What Is Wrong With Republicans???

Who didn't watch with amusement yesterday as Republicans refused to vote for Boehner's bill to make permanent the Bush era tax cuts for all Americans earning less than $1 million per year. It would seem that the Keystone Cops are alive and well in the Republican wing of Congress. As Gerard van der Luen of American Digest is wont to say, "Republicans, they thirst for death."

Republicans have precisely zero leverage on tax rates. Come January 1, all of the Bush era tax cuts expire and all the tax rates will go up automatically - and quite unfairly, Republicans will get the blame. Moreover, the centerpiece of Obama's tax plan was to raise tax rates on "the rich." It is time to give the people what they voted for. If four years of gross economic incompetency wasn't enough to convince the electorate, well, let's let them have the next four years good and hard indeed. Obviously, more lessons are needed.

In this instance, Republicans prepared to die on the hill of stopping higher taxes is much like Picket's charge - a suicidal act that did nothing beyond sealing the doom of Lee's Army of the Potomac. One of the first rules of warfare - don't reinforce failure, reinforce success - or at least where you have the greatest likelihood of success.

Where House Republicans hold absolute power is on spending. Give Obama whatever tax increase he wants, but then shut down the government over the budget ceiling. Moreover, refuse to pass anything but a life support budget until all sides agree on - and pass into law - a grand bargain that in real terms, sans the usual accounting gimmicks, will decrease the debt by 25% over the next four years.

Debt is where the real issue lies. Sure, Obama's tax increases will hurt the economy - but they won't kill it. Our continued accumulation of debt will. Between Obama's world record profligate spending and Fed Chairmen Ben Bernanke, who is keeping our printing presses spinning at a record pace, they are placing our nation in mortal peril. Obama and Bernanke are setting the stage for runaway inflation and the devaluation of the dollar. That is where Republicans need to draw the line in the sand - this far, and no further.

Tweet

Read More...

Summary only...

QE3: The Fed Gambles With Our Economy

In order to boost job growth, Ben Bernanke, the Chairman of the Federal Reserve, announced the other day the start of a third round of quantitative easing - QE3. It is creating money out of thin air. This from Q&O:

The Fed will increase its holdings by an estimated $85 billion per month in securities, about half of which will be long-term Treasury bonds, and the remaining $40 billion or more will be agency mortgage-backed securities. The agency paper will be purchased with new cash, while the long-term Treasuries will be acquired in exchange for short-term Treasury paper, as a continuation of Operation Twist.

There is no ultimate target amount or end date specified for this round of easing. Essentially, the Fed will buy or exchange $1 trillion in securities per year, until chairman Bernanke says to stop. It is completely open-ended. Additionally, the Fed expects to keep interest rates at or near 0% until sometime in 2015.

Let’s be clear about what this announcement means: The Fed will print $500 billion per year in new money, and inject it into the economy by buying agency paper (Freddie Mac, Fannie Mae, et al.), while also flooding the market with $500 billion of short-term paper in exchange for long bonds. That new money is not based on any realistic estimate of economic growth, or economic requirement to expand the money supply. It is pure, Keynesian monetary stimulus.

This is the fed trying to use monetary policy to solve problems that are not "monetary" in origin under the Obama economy. Credit isn't sluggish because interest rates - today at historic lows - aren't low enough. Being able to borrow more money does nothing for overleveraged consumers trying to shed their debt. The fed action does nothing to assuage the concerns of businesses regarding new taxes and regulations. The fed action will do nothing to bring down the price of energy. Actually, as to the price of energy and other commodities, these will skyrocket as the Fed's balance sheet grows to $4 trillion and the dollar is devalued.

Whatever minimal benefit the fed action will have on our economy, its potential downsides are far more significant. The first and most obvious is that this will eventually cause run away inflation. Zombie at PJM has a good primer on this - Quantitative Easing, Wiemar Edition. And as Gerri Willis wrote at Fox Business:

Now, the federal government promises a blank check, printing unlimited money to pull us out of the ditch. How will they ever unwind all this stimulus? Who will pay? What will be the unintended and inevitable consequences?

Economist John Taylor recently wrote that sky-high inflation will be the ultimate result of the federal government’s moves, before today’s action.

And, almost undoubtedly, he sure seems right.

Two, this act of the fed threatens the bond market

Thierry Apoteker, chief economist at TAC Financial, . . . tells CNBC that a QE3 program could turn into a disaster for bonds.

"If you have fiscal policy that is loose and monetary policy that is loose, and commodity prices rising, then you have the recipe for a very lethal cocktail on the bond market," Apoteker says.

The bond market is crucial to our economy, as it is what allows every level of our local, state and federal government, not to mention businesses, to borrow money from the public.

Lastly, as Zero Hedge points out, this is the fed firing the last bullet in their gun. Moreover, by announcing it as an open-ended program, the Fed loses the ability to impact the markets in response to a future crisis. That is a terrifying proposition.

