Free Markets, Free People

Monthly Archives: July 2012


Quote of the Day: Composite Obama edition

Heh … I think this sums it up pretty well.  A sort of Ott Scerb like litany:

If you’ve got a business — you didn’t build that. Somebody else made that happen because you’ve been a little lazy over the last couple of decades and you’ve lost your ambition, your imagination and your willingness to do the things that built the Golden Gate Bridge, causing you to become bitter and cling to guns and religion and antipathy toward people who aren’t like you, and to act stupidly, just like a typical white person or our troops who are just air-raiding villages and killing civilians. Frankly, that’s why I believe in American exceptionalism, just as I suspect the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism, and that’s why it’s necessary for me to fundamentally transform America and spread the wealth around — just as soon as I get more flexibility in a second term.

In his own words.

Forward.

~McQ

Twitter: @McQandO


Is Iran preparing to close the Straits of Hormuz?

That’s what our intel guys are saying:

U.S. government officials, citing new intelligence, said Iran has developed plans to disrupt international oil trade, including through attacks on oil platforms and tankers.

Officials said the information suggests that Iran could take action against facilities both inside and outside the Persian Gulf, even absent an overt military conflict.

The findings come as American officials closely watch Iran for its reaction to punishing international sanctions and to a drumbeat of Israeli threats to bomb Tehran’s nuclear sites, while talks aimed at preventing Iran from developing nuclear weapons have slowed.

Now, of course, “developing plans” and actually executing them are entirely different things.  But, as irrational as Iran can be sometimes, the development of such plans has to be taken seriously.

If you’ve been paying attention over the past few months, we’ve been creeping any number of assets closer to Iran.  So obviously we believe where there is smoke we may see fire.

"Iran is very unpredictable," said a senior defense official. "We have been very clear what we as well as the international community find unacceptable."

The latest findings underscore why many military officials continue to focus on Iran as potentially the most serious U.S. national-security concern in the region, even as the crisis in Syria has deepened and other conflicts, as in Libya, have raged.

Defense officials cautioned there is no evidence that Tehran has moved assets in position to disrupt tankers or attack other sites, but stressed that Iran’s intent appears clear.

Iran has a number of proxies, as we all know, none of whom have much use for the US or the rest of the Western world.   What would possibly cause Iran to attempt to strike at outside targets?  The belief that they could get away with it:

But U.S. officials said some Iranians believe they could escape a direct counterattack by striking at other oil facilities, including those outside the Persian Gulf, perhaps by using its elite forces or external proxies.

I’m not sure how one thinks they can escape retribution by such tactics, but it is enough to believe you can.  And apparently there are some in Iran who do.  That’s dangerous, depending on where they sit in the decision making hierarchy.

The officials wouldn’t describe the intelligence or its sources, but analysts said statements in the Iranian press and by lawmakers in Tehran suggest the possibility of more-aggressive action in the Persian Gulf as a response to the new sanctions. Iranian oil sales have dropped and prices have remained low, pinching the government.

So, we wait.  And creep more assets into the area.  And wait.

As an aside to all the arm-chair defense experts who claim we shouldn’t be developing advanced weaponry because all our future wars are likely to be “just like Afghanistan”.

Really?

~McQ

Twitter: @McQandO


Speculation: Aurora shooter an OWS guy? (Update)

At this point, I see it as mostly rumor, but I wonder how the left will react if this is true:

As speculation mounts about the motive behind the mass shooting, one private investigator has claimed that Holmes may have been part of Occupy Wall Street’s most violent faction Occupy Black Bloc.

Bill Warner told how the Batman movie portrays the OWS crowd in a negative vein, leading him to believe that may have been a cause behind the shooting.

Again, note the word “speculation”.  We’ll learn more as the investigation continues.  Interesting that I read this first in the foreign press.

I have to wonder, then, if this indeed turns out to be true, whether authorities will continue to state that he had no ties to known terrorist groups.

That said, my profound sympathies to the families of the victims of this kook’s madness.

