Everybody Do The Twist! More Bank Runs, and Buffet's Father a Rothbardian

As expected, Bernanke and his cohorts (there were 3 dissenters) have launched "Operation Twist":

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative.

I was watching CNBC live as the announcement unfolded and let me tell you, the talking heads were having a field day.  The market literally pricing in the "Twist" beforehand wasn't a consideration, they finally got something right unlike that pesky housing bubble.  Zerohedge has the best summary of the plan (like always):

• FED SEES `SIGNIFICANT DOWNSIDE RISKS' TO ECONOMIC OUTLOOK
• FED TO BUY TREASURIES WITH 6-YEAR TO 30-YEAR REMAINING MATURITY
  
• FED LEAVES FEDERAL FUNDS RATE TARGET AT ZERO TO 0.25 PERCENT
  
• FED SAYS PROGRAM PUTS `DOWNWARD PRESSURE' ON LONG-TERM RATES
  
• FED TO SELL TREASURIES WITH 3-YEAR OR LESS REMAINING MATURITY
  
• PLOSSER, FISHER, KOCHERLAKOTA DISSENT FROM FOMC DECISION
  
• FED REPEATS `EXCEPTIONALLY LOW' RATES THROUGH AT LEAST MID-2013
  
• FED TO BUY $400B OF LONG-TERM DEBT, SELL $400B SHORT-TERM DEBT
  
• FED EXTENDS AVERAGE MATURITIES OF SECURITIES HOLDINGS
  
• FED TO REINVEST MATURING HOUSING ASSETS IN HOUSING DEBT
• FED SAYS INFLATION `APPEARS TO HAVE MODERATED'
• FED SEES `CONTINUING WEAKNESS' IN LABOR MARKET
• FED PURCHASES TO BE DISTRIBUTED ACROSS FIVE SECTORS
• FED SAYS 32% OF DEBT PURCHASES MATURE FROM 6- TO 8-YEARS
• FED SAYS 32% OF DEBT PURCHASES MATURE FROM 8- TO 10-YEARS
• FED SAYS 4% OF DEBT PURCHASES MATURE FROM 10- TO 20-YEARS

In other words: $400 billion in POMOs over the next 8 months or so, with the monthly at about $50 billion. Also MBS repurchases for a token amount. No LSAP as most expected, and no IOER rate cut. Goldman once again about half of what it expected.

Here were the immediate consequences *spoiler* it was a slight success:

While "Operation Twist" is expected to not have any substantial effect (Bernanke is trying to goose those long term oriented animal spirits, there is no monetary base increase), Robert Wenzel brings up some interesting history regarding "Operation Twist":

John F. Kennedy was elected president in November 1960 and inaugurated on January 20, 1961. The U.S. economy had been in recession for several months, so the incoming Administration and the Federal Reserve wanted to lower interest rates to stimulate the weak economy...

The Kennedy Administration’s proposed solution to this dilemma was to try to lower longer-term interest rates while keeping short-term interest rates unchanged—an initiative now known as “Operation Twist” in homage to the dance craze then sweeping the nation. The idea was that business investment and housing demand were primarily determined by longer-term interest rates, while cross-currency arbitrage was primarily determined by short-term interest rate differentials across countries. Policymakers reasoned that, if longer-term interest rates could be lowered without affecting short-term yields, the weak U.S. economy could be stimulated...

Here is the 2004 report from 3 Fed economists on the success of "Operation Twist":

A second well-known historical episode involving the attempted manipulation of the term structure was so-called Operation Twist.  Launched in early 1961 by the incoming Kennedy Administration, Operation Twist was intended to raise short-term rates (thereby promoting capital inflows and supporting the dollar) while lowering, or at least not raising, long-term rates. (Modigliani and Sutch 1966).... The two main actions of Operation Twist were the use of Federal Reserve open market operations and Treasury debt management operations.. Operation Twist is widely viewed today as having been a failure, largely due to classic work by  Modigliani and Sutch.

So who were those three economists that came to this conclusion?

Vincent R. Reinhart, Brian P. Sack and BEN S. BERNANKE.

Wenzel's conclusion:

That experiment is now being conducted on the economy of the United States with the $400 billion Operation Twist announced today. How big was the original Operation Twist? $8.8 billion.

Yes, the current Fed chairman is the man who wrote that the first Operation Twist was a failure and that it was possibly so  because it wasn't large enough---and he is now testing the US economy to see if a greater size Operation Twist will work differently!

Hope everyone likes their cages because in the eyes of Bernanke we are all experimental rats and "Operation Twist" is another effort to get us to run faster in our exercise wheels.  One of my former bosses told me once that he thought it was worrisome that one man can have so much power over an economy.  He doesn't even know the half of it.

Surprisingly, looks like some of the GOP leaders decided to grow a spine last night and sent an open letter to Bernanake:

Dear Chairman Bernanke,

It is our understanding that the Board Members of the Federal Reserve will meet later this week to consider additional monetary stimulus proposals. We write to express our reservations about any such measures. Respectfully, we submit that the board should resist further extraordinary intervention in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people.

It is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate. To the contrary, there has been significant concern expressed by Federal Reserve Board Members, academics, business leaders, Members of Congress and the public. Although the goal of quantitative easing was, in part, to stabilize the price level against deflationary fears, the Federal Reserve’s actions have likely led to more fluctuations and uncertainty in our already weak economy.

We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy. Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers. To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.

Ultimately, the American economy is driven by the confidence of consumers and investors and the innovations of its workers. The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy if measurable outcomes cannot be demonstrated.

We respectfully request that a copy of this letter be shared with each Member of the Board.

Sincerely,

Sen. Mitch McConnell, Rep. John Boehner, Sen. Jon Kyl, Rep. Eric Cantor

This looks more like populist vote grabbing than actual monetary knowledge to me, but it's a nice effort.  And of course the left comes out and says the GOP are against any further stimulus today, as if the Fed printing money, giving it to their buddies on Wall Street, and inflationary expectations driving up the price of food is really going to help the poor.  I thought the left hated supply side economics anyway?

Perhaps the strangest news of the day when it comes to the Fed was this:

Alan Greenspan went to the Federal Reserve headquarters Tuesday as the Federal Open Market Committee began a two-day meeting on monetary policy.

He was caught on camera arriving at the Fed.

But officials claim that he wasn't there to advise on monetary policy.

He was there to get a haircut. And not a metaphorical reduction in the principal value of a bond. An actual haircut.

The Fed has an in-house barbershop.

Are you sh!tting me?  What kind of haircut is Greenspan getting? A comb over?  Either Greenspan is senile (a big possibility) or there is something fishy going on.