The economy is stagnant - neither getting worse or better at the moment. Its ills and the solutions thereto are all in the political realm. Trying to use monetary policy - with all its potential downsides - to solve the political problems of the Obama economy is just wrongheaded in the extreme. One wonders whether it is not time to reconsider the independence of the Fed and its ability to act unilaterally.

Update: Well, that didn't take long. In response to QE3, ratings firm Egan-Jones has downgraded its rating of U.S. government debt:

In its downgrade, the firm said that issuing more currency and depressing interest rates through purchasing mortgage-backed securities does little to raise the U.S.'s real gross domestic product, but reduces the value of the dollar.

In turn, this increases the cost of commodities, which will pressure the profitability of businesses and increase the costs of consumers thereby reducing consumer purchasing power, the firm said.

Tweet

Read More...

Summary only...

2011: The State Of The Union Economy

In the near future, Obama will be giving his State of the Union address. Here are some deeply troubling facts about our economy that you will not be hearing in that speech.

1. Food Prices At Record Highs & Heading Upwards; Ethanol Mandates & Subsidies Put Fuel In Competition With Food

Food prices are skyrocketing upward, running last month at an annualized rate of 8.7% inflation.

In December, the wholesale price of vegetables rose by 22.8 percent, and fruit was up 15.4 percent. . . . The price of beef rose 2.7 percent in December and was 15 percent higher than a year ago, the Department of Labor said in the PPI report. Pork is up 22.3 percent from a year ago, and fish is up almost as much. Turkey is up 18 percent.

This is a world wide issue. Food prices are at their highest ever. Just today, the chief executive of one of the world's largest food producers warned that the global crisis in food production is reaching "dangerous territory" with demand outstripping supply.

The causes are multiple, but a large portion of it is the insane push to create "bio-fuels" out of food crops and the concomitant misuse of agricultural land:

In the United States, which harvested 416 million tons of grain in 2009, 119 million tons went to ethanol distilleries to produce fuel for cars. That’s enough to feed 350 million people for a year. The massive U.S. investment in ethanol distilleries sets the stage for direct competition between cars and people for the world grain harvest. In Europe, where much of the auto fleet runs on diesel fuel, there is growing demand for plant-based diesel oil, principally from rapeseed and palm oil. This demand for oil-bearing crops is not only reducing the land available to produce food crops in Europe, it is also driving the clearing of rainforests in Indonesia and Malaysia for palm oil plantations.

Bio-fuels are the world's greatest boondoggle. The fuel is inefficient, expensive and actually contributes to the growth of CO2 in our atmosphere. Not only does it make no sense to mandate or subsidize ethanol, it is a major contributing factor to poverty and hunger world-wide. Yet it is now a vested interest and thus, seemingly impossible to dislodge.

This particular problem in America has bi-partisan origins. It began under the Bush administration and now being furthered by the Obama administration. Within the past months, Obama's EPA actually increased by 50% the amount of ethanol allowable in gasoline, from 10% to 15% ethanol. Between that and the recent renewal of the ethanol subsidy, this problem of food prices will only get worse.

2. Housing Market

Our housing market has crossed the threshold into uncharted territory - it is now worse than it was during the Great Depression. Home values have declined 26% since their 2006 peak and there is no end in site to the slide. Foreclosures this year are expected to top 2010's record of one million, and over five million people are over two months behind in their mortgage payments.

3. Obama's War On Domestic Oil & Gas

It is impossible to underestimate the cost to our economy of Obama's war on domestic production of oil. An incredible 62% of our entire trade deficit now comes from importing foreign oil.


And the situation is poised to become much worse. Many expect the price of gasoline seems to spiral upwards, beyond the $4 a gallon threshold that caused nationwide discontent two years ago. Gas could well hit $5 a gallon this year. Opening up oil and gas drilling throughout America would add significantly to jobs, fill our declining coffers and significantly increase the supply of oil and gas, thus reducing the cost of gasoline. Yet the Obama administration is taking the opposite tack, warring on our oil and gas infrastructure.

The administration, has shut down all new offshore drilling and is making it ever more difficult to drill for oil on federal lands. Further, the Obama administration is in the midst of massive land and ocean grabs specifically aimed at cutting off ever more of our natural resources from exploitation. Lastly, the administration is expected to introduce even more regulations and increase taxes on our domestic oil industry in response to the report of the deeply partisan Oil Spill Commission, which, while tasked with investigating BP, instead condemned the entire oil industry.

4. Obama Is Killing Coal Mining & The Use Of Coal For Electricity With Deep Ramifications In The Future For The Cost & Availability Of Energy In America

The war on oil and gas pales in comparison to the Obama administration's war on coal - the basis for over 50% of the electrical power generation in our country. The Obama administration is doing all that it can to completely kill our coal industry:

"Coal is a dead man walkin'," says Kevin Parker, global head of asset management and a member of the executive committee at Deutsche Bank. "Banks won't finance them. Insurance companies won't insure them. The EPA is coming after them. . . . And the economics to make it clean don't work." . . .

