Op-Ed piece o' the day...

Karl Rove is a fucking dick.

That is all.

Hmmm....

Another great piece from The Daily Reckoning:

At the risk of boring long time Daily Reckoning sufferers and annoying new ones, we offer a two-sentence explanation of the world economy, circa 2005, under the reign of George W. Bush and Alan Greeenspan:

Asians make things and sell them to Americans, who borrow money from their suppliers (on the inflated value of their houses) in order to continue living beyond their means. Asians take their profits and either relend them to Americans...or use them to buy more productive capacity, in America and elsewhere.

For those who wonder where this trend will lead, we offer a guess: The average American will be left with a shoeshine kit and instructions on how to say "please" and "thank you" in Chinese.

Ouch...

"New U.S. envoy to Iraq 'horrified' by attacks"

A report from today's AP Wire:

BAGHDAD, Iraq - America's new ambassador to Iraq expressed horror yesterday at the violence racking the country and said Islamic extremists and Saddam Hussein loyalists are trying to start a civil war.

I believe this falls into the "No shit, Sherlock" category.

Also,

"I am horrified by the daily suffering of the Iraqi people. The terrorists attack ordinary people, teachers, doctors, newly trained police and others who are assisting the people of Iraq," Khalilzad added.

My question to conservatives, or anyone who still stands behind this war is...how is this better than before we invaded Iraq? Don't get me wrong, Saddam was a jackass. But it seems like every day we get more confirmation of how we have fucked these people, royaly.

Thought of the day...

Why do we kill people who kill people, to teach them that killing is wrong?

Discuss....

Hot idea...

"Ford gives employees cash to sell cars."
"In effort to lift sales, automaker will give employees up to $1000 for referring someone to buy car."

Of course, it may burst into flames once they buy it.

The Ford PR guys will probably be working through the weekend...

Today's Economic / Real Estate Lesson...

An interesting e-letter from the folks over at The Daily Reckoning:

A RECIPE FOR DISASTER
by The Mogambo Guru

It was a week of extraordinary excess (WOEE) everywhere you looked in the shadowy world of modern money. At least, that is the way that it looks to me, as I nervously peer out of the periscope of the heavily fortified Mogambo Bunker, cowering in abject overpowering fear.

First off, the Federal Reserve has apparently started down the dismal path to economic hell of Ultimate Money Debasement (UMD), namely the last-ditch desperation move classically known as direct monetizing of debt. They have now sunk so low that they are now engaging in the worst behavior that a central bank can engage in, namely creating money to buy government debt, which is commonly known as "monetizing" the debt.

In effect, the Federal Reserve (which is, I hasten to point out, a private bank) creates money - poof! - for itself and buys government debt with the money. It's that simple! Magically, money has appeared out of nowhere! The total, aggregate debt load has not, unfortunately, changed, but the total amount of money sloshing around is greater!

If you keep a close eye on your finances, you realize that you do not have more money. Likewise, I do not have more money. So if YOU do not have more money (I point to you) and I do not have more money (I point to myself) then, (audience shouts in unison) "Who the hell DOES have more money?"

The answer is, of course, that the BANKS have more money! I know what you are thinking: "Wow! What a racket, huh?" This brings us to today's timeless gem from the Mogambo's Famous Treasure Trove of Valuable Lessons In Life (MFTTOVLIL), and this lesson is that when you get a chance to make a wish, maybe by wishing upon a star, or blowing out the candles on your birthday cake, or rubbing a magic lamp and a genie pops out or something, you should wish to own a country's central bank. You can create money out of thin air, anytime you want, and buy anything you want with it! Cool!

But so much money has already been created, so achingly much money, so damnably impossible much money, has been created and borrowed. Reluctantly, I rise up from my chair and stagger over and look out the window, and I cry out in horror as I note that MORE money and credit are STILL being created right now, every minute of every day, all around the freaking world! And a lot of that the money is being used to buy some of everything, sometimes a LOT of everything, including stocks and bonds and houses and government, which drives prices up. And when a bond goes up in price, then that automatically means that the imputed yield goes down. Thus, interest rates are low! It's as simple as that!

And so long-term rates, which are most affected by market forces, have gone down, but short rates, which are more affected by Fed actions, stayed up. The difference in interest rates between the short and long terms narrows, and thus the yield curve flattens.