Yesterday, I highlighted some of the problems with Euro banking zone.  Both Chris Martenson and Gary North have great articles on this issue today.  Martenson, with the help of Charles Hugh Smith, does a good job of bringing up the fascist nature of the Euro zone and central banking in general (I highlighted the Austrian parts):

The key feature of the Neoliberal model borrowed from Classical Capitalism is that the risks of enterprise and the investing of capital are (supposedly) transferred from the Central State to the newly liberalized private sector. But this turns out to be a charade played out for public-relations/perception management purposes: when the expansion of credit and financialization ends (as it must) in the tears of asset bubbles popping and massive losses, then the Central State absorbs the losses which were supposedly private.
My definition of Neoliberal Capitalism differs significantly from the conventional view: markets are opened specifically to benefit the Central State and global corporations, and risk is masked by financialization and then ultimately passed onto the taxpayers. In this view, the essence of Neoliberal Capitalism is: profits are privatized but losses are socialized, i.e. passed on to the taxpayers via bailouts, sweetheart loans, State guarantees, the monetization of private losses as newly issued public debt, etc.
The Neoliberal model is superficially a win-win for both global corporations and Central States, as the Central State benefits from the explosion of tax revenues created by financialization and the expansion of credit, and from the schwag showered on political apparatchiks by the global corporations.
From a Neoliberal perspective, the union consolidated power in a Central State proxy (The E.U.) and provided large State-approved cartels and quasi-monopolies access to new markets..

While this is on point for the most part, the rest of the article comes off as a jab against free trade.  Not sure if this was Martenson's intention, but he really nails the privatizing gains, socializing losses aspect of our current financial system.  This can only last for so long though as demonstrative of Europe.  Politicians get addicted to easy money and make too many promises they can't keep before cashing out.  When things start crumbling, people begin trying to get out.  Yesterday, I talked a bit about the bank runs going on in Europe right now.  Chalk up another one to the list, via Bloomberg:

Lloyd’s of London, concerned European governments may be unable to support lenders in a worsening debt crisis, has pulled deposits in some peripheral economies as the European Central Bank provided dollars to one euro-area institution.
“There are a lot of banks who, because of the uncertainty around Europe, the market has stopped using to place deposits with,” Luke Savage, finance director of the world’s oldest insurance market, said today in a phone interview. “If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them.”

Expect more reports like this in the future.  I am reading Barry Ritholtz's fantastic "Bailout Nation" right now and this was the kind of behavior going on in the lead up to Bear Sterns and Lehman Brothers.

In lieu of Warren Buffet's recent call for the U.S. to raise taxes on the rich, Philip Klein of The Examiner has an interesting article out on Buffet's father.  Turns out he was more Rothbardian than limousine liberal:

Warren Buffett may be a committed liberal Democrat, but his father, Howard Buffett, was a four-term Republican member of Congress (1943-49 and 51-53), a John Bircher who fought FDR and warned that the expansion of government was eroding individual liberty.
“Today’s situation is the result of an alarming and devious governmental intervention in the economic affairs of the nation for objectives not contemplated by the men who wrote the Constitution,” Buffett lamented in a lecture excerpted in the December 1956 issue of the libertarian journal The Freeman. “Historically, in America the producer was protected by government in the enjoyment of the fruits of his labors. That protection of his property explains the glorious material progress already recounted.”

Buffett also wrote an article opposing the draft in a 1962 issue of the New Individualist, his piece squeezed in between contributions from legendary free market economist Milton Friedman and libertarian intellectual Murray Rothbard. (Rothbard had high praise for Buffett).

I love his scathing criticism of the Marshall Plan and foreign intervention in general:

He attacked the Truman doctrine on the floor of Congress, declaring, "Even if it were desirable, America is not strong enough to police the world by military force. If that attempt is made, the blessings of liberty will be replaced by coercion and tyranny at home. Our Christian ideals cannot be exported to other lands by dollars and guns."
In a 1948 article promoting the gold standard (PDF), Buffett explained his opposition to the Marshall Plan, making what today would be considered a “crony capitalism” critique.
“There are businesses that are being enriched by national defense spending and foreign handouts,” said Buffett. “These firms, because of the money they can spend on propaganda, may be the most dangerous of all. If the Marshall Plan meant $100 million worth of profitable business for your firm, wouldn't you Invest a few thousands or so to successfully propagandize for the Marshall Plan? And if you were a foreign government, getting billions, perhaps you could persuade your prospective suppliers here to lend a hand in putting that deal through Congress.”

Buffet's father must roll in his grave when he hears the types of things his son advocates for now.  While it's always great to see Rothbard mentioned in the mainstream news, Jonah Goldberg, whether he meant to or not, paid awesome tribute to him in the Los Angeles Times recently:

And now let us recall the "Fable of the Shoes."

In his 1973 "Libertarian Manifesto," the late Murray Rothbard argued that the biggest obstacle in the road out of serfdom was "status quo bias." In society, we're accustomed to rapid change. "New products, new life styles, new ideas are often embraced eagerly." Not so with government. When it comes to police or firefighting or sanitation, government must do those things because that's what government has (allegedly) always done.

"So identified has the State become in the public mind with the provision of these services," Rothbard laments, "that an attack on State financing appears to many people as an attack on the service itself." The libertarian who wants to get the government out of a certain business is "treated in the same way as he would be if the government had, for various reasons, been supplying shoes as a tax financed monopoly from time immemorial."

If everyone had always gotten their shoes from the government, writes Rothbard, the proponent of shoe privatization would be greeted as a kind of lunatic. "How could you?" defenders of the status quo would squeal. "You are opposed to the public, and to poor people, wearing shoes! And who would supply shoes … if the government got out of the business? Tell us that! Be constructive! It's easy to be negative and smart-alecky about government; but tell us who would supply shoes? Which people? How many shoe stores would be available in each city and town? … What material would they use? … Suppose a poor person didn't have the money to buy a pair?"

Goldberg goes on to defend Ron Paul against the accusations of heartlessness for his remarks about how the government shouldn't force others to pay for someone's health care who can't afford it.  This is the type of column that needs more mainstream publication.  As more and more people become dissatisfied with the status quo, eye opening examples such as the one Rothbard presented can have a substantial impact.

With tomorrow's GOP debate fast approaching, I just wanted to point out this recent Tony Bennet interview with Howard Stern.  Remember Ron Paul getting booed  last debate for correctly pointing out that the Taliban targets us because we have been screwing around in the Middle East for over half a century?  Turns out Bennet agrees:

“To start a war in Iraq was a tremendous, tremendous mistake internationally,” he said.
Stern then asked Bennett about how America should deal with terrorists, specifically those responsible for the 2001 attack on the World Trade Center.
“But who are the terrorists? Are we the terrorists or are they the terrorists? Two wrongs don’t make a right,” Bennett said.
In a soft-spoken voice, the singer disagreed with Stern’s premise that 9/11 terrorists’ actions led to U.S. military involvement in Iraq and Afghanistan.
“They flew the plane in, but we caused it,” Bennett responded. “Because we were bombing them and they told us to stop.”
Following seconds of silence, Stern said that his guest was “making some good points.”

Nicely put.  Thanks to Lew Rockwell, I am looking forward to Bennet's version of "Lady is a Tramp" with Lady Gaga.