Not a single new coal power generation plant was built in 2010. And lest there be any question whether investors should put their money into coal mines, the EPA recently took the unprecedented step of withdrawing a Clean Water permit for a mine it had approved three years ago. This from the WSJ, via Bizzy Blog:

The Environmental Protection Agency, in an unusual move, revoked a key permit for one of the largest proposed mountaintop-removal coal-mining projects in Appalachia, drawing cheers from environmentalists and protests from business groups worried their projects could be next.

The decision to revoke the permit for Arch Coal Inc.’s Spruce Mine No. 1 in West Virginia’s rural Logan County marks the first time the EPA has withdrawn a water permit for a mining project that had previously been issued. . . .

A spokeswoman for Arch said the company was “shocked and dismayed” by the agency’s decision, which it said would block an additional $250 million investment that would create 250 jobs. The company said it would appeal to the courts.

… As the EPA stressed that the permit decision had no implications beyond the Spruce mine, business groups outside the coal industry said the government’s action raised questions about whether permits previously issued for other businesses could also be revoked, potentially stranding investments and costing jobs even as the economy continues to heal.

The EPA has just added a significant amount of risk for any investor considering investment in a coal mine. This is killing jobs in the oil and coal industries. This war on coal and oil will soon have major ramifications for the domestic cost and availability of energy.

Update: Obama conducts this war even though his push for "green energy" is falling utterly flat. American Thinker covers the moras Obama has created with solar energy - a black hole for tax dollars and Democratic corruption that will not be replacing coal in our lifetime, if ever.

5. The EPA Poised To Harm Our Economy

Regulation as a whole has been creating an anti-business momentum for decades. But under Obama, and in particular with the EPA, the regulatory bureaucracy has taken wing. While Congress has refused to legislate restrictions on CO2, the EPA, with an assist from the climate scientists sitting on the Supreme Court, has assumed the right to do so under the Clean Air Act, a law ill suited for the task. The first leg of EPA's new regulatory scheme for CO2 went into effect this month. It is initially aimed at the "largest emitters" - i.e., coal fired power plants, cement plants, etc.



It is expected that this power grab will EPA will cost our country a million jobs and drive up significantly the price of energy.

6. Environmental Groups & The Courts Driving Energy Policy

Unfortunately, it is not just the regulatory bureaucracy that is implicated in this ever greater assault on our economy. Each of the regulatory laws passed by Congress decades ago contain a provision giving the keys to the courthouse to environmentalists. Because of that, a major driver of our nation's environmental policy is being dictated by the Courts - with drastic consequences. For example, a Federal Court decision to protect the Delta Smelt has turned one of our nation's prime agricultural areas into "Zimbawbwe." For another example, enterprising lawyers are now filing nuisance suits to sue U.S. manufacturers and power plants for their contribution to global warming. Our Supreme Court recently opted to allow such cases to proceed. It is time for Congress to end standing for all private suits under our environmental laws as well as clarifying that the regulation of green house gasses are policy questions for our elected representatives and thus cannot be heard by state or federal Courts.

7. More Regulatory Overreach & The Looming Explosion In Regulations

Before leaving the question of the regulatory bureaucracy, it is of course not just the EPA that has engaged in power grabs of very dubious constitutionality. The FCC's recent decision to assume control over regulation of the internet is yet another shining example of regulatory agencies gone wild. And we see similar overreach by HHS as Kathleen Sebilius is in the process of taking control over health insurance pricing in the U.S. Meanwhile, hundreds of new bureaucracies remain to be staffed and reams of new regulations remain to be written for Obamacare and the Financial Regulatory bill.

The regulatory bureaucracy is clearly out of control, bastardizing our form of government. We are beginning to resemble the EU - a government run by unelected bureaucrats. That is far from the vision of our Founders. As George Will notes in a column today, reasserting Congressional authority and oversight over the regulatory bureaucracy should be at the top of the agenda for the 112th Congress. Indeed, I believe that Congress should immediately pass a law holding that no regulation will become binding and enforcable unless and until approved by Congress.

8. Obamacare's Looming Taxes & Costs

As to Obamacare, its first effects are just now being felt. What we as a nation have to look forward to in the offing - higher health insurance premiums as well as hundreds of billions in new taxes, all on top of the costs of compliance:

- Excise Tax on Charitable Hospitals (2010)
- Tax on Innovator Drug Companies (2010)
- Tax on Indoor Tanning Services (2010)
- Medicine Cabinet Tax (Jan 2011)
- HSA Withdrawal Tax Hike (Jan 2011)
- Corporate 1099-MISC Information Reporting (Jan 2012):
- Surtax on Investment Income (Jan. 2013)
- Flexible Spending Account Cap aka “Special Needs Kids Tax” (Jan 2013)
- Hike in Medicare Payroll Tax (Jan 2013)
- Tax on Medical Device Manufacturers (Jan 2013)
- Raise "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI (Jan. 2013)
- Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D (Jan 2013)
- $500,000 Annual Executive Compensation Limit for Health Insurance Executives (Jan 2013)
- Individual Mandate Excise Tax (Jan 2014)
- Employer Mandate Tax (Jan 2014)
- Tax on Health Insurers (Jan 2014)
- Excise Tax on Comprehensive Health Insurance Plans (Jan 2018)

9. The National Debt & The Road To Becoming A Banana Republic

Our national debt is expected to balloon over the next decade, particularly in light of massive entitlement obligations. Obama and the left have us on track to have debt rise to $20 trillion, 90% of GDP, by 2020, the consequences of which will be calamitous. It means we will soon be facing massive increase in taxes, inflation, and the need for draconian cuts in spending - or default on our sovereign debt, with unimaginable consequences not just for us, but also for the world economy.