Now, if long-term interest rates keep falling and falling, and eventually fall below the interest rate on short-term debt, you get the famous inverted yield curve. That means you have achieved the absurd condition where you are getting paid less money for loaning your money for a longer term, and at higher risk! Hahahaha!

Of course, Alan Greenspan thinks that this is not necessarily bad, according to Reuters, which reported that the Federal Reserve chairman said that an inverted yield curve was not necessarily an indicator of a recession these days. He admitted that it USED to mean exactly that, back before the Federal Reserve got into Permanent Liquidity Mode (PLM), when he said, according to Reuters, "It's ... certainly the case that history suggests that it's usually, or has been, an indicator - a forward indicator - of softening economic activity." See?
He actually admits that an inverted yield curve always has been an indicator of what he calls "softening economic activity!"

He went on to say, "I suspect, however, that we have changed the structure of flow of funds and relationships amongst the various interest-rate tranches by maturity such that I'm not sure what such a configuration, should it occur, would mean."

You are going to be surprised that I agree with him 100%. He is exactly right. Interest rates are no longer the result of a tug-of-war between borrowers and savers. There are no savers anymore. Savings have been replaced by instant liquidity, as part of the Federal Reserve's new Permanent Liquidity Mode (PLM) philosophy and practice. What the Federal Reserve has done is to produce more "liquidity" all the time, which gets borrowed by someone like you, although not as good-looking as you, and the borrower (you) uses the money to play the spread between different pieces of debt, in effect borrowing money short-term at low rates, and lending the money long-term at higher rates. You then pocket the difference! What a racket, huh?

And when it comes time to make a payment on that first loan, you merely saunter into a bank, and borrow some more just-created "liquidity"! You then use this second, bigger loan of instant liquidity to do the interest-rate spread thing TWICE more; once to pay the interest on the first loan, and the other one to provide some more pocket money for yourself! Sweet!

And this can, theoretically, go on, and on, and on, forever. So therefore the actual interest rates are immaterial! The only important thing is that there is a difference between short-term interest rates and long term interest rates! That's it!

The only difficult thing is that it takes massive amounts of leverage to make it worthwhile when the yield curve is flat. Borrowing a million dollars at 4% to buy a bond that pays 4.0001%, resulting in a cash-flow of a measly $100 a year, is hardly worth the trouble. But let me leverage up, maybe putting up only $10 as my part of this deal, and suddenly I have made ten times my initial investment! I only put up ten stinking bucks and made a hundred! All it takes is a bank that is willing to do it.

That, sadly, is how it is nowadays. And to everyone who thinks that this can work out in the long run, I say, "Look at my face to see my contempt for you, and hear my mocking ridicule echo in your ears as I say hahahahaha!" because, and you might want to write this down because it seems to be some big secret or something, eventually the money gets to be SO huge that it starts going into those things OTHER than stocks, bonds, houses, and government, and they start showing up as price inflation, and everybody gets all crazy, and it gets worse and worse, and people are screaming bloody murder, and the nightly news is full of people rioting because prices are so high.

Or perhaps you would rather listen to Eric Fry, of the Rude Awakening column, who writes, "For starters, throughout the ages, bond yields and commodity prices have tended to move up and down together - not at every single moment, but over long sweeps of time. Over the last few years, however, bond yields have strayed from commodity prices like an unfaithful spouse. But we expect this philanderer to return home fairly soon, in which case, bond yields would rise." Which means bond prices would fall, handing a lot of people some hefty losses, losses so big that not even Superman could lift it.

Stephen Roach, on the same subject, writes, "Real interest rates - both short and long - are still far too low for sustainable growth in the global economy and for stable conditions in world financial markets. Yet central banks - especially America's - have been reluctant to lead the charge in normalizing the rate structure. The best we have gotten from the Fed is a policy rate that has gone from negative to zero in real terms over the past year. I continue to believe this is ultimately a recipe for disaster."

Nevertheless, he reluctantly acknowledges, "At some point over the next year, I wouldn't be shocked to see yields on 10-year governments test 3.50% in the US, 2.50% in Europe, and 1% in Japan."

