Tuesday, July 31, 2012

Obama Administration Tells Defense Contractors Not to Comply with WARN Act in Order to Avoid Layoff Notices Before Election

More government by waiver.  The WARN Act requires companies with 100 or more employees to provide at least 60 days warning before a mass layoff to give the employees fair warning, otherwise they would be in violation of the law and also open to lawsuits from any fired employees themselves.  As defense cuts are currently scheduled to occur on January 2, the WARN act deadline is now right before the election, and Lockheed Martin has said they would have to notify the majority of its 123,000 employees that they are at risk of layoff.  This, of course, has the Obama campaign in a tizzy and they have made the Department of Labor effectively issue a waiver to the WARN act in this instance.  All this despite clearly stating previously that "the Department of Labor, since it has no administrative or enforcement responsibility under WARN, cannot provide specific advice or guidance with respect to individual situations."  Also, when was the last time you saw a government agency tell you which loophole to use to avoid a regulation?:

The WARN Act and regulations also recognize that there may be situations in which an employer cannot give 60 days advance notice. The Act lists three situations in which notice may be given fewer than 60 days before a plant closing or mass layoff will occur. These exceptions are referred to as the faltering company, unforeseeable business circumstances, and natural disaster exceptions. 29 U.S.C. 2102(b). Of these three exceptions, the unforeseeable business circumstances exception is the one that would apply to plant closings or mass layoffs occurring before or in the wake of the potential sequestration on January 2,. The unforeseeable business circumstances exception occurs when "the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required." 29 U.S.C. 2102(b)(2).
The WARN regulations expand on the definition of unforeseeable business circumstances. Section 639.9(b)(1) states that an important indicator of whether a circumstance was reasonably foreseeable is if it was "caused by some sudden, dramatic, and unexpected action or condition outside the employer's control." 20 C.F.R. 639.9(b)(1).

The West Wing on Why We Shouldn't Single Out the Wealthy for Tax Increases

Josh Barro had a great quote from West Wing in his latest piece on Obama's recent anti-business rant:

The president's speech calls to mind a second-season West Wing episode, in which speechwriter Sam Seaborn (Rob Lowe) explains to the staff of some liberal house members why he won't insert a line in President Bartlet's upcoming speech. They want the president to attack Republican tax cut proposals as financing "private jets and swimming pools" for the wealthy. As Seaborn argues:

Henry, last fall, every time your boss got on the stump and said, "It's time for the rich to pay their fair share," I hid under a couch and changed my name. I left Gage Whitney making $400,000 a year, which means I paid twenty-seven times the national average in income tax. I paid my fair share, and the fair share of twenty-six other people. And I'm happy to 'cause that's the only way it's gonna work, and it's in my best interest that everybody be able to go to schools and drive on roads, but I don't get twenty-seven votes on Election Day. The fire department doesn't come to my house twenty-seven times faster and the water doesn't come out of my faucet twenty-seven times hotter. The top one percent of wage earners in this country pay for twenty-two percent of this country. Let's not call them names while they're doing it, is all I'm saying.

Monday, July 30, 2012

Romney vs. Obama at the Western Wall

I continue to be struck by Romney's apparent sincerity while visiting Jerusalem, he has done quite a few things that he really didn't have to do.  First, according to Elliot Abrams he added a very strong line to his speech:

Romney added something to his text in Jerusalem: “I love this country, I love America, I love the friendship we have.” That line does not appear in any prepared text the news media have carried, suggesting that Romney added it late in the drafting process or even while speaking. Like his other lines, it does not directly challenge U.S. policy or criticize the president, but it sets the two men apart; I have been unable to find any similar line from the president.
 Second, he quoted Menachem Begin multiple times during the speech.  Begin was the first Likud Prime Minister of Israel, had been head of the Irgun and had blown up Iraq's nuclear reactor in a decidedly unilateral act which received worldwide condemnation at the time.  Importantly, Begin is the only past Israeli Prime Minister that Romney mentioned.  No Ben Gurion, no Golda Meir and no Shimon Peres.  That is going above and beyond in terms of showing that he is a true friend to the Israeli people and the current government of Israel. Anyway here are the quite telling quotes:

It was Menachem Begin who said this about the Ninth of the month of Av:  “We remember that day,” he said, “and now have the responsibility to make sure that never again will our independence be destroyed and never again will the Jew become homeless or defenseless.” “This,” Prime Minister Begin added, “is the crux of the problems facing us in the future.”


My message to the people of Israel and the leaders of Iran is one and the same: I will not look away; and neither will my country. As Prime Minister Begin put it, in vivid and haunting words, “if an enemy of [the Jewish] people says he seeks to destroy us, believe him.”
 And now let's take a look at images of Romney at the Western Wall and one of Obama at almost exactly the same point in the 2008 race.  First, here is Romney who recited Psalm 121 which begins "I lift up my eyes to the mountains—where does my help come from?  My help comes from G-d, the Maker of heaven and earth.":

It looks like a very solemn and touching moment.  Now take a look at Obama, who seems to have the look (thanks to some tension in the lower part of his face) of "okay, now how long should I have my hand here?  The crap I have to go through":

Romney Infuriates Palestinians for Pointing Out What is Behind Israel Having a Higher GDP per Capita than Palestinian areas

Anybody who pisses off the Palestinians can certainly get my vote.  Anyway, here is what Romney said:

"As you come here and you see the GDP per capita, for instance, in Israel which is about $21,000 dollars, and compare that with the GDP per capita just across the areas managed by the Palestinian Authority, which is more like $10,000 per capita, you notice such a dramatically stark difference in economic vitality," the Republican presidential candidate told about 40 wealthy donors who ate breakfast at the luxurious King David Hotel.
Romney said some economic histories have theorized that "culture makes all the difference."
"And as I come here and I look out over this city and consider the accomplishments of the people of this nation, I recognize the power of at least culture and a few other things," Romney said, citing an innovative business climate, the Jewish history of thriving in difficult circumstances and the "hand of providence."

And here is the angry and overly defensive Palestinian response:

"It is a racist statement and this man doesn't realize that the Palestinian economy cannot reach its potential because there is an Israeli occupation," said Saeb Erekat, a senior aide to Palestinian President Mahmoud Abbas.
"It seems to me this man lacks information, knowledge, vision and understanding of this region and its people."