Update- Apparently R.E.M. broke up today.  Very sad but here is a really good performance of my favorite song by them, it just so happens to be their debut on national television:

Modern Banks Runs and What to Expect from Bernanke

I hope everyone likes the new banner up top.  Big thanks to Parker for the assistance, the check is in the mail.

Reggie Middleton of BoomBustBlog.com has been someone whom I have paid a bit of attention to over the past year.  Judging by this great Zerohedge post today, I should be paying more attention.  The subject is the number of bank runs occurring in response to the Euro Zone.  While these transactions have been reported, Middleton does a great job putting them together:

Roughly two quarters ago, I warned subscribers that markets were overlooking a distinct concentration of risk in France. Interestingly enough, many believed France to be a stalwart, alongside fellow ECB boss Germany, as one half of the strongest economic duo in the EU. Our take was that France's exposure to Italy (and the other PIIGS states) through its highly leveraged and funding mismatched banking system was a house of cards waiting to happen. I also asserted that Italy was nowhere near as strong a credit as the media and the sell side has made it out to be.

So, what does this have to do with French banks?

Well, if you subscribed, you'd already know, but I'll spill the beans anyway. On Wednesday, 03 August 2011 I digitally penned "France, As Most Susceptble To Contagion, Will See Its Banks Suffer". Long story, short - France and French banks are uniquely and solely situated to suffer from excessive leveraged exposure to both Greece AND Italy. What an enviable position. Italy CDS seemed to be underpriced for quite some time, but not anymore. The cat is apparently out of the bag. Interested parties should have acted back when the origianal BoomBustBlog Italian Finances report was released: March 2010 (exactly 1 1/2 years ago): Italy public finances projection. According to ZH, Italy 5 Year hit 520 earlier, a new all time record.

So what has the exposure French banks have to Italy caused, see the Financial Times:

Siemens withdrew more than half-a-billion euros in cash deposits from a large French bank two weeks ago and transferred it to the European Central Bank, in a sign of how companies are seeking havens amid Europe’s sovereign debt crisis.

Middleton explains the lack of confidence:

I'm sure many of you may be asking yourselves, "Well, how likely is this counterparty run to happen today? You know, with the full, unbridled printing press power of the ECB, and all..." Well, don't bet the farm on overconfidence. The risk of a capital haircut for European banks with exposure to sovereign debt of fiscally challenged nations is inevitable. A more important concern appears to be the threat of short-term liquidity and funding difficulties for European banks stemming from said haircuts. This is the one thing that holds the entire European banking sector hostage, yet it is also the one thing that the Europeans refuse to stress test for (twice), thus removing any remaining shred of credibility from European bank stress tests. As I have stated many time before, Multiple Botched and Mismanaged Stress Test Have Created The Makings Of A Pan-European Bank Run!

See more evidence, via The Telegraph:

Senior sources have revealed that leading banks, including Barclays and Standard Chartered, have radically reduced the amount of unsecured lending they are prepared to make available to eurozone banks, raising the prospect of a new credit crunch for the European banking system.

Standard Chartered is understood to have withdrawn tens of billions of pounds from the eurozone inter-bank lending market in recent months and cut its overall exposure by two-thirds in the past few weeks as it has become increasingly worried about the finances of other European banks.

Barclays has also cut its exposure in recent months as senior managers have become increasingly concerned about developments among banks with large exposures to the troubled European countries Greece, Ireland, Spain, Italy and Portugal.

And Reuters:

Bank of China (601988.SS), a big market-maker in China's onshore foreign exchange market, has stopped foreign exchange forwards and swaps trading with several European banks due to the unfolding debt crisis in Europe, three sources with direct knowledge of the matter told Reuters on Tuesday.

So there you have it, the slowly unfolding detachment from Euro zone risk by global banks, financial institutions, central banks, and companies.  Middleton's conclusion that modern day bank runs are now caused by institutions and not grandma rushing to get the last bit of her retirement out before it all goes bust looks spot on.  Congrats on the great call Reggie.  And these are some nicely done graphs on the absurdity of IMF and government economic projections of Greece and the U.K.:

So as Bernanke and his cohorts are meeting today and tomorrow, the rumor mill is filled with assumptions that operation twist (buying at the far end of the yield curve to drive long term rates down) is coming.  A few days ago, I remarked on some of David Rosenberg's predictions from this FOMC meeting.  Today, Mish weighs in on Rosenberg's predictions:

Mish Analysis of 6 Alternatives

1. Buy the long end of the curve: What would it do? 10-Year yields are near all-time below 2%. Would another .5% lower to 1.5% accomplish anything? About the only thing I can think it might do is increase the Fed's exit problem down the road.
2. Eliminate Interest on Excess Reserves: I think the Fed should eliminate interest on reserves because printing money then handing interest straight over to banks on that money is outrageous. However, banks are capital impaired. Paying interest on excess reserves is one way of slowly recapitalizing banks over time. It would be a huge policy error for the Fed (from their point of view, not mine), to eliminate interest on excess reserves.
3. Announce an explicit ceiling on the 10-year note yield (say 1.5%): Rosenberg calls this the preferred scenario. It has three problems: It will not accomplish much, if anything, for the real economy. It would increase the exit problem of the Fed down the road. And worst of all it would increase the exit problem by an unknown amount. Defending an interest rate target, as Switzerland just did, means buying unlimited quantities of treasuries from any sellers.
4. Buy foreign securities: This one is interesting, and little discussed. Moreover, the market is clearly focused on problems in Europe. Were the Fed to announce backstopping debt of Italy, it could easily start a huge market reaction (if a market reaction is the goal). However, there are obvious political problems of this policy and if the ECB will not do buy sovereign debt, why should the Fed? Note that once the EFSF is in place the ECB stops buying debt.
5. Announce an explicit higher inflation target or perhaps a lower unemployment rate target: The goal of driving rates lower while announcing a higher interest rate target sure seems counterproductive, especially at the long-end of the yield curve. Should the Fed announce a lower unemployment target, members of Congress would pressure the Fed until that goal was reached. The Fed most assuredly will not want that pressure.
6. Fixed-term loans to banks at low or zero interest: Banks will not lend for 10 years or even 2 years (remember they are capital impaired and have few good credit risks willing to borrow) if the Fed will only backstop the loan for 90 or 180 days. I am not sure the Fed would try this anyway, but if they did I fail to see how it would spur much lending. It does nothing to solve capital impairment.

Mish has some nice thoughts, and yes, operation twist probably won't accomplish much.  That means Bernanke will attempt it.  It would be pretty interesting if Bernanke tried bailing out Europe (more directly than he is now anyway) and see the political consequences of such.  It would definitely make Geithner jump for joy.  It would be my great hope that the public would catch on to the "good ole boys" shenanigans going on if it should happen.  Lending directly to the private sector would be a radical move and I am not sure if Mish is right on with his analysis.  If Bernanke really wanted to get banks to lend, he will find some way to do it, even if it means picking up the phone and screaming "lend lend lend!! I will give you all the liquidity you want!"  This would have grave consequences of course so it depends on what kind of reputation Bernanke wants to leave with.