10. Unemployment

Since Obama assumed the Presidency, we have hemorrhaged millions of jobs and remain mired above 9% unemployment. For two years, Obama has concentrated on everything but the economy and jobs for Americans, apparently assuming that the economy would bounce back of its own accord while he focused on paying off labor unions and forcing through Obamacare. We are world's away from the Bush years, during which unemployment averaged 5.2%.

The December unemployment report showed that the jobless number dropped to 9.4%. That seemingly small piece of good news is illusory. This from Morning Bell via Bizzyblog:

You are going to hear a lot of noise from the White House about how this drop from a 9.8% unemployment rate to 9.4% means the economy is in a strong recovery. This is false. The reality is that the only reason the unemployment rate dropped is because the U.S. labor force decreased by 434,000. More importantly 260,000 Americans dropped out of the labor force entirely. This means that the Obama economy is now driving Americans out of the labor force faster than it is bringing them in.

Unemployment will remain an intractable problem under this deeply incompetent administration. Indeed, it will take a major change to all of the conditions dicussed above if we are to turn our country around, lower unemployment and grow our way out of this fiscal crisis.

11. Conclusion

Obama inherited a bad economy that he has made worse. Instead of changing tack, he is on the cusp of making our economy infinitely worse. True, he has finally appointed a token capitalist with business experience to his administration - William Daley. But unless this means Obama is willing to do an economic u-turn on gas, oil, Obamacare, the EPA, the FCC, ethanol and deficit spending, nothing is going to pull us out of our downward trajectory between now and 2012. The best we can hope for is for the House to slow the slide. But don't expect to hear any of that at the State of the Union.

Read More...

Summary only...

The Looming Crisis In Energy Costs

Our economy, already in serious trouble, faces yet another crisis waiting in the wings - energy prices. They are going to rise and rise sharply. How high they will get is anyone's guess. The causes will be multiple - and most of our own making. They are:

1. Obama's war on fossil fuels through cap and trade.

2. The alternative energy Obama is pushing on America is untried at scale and considerably more expensive than fossil fuels.

3. Rising global demand for oil.

4. Obama's decision to renege on his campaign promise to allow exploitation of our extensive domestic resources.

5. The expected rise in cost of shipping foreign oil to U.S. ports because of a new proposed UN tax on CO2 produced by ships.

6. Oil is priced in dollars. The devaluation of the dollar through inflation will cause a rise in prices.

7. Investment in repair and replacement or our existing energy infrastructure.

8. A wild card - global cooling?

To discuss these in some detail:

********************************************************************

1. Obama's War On Fossil Fuels:

The direct effects of Obama's war need little elaboration. I've covered them in detail in the post, "Throwing Green Fuel On An Economic Fire." He intends to introduce a cap and trade system that will punish the use of fossil fuels for power generation, imposing a massive regressive tax that will touch every aspect of our economy and that is estimated to cost every American family just under $4,000 annually. This is completely in line with his plans, articulated in a January, 2008 interview: "Under my plan of a cap and trade system, electricity rates would necessarily skyrocket."

The cap and trade plan will also directly effect energy production in a way I did not anticipate. Obama's cap and trade legislation seems designed to directly attack our refineries. This from testimony before the House Energy Committee the other day:

If climate-change legislation passes Congress in its current form, Lion Oil Co., an El Dorado refinery, will have to shutter operations within a year and lay off 1,200 workers, a company executive told a congressional panel Tuesday.

Passage of the bill "will make our survival impossible," Steve Cousins, vice president of refining, testified before the House Energy and Commerce Subcommittee on Energy and the Environment.

. . . "This bill's treatment of domestic refiners with respect to the allocation of allowances is simply a thinly veiled attack on crude oil as an energy source and domestic refiners as a provider of energy to consumers, farmers and truckers," Cousins said.

This will be bad news indeed. We already have insufficient refining capacity in the U.S. as it is, and thanks to the left, we haven't been able to build a new refinery in the U.S. since 1976. It cap and trade marks a major attack on our domestic refineries, then this alone could have a major impact on energy prices.

