast the Privileges Committee live.

Monday, September 08, 2008

...Is this the end my friend?...

I tried to google the lyrics I was thinking of - "...so let's keep dancing... let's have a ball..." and the only song that it turned up was a little ditty about the suicide of a friend. Most depressing but, for that reason, perhaps also a propos.

Readers will know that Freddie Mac and Fannie Mae is a topic that I have been banging on about for some while now; most recently here.

From Bloomberg 11 July...
07.11.08, 11:55 AM ET

NEW YORK (Thomson Financial) - U.S. stocks fell further Friday after U.S. Treasury Secretary Henry Paulson indicated that a bailout of troubled mortgage giants Fannie Mae and Freddie Mac was not on the horizon.

A somewhat short-sighted Henry Paulson.

Oh, what a different tune today! Bloomberg again...
Sept. 7 (Bloomberg) -- The U.S. government seized control of Fannie Mae and Freddie Mac after the biggest surge in mortgage defaults in at least three decades threatened to topple the companies making up almost half the U.S. home-loan market.

``Our economy and our markets will not recover until the bulk of this housing correction is behind us,'' Treasury Secretary Henry Paulson, who engineered the takeover along with Federal Housing Finance Agency Director James Lockhart, said in Washington today. ``Fannie Mae and Freddie Mac are critical to turning the corner.''

Now, in times gone past, NZers used to have access to government mortgages. They were "means tested" for interest rates - the lower your income the better the rate; they were in general fixed interest rates for the full 20 year term. The mortgages were available only for a first house. Most importantly, the proceeds of the loan were strictly controlled - by the lender. But then, about 20 years back, the government of the day decided that this approach was far too socialist. The portfolio was sold off to "private interests" who in their turn made quite a good profit from the deal. Now, I could if I had the inclination, mortgage both my properties to 100% (more if I had a friendly valuer) and use the proceeds for anything from more properties to a permanent global tour. Naturally, failure to make repayments and interest obligations would result in fairly rapid foreclosure, but if the funds were safely tucked away and I was in Brazil why should I worry.

What was wrong with Freddie Mac and Fannie Mae stemmed from the "government guarantee" that accompanied the privatisation back in the late '60's early '70s. There was no risk to either borrowers or investors; the government would stump up if things went pear-shaped. Because there was no commercial risk the twins effectively became lenders of last resort for all and any hare-brained idea that a person wanted to hang from a loan on their house.

And so it is.

For a nation that promotes "capitalism" as the ultimate goal of humanity, there are a lot of things wrong.

Found those lyrics, too.

Peggy Lee -
Is that all there is, is that all there is
If that's all there is my friends, then let's keep dancing
Let's break out the booze and have a ball
If that's all there is

Sunday, September 07, 2008

On Father's Day...

Today is Father's Day here in NZ.

I had a very good Father's Day.

My wife gave me a very nice card with the inscription -

Families are like fudge...

mostly sweet with a few nuts.

Number One Son and his family came over for an afternoon tea.

Number Two Grand-daughter was in a very grizzly mood having had a disrupted morning schedule. Took a few funny faces to get her attention and things quietened down considerably.

Number One Grand-daughter got the double wink (both eyes, one at a time). Five minutes later I caught her "practising" from the safety of Dad's lap. When they left I got a full blooded double wink from her :) :) Gorgeous!!

So, I am better off by two cards, a box of scorched almonds (which will probably live in the cupboard for a few months because they do the waistline no good at all) and a phone call from Number One Daughter.

All in all, a good day.

Wednesday, September 03, 2008

On having been heard in high places...

You know something, it does give the old cockles a good and warm feeling when the meek and submissive are noticed by the powers that be.

I came across this instance as a result of a kindly letter to the editor in the Herald this morning from a gent in Ohio. He was singing the praises of NZ, partially as a previous visitor to these shores but primarily to recognise the editorial in NYT on 8/31.

Now to be fair, the NYT hands its kudos to a group of 20 nations led by “New Zealand, Ireland, Austria, Norway, the Netherlands and Switzerland”.

If you are feeling anxious — and you should be — about the world’s appetite for nuclear weapons, there is a bit of good news. More countries than we ever expected are refusing to be pressured by the United States and India to approve an ill-conceived nuclear deal.

For 30 years, ever since India used its civilian nuclear program to produce a bomb, the world has been banned from selling nuclear technology to India. Three years ago, President Bush agreed, with far too few conditions, to break that ban and sell India reactors and fuel.

The White House argued that India is an important democracy and shrugged off critics who said that breaking the rules would make it even harder to pressure Iran and others to abandon their nuclear ambitions.

Seems reasonable, if you don’t think about it too hard. Until –
Mr. Bush and his team were so eager for a foreign policy success that they gave away the store. They extracted no promise from India to stop producing bomb-making material. No promise not to expand its arsenal. And no promise not to resume nuclear testing.

Now I have no doubt that the group of 20 nations would say exactly the same to any other nation which had the same processes for the control of nuclear energy trade in place. Regretfully, the primary movers – count in China, Russia, Israel and France – do not have the same regard for the feelings of others.

So, the NYT should give a bit more credit to those who put this process in place. At the very least it gives an opportunity for objective scrutiny and useful contribution (as evinced by Congress adopting many of the recommendations made by the group).

And, as a useful side benefit, it provides further evidence of the way in which the present Administration has worked and the depths to which it has been prepared to plumb for support.