PIMCO has an interesting report out today on the potential central banking endgame scenario that could play out very soon, via Zerohedge:

In an environment where large fiscal adjustments are required, central banks rely on mechanisms that are effective. Indirectly through asset purchases or liquidity injections, central banks could competitively devalue their currencies. As competition intensifies, cooperation and coordination among global central banks could diminish and engender a timing dilemma for policy reversal. At the same time, decisions may become asymmetrical as central bank actions are not synchronized but rather self-centered. Both cases of Switzerland and Japan showed by targeting the currency in reaction to flight to safety and negative real interest rates, each central bank acted on its own in a non-cooperative manner, contrary to what the coordinated dollar liquidity action suggests.

Quite the prisoner's dilemma going on here.  If one central bank goes rogue from the coordinated devaluation effort, it could cause an incredible flight to safety for whoever wants to be a rebel.

I will end with a recent interview of Tom Woods by Press TV:

Woods is fantastic as always.

Update- Forgot to mention, had a post on the American Thinker today entitled "Mark Zandi: Never Right, Yet Still Trusted."  An excerpt:

It's premature to say the economy is reviving in a consistent way, but I think it is fair to say the economy isn't going to weaken any further."

So predicted Moody's chief economist Mark Zandi on July 6, 2007, right in the midst of a deflating housing bubble.  As the rest of the world knows, the U.S. economy didn't bottom out till well over a year later.  Chalk up another failed prediction for Mr. Zandi who holds a worse record than Charlie Sheen in rehab.  Even more ironic is the fact that he works for one of the three stooges of rating agencies that were blind to the toxicity of subprime mortgage paper.

Like Alan Greenspan, whose over-hyped reputation as a central planner provided cover for easy credit policies which inflated the housing bubble, Mark Zandi still has the nerve to pop up on national media outlets and share his infinite wisdom.

How an Economy Works, Obama's New Buffet (Give Me Campaign Donations) Tax Works and Paul Volcker Calls Out Paul Krugman (Sort Of)

I couldn't help but notice this genius quote from commenter "doug" at Cafehayek the other day:

How the Economy Works:
Two parties freely enter into an agreement whereby one performs and action and the other renumerates. And they are both better off.

That is the true definition of a free market, plain and simple.  There is no worker exploration, no consumer profiteering, no Marxist chains to throw off.  Just social cooperation in the aggressive pursuit of a better standard of living.  The alphabet soup of regulatory agencies born out of Franklin D. Roosevelt’s fetish for power and control serve no real purpose but to bolster government payrolls and guarantee votes under the charade of “doing something.”  In turn, government sponsored enterprises are mere funnels of taxpayer money to mitigate private risk and preserve the cash flow of campaign contributions.  It's always inspiring to hear leftists wax on so eloquently about all the good government does when it comes to regulation yet when pressed on unintended consequences, you might as well be talking about quantum physics.

"What do you mean Fannie and Freddie sucked up the risk of subprime mortgages from the banking industry so that more money could be lent in the name of universal home ownership?  We need to house everyone, we live in a society!"  Yes yes, guns and badges in the name of universal harmony, the same tired, old argument.  Government money printing and financing never creates assets bubbles, it's those greedy capitalists trying to better their lives.

So in that spirit, we have President Obama come out today with a new proposal to screw with an already convoluted tax system:

Key features of Obama's plan:
$1.5 trillion in new revenue, which would include about $800 billion over 10 years from repealing the Bush-era tax rates for couples making more than $250,000. It also would place limits on deductions for wealthy filers and end certain corporate loopholes and subsidies for oil and gas companies.

Illustrating Obama's populist pitch on taxes, he also suggested that Congress establish a minimum tax on taxpayers making $1 million or more in income. The measure – the White House calls it the "Buffett Rule" for billionaire investor Warren Buffett – is designed to prevent millionaires from taking advantage of lower tax rates on investment earnings than what middle-income taxpayers pay on their wages.

Damn all those filthy rich earning over $250,000 a year!  How dare they try and make more money!  Obama claims this isn't class warfare and just simple math, well let's a closer look:

Adjusted Gross Income, 2009	Average Federal   Income Tax Rate (%)
$10,000 to $15,000	6.8%
$15,000 to $20,000	6.6%
$20,000 to $25,000	8.7%
$25,000 to $30,000	9.7%
$30,000 to $40,000	10.0%
$40,000 to $50,000	10.6%
$50,000 to $75,000	11.6%
$75,000 to $100,000	12.3%
$100,000 to $200,000	16.3%
$200,000 to $500,000	24.6%
$500,000 to $1,000,000	28.8%
$1,000,000 to $1,500,000	29.4%
$1,500,000 to $2,000,000	29.6%
$2,000,000 to $5,000,000	29.7%
$5,000,000 to $10,000,000	29.1%
$10,000,000 or more	26.3%
Average	17.8%

From Mark Perrry:

We now have a proposal for a tax policy - the "Buffett Rule" - based on Warren Buffett's anecdotal "evidence" of his and his employees' tax burdens.  But that "evidence" seems pretty far-fetched and not consistent with: a) average federal income tax rates available from the IRS, nor b) average tax rates for all federal taxes paid, from the CBO.  Buffett's anecdote has to be an outlier or exception, because under the current federal tax system, the average "super-rich" taxpayer pays taxes at a rate 2-3 times the average secretary.

The U.S. federal income tax system is highly progressive (as it's intended to be, and not regressive as Buffett wants us to believe from his "analysis" of his and his employees' tax rates) and higher income groups pay taxes at a higher rate on average, as a share of their taxable income, from a low of 6.8% on incomes between $10,000-$15,000 to a high of 29.7% for incomes between $2,000,000-$5,000,000. 

Here is the usually pretty good Charles Gasparino on the new tax hike scheme:

Thing is, taxing income won’t get squat from the president’s favorite limousine liberal, Warren Buffett -- the guy who supposedly inspired Obama’s plan. Buffett doesn’t collect most of his money as the normal income that the tax would hit. (His salary is just $100,000 a year.) 

OK, forget the hypocrisy that Buffett at 81 has already made his many billions so he couldn’t really care less how much he’s taxed. Forget, too, that since he makes most of his income through investments, this tax apparently won’t affect him or his Wall Street buddies much at all.

And let's not forget the most important consequence of taxing the rich.  The super rich are the ones who have enough income to put aside substantial amounts of money to be made available for capital investment and increased production.  I am not saying we should get down on our hands and knees and hail the super rich, but perhaps in the midst of a severe economic downturn we should think twice about taking more money out of the private sector and give it to the institution that brought us great successes such as Solyndra, cash for clunkers, Fannie Mae, Freddie Mac, and all those wonderful shovel ready projects that, according to Obama, weren't so "shovel ready."  You would be better off putting blue kool aid powder in a bottle of clear cleaning solution and handing it to a small child.