UPDATE:  Interesting little back and forth on Twitter about this post among friends and colleagues essentially trying to convince me that I shouldn’t “go there”. 

I disagree.  The possibility exists and this being a news source which clearly identifies the point as “speculation” based on what it gathered from one “private investigator”, I see nothing wrong with posting it.  They obviously found something credible in what the investigator said, credible enough to include it in the story (but obviously not willing to cast it beyond “speculation” until they can find a corroborating source).  I present it as they have.

Never said or directly implied in the back and forth was the “sensitivity” of the recent massacre or the apparent assumed time one must let pass before “speculating”.  We speculate about motive all the time on really fresh crimes (see recent bus bombing in Bulgaria).  The size of this one is the only real difference.   It was a heinous act – agreed.  Got it.  So are green-on-blue murders in Afghanistan, be we don’t assume a waiting period on those.  We discuss them.  We speculate on motive, etc.  Talking about it or what may have motivated the crime won’t make it any less heinous.

Should the source choose to retract, I’ll note that.  Other than that, this is something to be considered in the mass murders this yahoo perpetrated.  Call it what you will, I see it as news.   And if you don’t believe this should be “politicized”, that ship sailed hours ago.

~McQ

Twitter: @McQandO


Crop cronyism’s destructive results

We talk about it.  Politicians condemn it.  Nothing ever happens to change it though.

This year’s agriculture bill again redistributes your money to rent seekers:

Combine a Midwestern drought with pointless ethanol mandates, and the supplies of corn inevitably dwindle, driving prices sky high. Politicians like Sen. Claire McCaskill, Missouri Democrat, are citing the crop crisis as an excuse to ram through a near-$1 trillion farm bill. While a bit of that cash might find its way to a small farmer, the bulk of the loot will be transferred to individuals who are anything but poor. Like the bank bailouts and TARP, the farm bill illustrates the capture of the legislative process by special interests.

The last farm bill in 2008 was the focus of $173.5 million in lobbying expenditure, according to a report released Tuesday by Food & Water Watch. This is all money spent on what the Mercatus Center’s Matthew Mitchell calls “unproductive entrepreneurship” where people are organizing and expending their talent to become rent seekers, and the end result is wealth redistribution, not wealth creation. Real entrepreneurship innovates in ways that are socially useful. Cronyism diverts resources — both money and talent — into a system that rewards privileges to favored groups. In the case of the 2008 farm bill, recipients of subsidies of $30,000 or more had an average household income of $210,000.

Mr. Mitchell argues that “government-granted privilege is an extraordinarily destructive force” because it not only results in a misallocation of resources and slower growth, it undermines civil society and the legitimacy of government by providing a rich soil for corruption.”

She’s absolutely right.  And, of course, when you mess with markets, like has been done with the corn market and mandated ethanol, the expected results occur when something unanticipated, like a drought, happens:

Corn and soybeans soared to record highs on Thursday as the worsening drought in the U.S. farm belt stirred fears of a food crisis, with prices coming off peaks after investors cashed out of the biggest grains rally since 2008.

Corn prices crossed into uncharted territory above $8 per bushel — about three-and-a-half times the average price 10 years ago of $2.28. Soybeans punched past $17 for the first time — also three-and-a-half times the 2002 average.

Analysts said that while forecasts for continued dry weather are expected to sustain the rally, corn prices could be vulnerable to any move by the government to lower the amount of corn-based ethanol blenders are required to mix with gasoline.

Notice what entity is mentioned in the last paragraph?  Yes, government. A key player in the increase in corn prices (yes, understood, they’d be higher with the drought alone, but government’s ethanol mandate has driven them even higher yet).

Meanwhile, as mentioned above, we’re subsidizing agriculture to the tune of $1 trillion dollars of your money (in cash or in debt to be paid back in the future).  Meanwhile, you’ll be paying more for corn based products at the grocery store as well.