It seems to me, from a logical perspective, Romney's comments would only be racist if, in the absence of an Israeli occupation, the Palestinians would have a GDP per capita around where Israel's is.  The regional data doesn't seem to corroborate that sort of thinking.  According to the latest data from the IMF, Israel has a GDP per Capita of $30,975 (Romney seemed to be understating it a little), the neighbor with the closest level of GDP per capita is Lebanon with $15,523, which benefits from large and relatively wealthy christian minority.  The numbers get much worse from here.  Egypt has a GDP per capita of $6,540, Jordan's is at $5,900 and Syria's pre-civil war tally is at $5,041.  None of these are anywhere close to Israel's and none of these countries can realistically be viewed as being occupied by the Israelis.  Turkey, which is a member of NATO, only has a GDP per capita of $14,517.  Even Saudi Arabia, which is sitting on a humongous amount of US and UK engineer discovered oil can't match the Israeli number.  The only countries in the area that surpass Israel are the very small oil rich countries of Qatar and United Arab Emirates.  Unless they find a massive oil field in Ramallah or Jericho, there is probably no hope for the Palestinians approaching their wealth, Israeli occupation or not.

Now I'm not saying there is no negative impact from checkpoints etc., obviously there are, but even without them, there would be a considerable gap in GDP per capita between the two entities, obviously driven by culture (it sure isn't driven by natural resources!).  Romney certainly isn't lacking in any understanding in that regard.

Sunday, July 29, 2012

Mitt Romney's Great Speech from Jerusalem

Mitt Romney just gave  a great speech from Jerusalem.  I liked the fact that he can answer the "what's the capital of Israel" question unequivocally and even quoted Menachem Begin (who Obama would probably view as another problematic and uppity Jew who doesn't know his place).  Anyway, watch the whole video, it really would be great for us to have a pro-America and pro-Israel President again.  It feels like it's been forever:

Friday, July 27, 2012

Palestinians: It's Racist to Have a Moment of Silence to Commemorate Murdered Israeli Athletes But Its Not Racist to Murder Them

Jibril Rajoub, President of the Palestinian Olympic Committee, sent a letter to the President of the International Olympic Committee, Jacques Rogge thanking him for blocking any moment of silence to commemorate the murdered Israeli athletes at the 1972 Munich Olympics (murdered by Palestinians of course).  Here is the passage reporting on the letter from the official Palestinian Authority Daily:

"'Sports are a bridge to love, interconnection, and spreading peace among nations; it must not be a cause of division and spreading of racism between them.' With these words the President of the Palestinian Olympic Committee, Jibril Rajoub, began a special letter which he sent to president of the International Olympic Committee, Jacques Rogge. He expressed appreciation for [Rogge's] position, who opposed the Israeli position, which demanded a moment's silence at the opening ceremony of the Olympic Games in London. He said that his position not to politicize sports, and his determination to implement the International Olympic Charter represents a victory for freedom in sports. It should be noted that Rogge once again expressed the position of the executive office of the International Olympic Committee, which opposes the idea of holding a moment's silence during the opening ceremony of the 2012 London Olympics, to mark the anniversary of the Munich operation, which took place during the Munich Olympics in 1972."

You just can't make this crap up.   I also love how they refer to it as the "Munich Operation".  See it's okay, it was just an operation!  Not the murder of innocent athletes who only wanted to life weights, wrestle and fence at the Games.   Anyway, just another thing to put in the "Palestinians shouldn't have a state" bin.

"You will always spend your money better than the government"

A great speech by Dan Bongino, candidate for Senate in Maryland (h/t Legal Insurrection):

Wednesday, July 25, 2012

Contrasting a Great Scott Brown Ad with a Lame Obama Ad

Check out this great Scott Brown ad which shows that Obama and Elizabeth Warren are actually to the left of most of the Democratic Presidents of the last half century:

Now take a look at this Obama ad in which he says "of course Americans build their own businesses".  Alana Goodman at Commentary thinks this is his "I am not a witch" moment.  Personally, I think it's more of a "I love Jews, some of my best friends are Jews" kind of moments.

He and his minions on the left continue to claim that his quote  "If you've got a business -- you didn't build that" was taken out of context, even going so far as to debate the meaning of the word "that" (like Clinton debated the meaning of "is").  But the context really doesn't help him.  Take a look at the passage right before the one with the soundbyte:

If you've been successful, you didn't get there on your own.  You didn't get there on your own.  I'm always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there. 

He seems to be implying that the big difference between the successful and everybody else is not intelligence or hardwork but luck, and if it's luck, they don't quite deserve the money they have (hence his incessant harping on the top 1% paying their fair share despite their current share of taxes being 40%!).  The context really doesn't help now does it.  The Romney camp should just keep playing that entire segment of the speech over and over again and see how Obama gets away from that one given that the full context will be in full view.

Israeli Hackers Have a Sense of Humor In Latest Attack on Iran

A computer security expert at F-secure was emailed this from a scientist working at the Atomic Energy Organization of Iran (AEOI):

I am writing you to inform you that our nuclear program has once again been compromised and attacked by a new worm with exploits which have shut down our automation network at Natanz and another facility Fordo near Qom.

According to the email our cyber experts sent to our teams, they believe a hacker tool Metasploit was used. The hackers had access to our VPN. The automation network and Siemens hardware were attacked and shut down. I only know very little about these cyber issues as I am scientist not a computer expert.

There was also some music playing randomly on several of the workstations during the middle of the night with the volume maxed out. I believe it was playing 'Thunderstruck' by AC/DC.

Tuesday, July 24, 2012

Egyptian Actor Strikes TV Hostess When Told He is on Israeli TV

This is from an Egyptian version of candid camera where they fool an Egyptian actor into thinking he is on Israeli TV. He not only strikes a male producer but the female hostess of the show. I also thought that at one point he was going to pull out the gun he admittedly had in his pocket.

Monday, July 23, 2012

Is China the Next Japan?

Also Sprach Analyst has a nice analysis of China's demographic problems which can probably be summarized best by this comparison with Japan's profile back in 1990:

And here is a key quote from a paper from Nicholas Eberstadt that Also Sprach quotes from:

In this future China, there would be fewer people under the age of 50 than in China today – and many fewer Chinese in their 20s and early 30s. On the other hand, there would be many more elderly Chinese than today – vastly more, in fact, in their 60s, 70s and 80s. This dramatic shift in China’s population
China’s total working age population is set to fall between 2010 and 2030. Furthermore, as noted above, China’s manpower pool will be ageing over these years; in fact, by 2030, there would be more than four older (50–64 years) prospective workers for every three younger counterparts (15–29 years) – a complete inversion of the current ratio. With a smaller and much greyer Chinese workforce on the horizon, sustaining the growth rates of the recent past would be a truly counter-intuitive proposition.
Should be interesting to see how China manages this. Once again, people who think something will grow in a straight line forever will be shown to be rather wrong. 