I hate to do this, but I gotta give praise to former Fed chairman Paul Volcker whose scathing New York Times editorial had the fantastic irony of being in the same issue as Paul Krugman's latest column.  Some excerpts:

So now we are beginning to hear murmurings about the possible invigorating effects of “just a little inflation.” Perhaps 4 or 5 percent a year would be just the thing to deal with the overhang of debt and encourage the “animal spirits” of business, or so the argument goes.

It’s not yet a full-throated chorus. But remarkably, at least one member of the Fed’s policy making committee recently departed from the price-stability script.

The siren song is both alluring and predictable. Economic circumstances and the limitations on orthodox policies are indeed frustrating. After all, if 1 or 2 percent inflation is O.K. and has not raised inflationary expectations — as the Fed and most central banks believe — why not 3 or 4 or even more? Let’s try to get business to jump the gun and invest now in the expectation of higher prices later, and raise housing prices (presumably commodities and gold, too) and maybe wages will follow. If the dollar is weakened, that’s a good thing; it might even help close the trade deficit. And of course, as soon as the economy expands sufficiently, we will promptly return to price stability.

Well, good luck.

Some mathematical models spawned in academic seminars might support this scenario. But all of our economic history says it won’t work that way. I thought we learned that lesson in the 1970s. That’s when the word stagflation was invented to describe a truly ugly combination of rising inflation and stunted growth.

My point is not that we are on the edge today of serious inflation, which is unlikely if the Fed remains vigilant. Rather, the danger is that if, in desperation, we turn to deliberately seeking inflation to solve real problems — our economic imbalances, sluggish productivity, and excessive leverage — we would soon find that a little inflation doesn’t work. Then the instinct will be to do a little more — a seemingly temporary and “reasonable” 4 percent becomes 5, and then 6 and so on.

It's surprising that the NYT would even publish this given that the biggest cheerleader of inflation in the country writes a regular column for them.  While Volcker says we aren't on the edge of serious inflation, a 23% increase in M2 may beg to differ pretty soon.  And the latest CPI at 3.8% sure doesn't look like deflation to me.  Still, when a former Fed chairman, who has obvious experience taming inflation to begin with, comes out and issues a warning about the inflationary fetish Bernanke and Krugman have, it says something; especially with a guy this tall:

Update- Ever wonder where the term "American exceptionalism" comes from?  Here ya go:

Most politicians assume the term was coined by a Founding Father or some other traditional figure. In fact, it was coined by a communist. In 1927, a leader of the American Communist Party by the name of Jay Lovestone used the term "American exceptionalism" to describe the way in which our economic system differed from the systems in other countries.

It's comforting to see Rick Santorum citing a communist

Fantastic Interview with Jim Grant, Pirate Party Gets 9% in Berlin, and Why Young College Students Like Rick Perry

Wow, I just read one of the best reviews ever, or at least one of the best in a very long time.  It basically sums up a lot of what I have been talking about and the kind of erratic monetary trends we are experiencing.  The interview is with the always impeccable Jim Grant and is conducted by Barron's.  First on if gold is in a bubble (note, what Grant says is what I tell everyone that tells me gold is in a bubble):

If a bubble connotes absurdity, what is absurd are the monetary conditions that supported this gold bull market. Gold is an expression of the world's justifiable distrust of the way our central bankers conduct their affairs. The poetry of it is that it can't be quantified. The central banks are unworthy opponents. The Fed has pledged 0% money-market rates for the next two years, so that's not much competition. And the governments of the world are taking under advisement this notion called financial repression—short-circuiting market mechanisms, capital controls, punitive taxes or intrusive taxes and the like.

I of course don't say it in quite the brilliant prose that Grant does.  And here he follows up with has got to be one of the best quotes I have read since, well, probably Gary North's last article:

Q: The gold standard, which you've championed, is now getting its due.
A: I'm talking about the classical gold standard that ended with the guns of August 1914, not the successors. Indeed, some of the variations are not much better than the present-day paper-money system. One of its essential features is that there is no reserve currency. Markets are distorted by the huge outpouring of paper currencies. With the gold standard, nobody gets a special credit card, everyone gets a debit card, and deficits and surpluses are settled promptly in cash. The essential feature of the current monetary system is procrastination. It's "Oh, we'll get to that, we'll balance accounts later." But it turns out we don't.

"With the guns of August 1914" is a powerful connotation and perfect analogy for what happened to the classical gold standard.  It reminds me of one of the greatest Mises quotes that Robert Wenzel happened to cite today:

The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.

Grant goes on about Paul Krugman's and Ben Bernanke's "deflation fairy":

Both Alan Greenspan and Bernanke in 2001 to 2003 were on a campaign to anticipate a deflationary threat. They said that we had to act lest we tumble down the stairs that Japan did in the 1990s. But never once did they define this phantom that they held out to be a clear and present danger. Most Americans spend some part of the weekend hunting down everyday lower and lower prices. And in a world blessed with digital technology and with the introduction of great new swathes of territory in which something like market economics are practiced, and with the inclusion of hundreds of millions of willing new hands into the world's labor force over the past 15 years or so, wouldn't you expect a tendency toward falling prices? That is called progress.
Deflation to me is trouble with debt, a symptom of which is falling prices. In a debt crisis, companies can't finance, they have to liquidate inventory, sell stuff at a loss—that's deflation. But Bernanke and his predecessor never distinguished between everyday lower prices and deflation. Having made their error, they suppressed the funds rate for more than a year at 1%. If there had been a sensible discussion about this, much of the distress of the past 10 years could have been avoided.

As Gary North points out, Japan experienced no deflation during its "lost decade."  Just stable and rising prices (chart is Japan from 1993-2010):

Here is the chart on Japan's output for that time period:

Yup, stable and rising prices with increased output make for a real "lost decade."  It's a wonder the Japanese are still alive after that horrible deflation.

Grant goes on in the interview and mentions the kind of weird monetary trends we are seeing lately that I often speak about:

The Fed has achieved something unique in this cycle. It has given us symptoms both of inflation and deflation. The Fed has overdone it with quantitative easing and rate reductions; the symptoms of that are the dollar exchange rate, the price of gold in dollars, commodity markets generally and a lot of speculative assets. The measured rate of rise in consumer prices is not minus 3.6%, year over year, it's 3.6%. We have too much debt, and a consequence of that is a tendency for some prices to fall. We have too much money, a symptom of which is that some prices rise. What an interesting world we live in.

I was a bit hesitant to jump on the recent biography by Grant about a former Speaker of the U.S. House of Representatives, but he sure makes it sound intriguing:

Q: You just published Mr. Speaker!, a biography of the great House Speaker Thomas B. Reed. What did you learn?
A: He was that rarest of creatures, an intelligent, principled and, not least, funny politician, who transformed Congress through his parliamentary skill and wit. In Reed's day, the final quarter of the 19th century, the wingnuts, the eccentrics, were those who argued for a paper currency uncollateralized by gold. Today, the eccentrics are the gold people. The establishmentarians are teaching at Princeton and running the central bank. I learned that cycles forever change and that wingnuts and establishmentarians change places, even before you know it.

