Daily Archives: March 27, 2009
Desmond Lachman, a fellow at the American Enterprise Institute, was previously chief emerging market strategist at Salomon Smith Barney and deputy director of the International Monetary Fund’s Policy and Review Department. So, he’s spent a lot of time watching emerging markets from the IMF’s point of view, and pointing out where the leaders of developing countries ran the economy off the rails.
Just like he’s watching our political leaders doing the same thing to us. In essence, he writes that the US is repeating the same mistakes that led to Japan’s “Lost Decade”, and Russia’s default on it’s debt.
A singular characteristic of an emerging market heading for deep trouble is a seemingly suicidal tendency to become overly indebted to foreign creditors. That tendency underlay the spectacular collapse of the Thai, Indonesian and Korean currencies in 1997. It also led Russia to default on its debt in 1998 and plunged Argentina into its economic depression in 2001. Yet we too seem to have little difficulty becoming increasingly indebted to the tune of a few hundred billion dollars a year. To make matters worse, we do so to countries like China, Russia and an assortment of Middle Eastern oil producers — none of which is particularly well disposed to us.
Like Argentina in its worst moments, we never seem to question whether it is reasonable to expect foreigners to keep financing our extravagance, and we forget the bad things that happen to the Argentinas or Hungarys of the world when foreigners stop financing their excesses. So instead of laying out a realistic plan for increasing our national savings, we choose not to face up to the Social Security and Medicare crises that lie ahead, embarking instead on massive spending programs that — whatever their long-run merits might be — we simply cannot afford.
After experiencing a few emerging-market crises, I get the sense of watching the same movie over and over. All too often, a tragic part of that movie is the failure of the countries’ policymakers to hear the loud cries of canaries in the coal mine. Before running up further outsized budget deficits, should we not heed the markets that now see a 10 percent probability that the U.S. government will default on its sovereign debt in the next five years? And should we not be paying close attention to the Chinese central bank governor’s musings that he does not feel comfortable with the $1 trillion of U.S. government debt that the Chinese central bank already owns, let alone adding to those holdings?
Speaking of canaries in the coal mines, I note with interest that there have been two failed bond auctions in Germany this year, followed by a failed bond auction of 5-year gilts this week in London.
I just keep watching the kangaroo.
John Murtha! Yes, “that John Murtha” … seriously:
In one of his last moves before leaving office March 13, then-Navy Secretary Donald Winter quietly awarded 19-term Democratic congressman John Murtha (Pa.) with the service’s highest civilian honor.
Citing Murtha’s “courageous leadership, vision, and loyalty to the men and women of the Department of the Navy,” Winter presented the influential chairman of the House Appropriations Committee’s defense panel with the Navy’s Distinguished Public Service Award, an honor bestowed in “those extraordinary cases where individuals have demonstrated exceptionally outstanding service of substantial and long term benefit to the Navy, Marine Corps, or the Department of the Navy as a whole,” a Murtha release stated.
As you can imagine, this didn’t sit well with some in the military. Seems they don’t appreciate seeing elected officials who condemn their comrades in arms as “murderers” being awarded medals:
The primary reason for their ire stems from the congressman’s statements in May, 2006, that a squad of Marines who responded to an IED ambush and short firefight in Haditha, Iraq, rampaged through the village, murdering civilians “in cold blood.”
Murtha made those comments in the heat of the 2006 congressional mid-term election campaign, in a move some political analysts saw as an attempt to stoke the anti-war vote for a Democratic takeover of the House. The former Marine and distinguished Vietnam veteran continued his accusations in follow-up media appearances before an official Pentagon and Naval Criminal Investigative Service investigation had been completed.
When the dust settled more than two years later, six of the eight Marines and Sailors accused of crimes in the Haditha incident had their cases dismissed, one was found not guilty and the last has been continued indefinitely.
Murtha has refused to recant his accusations or apologize to the Marines he accused of war crimes. When asked by Military.com in late 2007 whether he regretted his initial statements and owed the exonerated Marines and Sailor an apology, Murtha refused to comment, saying the cases were still being adjudicated.
Well, I can understand why he wouldn’t apologize. After all, it’s quite well known that Murtha is an officious liar, and no one should believe a word he says.
As for some actual soldier reaction, Deebow at Blackfive queries “Are You F’ing Serious?!”