Nita Ghei lays out the bottom line problem with this sort of cronyism and rent seeking:

Government privileges come in many forms, direct and indirect. It might be a monopoly, such as the one granted to utilities like Pepco. Regulations such as licensing can be used to limit entry to a particular field to the benefit of existing businesses. Lobbying and the revolving door in Washington create what economists call “regulatory capture,” which is what happens when existing firms use regulatory agencies to benefit themselves. Tax breaks, loan guarantees and subsidies are the most direct signs of a government’s favor. Bailouts of big banks under TARP, and Fannie Mae and Freddie Mac when the housing bubble burst, are the most recent examples of direct action.

Extending each of these privileges reduces America’s economic competitiveness. A monopoly protected by the government has little incentive to provide good service. The greater the availability of privileges, the greater is the incentive to indulge in rent seeking, which diverts resources from truly productive activities. In the long run, the result of anti-competitive policies is less innovation, lower growth and a smaller pie to share.

The greatest scourge to the honest Midwest farmer is not unfavorable weather, pestilence or disease. Far worse for them is the plague of politicians who create an artificial market in which only those with influence can truly compete. Defeating the budget-busting 2012 farm bill is the best chance at a good harvest.

The chances of that happening, however, are slim to none.  Regulatory capture is as common now as government debt and unemployment.  It is a systemic problem that rewards rent seekers and the well connected to the detriment of innovators and competition.  It is the antithesis of capitalism.

Unless we have the will to stop this sort of cronyism, we’re on a short road to failure.  This is another, in a long line of government programs, that are unsustainable, destructive and just flat something government shouldn’t be involved in.

But my guess is, this time next year, we’ll still be talking about it, politicians will still be condemning it and nothing will change except the higher national debt number.

~McQ

Twitter: @McQandO


Call it crony capitalism or venture socialism, either way, it sucks

And neither have anything in common with real capitalism.   But they do have a tendency to privatize profits while socializing losses.

Examples abound, and unsurprisingly, most come in the “green” industries associated with long-time Democratic fund raisers and Obama supporters.  For instance, one with which we’re all familiar:

The most publicized instance of so-called “crony capitalism”—investing taxpayer dollars in firms tied to political donors—is the failed solar panel company Solyndra. The Fremont, Calif., firm was the first to receive a taxpayer-backed loan guarantee from the Department of Energy (DOE) in September 2009, worth more than $530 million. The funding for the loan was allocated in the controversial stimulus package passed earlier that year.

Obama bundler George Kaiser was a major stakeholder in Solyndra through his Kaiser Family Foundation, and made several trips to the White House in March 2009 to meet with senior administration officials. In July 2009, Kaiser bragged about securing face time with “all the key players in the West Wing of the White House,” as well as his “almost unique advantage” when it came to steering taxpayer funds toward his pet causes.

“There’s never been more money shoved out of the government’s door in world history, and probably never will be again, than in the last few months and in the next 18 months,” Kaiser told members of the Tulsa Rotary Club. “And our selfish parochial goal is to get as much as it for Tulsa and Oklahoma as we possibly can.”

Although things did not pan out for Solyndra—the company filed for bankruptcy in September 2011—Kaiser can expect to see a better return on his investment than American taxpayers. As part of an agreement to restructure Solyndra’s loan agreement in 2010, Obama’s DOE granted priority status to private investors like Kaiser with respect to the first $75 million recovered in the event of the firm’s bankruptcy, a move that many suspect violated federal law.

Taxpayers, meanwhile, are unlikely to recover much of the money invested on their behalf.

Sound familiar (*cough* GM *cough*).  There the bankruptcy laws were tinkered with as well.  And in the case of Solyndra, that isn’t the full extent of the cronyism:

Emails uncovered by Congressional investigators reveal that Solyndra helped secure its $535 million loan guarantee with the help of Steve Spinner, another prominent Obama donor. After bundling more than $500,000 for Obama in 2008, Spinner was named to the White House transition team and later served as “chief strategic operations officer” of the DOE loan program that funded Solyndra.

Here’s the other shoe:

Spinner’s wife Allison worked for a law firm that represented Solyndra and several other green energy outfits that applied for taxpayer funding. Records show that her firm, Wilson Sonsini Goodrich & Rosati, received $2.4 million in federal funds in legal fees associated with Solyndra’s loan application.