Like I said before, Grant hit it out of the park on this interview.  He sums up a lot of what I have been feeling lately in his always articulate manner.

For some more interesting news, see the results of a recent regional election in the city-state of Berlin, Germany:

Germany's centre-left Social Democrats beat Angela Merkel's conservatives in a regional election in the city-state of Berlin on Sunday, handing the chancellor her sixth defeat in seven elections this year.

The SPD won 29.5 percent of the vote in Berlin, down from 30.8 percent in 2006 in Germany's largest city with 3.4 million inhabitants, according to an exit poll on ARD television. SPD Mayor Klaus Wowereit appeared to be headed for a third five-year term, with the Greens as his most likely coalition partner.

The CDU won 23.5 percent, up slightly from 21.3 percent in 2006 but well below the 40 percent the party used to win in Berlin in the 1980s and 1990s. The Greens won 18 percent, up from 13.1 percent in 2006, and the Left party fell to 11.5 percent from 13.4 percent. The Pirate Party won a stunning 8.5 percent.

No surprise here with Merkel's "screw taxpayers, save the banks" positions, but the Pirate Party's success is unprecedented.  So what's up with the Pirate Party?

The party supports the preservation of current civil rights in telephony and on the Internet; in particular, it opposes the European data retention policies and Germany's new Internet censorship law called Zugangserschwerungsgesetz. It also opposes artificial monopolies and various measures of surveillance of citizens.
The party favors the civil right to information privacy and reforms of copyright, education, computer science and genetic patents.
It promotes in particular an enhanced transparency of government by implementing open source governance and providing for APIs to allow for electronic inspection and monitoring of government operations by the citizen.

Sound like my kind of dudes.  Looks like the Ron Paul influence is going worldwide.  Speaking of the only presidential candidate worth supporting, his Constitution Day money bomb just reached $1,000,000 and he just won the California Republican straw poll by a large margin:

This weekend, the California Republican Party had its 2011 Fall Convention at the JW Marriott Hotel in downtown Los Angeles. One presidential candidate, Minnesota Rep. Michele Bachmann, spoke at a dinner on Friday night, and Saturday morning's breakfast featured two more contenders: Michigan Rep. Thaddeus McCotter and Texas Rep. Ron Paul.
Paul's fans were out in force both outside the hotel -- awaiting his arrival -- and inside the ticketed Lincoln Clubs Breakfast. He spoke last and was late, allowing McCotter to add a question-and-answer period to his prepared remarks (more on that later, check back).

Below find the results:

Congressman Ron Paul (374, 44.9%)

Governor Rick Perry (244, 29.3%)?

Mitt Romney (74, 8.8%)

Congresswoman Michele Bachmann (64, 7.7%)

Jon Huntsman (17, 2.0%)

Herman Cain (15, 1.8%)

Newt Gingrich (14, 1.7%)

Thad McCotter (7, 0.8%)

Rick Santorum (7, 0.8%)

Gary Johnson (2, 0.2%)

Fred Karger (1, 0.1%)

Write-ins (15, 1.8%)

Another astounding victory that will surely be ignored by the media.  The circle of life continues, but here is an interesting excerpt from the article:

They mostly consisted of groups of roving college-age men and women in "Americans for Perry" T-shirts.
Asked why she liked Perry, one twentysomething said, "He's awesome!"

Those kids are morons, clearly Ron Paul is more awesome than Rick Perry any day!  But seriously, that should tell you a lot about Rick Perry's supporters.

More Mark Zandi Brilliance, Gordon Brown Surprisingly Tells teh Truth, and Switzerland Funds Prostiution Stalls

I mentioned another idiotic proposal by the ever incompetent Mark Zandi of Moody's a few days ago.  The new brilliant proposal by Zandi involved Obama's home refinancing program HARP (sounds devilishly close to TARP) which pushes Fannie and Freddie to "forgo borrower income verification and detailed home appraisals to keep costs down" as well as offer new refinancing options to borrowers including not charging add-on rates to those with low credit scores or who have lost a ton of equity in their homes.  Do you smell that?  Yup, the proposal stinks to high heaven with the stench of being another bailout.  Just think of all the votes Obama can buy with this proposal!

So let's get this straight:  the government, including the Bush and Clinton administrations, promotes home ownership by lowering lending standards for the GSEs in charge, this comes back to bite the gov't in the ass as the people that took out mortgages to begin with really couldn't afford them, the Federal Reserve played its part with Greenspan lowering interest rates to create a housing bubble in order to cover for the stock bubble popped he had created, and now taxpayers are on the line for possibly trillions when all is said in done.  We are living in paradise baby!

But Zandi's plan is bad for just those reasons, as Mish points out:

Common sense dictates (and history proves), losses accelerate as you loosen standards. Forgo income verification and ignore credit scores as Zandi proposes and losses would soar.

It is ludicrous to propose loan modifications to those with no job or no income, and those significantly upside down on their mortgage. The former cannot afford any payment and history proves the latter will walk away anyway.

Loose standards created this problem, it's no surprise Zandi thinks they are a solution.  Just look at the company he works for that rated a bunch of toxic subprime mortgage paper as fine.

Even after all of this (sorry for the rant, I am honing my chops for an article I am writing on Zandi), I dug up this nugget of his today:

Just last month, for example, the chief economist for Moody’s Analytics Mark Zandi released an analysis of stimulus measures work. Zandi advised John McCain in 2008 and is anything but a committed liberal. But his study, supported by the full weight of Moody’s modeling expertise, clearly shows that spending is the best form of stimulus.

Yeah yeah, more stimulus, more big government sympathizing, your a true non-liberal Zandi, keep telling yourself that.  Here is the clincher:

The single most effective form of stimulus, the study found, are increased outlays for food stamps — which create $1.71 in economic activity for each dollar in federal spending.

Jesus Christ on a bicycle! (sorry, always wanted to say that) I think I figured out how to fix the economy!  Just lower the standards for food stamp approval and dedicate more public funds to the program! After all, Zandi has already proven he is in favor of lowering standards, just imagine the prosperity that will reign down from the fairy tale multiplier of 1.71!  Oh but wait, I am not stopping there.  With newly acquired food stamps, the recipients should be forced to purchase only organic foods!  What's that Barry? I thought you wanted to make Michelle happy?

Okay, enough fun with Zandi, let's pick on another joke in the public policy field.  I am referring to former UK Prime Minister Gordon Brown who had the pleasure of leaving his country in fiscal shambles.  But wait, it looks like Brown isn't completely blind to the troubles the Eurozone is facing, from a recent speech:

"In 2008, governments could intervene to sort out the problems of banks. In 2011, banks have problems, but so too do governments."