Friday, July 20, 2012

Another Sign of American Decline: Adjusted for Inflation, the S&P 500 is unchanged for 14 Years

I have to say, I really love the FRED database, it really lets you play around with so many numbers in such an easy and quick way. The other day, I decided to take a look at what happens if you inflation adjust the S&P 500 index by the PCE deflator. First, here is the chart of the unadjusted S&P 500:

As you can see, we aren't that far from an all-time high in the index, just a little over 11% away.  Essentially about the rally we would see in a good year.  That really masks though the effect of time on the value of your dollar.  Here is what happens when you adjust it for inflation:

As you can see, we aren't anywhere near the highs when you adjust for inflation.  We are still about 30% below the 2000 peak and 20% below the 2007 peak and given the economy seems to be rolling over, that gap is unlikely to shrink much anytime soon.  We're currently at the same inflation adjusted level as we were in February of 1998, so if you invested money over 14 years ago, you will have faced quite a bit of volatility for no actual gain in your purchasing power.  If you view the stock market, especially long term, as a good proxy for the health of the economy, you can see that our economy is quite sick.

So what should we do about it?  The chart gives you a hint.  The huge jump in stock prices occurred at the same time as the internet revolution, which was the last time that the United States actually built something from nothing domestically.  We need to do that again and this time keep the jobs that came from that revolution in the United States.  I'm not saying we should punish companies from going overseas, I think we should eliminate many of the issues which are forcing them to go overseas, such as excessive regulations.  There is certainly a minimum that we shouldn't go below, but do we really need bureaucrats threatening to sue you if you don't employ enough people without high school diplomas?  Or regulators who say you can't build on a piece of land because some stupid salamader would be put out.

Something else that would probably help would be a return to a strong dollar policy.  When we devalue our currency, foreign investors have less incentive to invest their cash here.  If an investment is up 10% and we devalue by 10%, it's a wash for them.  And god forbid the investment goes down in value or they are punished double for their trouble.  I hope that when Romney is elected, he fires Ben Bernanke immediately and puts someone in charge who actually cares about the dollar.

Thursday, July 19, 2012

Great Peter Thiel (founder of Paypal) vs. Eric Schmidt (Chair of Google) Debate

You can read the whole transcript here but here are some key excerpts, all from Peter Thiel who I generally agree with:

PETER THIEL: You have Moore's Law on the one hand.  On the other hand, if I had to sort of simplify it, we've had incremental but relentless progress on the computer side.  And on the other hand, we've had basically no progress on energy.  And if you think about where oil prices were in 1973, it was $2 or so a barrel, it is now at north of $100 a barrel, and so you've had sort of a catastrophic failure of energy innovation.  And it's basically been offset by computer innovation.  I think that's sort of the simplified account of what's happened in the last 40 years.

ADAM LASHINSKY:  So, before I give Eric and opportunity to jump in I want to prompt you in one way, Peter, which is why do you think this is?

PETER THIEL:  The why questions always get immediately ideological.  I'm Libertarian, I think it's because the government has outlawed technology.  We're not allowed to develop new drugs with the FDA charging $1.3 billion per new drug.  You're not allowed to fly supersonic jets, because they're too noisy.  You're not allowed to build nuclear power plants, say nothing of fusion, or thorium, or any of these other new technologies that might really work.

So, I think we've basically outlawed everything having to do with the world of stuff, and the only thing you're allowed to do is in the world of bits.  And that's why we've had a lot of progress in computers and finance.  Those were the two areas where there was enormous innovation in the last 40 years.  It looks like finance is in the process of getting outlawed.  So, the only thing left at this point will be computers and if you're a computer that's good.  And that's the perspective Google takes, because it thinks of the world of the future ‑‑


ADAM LASHINSKY:  Let me ask you this.  Hold on, Peter, one second.

There's one thing, Eric, that you haven't answered.  At the high level Peter has made the assertion that making, for example, cars go faster, or being able to, I don't know, for rockets to go higher or faster, to be able to colonize Mars, as an example, are the sorts of things we're not doing and they're less important than having good algorithmic search.  Is that a fair characterization, Peter?

ERIC SCHMIDT:  If you look at the improvements in power to weight ratio with new materials in cars I think you'd be pretty impressed with that.  There's a whole renaissance of materials science going on, with new smart services, new much lighter, much stronger materials, all of this being driven by American universities.  There is a mini-boom I America in advanced manufacturing using all these new technologies.

PETER THIEL:  I often think it's worth looking at quantity not quality, and we're not going faster.  The Concorde was decommissioned in 2003, and if you include low-tech airport security mechanisms, we're back to about 1960 type travel speeds today in the U.S.  But, let's take another area that's probably much more basic, something like agriculture.  We had a green revolution in the '50s and '60s that basically doubled world food production in line with population growth.  It's decelerated dramatically over the last 40 years and that's reflected in this incredible rise in food prices that we've seen over the last decade.


PETER THIEL:  But, they're not ones that are able to basically ‑‑ you know, they're sort of the exception to the rule that we don't have enough innovation.  So, you have to avoid confusing the specific and the general.  Google is a great company.  It has 30,000 people, or 20,000, whatever the number is.  They have pretty safe jobs.  On the other hand, Google also has 30, 40, 50 billion in cash.  It has no idea how to invest that money in technology effectively.  So, it prefers getting zero percent interest from Mr. Bernanke, effectively the cash sort of gets burned away over time through inflation, because there are no ideas that Google has how to spend money.


PETER THIEL:  But I think that ‑‑ I disagree with the premise behind the question that there's some sort of tradeoff between finance and other areas of innovation.  I think it's easy to be anti-finance at this point in our society, and I thin the reality is we have an economy that got very lopsided towards finance, but it's fundamentally because people weren't able to do other things.

So, if you ask why did all the rocket scientists go to work on Wall Street in the '90s to create new financial products, and you say well they were paid too much in finance and we have to beat up on the finance industry, that seems like that's the wrong side to focus on.  I think the answer was, no, they couldn't get jobs as rocket scientists anymore because you weren't able to build rockets, or supersonic airplanes, or anything like that.  And so you have to ‑‑ it's like why did brilliant people in the Soviet Union become grand master chess players?  It's not that there's something deeply wrong with chess, it's they weren't allowed to do anything else.

"Did somebody else take out the loan on my father’s house to finance the equipment?"

A great and effective Romney ad (h/t Powerline):

Obama is a Villain from Atlas Shrugged

And I thought all the villains in Atlas Shrugged were just exaggerated caricatures.  Guess not.  First, here is James Taggart from Atlas Shrugged talking to his Randian sister:

"He didn't invent iron ore and blast furnaces, did he?"