Ethical questions?  Conflict of interest?  Bah.  And what in the world is the Federal government doing paying a law firm of an applicant for legal services in relation to their loan application?

Like I said, Solyndra is just one of many examples.  It just happens to be the best known of the bunch.  I would bet you never heard of this little bit of cronyism:

California investment guru John Doerr, for example, has personally contributed more than $170,000 to Democratic campaigns and committees since 2008, and more than $2 million over the past 20 years. His investment firm, Kleiner Perkins Caufield & Byers (KPCB), which lists former Vice President Al Gore as a partner, has given more than $1 million to Democrats since 2005.

An early and outspoken advocate for federal investment in “green” technology, Doerr was named to the president’s Economic Recovery Advisory Board in 2009, where he helped craft the $787 billion stimulus package. Of the 27 companies list in KPCB’s “green-tech” portfolio, 16 received some form of taxpayer support.

And:

Another prominent Obama donor who has benefitted handsomely from the president’s policies is Steve Westly. A frequent guest at White House events and state dinners, Westley served as California co-chair and a National Finance Committee member of Obama’s 2008 campaign and currently sits on the DOE’s Energy Advisory Board.

He has bundled at least $700,000 in campaign donations for Obama since 2008 and personally given about $260,000 to Democratic campaigns and committees since 2007.

Westley’s investment firm, the Westly Group, had a financial stake in four green energy companies that received more than half a billion dollars in federal funding in 2009. The group’s website once touted the firm as being “uniquely positioned” to take advantage of the influx of taxpayer funding in green technology, and currently notes that “To win in the clean technology space, a company must navigate the halls of government.”

Westly has openly acknowledged that knowledge of federal policy is key to investing in green technology. In response to a reporter’s question about which green energy companies he likes to invest in, Westly said: “Who cares what I think. Let’s talk about ‘what does Obama like? Here’s what he likes,’ because here’s where the federal government is putting money. And let me tell you, whatever he likes, that’s what I like.”

Access and a relationship equal profit.  Nice, if you’re an insider, huh?

Here’s something Obama “liked”:

One of the companies Obama “liked” was the Exelon Corporation, a Chicago-based utility and recipient of hundreds of millions of dollars in stimulus funding. One of the most politically connected firms in the country, Exelon employees have made up one of President Obama’s top sources of campaign contributions throughout his career.

Exelon was Obama’s fourth-largest campaign donor when he ran for Senate in 2004, contributing more than $73,000, according to the Center for Responsive Politics. The firm donated $326,000 to Obama’s presidential campaign in 2008. The firm has ties to several top Obama bundlers, as well as to Obama campaign adviser David Axelrod and former White House chief of staff and current Chicago mayor Rahm Emmanuel.

As the Washington Free Beacon reported in June, an Exelon subsidiary was recently awarded a lucrative 20-year contract to install solar panels manufactured by federal inmates on government facilities.

The “Chicago way”. 

Finally, cronyism comes in many forms:

DreamWorks Animation CEO Jeffrey Katzenberg has bundled at least $500,000 for Obama’s reelection campaign, and is the largest contributor to Priorities USA, the Obama-allied Super PAC.

The Securities and Exchange Commission is currently investigating whether DreamWorks made illegal payments to Chinese officials in order to secure exclusive film rights in the communist nation. The New York Times reported that Katzenberg, as well as Vice President Joe Biden, were intimately involved in negotiating an agreement under which China would up its annual quota of foreign-produced films from 20 to 34 and allow studios to keep a greater percentage of box-office revenue.

DreamWorks announced a $2 billion deal with the Chinese government in February to build a production studio in Shanghai just days after Chinese Vice President Xi Jinping held an extensive meeting with Barack Obama in Washington, D.C.

Nice to have the leverage to engage the president and VP in your business pitch, no?  Guess 500K bundles help make that happen.

