Back from Seattle, The Week's Econ Events, Topped Off With Jackson Hole, and Harrisburg Ready to Tell Bondholders to Hit the High Road

Got back in from Seattle early this morning.  The 19th annual State Policy Network conference was great! I got to experience the wonderful TSA screening procedure, of which I wrote an article on for the Mises Institute today. Like most conferences however, I was unable to keep detailed track of news.  A few things stuck out, mainly Warren Buffet shoving a few billions into Bank of America, a kind of war of words between Mr. Banker Insider Nouriel Roubini and Zerohedge, Bernanke's much hyped Jackson Hole speech, and Harrisburg readying to miss a bond payment.

On Buffet's BoA investment, clearly he thinks the Bank is a worthy moneymaker.  Giving that Obama's speech on a jobs plan is coming September 5th and will most likely contain a push for the infamous infrastructure bank, it looks like Bank of America will benefit financially:

Wall Street Journal misses big point on Obama's upcoming proposal...The bigger point is that Obama WH apparently doesn’t probe the motives of the bankers who are pushing the infrastructure bank on them. I'm guessing that UBS and others are spinning it as “Hey, you’ll be releasing the efficiencies of the private markets and you’ll get more projects underway and faster.”

They probably leave out the part about why the U.S. government — the most efficient, lowest cost borrower in human history — needs Wall Street banks to step in the middle with a fat margin to finance public works.

Buffet has a history of using the government to shut down or buy out competitors, so it looks like something big may be coming BoA's way via the White House and Congress.  Banktocracy at it's finest.

When it comes to the banks and insider deals, no one knows better than Nouriel Roubini.  It seems like Roubini took offense to the bankster's best friend, Zerohedge, during the week over Twitter:

Check out these Roubini tweets:

@zerohedge knows nothing about keynes & the academic studies fiscal stimulus Read all 9 of them & then talk again about "voodoo keynesians"

---

@zerohedge read 9 studies showing that Keynesian stimulus worked.Then write a scientific rebuttal if you got 1.Enough of your juvenile rants

All Roubini has to do is click on over to the Mises Institute if he wants a good rebuttal of Keynesian economics.  Either Roubini actually believes is own nonsense or is worried that the party is coming to an end and has taking it upon himself to keep the status quo.  John Tamny had the perfect description of Roubini about a week in ago at RealClearMarkets:

Moving to the left, Binyamin Appelbaum of the New York Times referred to Perry's outburst as "horrifying", while the vastly overrated Nouriel Roubini, still clinging to his 15 minutes after an economy call that he got right for all the wrong reasons, viewed what Perry said as "criminal".

The biggest news of the week was the much hyped, and much disappointing Jackson Hole speech by the Bernank.  To sum it up rather quickly, here is the word bubble:

According to Zerohedge, there was 10 mentions of inflation and 0 of deflation.  Krugman may be off weeping somewhere.  While QE3 was rumored, Bernake has put it off for now:

Federal Reserve Chairman Ben S. Bernanke said the central bank still has tools to stimulate a recovery that has been weaker than forecast while sticking to his view that growth will pick up.
Bernanke, in a speech today to central bankers and economists at an annual forum in Jackson Hole, Wyoming, didn’t give details on the measures the Fed might take or signal when or whether policy makers might deploy them. A second day has been added to the next Federal Open Market Committee meeting in September to “allow a fuller discussion” of the economy and the Fed’s possible response, Bernanke said.

Let's add a few things up: Buffet investing in BoA + Obama job plan coming in September + and possibly Bernanke announcing QE3 also in September = more privatizing the profits and socializing the losses.

Meanwhile, Europe continues to be the horny drunk girl who keeps ruining the party:

Capital flight from European banks has now reached such a state that for one undisclosed bank needed emergency funding last week for a mere $5 million. Previously, the ECB stepped in to provide $500 million in emergency liquidity measures to non-disclosed banks.

As money flees Europe, it lands in US banks that do not know what to do with it. Capital flight has led to negative interest rates in the US.

Duration	U.S.	Japan	Germany	UK
3-Month	-.01	0.10	0.97	0.51
6-Month	0.02	0.11	0.56	0.59
12-Month	0.08	0.12	0.59	0.53
2-Year	0.19	0.14	063	0.59
3-Year	0.32	0.17	0.67	0.75
5-Year	0.93	0.34	1.20	1.36
7-Year	1.52	0.59	1.63	1.84
10-Year	2.18	1.04	2.14	2.49
30-Year	3.55	2.01	2.98	3.75

European banks are struggling to stay afloat despite the ECB's help, this is what is holding back a Fed induced recovery here in the states.

Though money printing has accelerated in the U.S., it looks like my hometown is making international news as it threatens to leave bondholders on the hook:

Harrisburg, Pennsylvania’s capital, may miss $3.3 million in general-obligation bond payments due Sept. 15 if council members fail to approve a portion of a fiscal rescue plan, according to the mayor’s spokesman.
The city faces a $5 million deficit and is trying to arrange for a $7.5 million advance on a lease of municipal land to the Harrisburg Parking Authority.

I have written on this issue and the correct solution before.  If the admirably inept Mayor Thompson had any sense of decency, she would lapse on the bond payment.  It would send the perfect signal, that actions have consequences and the city's creditors miscalculated in investing.  Borrowing your way out of debt makes as much sense as Robert Reich playing in the NBA.  The sooner Keynesian clowns realize this, the better.

I will end with a very high profile endorsement of Ron Paul's campaign, the legend himself Jim Rogers!