Whew! After all that, and notice how I am drained and winded from the ordeal, to make matters even worse, the Treasury printed up and issued more actual dollars. How much? I will wait until you are seated. Comfy? Okay, two weeks ago they printed up another $6 billion in actual cash! Where in the hell is $6 billion in cash going all of a sudden? I have no idea, personally, but I am sure that it is due to government corruption, and it also adds to the overall money supply, which will, once again, cause just that little bit more inflation down the road. It just never stops.

Regards,
The Mogambo Guru

Thought of the day...

I think that every guy who drives a Hummer should have a bumper sticker that reads "Small Penis On Board". I can't think of any other reason why someone would buy those pieces of shit. Just a random thought...not really sure where that came from.

Fair & Balanced

Apparently, Fox News no longer finds updating the casualty report from Iraq relevant.

Big Brother Is Watching....I'm mean, a blurb on the Patriot Act

I came accross this on CNN today.

"President Bush today credited the Patriot Act with helping to convict more than 200 terrorists and dismissed accusations that the law has violated civil liberties. "For the state of our national security, Congress must not rebuild a wall between law enforcement and intelligence," he said to an audience that included roughly 100 uniformed state troopers at the Ohio Patrol Training Academy."

I know we have convicted a few terrorits since 9/11, but I do not recall anything near the 200 number. I may be mistaken, but I also don't believe any of the convictions owe credit to the Patriot Act. If I AM incorrect, please let me know. Back-up to your claims is required.

Stolen, not stirred....

The real-estate bubble is something that has been of great concern of mine lately. My father and I have had several discussions about how it can't last and how long I should wait before I consider buying a house. Currently in downtown Baltimore...Canton to be more specific...two bedroom townhouses are selling for anywhere from $350,000 to $550,000. Here is an example.

Last summer and well into the late winter months, houses were selling just days after they were put up for sale. But now, such is not the case. Several houses have been up for sale for 2-3 months now. The open houses aren't drawing many people (not that I can see anyway) and the "take-one's" in front of the houses aren't being taken.

So what gives? Is the bubble about to burst? In my humble opinion...yes. The market simply cannot sustain these prices. No recently married couple can afford a two bedroom townhouse with one-and-a-half baths for a HALF-A-MILLION DOLLARS!!! Especially with average household incomes falling! Even if they could, what kind of stupid morons would they be? (Did I mention that because of the proximity to the Inner Harbor and over 100 bars/restaurants in a one square mile radius, that the area is infested with RATS?)

Anywho, enough of my rant. I stole the next portion of this entry from Jane Hamsher over at firedoglake. (You can buy her book here.) I disagree with SOME of her views of the cast on CNBC, but a very good blog entry on one man's (Julian Robertson) view of the economy, including the real estate market. It also ties in well with my previous Nixon post:


I know I'm probably boring the crap out of everyone with my Chicken Little Economy Series, but there actually is method to my madness. Just bear with me.

I always keep one eye on the business news, because despite the fact that the gang at CNBC are a pack of inveterate liars who slavishly shill for their corporate masters, money has a preference for following craven truth no matter how base or amoral. So every once in a while somebody will pop up with a clear-eyed estimation of things with a greater frequency than you are likely to find, say, on the NBC evening news.

And the other day in between fluffing CEOs, human ashtray Ron Insana (who will always go down in my memory as he appeared on the Today Show set on 9/11, with a big pile of soot on his head...who thought that was a good idea...) interviewed a famous fund manager named Julian Robertson, who has worked on Wall Street for 53 years and manages the Robertson group of funds. As Al Martin recounts it:

They used to call him, still do call him 'Never Been Wrong' Robertson. He has predicted every economic cycle, every debacle, every bull market, and every bear market.

Of course, he's a very old man now. But his reputation on the Street is like nothing you could imagine. When the segment of his interview was through, his comments alone took the Dow Jones down 50 points. Just on his comments alone. That's how powerful this man's reputation is.

Robertson was actually a teary-eyed, an old man. When Ron Insana asked him about his predictions, he said that he's worried about the speculative bubble in housing and the fact that more than 1/4 of all consumer spending is now sustained by that bubble, plus the fact that 20 million citizens could lose their homes in a collapse of the speculative bubble in housing, and that the Fed and, indeed, central banks worldwide would act in concert out of desperation to reinflate the global economy in the process, creating an inflationary spiral unheralded in the economic history of the planet.