So, wondering what happened to all the money?  Still perplexed as to what the stimulus was spent on?  Bruce Bartlett knows:

“As of March 31, $452.6 billion of net stimulus funds had been disbursed in ways that show up in the national income accounts. Of this, the vast bulk, $399.7 billion, went for transfer payments. Another $9.6 billion went for subsidies and $68.1 billion for capital transfers to state and local governments. Only $37.8 billion went for consumption and $11.8 billion for investment — the only two categories of outlays that we know add to growth.”

And in the “investment” category, most of that apparently went to cronies.

That’s no way to run a government – an honest government, that is.

~McQ

Twitter: @McQandO


Economic Statistics for 19 Jul 12

The following statistics were released today on the state of the US economy:

In a week confused by seasonal adjustments, initial unemployment claims rose 34,000 in to 386,000, which is much higher than expected. But the 4-week average is actually lower, down 1,500 to a 375,500. Continuing claims rose 1,000 to 3.314 million. The 4-week average is also up 1,000 to 3.312 million.

The Bloomberg Consumer Comfort Index remained unchanged at -37.5 in the latest week.

Existing home sales fell 5.4% in June to a much weaker than expected 4.37 million annual rate, the lowest of the year. The declines are across the board in both single-family homes and condos, and in all geographical regions.

The Philadelphia Fed Survey rose to -12.9, indicating a slower rate of contraction in the district from last month.

The Conference Board’s index of leading indicators fell 0.3% in June. But the coincident index rose 0.2% in June, indicating current growth in the economy.

~
Dale Franks
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NYT says Obama distraction campaign may not be working

Much to the Obama campaign and the Time’s chagrin I would suppose.  You see, the economics and politics of unemployment are personal, and most of those who find themselves in that position don’t care about Bain Capital or Romney’s tax returns.  That’s essentially the message the most recent NYT/CBS News poll reported:

Despite months of negative advertising from Mr. Obama and his Democratic allies seeking to further define Mr. Romney as out of touch with the middle class and representative of wealthy interests, the poll shows little evidence of any substantial nationwide shift in attitudes about Mr. Romney.

Personal situations trump political rhetoric, especially when the political rhetoric has no bearing on that personal situation.  Apparently, unlike the media, most of the public still realize what is important.  They aren’t caught up in the politics.  They want answers to the hard questions … the questions the Obama campaign would just as soon ignore.

Thus the distraction game.

But, apparently, that game isn’t working.

The new poll shows that the race remains essentially tied, notwithstanding all of the Washington chatter suggesting that Mr. Romney’s campaign has seemed off-kilter amid attacks on his tenure at Bain Capital and his unwillingness to release more of his tax returns. Forty-five percent say they would vote for Mr. Romney if the election were held now and 43 percent say they would vote for Mr. Obama.

When undecided voters who lean toward a particular candidate are included, Mr. Romney has 47 percent to Mr. Obama’s 46 percent.

Now that’s pretty much dead even with the challenger, despite all the negative ads and stories, having the slight edge.

Frankly, given history, it shouldn’t be this close at this point.  Even Jimmy Carter had a lead at this point in his re-election campaign.

The poll is another among many indicators that the Obama presidency is in trouble.  Take it for no more than that.  It’s a temperature check.  A snapshot. 

However, when put together with all the other temperature checks, you begin to see a campaign that isn’t at all healthy.

I can’t say I’m shedding too many tears over that.   And it also says that the voters are, at least to this point, able to push aside the distractions, focus on the key issues and hold a president accountable that desperately seeks someone (or something) to blame his failure on or an issue to distract from that failure.

Not working.

~McQ

Twitter: @McQandO


Economic Statistics for 18 Jul 12 (Updated)

The following statistics were released today on the state of the US economy:

Housing starts rebounded 6.9% in June, to a 0.760 million annual rate. Housing permits, an indicator of future activity, fell -3.7% to a 0.755 million annual rate.

The Mortgage Bankers’ Association reports mortgage applications rose 16.9% last week, with purchases down -0.1%, and re-finance applications up 22.0%.