"Rearden. He didn't invent smelting and chemistry and air compression. He couldn't have invented his Metal but for thousands and thousands of other people. His Metal! Why does he think it's his? Why does he think it's his invention? Everybody uses the work of everybody else. Nobody ever invents anything."

She said, puzzled, "But the iron ore and all those other things were there all the time. Why didn't anybody else make that Metal, but Mr. Rearden did?"

And here is our President:

If you've been successful, you didn't get there on your own.  You didn't get there on your own.  I'm always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something -- there are a whole bunch of hardworking people out there.  (Applause.)     

If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you've got a business -- you didn't build that.  Somebody else made that happen.

Wednesday, July 18, 2012

Gary Shilling: We are in or within 3 months of a recession

In the history of the retail sales figures, when they have gone down for 3 months in a row, as they just did, you are in or within 3 months of a recession 25 out of 27 times. Also note that nominal retail sales have fallen 1.4% since March, which is not very reassuring:

Great Essay on the Wrongness of Obama's Words About Business Owners

Obama seriously has no clue about what it means to have your own business.  Below is a key excerpt, read the whole thing here:

All I had to do was think of the driveway of our home, and my dad's car gone before dawn, that old white Chrysler with a push-button transmission. It always started, but there was a hole in the floor and his feet got wet in the rain. So he patched it with concrete mix and kept on driving it to the little supermarket he ran with my Uncle George.

He'd return home long after dark, physically and mentally exhausted, take a plate of food, talk with us for a few minutes, then flop in that big chair in front of the TV. Even before his cigarette was out, he'd begin to snore.

The next day he'd wake up and do it again. Day after day, decade after decade. Weekdays and weekends, no vacations, no time to see our games, no money for extras, not even forMcDonald's. My dad and Uncle George, and my mom and my late Aunt Mary, killing themselves in their small supermarket on the South Side of Chicago.

There was no federal bailout money for us. No Republican corporate welfare. No Democratic handouts. No bipartisan lobbyists working the angles. No Tony Rezkos. No offshore accounts. No Obama bucks.

Just two immigrant brothers and their families risking everything, balancing on the economic high wire, building a business in America. They sacrificed, paid their bills, counted pennies to pay rent and purchase health care and food and not much else. And for their troubles they were muscled by the politicos, by the city inspectors and the chiselers and the weasels, all those smiling extortionists who held the government hammer over all of our heads.


He [Obama] offers an American dream much different from my father's. Open your eyes and you can see it too. He stands there at the front of the mob, in his shirt sleeves, swinging that government hammer, exhorting the crowd to use its votes and take what it wants.

Once again, Arab/Muslim terrorists target that nexus of evil, the Israeli tourist on vacation

This time the targets were simply on tourist buses in Bulgaria, harming nobody and just looking for some time off.  I saw a report on Twitter that at least 7 are now dead:

At least three people were killed in an attack on three Israeli tour buses in at the Sarafovo International Airport in the Bulgarian vacation city of Bourgas. According to initial reports, up to three tour buses were attacked, possibly by a suicide bomber .

Israel Police and the Bulgarian Foreign Ministry confirmed at least 20 people were injured in the attack.

The plane from Tel Aviv to Bourgas landed at 4:50 p.m. local time, and its passengers boarded buses to take them to the Globus Hotel. The explosion occurred 40 minutes later, at 5:30 p.m.

A Jew Who Views Holocaust Survivors as Villains

It seems that the most disgraceful piece of anti-semitism (as John Podhoretz referred to it as) was published by a Jewish girl from Brooklyn in a Jewish magazine.  Somehow the show "Breaking Bad" reminded her of how much she hated her own people.  Here are the key excerpts:

Since I was 12 I've had an unappealing, didactic distrust of people with the extreme will to live. My father's parents were Holocaust survivors, and in grade school I received the de rigueur exposure to the horror—visiting geriatric men and women with numbers tattooed on their arms, completing assigned reading like The Diary of Anne Frank and Night. But the more information I received, the less sympathy the survivors elicited from me. Each time we clapped for the old Hungarian lady who spoke about Dachau, each time Elie Wiesel threw another anonymous anecdote of betrayal onto a page, I eyed it askance, thinking What did you do that you're not talking about? I had the gut instinct that these were villains masquerading as victims who, solely by virtue of surviving (very likely by any means necessary), felt that they had earned the right to be heroes, their basic, animal self-interest dressed up with glorified phrases like "triumph of the human spirit."

I wondered if anyone had alerted Hitler that in the event that the final solution didn't pan out, only the handful of Jews who actually fulfilled the stereotype of the Judenscheisse (because every group has a few) would remain to carry on the Jewish race—conniving, indestructible, taking and taking. My grandparents were not excluded from this suspicion. The same year, during a family dinner conversation about Terri Schiavo, my father made the serious request that should he fall into a vegetative state, he would like for us to keep him on life support indefinitely. Today he and I are estranged for a number of other reasons that are all somehow the same reason.

Bet you $100 she is voting for Obama.

Tuesday, July 17, 2012

Great Romney Speech in Defense of Free Markets and Individual Achievement

Romney gave a great speech in defense of free markets and individual achievement in Pennsylvania.  Watch it here. Here are some key quotes:

"I don't want government to take credit for what the individuals of America accomplish!"

"President Obama attacked success, and under President Obama we have less success!"

"We have seen what Barack Obama's political philosophy brings, and we don't want any more of it!"

"I believe the kid who studies hard and gets an A, he earned that and deserves credit for that!"

Greece Hasn't Really Implemented Spending Austerity And Are Now Saying They Won't Ever Implement It

I know that a lot of people, especially fans of big government spending, are blaming much of Greece's problems on "austerity".  Somehow cutting government spending caused by government spending is wrong and just makes things worse.  Well let's just take a look at Greek austerity measures and what they have actually meant for spending.  If you look at the Greek Ministry of Finance's State Budget Execution Report for January-May, austerity is so light that government expenditures actually went up compared to a similar period int he previous year.  In the January-May time period in 2011, the government spent 29.45 billion Euros.  In the same time period in 2012, they spent 30.5 billion Euros, an increase of 3.7%.  That doesn't seem very draconian.  Of course, that's not to say that they haven't made some cuts, they did cut spending on public employee wages by 8.6% and hospital employee wages by 11.1% (why do socialists always hate doctors the most?) but on the whole, spending still went up.