"We’ve now got the interplay between banks that are not properly capitalized and sovereign debt problems that have arisen partly because we’ve socialized or accepted responsibility for the banks’ liabilities."

Well no shit Sherlock.  Brown might realize the obvious but probably doesn't put together that bailing out the banks the first time may have given them the incentive to not change practices since the ECB and respective governments came to the rescue before.  A 6th grader could probably make the connection which probably explains why a former Prime Minister can't.

Europe may be screwed, but at least in one place they are investing in the world's oldest profession:

Zurich city parliament on Wednesday rubber-stamped a loan earmarked for the construction of drive-in sex stalls where punters can meet prostitutes at purpose-built venues away from the city centre.

Representatives voted 74 to 30 in favour of the new development in Alstetten to the west of the city, Tages-Anzeiger newspaper reported.
Ten garage-like booths will be erected on derelict land in an industrial area in Alstetten, complete with parking spaces and alarm buttons. The so-called "performance stalls" will be the first of their kind in Switzerland if the project goes ahead.

Government financed prostitution? I am sure this counts as some type of stimulus project.

Update- RIP Carl Oglesby, here is description via Eric Garris at Antiwar.com:

Oglesby was a leader and one-time president of Students for a Democratic Society (SDS). SDS was the leading antiwar students group in the 1960s until factional politics caused the implosion of the group in 1969. Another SDS leader once described the makeup of SDS: “We have within our ranks Communists of both varieties, socialists of all sorts, 3 or 4 different kinds of anarchists, anarchosyndicalists, syndicalists, social democrats, humanist liberals, a growing number of ex-YAF libertarian laissez-faire capitalists, and, of course, the articulate vanguard of the psychedelic liberation front.”
Oglesby was a proponent of working with libertarians and conservative antiwar activists in such groups as Young Americans for Freedom on war and other issues. He argued that “the Old Right and the New Left are morally and politically coordinate.”

Random Observance of the Day, Crony Capitalism and Kleptocracy Reign Supreme, and New Mises Article and Liberty Web Alliance Acceptance

I drove my grandmother to a plastic surgeon today so she could get a mole removed.  On our way there, I mentioned a few of the pieces I had published this week and out of the blue (well not exactly, I mentioned something about econ) she asked me if interest rates were going up anytime soon because she was making pennies on her CDs.  I broke the news of course that Bernanke would rather bailout the banks and the government by keeping interest rates low till 2013.  Now I didn't use those exact words, but I probably should have since it's the truth.  Needless to say, she wasn't very happy, and nor should she be.  There is a good Rothbard quote as a footnote in Man, Economy, and State:

Did Keynes realize that he was advocating the not-so-merciful annihilation of some of the most unfit-for-labor groups in the entire population- groups whose marginal value productivity consisted almost exclusively in their savings?

David Rosenberg has an interesting prediction for Bernanke's next move, which will undoubtedly include bankrupting retirees.  The market has some pretty big expectations for "Operation Twist" coming soon:

Market participants now think the Fed will likely announce a plan to sell short-dated Treasury debt and use the proceeds to buy long bonds after its meeting later this month.

But Rosenberg thinks the great bearded one may go further, via Zerohedge:

1. Just go back to August 9th. The Fed was supposed to make a more emphatic comment in the press statement about "extended period" as it pertained to the length of time the Fed would stay ultra-accommodative on the rates front. Bernanke went much further than anyone thought with his pledge to keep the funds rate at the floor at least to mid-2013.
2. Ben Bernanke has shown repeatedly that he is willing to take risks and be very aggressive.
3. Everyone knows that the Dow finished the August 9th session with a huge 430 point gain after the FOMC press statement was fully digested. Not only that, but when Bernanke held his two-day meeting in mid-December of 2008 and unveiled QE1, the Dow soared 360 points. And last November, the day after that two-day meeting when Bernanke made it clear in his Washington Post op-ed article how key it was to ignite the stock market, the Dow jumped 220 points. It may all be just for a near-term trade, but in an industry where every basis point counts, who wants to be short knowing all that?
4. At that August meeting, we know both from the statement and minutes that additional rounds of unconventional easing were discussed. And Mr. Bernanke made it very clear at Jackson Hole that they would be on the table again at the coming meeting
5. The Fed would like to be out of the picture during the election campaign (especially if Richard Perry ends up winning the GOP nomination).
6. The Fed has cut its GDP forecasts at each of the past three meetings.
7. The stock market is actually little changed from where it was at the last meeting and we know based on that Washington Post op-ed, that it is equity valuation (specifically the Russell 2000) that Ben wants to see rally. Sanctioning lower bond yields is just a means to that end.
8. There is no fiscal stimulus to bolster the economy, with the odds very high that the Obama jobs plan — some in his own party object to the package as per yesterday's New York Times — will be dead-on-arrival on the House floor. The Fed is the only game in town.
9. Financial conditions have tightened nearly 100 basis points since the spring and deserve a policy response.
10. Bernanke announced at Jackson Hole that this coming meeting was going to be a two-day affair, not one day. The last time he did this was back in December 2008 and that was when he invoked QE1. There has to be a reason why it is two days, and it must be because he wants to build the case for three dissenters. The Board is being sequestered for a reason!

So what are Bernanke's other options you may ask:

1. Expand the balance sheet further and simply buy more bonds (at the longer end of the curve).
2. Eliminate the interest paid to commercial banks on excess reserves (to try to spur lending).
3. Announce an explicit ceiling on the 10-year note yield (say 1.5%), which the Fed has done in the distant past. Based on Bernanke's prior rhetoric, this would seem to be a preferred strategy (though the Fed relinquishes control of the balance sheet).
4. Buy foreign securities (bail out Europe and weaken the U.S. dollar — talk about killing two birds with one policy stone).
5. Announce an explicit higher inflation target or perhaps a lower unemployment rate target (i.e. reinforce the DUAL mandate).
6. As Mr. Bernanke stated for the record in November 2002, the Fed does have broad powers to lend to the private sector indirectly via banks, through the discount window. It could offer fixed-term loans to banks at low or zero interest, with a wide range of private assets (including, among others, corporate bonds, commercial paper, bank loans, and mortgages) deemed eligible as collateral. For example, the Fed might make 90-day or 180-day zero-interest loans to banks, taking corporate commercial paper of the same maturity as collateral. Such a program could significantly reduce liquidity and term premiums on the assets used as collateral. Reductions in these premiums would lower the cost of capital both to banks and the nonbank private sector.

Lend to the private sector more aggressively?  Isn't that the job of the federal government with all its success promoting green energy (*cough* Solyndra *cough*)?

Whether this move happens will remain to be seen but if Bernanke attempts to do this, he may be throwing in his nomination for the "best central planner in the world" contest.  Who knows, maybe he will give Benito Mussolini and Alan Greenspan a run for their money.  All he needs to do is inflate another bubble to beat Greenspan.  I bet Bernanke carries a picture of Mussolini in his wallet next to his mother and children who he's continually trying to bankrupt.  I mean, why shouldn't we trust him to pick which industries deserve some newly printed greenbacks?  He has done a stupendous job with the economy thus far.  Don't give me that smirk, in the words of Paul Krugman, it could always be worse!!!