Update: The Fed’s Beige Book report on the economy, while still troubling, was a bit more optimistic than expected. Retail sales, housing, loan demand, and inflation were moderately positive. Manufacturing is still weak, however. Overall, though, the report indicates a weakening recovery and sluggish economy. The strength in retail sales also is at odds with the official reporting, which indicates substantially more weakness than the Beige Book reports.

~
Dale Franks
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The most underreported energy related story?

Did most of you know about this?

The U.S. Energy Information Administration’s (EIA) June energy report says that energy-related carbon dioxide fell to 5,473 million metric tons (MMT) in 2011.

That’s down from a high of 6,020 MMT in 2007, and only a little above 1995′s level of 5,314 MMT.

Better yet, emissions in the first quarter of 2012 fell at an even faster rate — down 7.5% from the first quarter of 2011 and 8.5% from the same time in 2010. If the rest of 2012 follows its first-quarter trend, we may see total energy-related carbon dioxide emissions drop to early-1990s levels.

Wow.  Victory for the enviro crowd, yes?  Regulation has succeeded, right?  The government has turned the tide?

Nope.  In fact it has nothing to do with the enviro crowd, government or regulation.

Two dirty words: Hydraulic fracking.  Two more for good measure: Natural gas.  And the dirtiest word of all: Markets.

Those three have combined, via a price point that has stimulated demand and made the conversion of coal plants economical to drive down emissions as they produce electricity more cheaply and efficiently.  This trend began in 2007 and is now having a real effect:

Increasingly, power plants are turning to natural gas because it has become abundant, and therefore cheap. And though technology is improving our ability to reduce emissions from coal usage, natural gas is still a much cleaner source.

Natural gas, given the extensive finds and the exploitation, is much cheaper than coal now.  In fact:

Indeed, natural gas has just passed an important milestone. As noted by John Hanger, energy expert and former secretary of the Pennsylvania Department of Environmental Protection: "As of April, gas tied coal at 32% of the electric power generation market, nearly ending coal’s 100-year reign on top of electricity markets."

That’s how it works in markets, or is supposed too.  The fact that emissions are down is an actual side benefit of the process.  And it is a process that has managed to work despite government and environmental groups like the Sierra Club’s interference or attempted interference in the process (the Sierra Club has declared war on natural gas and fracking after accepting millions in previous years from the natural gas industry). 

It is a part of the creative destruction of the capitalist process.  Coal will still have its uses, but just as it was replaced as a primary fuel for heating homes last century, it is now being replaced as a primary fuel for generating electricity for the same reason – there is a cheaper and more efficient fuel (which also happens to have fewer emissions) that is easier to produce and deliver than coal. 

At some point coal producers will either have to reinvent themselves or find something else to do.  And on the other side, opportunities will expand within the natural gas industry as more and more demand builds.

But shhhhh.  Don’t want anyone knowing this all happened because of markets.  Why that would hurt the argument that it requires government intrusion, regulation and the pressure of environmental groups to make things like this happen.

Can’t have that.

Forward.

~McQ

Twitter: @McQandO


Economic Statistics for 17 Jul 12

The following statistics were released today on the state of the US economy:

The consumer price index was unchanged for June, and up 1.7% from last year. The core CPI rose 0.2%, and is up 2.2% from last year.

The Housing Market Index jumped the most in 10 years, rising a huge 6 points to 35, its highest level since March 2007. This has analysts hoping that the housing market has turned the corner.

Industrial production rose 0.4% in June, but capacity utilization at the nation’s factories fell slightly to 78.9%. Manufacturing output rose 0.7% for the month.

Net inflow of long-term securities rose $55.0 billion in May, up from April’s revised $27.2 billion. Foreign official institutions were the heaviest buyers of US securities in the month.

In weekly retail sales, Redbook shows a very disappointing 1.7% year-on-year sales increase, one of the lowest since April 2011. ICSC-Goldman Store Sales showed no increase from last week, and the year-on-year increase was 2.6%, which, while still on trend, is moving south.

~
Dale Franks
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