And now, the head of PASOK, a key coalition partner is saying that more spending cuts (what spending cuts?) are almost impossible.  So after watching the Greek budget increase despite "cuts" the Greek government is already trying to give up on further "cuts".   They are like the alcoholic who cuts back by increasing their intake of alcohol and then says they can't do anymore.  Germany should just cut them off already.

One more thing, this time on taxes.  I think looking at the Greek budget would be a good lesson for Obama so he would understand the difference between tax rates and actual taxes collected.  As part of the original austerity package, taxes were supposed to go up rather substantially.  Here is a summary:
  • Taxes will increase by 2.32bn euros this year, with additional taxes of 3.38bn euros in 2012, 152m euros in 2013 and 699m euros in 2014.
  • A solidarity levy of between 1% and 5% of income will be levied on households to raise 1.38bn euros.
  • The tax-free threshold for income tax will be lowered from 12,000 to 8,000 euros.
  • There will be higher property taxes
  • VAT rates are to rise: the 19% rate will increase to 23%, 11% becomes 13%, and 5.5% will increase to 6.5%.
  • The VAT rate for restaurants and bars will rise to 23% from 13%.
  • Luxury levies will be introduced on yachts, pools and cars.
  • Some tax exemptions will be scrapped
  • Excise taxes on fuel, cigarettes and alcohol will rise by one third.
  • Special levies on profitable firms, high-value properties and people with high incomes will be introduced.
But what happened was not what was expected.  Total taxes collected fell by 1% compared to the previous year with VAT taxes, which were supposed to go up the most, actually fell by 12.1%.  Yes, it is possible for tax rates to go up but taxes collected to fall.  Maybe Obama should keep that in mind before talking about people paying their "fair share" again. 

I Wish This President Would Learn How To Be an American

John Sununu seems to be in a little hot water right now because he said on a Romney campaign conference call with reporters "I wish this president would learn how to be an American."  Despite not being the biggest fan of John Sununu, I have to say that he really hit the nail on the head.  Obama simply does not act like we expect an American President to act.  I came here with my family from the Soviet Union to escape repression and the belief that the society should dominate the individual.  We came here for freedom, freedom to worship, freedom to make money and freedom to believe what we want to believe.  This President doesn't seem to really believe in any of these things.  He wants to force Catholic institutions to pay for abortions (the equivalent of making Jewish schools serve bacon in their cafeterias). He thinks the rich should pay an ever increasing "fair share" (despite the fact that the top 1% already pays almost 40% of income taxes) and don't deserve any credit for the businesses they created.  He also wants to be able to strong arm anybody who doesn't agree with him.  Note the DISCLOSE Act, IRS harassment of tea party groups,and just outright investigation of personal records of Romney donors to look for dirt on them.  These are not the actions of a true American, these are the actions of some banana republic despot who will do anything to get his way and thinks he knows better than everybody else how they should run their own lives.

I know many on the left are using that statement from Sununu as evidence of some sort of racism or nativism.  They should remember that Sununu is hardly a nativist.  He himself was born in Havana, Cuba and his dad was a Palestinian from Jerusalem and his mom was born in San Salvador, El Salvador.  It seems that immigrants like us have every right to demand that our President act like we expect Americans to act.

Monday, July 16, 2012

Visual Proof of Obama's Dishonesty of the Wealthy's "Fair Share"

It seems like an Obama speech doesn't go by where he doesn't talk about making the wealthy pay their "fair share" of taxes. As if the Bush tax cuts drastically lowered the tax burden for the richest Americans allowing them to benefit at the expense of everyone else. As Obama mentioned recently, "I’m not proposing anything radical here. I just believe that anybody making over $250,000 a year should go back to the income tax rates we were paying under Bill Clinton." Back then, everything was right and fair in the world. That is, as the data from the IRS indicates, complete and utter BS.

Take a look at this chart of the Top 1%'s percent share of income in blue, their percent share of income taxes in red and the ratio of the share of taxes to the share of income in green:

As you can see, in 2009 the top 1% made 17% of the income and paid 37% of the taxes. Does that seem like they "aren't paying their fair share?" Nope not at all. And as you can see from the green line, the ratio of their tax share to their income share has gyrated around 2 for the last quarter of a century, with no discernible trend change coming from the Bush tax cuts. Also, if you compare the final year of Clinton's time in office with Bush's, you'll see there really wasn't much of a difference in terms of the share of taxes that the wealthy pay. In 2000, the wealthy made 21% of the income and paid 37.4% of the taxes for a ratio of 1.8. In 2008, the wealthy made 20% of the income and paid 38% of the taxes for a ratio of 1.9. So if anything, under Bush, things actually turned out to be more "equitable" for the 99%. And the same held true for the Top 5%:

As you can see, the top 5% make 32% of the income and pay a whopping 59% of the taxes with the ratio of taxes to income being around 1.7 over time. Again, there are no signs that they aren't paying their "fair share." And once again, there doesn't seem to be any impact from the Bush tax cuts. In 2000, the top 5% made 35% of the income and paid 56.5% of the taxes for a ratio of 1.6. In 2008, the top 5% made 35% of the income and paid 58.7% of the taxes for a ratio of 1.7.

And now, what about the canard that the wealth just got wealthier under Bush while everyone else stayed the same? If that were true, the share of income generated by the top 1% would have gone up while Bush were President. But it didn't, the big increase in the share of income generated by the 1% came under Clinton. In 1993, the year Clinton entered office the 1% generated 14% of the income while in 2000, his last full year in office, the top 1% generated a whopping 21% of income. How about under Bush? In 2001, the wealthy generated 18% of the income and in 2008, they generated 20% of the income, which is still lower than the level generated in Clinton's last year in office. Again, the numbers tell a similar story if you look at the top 5%. In 1993, the top 5% accounted for 28% of the income, while in 2000 they accounted for 35% of the income. For Bush, their share of income went from 32% in 2001 to 35% in 2008, no different than the last year under Clinton.

Maybe Obama should pull a George Costanza and say the exact opposite of what he wants to say, that maybe the only way we can hear him speak the truth.

Obama's Messed Up View of Private Enterprise

Obama recently made these stunning statements at a campaign event in Roanoke, VA:

If you've been successful, you didn't get there on your own.  You didn't get there on your own.  I'm always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something -- there are a whole bunch of hardworking people out there.  (Applause.)     

If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you've got a business -- you didn't build that.  Somebody else made that happen.