For some more crony capitalism and more proof of the irrefutable intelligence our great leaders posses, check out this revelation:

Treasury Secretary Timothy Geithner ignored President Barack Obama’s order to consider dissolving Citigroup, a new book by Pulitzer Prize-winning author Ron Suskind claims.

Here is a genius idea, let the TBTF banks....fail!  What an unorthodox solution!  Instead of having the government bail it out and then tell it to break apart, look at how much time and effort we can save by just letting them fail! Shocking!

And of course Turbo Tax Timmy is over in Europe most likely assuring the powers that be that U.S. taxpayers will be there to buy up Euro bonds should they ever come to fruition:

Meanwhile Bernanke will just loan Euro banks money, thus perpetuating the sham.  And you wonder why this type of stuff happens ***caution for disturbing imagery***:

Today in Greece - A man pours a flammable liquid on his body to set himself on fire outside a Piraeus bank branch in Thessaloniki in northern Greece September 16, 2011. The 55-year old man had entered the bank and asked for a renegotiation of his overdue loan payments on his home and business, according to police, which he could not pay, but was refused by the bank (Reuters).

And yet the wonderful politicians in Greece will still opt for austerity rather than outright default.  How much more money is gonna be wasted before the inevitable happens?  How many more incidents like this are gonna occur?

Enough with all the doom and gloom, time for some good news.  I have a Mises Daily up today entitled "TSA and Unproductive Labor."  An excerpt:

No business wants the blood of a deadly crash or hijacking on its record. Such would mean a blemish on its record and a substantial loss of market share. At the same time, private airports would not waste money on inefficient personnel positions. A balance between efficiency, safety, and overall productiveness would be aggressively pursued. Like all market operations, equilibrium is never truly reached, but its pursuit yields results that satisfy customers and raise the standard of living for all those involved. When it comes to the TSA, Americans have become complacent in the degrading treatment they are forced to experience in order to fly. As the abuses continue however, public outcry will only increase. Yet the worst part of the TSA isn't the civil-liberty violations; it is the squandering of taxpayer funds for an operation that could be adequately provided through private firms. The use of airplanes and flight has brought about incredible advancements in transportation, communication, division of labor, and overall productivity. Increased mobility of the citizenry and increased mobility of capital always pose a danger to the state. The threat of foreign attacks has only increased the parasitic notion that such advances in human life must be controlled by our "leaders." Resources are funneled from the productive private sector to fund inefficient jobs that both grow the size of government and guarantee votes.

Even better news as Miller's Genuine Draft has been accepted as a member of the Liberty Web Alliance! Abhi Samuel, whom I worked with over the summer, wrote an incredible welcome for me and the blog:

Miller’s blog has perhaps one of the catchiest names I have ever come across – and it is apt! Besides the wit, what you can enjoy most about this blog is, well, the genuineness of Miller’s drafts.
In a media world ridden with lies, and a blogosphere overwhelmed by all sorts of content, it is hard to come across good and truthful content. Here at Liberty Web Alliance, we help with that. Miller’s blog not only has a wealth of information but incredibly detailed analysis that is hard to find in many places.
But you’ll get to know that as your read his blog.

So let me tell you about Miller. I had the opportunity to work with Miller this summer. He worked with my organization through IHS - so as for credentials he’s got the backing of one of the premiere liberty-friendly organizations in the nation.

I can tell you all the good stuff about him – that he’s humble and honest and so on… but that’s just half the story. So, let’s get to the interesting stuff.
Miller drives one of the lousiest cars in the world (I think he’ll agree). I once invited him and other friends over for drinks and as his car ambled up my driveway I noticed he had the largest collection of the most vociferous liberty bumper stickers I had ever seen. He advertised everything from the Ron Paul Revolution to Rothbard to Radicals for Rand (yes, I made that last one up).

A Radicals for Rand bumper sticker would be pretty sweet!  Thanks again for the awesome write-up Abhi!

I will end with another case of idiotic public policy in choosing bank bailouts over the public:

MADRID—The Spanish government said Thursday it will temporarily reinstate a tax on its wealthiest citizens, putting an end to weeks of debate over a controversial measure designed to help close one of Europe's largest budget gaps while easing widespread voter discontent with spending cuts.

Expect a great deal of wealth to leave Spain if the tax is enacted, if it hasn't left already of course.

Update- On the lighter side of things, here is the list of the best analogies compiled by English teachers from actual student papers.  Here are some of my favorites:

The plan was simple, like my brother-in-law George. But unlike George,
this plan just might work.

He was as lame as a duck. Not the metaphorical lame duck, either, but a
real duck that was actually lame, maybe from stepping on a land mine or
something.

The ballerina rose gracefully en pointe and extended one slender leg
behind her, like a dog at a fire hydrant.

He was deeply in love. When she spoke, he thought he heard bells, as if
she were a garbage truck backing up.

Behold the glories of our education system.  I can only assume most of these come from public schools.

Update 2- As I mentioned before, I am gonna keep try and keep track of developments in the natural gas field.  Here is the latest off Carpe Diem:

The study reached four conclusions:

1. "The potential supply of North American natural gas is far bigger than was thought even a few years ago. As late as 2007, it was thought that the United States would have to become increasingly dependent on imported liquefied natural gas, owing to what appeared to be a constrained domestic supply. That is no longer the case. It is now understood that the natural gas resource base is enormous and that its development – if carried out in acceptable ways – is potentially transformative for the American economy, energy security, and the environment, including reduction of air emissions. These resources have the potential to meet even the highest projections of demand reviewed by this study.

Thanks to the advances in the application of technology pioneered in the United States and Canada, North America has a large, economically accessible natural gas resource base that includes significant sources of unconventional gas such as shale gas. This resource base could supply over 100 years of demand at today’s consumption rates.

2. Surprising to many, North America’s oil resources are also much larger than previously thought. These oil resources offer substantial supply for decades and could help the United States reduce, though not eliminate, its reliance on imported oil. The United States and Canada together produce 4% more oil than Russia, the world’s largest producer. Realizing the potential of oil, like natural gas, in the future will depend on putting in place appropriate access regimes that can allow sustained exploration and development activity to take place in resource-rich areas.

3. Natural gas and oil resources will be needed even as energy efficiency reduces demand and lower carbon alternatives become more economically available on a large scale. Moreover, the natural gas and oil industry is vital to the U.S. economy, generating millions of jobs, widely stimulating economic activity, and providing significant revenues to governments.

4. Realizing the benefits of natural gas and oil depends on environmentally responsible development. The nation can realize the benefits of these larger resources by ensuring they are developed and delivered in a safe, responsible, and environmentally acceptable manner in all circumstances."

And North Dakota seems to be the main benefactor of much of the boom: