A Rookie President

We can lose some very big games with this rookie. National Review

The Ghost of Soviet Past

Where are we going? Is this what we really want?

A spectre is haunting America—the specter of unbridled Big Government command-style economics. The ghost of Soviet past is paying America a little visit. And its chilling effects are getting worse by the day.

Liberty and Tyranny

The Modern Liberal believes in the supremacy of the state, thereby rejecting the principles of the Declaration and the order of the civil society, in whole or part.
For the Modern Liberal, the individual's imperfection and personal pursuits impede the objective of a utopian state. In this, Modern Liberalism promotes what French historian Alexis de Tocqueville described as a soft tyranny, which becomes increasingly more oppressive, potentially leading to a hard tyranny (some form of totalitarianism).
As the word 'liberal' is, in its classical meaning, the opposite of authoritarian, it is more accurate, therefore, to characterize the Modern Liberal as a Statist. ... The Statist ... knows that despite his successful usurpations, enough citizens are still skeptical and even distrustful of politicians and government that he cannot force his will all at once. Thus he marches in incremental steps, adjusting his pace as circumstances dictate.
Today his pace is more rapid, for resistance has slowed. ... The Conservative does not despise government. He despises tyranny. This is precisely why the Conservative reveres the Constitution and insists on adherence to it. An 'effective' government that operates outside its constitutional limitations is a dangerous government. ... The Conservative is alarmed by the ascent of a soft tyranny.... He knows that liberty once lost is rarely recovered. He knows of the decline and eventual failure of past republics. And he knows that the best prescription for addressing society's real and perceived ailments is not to further empower an already enormous federal government beyond its constitutional limits, but to return to the founding principles. A free people living in a civil society, working in self-interested cooperation, and a government operating within the limits of its authority promote more prosperity, opportunity, and happiness for more people than any alternative. Conservatism is the antidote to tyranny precisely because its principles are the founding principles." --author and radio talk-show host Mark Levin in his book "Liberty and Tyranny"

A New Order Rises: President Fires GM Agency Head

The GM and Chrysler took the bait, I mean the bail out. They are now told what to do. These companies have been taken over. GM and Chrysler are no longer independent companies, these are now de facto agencies of the federal government.

Ford has rejected the bail out funds. Guess what, that company is gaining market share.

Who wants to buy a car made by the government?

Team Obama fired GM CEO Rick Wagoner Sunday afternoon - A ‘Truly Breathtaking’ Departure

The peculiar link between the markets and a 1957 novel

I understand sales of Atlas Shrugged are moving up quickly. Up to No. 17 on Amazon.

This link to the Toronto Star - March 8, 2009 reports the spikes in sales of 'Atlas Shrugged' , which coincides with specific developments in the economy.

Foreign Relations - Syria

Syrian Reactions to Initial Contacts with Obama Administration: The U.S. has Capitulated to Syria and Iran; The Resistance, has Changed the World - not Omaba

The wrong-minded auto rescue

Why is Washington determined to continue to bail out Detroit, despite the objections of the public (61% opposed it, according to a CNN poll in February)?

The public is correct. Money diverted to a dying industry is taken away from areas with better prospects.

Why build cars that no one wants?

Fortune - March 30, 2009

Inside the world's biggest hedge fund

Bridewater Founder Ray Dalio had a great year last year. His fund, Pure Alpha generated a return of 14% when 70% of hedge funds lost money last year and the average fund fell 18%.

Where does Dalio think then economy is going? He call it a D-process, which is when an economy has an unsustainable high debt burden and monetary policy ceases to be effective (interest rates being close to zero) and as a result the central banks has no way to stimulate the economy. To compensate, the value of debt must be written down (depression) or the central bank must print money (inflation).

The level of debt as % of GDP in the US has skyrocketed past the previous highs last seen in the early 1930s.

Dalio's view is that stocks will get materially cheaper and that we will have to go through an important debt restructuring program; lots of assets will be going on sale and there will be a shortage of buyers.

Hedge funds will not be immune. Hedge funds are 75% correlated to the S&P.

Fortune Magazine - March 30, 2009

Stocks Drop Most in 3 Weeks as U.S. Warns on Banks, Carmakers

It continues.... World Markets fall again

March 30 (Bloomberg) -- U.S stocks slumped the most in three weeks as the Obama administration warned that some banks will need more government aid and that General Motors Corp. and Chrysler LLC have one last chance to restructure. The Standard & Poor’s 500 Index fell 3.5 percent to 787.53 and the Dow Jones Industrial Average tumbled 254.16 points, or 3.3 percent, to 7,522.02.

UK PM...The devalued Prime Minister of a devalued Government

I caught this clip last week by Daniel Hannam, MEP. It was good. Thousands have seen it. The same will be said of the Omaba.

I'm back again...

Had a few days out of town. Traveled over to the Isle of Skye. It was good.

UK government bond auction fails

The UK Treasury has failed to sell all its government bonds in an auction for the first time since 2002. It's because the government has to borrow so much, that any such flop is unnerving.