2. Alternative Energy

It bears repeating that none of the Obama desired replacements for fossil fuels are cost effective or proven to scale. For example, the costs of solar power per kilowatt hour in the U.S. are 26 cents to 35 cents. That compares to about 5 cents for coal. It is one thing to move off one form of energy to another that is proven equally as reliable and cost effective. It is another thing entirely to do so when that movement is made without any such proof - but a profound belief, as Obama demonstrates - that they can be made more cost effective than fossil fuels at some point down the road. It is quite literally gambling with America's future. And, as Prince Turki al Faisal recently noted:

The U.S. has rising energy needs despite the economic downturn," Prince Turki said. "If you are going to be paying for wind, electric and solar energy equivalents that cost five or 10 times more than it costs to use oil, you are going to price yourself out of the market. You are going to lose whatever competitiveness you have in your products."

It's not like we can't see this freight train bearing down on us.

3. Supply and Demand are still with us.

The fall in energy prices since November has occurred because world wide demand has fallen in the face of a contracting world economy. Contrary to the claims of the left during the energy crisis of last year, they did not successfully repeal the laws of supply and demand. China, India, and the rest of the developing world are going to become ever more voracious consumers of oil and other fossil fuels - as will we - once we start to move again from a bear to a bull economy. As I documented in an earlier post, it was their increasing demand for oil that caused the spike in oil prices over the past two years. Even if we were to do absolutely nothing to proactively cause a rise in oil prices, we can still forecast with near certainty that oil prices will again skyrocket based on global supply and demand.

4. Obama has reneged on his campaign promises to allow exploitation of our own natural resources.

We have extensive domestic resources. Our coal reserves are the largest in the world. And as to oil, estimates are that we have: oil shale – 800,000,000,000 – 2,000,000,000,000 barrels of oil; continental shelf (East & West Coast) – 115,000,000,000 barrels of oil; ANWR – 10,000,000,000 barrels of oil.

The oil sits untouched.

During the campaign, at the height of the energy crisis and with gas topping $4 a gallon, Obama promised that he would allow for greater exploitation of our domestic energy resources. That promise did not last long after the inaguration. Indeed, within two weeks of taking office, Obama "shelv[ed] a plan announced in the final days of the Bush presidency to open much of the U.S. coast to oil and gas drilling, including 130 million acres off California's shores from Mendocino to San Diego."

All of this means that we will become ever more dependent on foreign oil to power the engine of America. Our dependence on foreign oil, already at 70%, will continue to rise, with implications for both our economy and our national security. That means $250 a barrel oil within a few years, if one Gazprom executive is correct, and $300 a barrel oil within a decade if T. Boone Pickens is right. Those types of numbers would put a stake into our economy.

5. Shipping Costs

The cost of shipping foreign oil to U.S. ports - and the costs to ship all of the other 80% of world trade that is shipped - are set to rise dramatically as the UN pushes through an international CO2 tax on shipping. We rely on foreign sources for 70% of our oil. Of that, on a typical day, we get from Canada and Mexico about 3,403,000 barrels of oil. The rest must be shipped considerable distances. This includes:

Saudi Arabia - 1,530,000 barrels
Venezuela - 1,227,000 barrels
Nigeria - 1,215,000 barrels
Iraq - 508,000
Angola 408,000

A typical supertanker carries two million barrels of oil. I do not have the figures yet to tell just how much this rise in shipping costs will be, but according to David Smick, writing at the Washington Post, "[t]he U.N. agreement last October on sulfur-burning levels for ships . . . are expected to send shipping costs skyrocketing."

6. Oil and devaluation of the dollar

Four months ago, oil was at $30 a barrel. It has already climbed to $72 a barrel, in part because of a weakening dollar, and looks to climb higher quickly. With oil priced in dollars, a weakening dollar means rising prices for oil. That said, Obama seems to be doing his best to devalue the dollar. He has created a mountain of debt and the Fed has turned on the money supply spigots like never before seen outside of the Weimar Republic:



As Q&O points out, quoting economist Arthur Laffer:

It’s difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed’s actions because, frankly, we haven’t ever seen anything like this in the U.S. To date what’s happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. . . .

The bottom line is that we may well see the collapse of the dollar. As that happens, the price of oil will be forced drastically upwards.

7. Repair and replacement of our energy infrastructure.

Our energy infrastructure needs to be constantly repaired and replaced. But from where will the money come to repair and replace fossil fuel burning plants if Obama is threatening them with massive taxes and refusing to grant permits for the creation of new plants? For example, only a few months ago, Obama's EPA took the extraordinary step of recalling a permit issued under the Bush administration for the building of a coal fueled generator plant in a Navajo reservation in New Mexico. According to Hot Air:

The EPA . . . said that the Navajos should have proposed using a gasification process that’s still in the experimental phase and hasn’t been proven at all. In fact, Al Gore called it a myth just this month, so apparently the EPA expected the Navajos to include a mythical system in order to retroactively justify the permit they had in their hand.

If that is what is required to build or improve our fossil fuel based energy infrastructure, we will see our nation in serous trouble in just a few years. Lest there be any doubt as to Obama's ideological stance on coal, he said in a January 2008 interview, "if somebody wants to build a coal plant, they can — it’s just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted." Hot Air has the video.

This is not yet a problem, but it can quickly become one and add appreciably to the cost of energy in America. And Obama is leading us on the exact same path as Britain in that regard, where the failure to repair the fossil fuel based infrastructure is bringing that nation ever closer to a severe energy crisis. EU Referendum has the details.

8. Global Cooling

Here is a real bit of irony - and a wild card. What if, instead of global warming, we stand on the cusp of another "Little Ice Age." The sun's near total inactivity and the seven year decline in average temperatures point to that far more than they do to global warming. If that is so, if we see a drop in average temperature of 3 degrees Fahrenheit equal to the Little Ice Age during the medieval period, than we can expect a sustained increase in the need for energy - not to mention a sustained increase in the need for CO2 to improve crop yields, but I digress.

**************************************************************

The bottom line is that we face, with near certainty, an energy crisis in the coming years, if not in the fairly near future. This is a situation that demands we act and act now to minimize the effect on our economy. But Obama and the left are so bound up in their ideology and so invested in the belief of anthropogenci global warming that, not only do they refuse to acknowledge the signs, but they are all set to compound the problem exponentially. It is the same sort of dysfunctional psychology you can see at work here. This will get much worse before it gets better.

Read More...

Summary only...

And He's Just Figuring This Out Now?

This from the One:

President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

No kidding. So did he come just now come to this epiphany . . . Right after wracking up a world record national debt on borrowed money and driving our federal bond ratings to the brink of downgrading? As Instapundit quite pithily asked, "If Obama were trying to wreck America as a superpower, what would he be doing differently?"

Read More...

Summary only...

"Terrible" Treasury Auction Signals Rough Economic Waters Ahead

"What if we hold a treasury auction and no one shows up?" That was the question posed by Ed Morrisey at Hot Air after a Treasury Auction saw the Treasury having to offer higher than planned interest rates to induce buyers to purchase our government's bonds. The answer - it means trouble for the economy. As the Heritage Foundation puts it, "[t]his is just the first sign that the debt-based Obama economic stimulus plan is about to become a major drag on the recovery, just as expected."

According to the Heritage Foundation, signs are that the recession is bottoming out and the economic situation will stabilize this summer. That signals the start of the unplanned consequences of the massive spending by Obama. This from the Heritage Foundation:

There are two critical consequences to the economy stabilizing. The first is that the massive liquidity injected into credit markets by the Federal Reserve and central banks around the world transforms from economic medicine to inflationary heroin. Central banks are going to face a difficult task of extracting the excess liquidity before inflation soars and without causing another recession. Doubt about the fight against soaring inflation means higher inflation premiums in interest rates.

The second dangerous consequence is that President Obama is on course to double the national debt in just four years. After years of complaining about annual deficits of $300 billion or $400 billion and their effects on interest rates, liberal commentators are suddenly silent now that the deficit is heading toward $2 trillion under a liberal administration. But now the vaunted “crowding out” effect from government borrowing is almost a certainty, as are the resulting higher interest rates.

Healing financial markets and a stabilizing economy generally translate into higher interest rates for long-term, high-quality bonds like 30-year Treasuries. The effect of the projected massive government borrowing, however, is to drive interest rates as much as a full percentage point higher yet. This will mean higher interest rates for consumer loans, mortgage loans, business loans, etc. Instead of a 6.5 percent mortgage rate, home buyers will face a 7.5 percent rate. The debt-based Obama economic stimulus plan is about to become a major drag on the recovery, just as expected.

And as Ed Morrisey points out, the rise in Treasury interest rates that resulted from the most recent auction means that the huge defecits forecast by the Obama administration - and, for that matter, the even larger defecits forecast by the Congressional Budget Office - are already unrealistically low. Here is the chart of the estimates:



And to think that my bill of particulars against the Republicans was a lask of fiscal restraint. Those guys were penny-pinchers compared to the real far left deal. At any rate, as Ed Morrisey writes:

These projections had to consider interest payments on all of the debt Obama planned to buy while running these deficits, and any hike in interest rates means that those interest payments will have to go up. That also means that we will have to spend more money than Obama projected, creating even higher deficits and the need for even more bond sales — and more interest payments on those.

It’s basically a Ponzi scheme, and it’s accelerating.

One of two things will have to occur to resolve the situation. Either the federal government will have to massively cut its spending in order to service all that debt at the higher interest rates now demanded, or it will have to pass massive new taxes in order to generate enough revenue to accomplish it. Which do you think Obama is likely to try?

As I've written before, we may soon be pining for the good economic times of the Jimmy Carter economy.

Read More...

Summary only...

An Iran Update

The EU have unilaterally imposed further sanctions on Iran, moving Ahmedinejad to announce that neither carrots nor sticks will stop Iran's enrichment of uranium. Israel recently conducted war exercises clearly aimed at Iran. The Iranian economy goes further into misery because of corruption on a grand scale, yet the theocrat's do not care. Motivated by theology and maintining a system that has made them wealthy, the theocrat's sole concern besides self-preservation is the export of the revolution by any means. Part of that export is going into Iraq, two million Iraqis have signed a petition protesting Iran's proxy acts of war in their country.
_______________________________________________________

The EU on Monday approved further sanctions on Iran, and most notably its largest bank, Bank Melli. Such tepid sanctions, which have no chance of altering the theocrat's determination to acquire a nuclear arsenal, brought a predictable reaction from Iran's theocracy. This from Fox News:

Iran said Tuesday that additional sanctions by the European Union will not affect Tehran, while President Mahmoud Ahmadinejad proposed the formation of a special court to punish the world "tyrants" for their attempt to thwart Iran's nuclear program.

Ahmadinejad was quoted as saying to a group of judges that "a court should be formed to try and punish all world criminals who invade the rights of the Iranian nation," according to the state IRNA news agency.

Iran considers its nuclear ambitions — which the West claims mask weapons making — as an inalienable right. Tehran has dismissed Western claims and contends its uranium enrichment is only meant for electricity production.

. . . Also Tuesday, Iranian foreign ministry spokesman Mohammad Ali Hosseini said in a statement that the "carrot and stick policy" by the 27-nation EU bloc won't stop Iran's "pursuit to realize its nuclear rights."

. . . Referring to the new sanctions as a "narrow-mindedness decision" by the EU, the statement quoted Hosseini as saying that "it will not help create a suitable atmosphere for a diplomatic solution" to the nuclear dispute.

Meanwhile in Brussels, the EU released on Tuesday a list of those sanctioned, updating the restrictions first adopted in 2007 and including 15 new names and 20 new companies the EU says all have links to developing Iran's nuclear program.

Most notable among the newly sanctioned, the Bank Melli, allegedly provided or attempted to give financial backing to companies involved in procuring goods for Iran's nuclear and missile programs, the EU said.

Earlier in June, the EU unsuccessfully proposed a package of economic incentives in return for an end to Iran's uranium enrichment program.

Tehran officials have scorned the proposal, although Iran has also said that both sides could start talks on it since the proposal has "common" points with the Iranian one, presented by Tehran in May but which the West said fell far short of meeting international demands. . .

Read the entire article.

Israel, for its part, recently conducted a training exercise with 100 F-16 and F-15 jets took part that was clearly aimed at Iran. The problem from Israel's perspective is that, given how dispersed the pieces of Iran's nuclear weapons program are dispersed throughout the country, a raid of that size will be insufficient. This from Reuters:

"A hundred warplanes are enough for a raid, but they do not make for an air campaign - and that is what is needed to deal conclusively with Iran's capabilities," an official said. "Israel wants to go it alone against Iran as a last resort only."

Pentagon sources said more than 100 Israeli F-16 and F-15 jets took part in a long-range Mediterranean exercise this month that appeared to be practice for real sorties over Iran.

Given that this may be beyond the capacity of Israel to fully complete, Israel is reportedly pushing for the U.S. to join in any military strike. The clock is ticking. Israeli intelligence believes that Iran will create its first nuclear weapon in 2009. John Bolton is predicting such a strike after the Presidential elections in November and prior to the swearing in of the next President.

The utter refusal of Iran to give up their pursuit of nuclear weapons - and the uselessness of economic sanctions that do not bite into the theocratic class - must be seen in context. The theocracy's goal is not the improvement of life for the people of Iran, but the export of its revolution and the imposition of Khomeinist control as far beyond its borders as possible. There is also an economic imperative to this expansionism as Iran's economy is crumbling from corruption. This makes Iran's theocracy every bit as expansionist and dangerous as Hitler's Nazi machine in the 1930's.

An exeptional article from the Asia Times discusses precisely these issues:

. . . Households in President Mahmud Ahmadinejad's Iran must suffer on a Dickensian scale, for they spend 10% more than their income, according to the country's central bank. Iran's data are more hilarious than reliable, to be sure, but they illustrate how ordinary Iranians are perishing in a sea of petrodollars.

The price of oil more than doubled since . . . last year. . . . Despite the surge in oil revenues, conditions are worse than they were a year ago, as the price of necessities soars out of ordinary reach. Not only the theft of the oil windfall, but the manner of the heft, puts Adhmadinejad's political future in doubt, . . . Changing the man at the top, however, is no cure for fecklessness of Central African proportions. Underneath Iran's imperial ambitions and messianic pretensions suppurates a pre-modern patronage system that corrupts everyone who comes near it.

The system is rotten, and must either break down, or break out, that is, through military adventures. Western observers who hope for reduced tensions through replacing the feckless Ahmadinejad with Majlis (parliament) speaker Ali Larijani will be disappointed. On that more below.

Iran's economic disaster looms large in the twilight war now in progress in the Middle East. Israel has just conducted the sort of public display of force that a nation does not do if it actually plans a surprise attack. Israel engages Syria, Egypt engages Hamas, and everyone else engages Iran - but to what end? It may be Sitzkrieg (sitting or phony war), but it is war nonetheless. Wars arise not from whim, but from circumstances that the prospective belligerents cannot bear. Iran has shown in the most vivid fashion that it cannot solve its internal problems. It is therefore likely to seek an external solution.