I was immediately a little suspicious about what kind of award Mr. Murtha could have received, knowing that he hasn’t done anything honorable lately, at least that I can remember. So I checked the Way Back Machine event tabulator I had next to my oatmeal and it says Representative Jack Murtha was an unindicted co-conspirator in the ABSCAM investigation done by the FBI, blatantly called his constituents racists and backwoods red-necks and, most recently, called United States Marines engaged in combat “Cold Blooded Killers” for their actions during a firefight in Haditha, Iraq.
WOW! Now that is one honorable Congressman…
[snip part where Deebow reads about the honor bestowed upon Murtha]
REALLY??? The former SECNAV thought that Rep. Murtha was someone who had “loyalty” to the men and women of the Department of the Navy? He really believed that Rep. Murtha had rendered “exceptionally outstanding service?”
Apparently he did. But, even if Deebow wasn’t impressed, the Congressman himself sure was!
“I’m proud of the service and sacrifices our troops are making, and I’m honored to receive this distinguished award from the Navy,” commented Murtha. “We have an obligation to ensure that our
cold-blooded murderersmen and women in uniform have the most modern equipment, effective training, first-class medical care, and family advocacy resources.”
Erm … there may be some mistranslation in there somewhere.
But one influential veterans group has reacted strongly against the award, crafting a petition to lobby the Navy to rescind it.
Vets for Freedom, a group that generally supports the wars in Iraq and Afghanistan, called Murtha’s award “appalling” and his accusations against the Haditha Marines “vile and despicable.”
“Congressman John Murtha should apologize for slandering the Marines of [3rd Battalion, 1st Marine Regiment], and for undermining the efforts of those servicemen and women who fought in Iraq,” the online petition states. “If he does not, the Secretary of the Navy should rescind this award as a sign of his unwavering support for those who served in combat during Operation Iraqi Freedom.”
So far more than 35,000 supporters have signed the online petition.
If you tend to side with Deebow rather than Rep. Murtha, then you can sign too by going to this link.
From Jim Harper of CATO speaking of the Obama on-line “Townhall meeting” yesterday:
President Obama promised to make his administration the most open and transparent in history, and taking questions from the public kind of looks like that. But it also kind of looks like gimmicky, a canned publicity stunt, rather than true openness in government.
Real transparency would include fulfilling his campaign promise to post bills online for five days before signing them. The President has now signed ten bills into law and not subjected any of them to that five-day public review.
Ten bills. That’s zero for ten in the transparancy department.
Yup, we’re just in too much of a hurry to really be transparent, apparently. And the press is doing such a great job of keeping Mr. Transparancy’s feet to the fire, isn’t it?
That is, why it isn’t the solution it is touted to be. Jeffrey Sachs of the Financial Times:
The Geithner-Summers plan, officially called the public/private investment programme, is a thinly veiled attempt to transfer up to hundreds of billions of dollars of US taxpayer funds to the commercial banks, by buying toxic assets from the banks at far above their market value. It is dressed up as a market transaction but that is a fig-leaf, since the government will put in 90 per cent or more of the funds and the “price discovery” process is not genuine. It is no surprise that stock market capitalisation of the banks has risen about 50 per cent from the lows of two weeks ago. Taxpayers are the losers, even as they stand on the sidelines cheering the rise of the stock market. It is their money fuelling the rally, yet the banks are the beneficiaries.
If you’ve been wondering why the stock market had a short rally upon its announcement, there’s your explanation. You need to read the whole thing as Sachs uses a simple example to explain his point. He concludes with:
Tim Geithner, Treasury secretary, and Lawrence Summers, director of the White House national economic council, suspect that they cannot go back to Congress to fund their plan and so are raiding the Federal Reserve, the Federal Deposit Insurance Corporation and the remaining Tarp funds, hoping that there will be little public understanding and little or no congressional scrutiny. This is an inappropriate institutional use of the Fed, the FDIC and the Tarp. Mr Geithner and Mr Summers should at the very least explain the true risks of large losses by the government under their plan. Then, a properly informed Congress and public could decide whether to adopt this plan or some better alternative.
But, of course, we’re just in too big of a hurry and the situation is too dire to actually discuss and debate the situation or do it properly through Congressional action. Instead we’ve been sold a bill of goods which, disguised as a way out, is simply a rip off of the taxpayer – again. As Jennifer Rubin notes:
So to avoid the overwhelming popular objection to perpetual bailouts and expenditures, the Obama administration will do this all “off budget” and with no hearings, Congressional debates, or votes. Not very transparent and quite imperious, when you get right down to it.
Yeah, not very “hopey changey” is it?
I’m warming more and more to my suggestion that government officials be compensated the same way they think CEOs should be compensated. If this ends up being a big loss to the taxpayer, Geithner and Summers should receive zero compensation for the outcome. And that would also go for anyone else in the administration or Congress who had a hand in implementing this plan.
Doug Heye points out something of which I’m sure few people are aware:
The Democratic Senatorial Campaign Committee (DSCC) has apparently decided to keep $100K in contributions from Bernie Madoff, who faces up to 150 years in prison for swindling billions from the likes of Steven Spielberg, Elie Wiesel, Kevin Bacon and Kyra Sedgwick in a massive Ponzi scheme.
In campaigns, one side often calls on the other to return money for one reason or another. Sometimes it’s valid, sometimes not. Regardless, it’s Campaign 101. But when the contributor in question is the single biggest financial criminal in history, there can be no question that those illicit funds should not remain in campaign coffers.
Given the economic uncertainty our nation faces and that Madoff not only fleeced the rich and famous but major corporations such as HSBC — in other words, Madoff swindled all of us — the DSCC’s decision is shockingly tone-deaf.
No kidding. People all over have been fleeced by this guy, they’re looking all over for assets with which to recover some of the funds and pay back the investors and the DSCC is keeping the funds he sent them. Shocking.
What isn’t shocking, however, is what Heye notes next:
However, what’s almost equally surprising is the virtual silence from the media. During the Enron scandal, returning campaign money was a daily drumbeat, as were the news stories discussing Enron’s purported ties to President Bush. Now, when the Democratic Senate campaign vehicle makes the conscious decision to keep $100K in Madoff money, stolen just as if it came from a bank holdup, there’s little to no outrage.
Heye seems surprised and asks “why” this is receiving no coverage.
Most of the rest of us are just shaking our heads knowingly and are not at all surprised by that fact.
UPDATE: Commenter Linda Morgan provides a link from the Washington Times, apparently the only MSM outlet which carried the story, with some positive results:
One day after The Washington Times reported that a key Democratic fundraising group was holding onto $100,000 from disgraced financier Bernard Madoff, the Democratic Senatorial Campaign Committee decided to donate the money to his victims.
“We’re reviewing this internally, and decided to give the money to the trustee for distribution to the victims,” DSCC spokesman Eric Schultz told Roll Call on Thursday.
Given the fact the Madoff scandal is old enough that he’s been to trial, plead guilty and is awaiting sentencing, you have to wonder why it has taken this long for the DSCC to “review this internally”.
And yes, it’s another Republican:
Sen. Orrin Hatch, R-Utah, may be a skinny guy with a high voice. But he’s angrily setting out to tackle the biggest powers in college football, vowing to pound them until they reform the Bowl Championship Series.
He called them out Wednesday, as he and Sen. Herb Kohl, D-Wisc. — respectively the top Republican and Democrat on a Judiciary subcommittee on antitrust — released a list of topics that panel plans to consider this year.
A bit buried on Page 4 of an eight-page list, amid somewhat sleep-inducing reading on oil and railroad antitrust, is a nifty paragraph about the BCS.
“The BCS system leaves nearly half of all the teams in college football at a competitive disadvantage when it comes to qualifying for the millions of dollars paid out every year,” their joint statement says.
Then it drops its first unexpected bomb: “The subcommittee will hold hearings to investigate these issues.”
That is followed by a second: “Sen. Hatch will introduce legislation to rectify this situation.”
Hatch’s office did not comment about exactly what may be in the yet-to-be-written bill — including whether it might attempt to mandate a playoff system similar to that in college basketball, or simply mandate that all colleges be given a fair shot to play their way into a national championship.
no one is particularly happy with the BCS and how they rank colleges or the method of “playoff” they’ve come up with. However let me be very clear here. This is none of Congress’s business. None. Nada. Zip. Zero.
Sorry if BSU was 13-0 and wasn’t crowned national champs. But that’s life and the system that’s in place. Get over it and worry about the things which are important – like shrinking government instead of making it more intrusive.
I’m coming to the conclusion we should hold Congress to the same standard as concerns their pay as we held AIG about the bonuses.
If we did that, most of these yahoos would be flat broke or owning the Treasury money at the end of the year. That’s certainly one way to cut spending.
[HT: Liberty Papers]