What Big Government you have!

Inflation or Deflation? That is the Question.

I think we all recognize that we are in a time of change. The leader of the US has promised change. We are all beginning to wonder what this change will actually be. Some are now having second thoughts for voting for change. We are where we are now. And the question is where are things going.

I do think we are in for change...we have seen it start. What I am assessing is what will this change be. Will it be more of the same? I think we can easily concluded that the answer is no. We are in a major state of change...more financially, economically and politically. This change could have serious and significant affect upon us all.

I have been thinking about this for some time, concerned with the situation. The question that we all need to ask ourselves and assess is whether the change will be (1) inflationary or deflationary or (2) hyper inflation or Great Depression 2.

I reject the first option of inflationary/deflation case. We are not in a situation that we will have either moderate inflation or deflation/recession.

The current environment indicates major forces in play; with economic events that have not been seen for 50-80 years.

So what will it be? HyperInflation or the Great Depression 2? Or will all of the action by the governments be successfull and return us to the norm?

Enough for now. Post your comments...what do you think? And what do you think should be done, and what are you doing ?

Social Behaviour

Animals that were formerly self-sufficient are modifying their behavior to take advantage of what they expect to be a new set of societal norms in the next four to eight years. This black bear has ceased hunting and, instead, has begun to merely sit outside a U.S. Fish & Wildlife Service office, waiting to be fed and to have his winter den dug by government employees. In honor of what is believed to be the cause of this behavior, area residents are calling him "Bearack Obama."

Next Bubble to Pop - US Bonds? NYT

Treasuries bear risk, in particular, the risk that flows from crowd psychology. Last month, in his annual letter to shareholders Warren Buffett wrote: “When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.”

How China sees the world - The Economist

IT IS an ill wind that blows no one any good. For many in China even the buffeting by the gale that has hit the global economy has a bracing message. The rise of China over the past three decades has been astonishing. But it has lacked the one feature it needed fully to satisfy the ultranationalist fringe: an accompanying decline of the West. Now capitalism is in a funk in its heartlands. Europe and Japan, embroiled in the deepest post-war recession, are barely worth consideration as rivals. America, the superpower, has passed its peak. Although in public China’s leaders eschew triumphalism, there is a sense in Beijing that the reassertion of the Middle Kingdom’s global ascendancy is at hand.

What Changed?

Economic Policy Conundrum

The world's economy is facing years of ill-begotten economic policies. The worst economic downturn in 80 years is the result of these policies. Healthy economic growth is savings based and thus is sustainable. However, the economic growth that has occurred was not based on savings and production, but was credit and policy induced. It was and is artificial and thus unsustainable.

The policies that were implemented included:

• Monetary policies - these kept interest rates low (artificially) for years
• Tax policies - favour debt financing over equity
• Regulatory policy - that allowed financial institutions to mismanage their operations eg excessive leverage
• Social policy - which pushed home ownership regardless of affordability
  

All of this combined created credit induced artificial demand. More and more debt was created.

The current world's view is that the solution lies in re-inflating the assets values. The proposal is to create more debt and more demand to lift the asset values. But this was the cause of the problem! Debt-financed demand can't not be sustained indefinitely and that is why the policy is doomed to fail in the long-term.

Economic demand has to be savings driven to be sustainable.

What now the governments has recently announced that in addition to debt driven demand, that they are now will use the nuclear option....of printing money which is a debasement of the currency. That will push up asset values in nominal terms but not real; as well as pushing up costs. Inflationary environments....everyone losses.

What is needed? It is an economic Marshall Plan for the world markets and economies. It requires work, it requires sacrifice, it requires lower expectations.

I think the people want change, and are willing to go with lower growth based on real economic principles and values.

However, what is required is need real leadership, leadership on savings and reducing costs. The US Congress needs to be an example and they are failing the world. Instead they are delivering empty promises, rhetoric and phony legislation. Appalling and disappointing.

Quant Easing: Central Banks Unleash the 'Nuclear' Option

Printing Money....Is this really the solution to the financial and economic problems?

Well, the Central Banks and Government think that is the only solution left. That is somewhat of a concern, isn't it? I do not think the people really think that is a good answer. No one wants hyper inflation; that is just a crazy environment that no one enjoys. It is a wealth destoyer.

I think we and the governments need to be honest. There are no quick fixes. We have over spent; and the debt that has been created needs to be reduced to a more reasonable level. The solution of more spending and more debt does not solve the problem.

The solution of QE or printing money, is not a real solution. It is a fraud; and it it is accepted then, the economy will suffer more.

More on QE -
Desperate times call for desperate measures. As the global “credit crunch” has grown increasingly severe, central bankers are examining the Great Depression of the 1930s for possible parallels that are relevant to today’s situation. Most worrisome, is the synchronized meltdown of the global stock markets, which had wiped-out $32-trillion of wealth, on top of another $10-trillion in losses in real estate.