While I do understand the "no man is an island" argument as no business grew up in a vacuum, it's usually built upon the ideas of predecessors, I really don't understand him stating that business owners actually didn't build their own businesses.  Then who did?  Without the entrepreneur there would be no business.  The great teacher could go on teaching for 100 years but if that entrepreneur didn't decide to take that risk, and building a business is risky, there just simply wouldn't be one.  Maybe someone needs to use a basketball analogy so Obama actually gets how ludicrous his argument is.  If someone passes you the ball and assists you in scoring a basket, does that mean you didn't actually score the basket?  There are really a few things that one can conclude from this idiotic statement from our supposedly brilliant President:

1.  He has absolutely ZERO clue how the private sector actually works, not surprising given he has almost zero experience in creating his own business.  Yes there are a lot of smart, hardworking people out there, but what separates entrepreneurs from the rest is their willingness to take great personal risk to start their business.  If they fail, there is a chance they and their families will be out in the streets.  Is there the same kind of risk for someone who is a corporate lawyer for IBM?  Of course there is some risk but it is not anywhere near the same magnitude.  Also, if you work hard or not-so-hard in corporate world, chances are your contributions will be relatively minor to the success of the business.  Your pay might be slightly higher or lower but at the end of the day, you know you are making about x amount of money with benefits etc.  If you own your own business and you decide to slack off, you will feel a tremendous difference in how much money you bring home.  That is why many business owners don't have the luxury of taking vacations.

2.  He believes the world is like Chicago, full of shady dealings and corruption.  Remember Obama's involvement with that corrupt (and now jailed) businessman Tony Rezko and how he pushed public funds in his direction?  Rezko would often use his political connections to get ahead, in effect, often having "other people" create his businesses for him.  But unlike a real entrepreneur, he was able to fix the outcome from the beginning with little actual business risk on his part.  Note that Obama's law firm helped Rezko get $43 million in government contracts.  That is not exactly creating something from nothing like say a Bill Gates or a Jeff Bezos did.

3.  He really is a Marxist.  How else do you explain his argument which boils down to "to the society everything, to the individual nothing".  Also note his recent views that tax cuts are a form of spending (the government seems to be doing you a favor by not taking more).

Friday, July 13, 2012

Just Say No to Condi Rice for VP

I realize that Condi Rice has some great qualities and in many ways she would add to the Romney campaign, at least politically.  She is absolutely brilliant, getting her Masters at the age of 21, a year that most kids are just happy to have an ID.  She is also a bright, confident speaker who you would be confident won't blow you up on the campaign trail.  And then of course, it's possible that the incremental African American or female vote she would attract (and she has a much better chance of attracting it than a Sarah Palin who is much more conservative on many issues than most women) would have a great impact on Romney's chances to overthrow Papa Doc Barack. 

The problem with Condi is that, in terms of governance, you can have no confidence that she would actually govern from the right.  Remember we are electing a Vice President of the United States who would become the President should anything happen to Romney or if she chose to run after his terms are up.  It isn't all just about biography and politics, it has to be about what kinds of policies would they enact while in power.  On economics, Condi is a clean slate.  She probably would go along with most Republican initiatives but solely because that would be expected of her.  And on foreign policy, she is definitely of the Brent Scowcroft, Jim Baker, Dick Lugar mold.  According to Dick Cheney, she practically outright lied in order to ram a deal with North Korea through, and unfortunately the North Koreans weren't the ones she was lying to.  People from the State Department who have a history of trying to "make a deal at any cost" are not people I want in the Oval Office.  Besides being wishy washy on North Korea, she also never struck me as particularly supportive of Israel.  And finally, do you really want someone who was with Bush for 8 years to be the #2 person on the ticket?  Talk about giving the Obama people an easy target.  I don't think there are many Americans, liberals, moderates or conservatives who look back at the Bush years with any joy.

Anyway, let's hope this trail balloon pops as it should and Romney picks someone who would both help him at the ballot box AND will help govern this country as it should.  I'm keeping my fingers crossed for Tim Pawlenty and Bobby Jindal.

Wednesday, July 11, 2012

Obama Wants to Discriminate Against Men in Access to Advanced Science & Engineering Programs in Public Schools and Colleges

Last month marked the 40th anniversary of Title IX, which had a goal of combating sexual discrimination in colleges, though in many programs, like athletics, it has turned into a quota system which discriminates against men.  The main reason for this is the three prong test that is used to show compliance with Title IX in athletics.  The three prongs are:
  1. Providing athletic participation opportunities that are substantially proportionate to the student enrollment. This prong of the test is satisfied when participation opportunities for men and women are "substantially proportionate" to their respective undergraduate enrollment.
  2. Demonstrating a continual expansion of athletic opportunities for the underrepresented sex. This prong of the test is satisfied when an institution has a history and continuing practice of program expansion that is responsive to the developing interests and abilities of the underrepresented sex (typically female).
  3. Accommodating the interest and ability of underrepresented sex. This prong of the test is satisfied when an institution is meeting the interests and abilities of its female students even where there are disproportionately fewer females than males participating in sports.
So what's happened is that male athletic programs were canceled in order to make participation amongst the sexes "proportionate".  Now, Obama and his minions want to target Science, Technology and Math (STEM) programs for similar treatment despite the fact that there is probably no evidence of actual discrimination in these fields.  After all, if a girl tests high enough, she gets in.  These fields especially are based on merit more than anything else.  Anyway, the White House announced:

Federal Agencies will commit to developing common guidance to colleges and universities on responsibilities and best practices for Title IX compliance: Building on the success of previous interagency collaboration efforts on Title IX and STEM, the Department of Education will lead an initiative with the Department of Justice and science & technology agencies (including the Department of Energy, NASA, National Science Foundation, and the Department of Health and Human Services) to develop common guidance for grant recipient institutions to comply with Title IX. These activities will consolidate agency expertise – which currently differs from agency to agency – to help institutions better understand their compliance obligations and ways to improve access and outreach to women and girls in STEM fields.

Department of Education will revise Title IX Technical Assistance to K-12 and post-secondary institutions to explicitly address STEM: The Department of Education will announce the revision of its Title IX Technical Assistance presentation, made available nationwide to state and local education agencies across the country, to include information on how institutions receiving federal financial assistance are also required to ensure equal access to educational programs and resources in STEM fields.

Department of Education will broaden data collection to provide new gender-based academic analyses: In 2011, the Department of Education released a first-of-its-kind national data tool for analyzing student participation, achievement, and educational experiences through the transformed Civil Rights Data Collection (CRDC), a survey of the nation's public school districts and elementary and secondary schools that provides information on student enrollment, educational programs, and services disaggregated by race/ethnicity, sex, limited English proficiency status, and disability. With hundreds of data points collected through mandated school reporting, the publically-available CRDC database allows for powerful analyses of topics such as school discipline rates, retention by grade, and participation in advanced math and science courses broken down by gender. At the time of the Title IX anniversary, the Department has published a new gender-based analysis of the CRDC data, taking stock of the gender gaps across K-12 education. Moving forward, the Department of Education will expand the 2011-12 CRDC dataset from 85% of U.S. students to include 100% of all U.S. public school students nationwide, becoming a universal collection of data representing all schools.