Insana then asks, "Where does it end?" And he said, "Utter global collapse." Not simply economic collapse; complete disintegration of all infrastructure and of all public structures of governments. Utter, utter collapse. That the end is collapse of simply epic proportion.

In 10 years time, he said, whoever is still alive on the planet will be effectively starting again.

(my emphasis)

Why do I bother recounting these stories? Because I applaud all the bloggers who are working to publicize the Downing Street memo, I really do. I'm one of them, and people need to know. But ultimately it will have more of an effect on history than elections, because people in this country do not care. I just got finished watching The Trials of Henry Kissinger, which if you can get past the omnipresence of Christopher Hitchens and just focus on the Seymour Hersh part is a pretty interesting documentary. People did not care that Nixon was a crook, they knew it and they re-elected him anyway, they just wanted him to be a crook for them. As long as it insures American hegemony, they just don't care what kind of evil mutant father-raping shithole has his finger on the bomb.

The only thing that is going to bring about regime change is if people fear that America No More Number One, and that the bunch in charge is leading them down the path of economic calamity. It bounced both Carter and Bush I out of office. When people begin to believe that their prosperity is in jeopardy, then and only then are they going to vote to change the course of the country. In the mean time, bless John Conyers for making the Sith lords take even a moment away from charting our destruction to deal with him, 'cos it's a pure labor of love.

Their vision for the economy was Iraq. Well that didn't fucking work, did it. Greenspan is trying to keep the housing bubble alive until the next bubble comes along -- and that was supposed to be a Wall Street boon from raping Social Security. Doesn't look like that's going to work, either. They have no next best plan. Their next best plan was the bankruptcy bill, which insures that when the shit does hit the fan that working class people will have no escape, and Corporate America can still get theirs.

When and if that message finally gets across in the public consciousness, nobody is going to give a rat's ass about activist judges or Girls Gone Wild or Gay Pride floats in the middle of the Easter Parade. Let's just hope it gets out there before the collapse of epic proportions arrives and there's no turning back.

Op-Ed...

A great op-ed piece from Bob Herbert in the NY Times last Thursday (courtesy of, thanks, and a big shout-out to Aunt Dottie). Just a small snipet:

"Just last month we had the disclosure of a previously secret British government memorandum that offered further confirmation that the American public and the world were spoon-fed bogus information by the Bush administration in the run-up to the invasion of Iraq.

President Bush, as we know, wanted to remove Saddam Hussein through military action. With that in mind, the memo damningly explained, "the intelligence and facts were being fixed around the policy."

That's the kind of deceit that was in play as American men and women were suiting up and marching off to combat at the president's command. Mr. Bush wanted war, and he got it. Many thousands have died as a result."

Gives new meaning to the phrase "blowing shit up".

I know this isn't political, but I can't read this without laughing hysterically. I may not know where all the good people have gone, but I DO KNOW where all the dumb people have gone.

"Man Sues for $10 Million after Toilet Explosion."

Man Sues for $10 Million After Toilet Explosion

MORGANTOWN, W.Va. (June 3) - A man who says he was severely burned when a portable toilet exploded after he sat down and lit a cigarette is suing a general contractor and a coal company, accusing them of negligence.

John Jenkins, 53, and his wife, Ramona Jenkins, 35, of Brave, Pa., filed the suit Tuesday in county circuit court seeking $10 million in damages from Chisler Inc. and Eastern Associated Coal Corp.

The lawsuit claims Jenkins' face, neck, arms, torso and legs were severely burned last July after the cigarette ignited methane gas leaking from a pipe underneath the toilet unit.

"When I struck the lighter, the whole thing just detonated - the whole top blew off," said Jenkins, a methane power plant operator with North West Fuels Development Inc. "I can't tell you if it blew me out the door or if I jumped out."

Eastern Associated owns the Blacksville property where the explosion occurred. Jenkins alleges that heavy equipment from Chisler Inc. ran over the pipelines before the explosion, causing the methane gas leak.

A call to the Charleston office of Peabody Energy, the parent company of Eastern Associated Coal, was not returned.

A man who answered the phone at Chisler's office in Fairview said the company would have no comment.

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...I mean really, a Spot-A-Pot is the last place I would think of to light up a cig. I don't even drop a deuce in those things unless it's a dire emergency. Even then, I am in and out as quickly as humanly possible.

Alas, my blog has already stooped to the level of "toilet humor".