Considering that only about 18% of engineering and computer science students are female, public schools and universities will likely have no choice but to both lower their entrance standards to include more women in these programs AND severely limit male participation (which is strange since aren't we hearing how we need more people to be in these programs for us to compete on the world stage?).  Note that nowhere in the President's remarks does it mention how 57% of college degrees currently go to women meaning men are underrepresented in college as a whole and probably most humanities majors.  This initiative will only lower the male proportion of college degrees even further.  It just isn't clear when this war on men and boys will stop.  When only 30% of college degrees go to men?  Will it ever stop?  I guess it's a similar question to "at what point is a wealthy person paying their 'fair share.'" Never, is the answer according to this administration. 

Tuesday, July 10, 2012

Obama's Tax Plan Actually Increases Taxes on Everyone

Yesterday, Obama gave yet another version of his class warfare speech, trying to paint the GOP as the party of the rich, while he is actually someone trying to keep the middle class from paying higher taxes.  Like just about everything else to leave his lips, it's all a complete lie.  Sure, the usual useful idiots in the media will eat it up but for anyone who is actually aware of what taxes are scheduled to increase in the fiscal cliff (aka taxmaggedon) his speech is a joke, full of empty rhetoric.  In this specific case what is important is what he didn't mention in his speech.  If taxmaggedon comes to pass, a total of $494 billion in taxes will increase in 2013 (this is not a 10 year figure, that is the amount of taxes that will be sucked out of Americans pockets in just 1 year). The Bush tax cuts (which is what he wants to extend for the middle class) represent only $166 billion of that or 34%, Obama simply neglects to mention the other 66% of the tax increases set to hit on January 1.  What about the 2% payroll tax cut worth $125 billion?  Not a peep.  Or the alternative minimum tax (AMT) worth $119 billion?  Or how about the American Opportunity Credit which is a refundable tax credit for higher education expense or the expanded child tax credit, both of which came from the 2009 stimulus?  Then of course there is $23 billion worth of tax increases through Obamacare, including an increase in the AGI floor from 7.5% to 10% for being able to deduct medical expenses.  That doesn't just hit the wealthy, that hits anyone who has had the bad luck of having a major health issue during the year. 

Funny how Obama doesn't mention all of these taxes that are going up next year in his speech and how they will impact ALL Americans, not just those he has chosen to target.

Monday, July 9, 2012

China Gives Obama and Hillary the Middle Finger

It's been pretty clear that the sanctions against Iran have been a sham, thanks in part to the ability of Hillary Clinton to give countries Obamacare-esque waivers.  As she commented last month:

SECRETARY CLINTON: Well, absent some action by Iran between now and July 1st, the oil embargo is going into effect. And that's been very clear from the beginning, that we were on this track. I have to certify under American laws whether or not countries are reducing their purchases of crude oil from Iran, and I was able to certify that India was, Japan was, South Korea was. And we think, based on the latest data, that China is also moving in that direction.

That "moving in the right direction" was a 2.2% decrease in May 2012 from the prior year and was enough to get them a waiver.  Well, just to show us that they don't really need no stinkin' waivers, China has just decided to invest $20 billion in the development of Iranian oil fields.  It really doesn't sound like China ever intends to comply with sanctions.  I know, shocking right?

This administration just seems to go from one policy disaster to another.

Friday, July 6, 2012

The State Department Will Do Anything to Not Admit Jerusalem is in Israel

They have now resorted to not even listing cities that the Secretary of State will visit and simply not verbally mentioning the city at all.  How lame.  From yesterday's State Department briefing (h/t Commentary):

QUESTION: For every single country she's going to, it lists the cities that she's visiting, except for Israel. So this is a semi-trick question: Is she going to be visiting the capital of Israel?

MR. VENTRELL: The Secretary will be in Israel and she will meet with Israeli officials.


MR. VENTRELL: At this point, I don't know where those meetings are going to be, but obviously as we get closer, the team will have more information.

QUESTION: You don't know if they'll be in Jerusalem or if they will be in Tel Aviv?

MR. VENTRELL: We can presume that she will visit multiple sites in Israel on this trip.

Visual Proof of Obama's Failure to Tackle Unemployment

Another month, another time the Obama administration wants you to "not to read too much into any one monthly report".  The worst part about today's bad jobs report is the truth is even worse.  As I have mentioned many times in the past, the current unemployment rate is being reduced by people simply leaving the workforce, not by the job market actually recovering.  If you assume the labor force participation rate is actually the same as when Obama was elected, the current unemployment rate is actually 11.3% and not 8.2%.  Also, Obama has had little to no success in bringing this level down as it's still very close to the peak.  See the chart below where the blue line is the real unemployment rate which takes into account the decline in the labor force participation rate and compare that with the red "official" rate:

Using this data, I also decided to calculate the number of unemployed by taking my adjusted labor force figures and subtracting out the number employed.  This essentially gives me the number officially unemployed + those that have dropped out of the labor force since Obama became President.  Again, further proof Obama has made no progress in tackling unemployment:

As you can see, we've had about 18 million people unemployed for the last 2.5 years and Obama has been completely unsuccessful in his attempts to make their lives better. 

All indicators that we are having a recovery are just statistical nonsense.

Federal Debt is Masking Major Problems with Our Economy

I noticed something that seems pretty disturbing.  If you look at how much our government is adding to the debt every year and compare it to how much the economy has grown every year, you see that the economy isn't growing at all outside of government stimulus.  And I'm not talking about just now when we have an anti-American, anti-free market President who is only interested in giving handouts to his special interest groups (though his numbers look pretty catastrophic now when we add over a trillion every year to the debt and only get a meager few hundred billion dollars of growth out of it), but its been happening for much of the last thirty years.  Take a look at this graph showing the growth in real GDP in billions of 2005 dollars (red line) and compare it to the growth on an annual basis of our debt in billions of 2005 dollars (blue line):

Notice that back in the 1950's and 1960's, back when America actually made stuff and government regulation of the economy was a fraction of what it is today, the economy was growing at a pretty steady clip, with very little help from federal deficits.  Then starting with Nixon and Carter, a large proportion of our growth seems to be coming from deficit spending.  In the 1980's, that's when the wheels really came off and our economy, more often than not, has grown less than the increase in our debt for the last thirty some years.  The only period when this wasn't the case was in the late 1990's when government shrank as a % of GDP and we had the benefit of a technological revolution that originated on our shores.  Take a look at the graph below that shows what our Real GDP growth would look like if you subtract out the growth in real gross federal debt (the red line is the reported rate of real GDP growth while the blue line is the debt adjusted GDP number):

It's pretty startling.  It shows that only 6 of the last 31 years were actually growth years when you adjust for increases in our debt and the last few years have essentially been like another Great Depression (something we already felt, even if it wasn't borne out in the official government statistics).

One thing that this made me realize, and bear with me on this, is that the Reagan and Bush tax cuts only gave the illusion that they were shrinking government and fixing our problems as neither President actually shrank the size of the federal government (Outlays as a % of GDP only went down marginally under Reagan and grew magnificently under W).  They made it seem like everything was okay and might have actually done harm as people felt less urgency to make the structural reforms that this economy needed to attract jobs. 

Don't get me wrong, I love tax cuts, I think taxes are essentially just highway robbery by the government, however tax cuts without spending cuts are just smoke and mirrors.  Government is still bigger than ever and eventually you will have to pay those increased deficits with increased taxes.  Republican administrations seem to have wanted the best of both worlds, they wanted to tax like Republicans but spend like Democrats, giving a double dose of Keynesian stimulus to make the numbers look good. 

But none of that was real and has delayed the reforms that we have needed to fix the system.  They were looking to maximize short term outcomes at the expense of the long term.  Instead of thinking, "hey, everything is fine, the economy is growing at 3 or 4% a year" they should have been thinking "how do we attract businesses to move their factories to the United States".  Or "how do we get America actually making stuff again"?  Perhaps without those deficit fueled booms, we might have lower regulations and lower corporate taxes today, which would keep companies from relocating to Ireland or Bermuda or moving their manufacturing to India and China.

I'm sure some liberals looking at those graphs will conclude quite the opposite of what they should conclude.  They will probably think that Obama did a great job with his massive stimulus in keeping our economy out of a deep depression.  No, what he actually did was delay the market clearing processes that are required for this economy to really get back on its feet.  And as we are seeing in Europe, chronic deficit fueled growth can't go on forever, eventually investors just stop giving you money.  Remember, when you are growing your debt by over a trillion a year, that means you need to find a trillion dollars worth of additional investor money per year.  Places like China don't even need to cut back their existing hordes of treasuries to create a crisis, they probably just need to stop adding to their hordes to create a crisis.  We are just one failed bond auction away from a real $hitshow.

Republicans need to get it through their thick skulls that they need to stop just running on tax cuts without actually limiting the size and scope of government.  They are doing our children a great disservice by doing so and should know better.  They claim to have read people like Ayn Rand and Hayek but have failed to actually put anything like that into practice.  I would try to give Democrats a lesson but I'm convinced that is a lost cause.  I actually think many of the Democratic elites are actually gunning to make America a failure and a second rate country.

Thursday, July 5, 2012

Europe Just Can't Seem to Unscrew Itself

While it has only been a week since the latest "bailout" announcement, it actually feels much longer.  In fact, the way bond markets have been acting, it might as well have been announced in 1941.  Yields on the Spanish 10 year went up 0.37% today to 6.78% (7% is considered to be the level at which people start to panic, and we are within a day of that), Spanish 2 year bonds went up a whopping 0.52% to 4.61% and even the Italian 10 year started knocking on the 6% level again.  Just to be clear, this is not the sort of volatility that sovereign investors like to see.  They are not biotech investors, they are investors who want to lend the government $100 with the absolute certainty that they will receive back $102 in 2 years.  No wonder, Europe just can't seem to fix their bond markets, run of the mill sovereign bond investors have mostly run away (especially after being fleeced in the Greek "bailout"). 

Of course, it doesn't help that Greece, which supposedly was fixed already, is now openly reneging on its austerity commitments (they don't seem to want to let go of almost any public sector employees).  If the Germans are given so much heart burn by miniscule Greece, imagine what trouble Italy and Spain could cause them?  This recalcitrant Greek attitude only makes it more likely that the Germans just get out of the bailout business, which is not much a business regardless.

It seems only a matter of time before Europe completely implodes.

Tuesday, July 3, 2012

Nigel Farage: The 19th Euro Summit was like the 19th Nervous Breakdown

He also tells the EU heads not to go away on their yachts for the summer as the markets will make sure they'll all be back working in August (due to another crisis):

Monday, July 2, 2012

The Italian Economy Seems to Be On the Road to Be Like the Greece's

Check out the latest data from the ANFIA, the Italian Automobile Association, on new car registrations from January-June:

As you can see, new vehicle registrations are imploding, down 20% compared to the same period last year and a whopping 43% from the peak in 2007.  The US faced a similar implosion in 2009, but the difference is that this Italian implosion may just be getting started as there are no signs that Italy is turning around and doesn't have the Federal Reserve or Cash for Clunkers to "prime the pump". 

It may only be a matter of time before Italy needs a bailout as well.  Unfortunately, Italy is definitely too big to save.

I think people have started to realize the latest Euro bailout is just smoke and mirrors

It appears that Euro Bailout v. 26 is starting to fail.  The yield on the Spanish 10 year is up about 20 bps off its intraday low, as are the yields of other Euro periphery bonds.  What's up with that?  I thought the latest Euro bailout was a one way ticket to solvency as the Germans have been forced to buckle under the pressure from just about every other country in Europe?  Not so much.  Just take a look at the actual text of the bailout "agreement":

We ask the Council to consider these Proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly.

This would rely on appropriate conditionality, including compliance with state aid rules, which should be institution-specific, sector-specific or economy-wide and would be formalised in a Memorandum of Understanding.

In other words, in the next 6 months we hope that this plan for bank aid from a non-existent mechanism (the ESM has yet to be ratified) is considered and god knows when it will be actually implemented or if any country is willing to go through all of the hoops that the northern countries will demand as a pre-condition.  Not very reassuring is it?

Also, who knows if the ESM money can actually be raised (show of hands, how many people want to buy debt of Italian banks at below market yields?  Obviously not that many or the market would already be at that price, not several percent higher).  It is worth noting that no new funds were actually promised to a bailout, simply the method that they could be dispersed was possibly expanded.  That could be a sign that governments weren't quite sure if additional funds COULD be raised.

And finally, and possibly most importantly, given that the US ISM survey just signaled that the US manufacturing sector is entering a recession, economic conditions may deteriorate markedly in the next six months.  There could be quite a few more governments and banking systems needing a bailout at that point.

No wonder this "bailout" is starting to fail, just one full day after it was announced.