What happened to the US$35 billion of oil revenues that Iran's Shabab News, in a now notorious account, claims disappeared from official accounting during the year through March 2008? Half the country's oil revenues disappeared from the books. A great deal of it left the country for banks in Dubai in the United Arab Emirates and elsewhere; capital flight already was running at a $15 billion annual rate last year, by my estimate.

. . . Corruption has metastasized, that is to say, for the scale of the property boom implies that tens of thousands of Iranians are taking six-to-seven figure bites out of the oil budget. Rather than a handful of officials siphoning state funds into bank accounts in Dubai, an entire class of hangers-on of the Islamic revolution is spending sums beyond the dreams of the average Iranian, and in brazen public view.

Ahmadinejad's patronage system generates payoffs to the political class that have set in motion uncontrolled inflation - officially 25% per year but certainly much higher - and a rush into real assets. A side effect is that the average Iranian urban household, which spends $316 a month, is gradually being priced out of the rental market.

Not only rents but foodstuffs, fuel and other essentials have registered double- or triple-digit price increases during recent months, according to fragmentary reports trickling out of the country. The government's 25% inflation figure cannot be correct. The German Suddeutsche Zeitung's Tehran correspondent wrote on June 17, "Price increases follow one another in batches. After the prices of rice and detergent suddenly jumped by a multiple, tea prices have their turn. In just a few days different types of tea have become 300% to 700% more expensive." It is too early to speak of hyperinflation, but the the Iranian bazaar already presents with symptoms of incipient hyperinflation. How do households survive?

"Iranian urban households spent an average of 35 million rials (US$3,700) for current annual living expenses (about 2.9 million rials per month)" in fiscal year 2005-2006, reports the country's central bank, of which just under 30% bought food. But it also reports that "urban households had an annual average gross income of 31,674 thousand rials [US$3,423], about 2,640 thousand rials per month, out of which 74.6% was the share of money income and 25.4% was the share of non-money income."

These are the most recent data available from the central bank, which does not explain how it is possible for households to spend more than they earn in a country that has no consumer credit . . . Part of the explanation seems to be that every poor Iranian has a part-time job, from selling black-market gasoline to prostitution. The latter appears to be the most lucrative source of extra household income. Some 300,000 prostitutes ply the streets of Tehran, or one out of 10 of the city's female population of child-bearing age, [1] according to the most frequently cited sources (see Jihadis and whores Asia Times Online, November 21, 2006.)

In addition, tens of thousands of Iranian women are working as prostitutes abroad, notoriously in the Gulf States, but in Europe and Japan as well. The US State Department recently downgraded Iran to a "Level III" country, that is, one that does nothing to suppress the trade in female flesh.

Prostitution incorporates such a large proportion of Iran's marriageable females as to accelerate the country's demographic decline, which by 2030 will leave Iran with as high a proportion of pensioners as Western Europe, just as its oil reserves run out. Unlike Norway, which entrusted its oil windfalls to a national trust under professional management, Iran has allowed the political class to steal its patrimony.

. . . Apart from oil, Iran exports mainly fruits and nuts. Its most talented people have emigrated, leaving behind only the leeches of the bazaar who hope to grow fat on state oil money. Its demographic problems are insoluble. It has no employment to offer its last generation of young people, half of whom have no visible employment, and no way to support a rapidly aging population. I am in no position to judge the likelihood that the Twelfth Imam of Shi'ite soteriology will reappear in the near future, but it is a fair assertion that nothing else is likely to steer the Persian pocket empire out of the ditch. Western analysts start with the premise that a solution exists for every problem, and set out to find it. I do not believe there is any way to save Iran from terminal dysfunction; it is only possible to prevent Iran's problems from turning into a disaster for the region.

It is no surprise that Iran's leaders remain obsessed with Shi'ite revolution. Larijani told the Islamic Coalition Party on June 19, "The jihadi forces of the Lebanese Hezbollah and the Palestinian Hamas are the pioneers of change in today's world," Iran's official press agency reported. Larijani added, "Interpreting the moves made within the Islamic World as terrorism under such conditions that the Islamic society enjoys the pride of having jihadi combatants is a grave mistake, since those groups are the soldiers of Almighty Allah."

. . . Adhmadinejad is a boor from the back streets of Tehran, while Larijani is the polished son and the son-in-law of two ayatollahs. No matter; German universities during the 1930s were crawling with Kant scholars who enthused for Adolf Hitler. Larijani's enthusiasm for the blood of martyrs as the determinant of national destiny is not a philosophical, but an existential view, and Iran is one of the few venues in the world in which existential despair is sadly justified.

Read the entire article. Part of Iran's attempt to export its revolution is aimed directly into Iraq. The Jerusalem Post is reporting that Iraqi condemnation of Iran is growing in response to their their proxy acts of war in Iraq:

The signatures of more than two million Iraqi Shi'ites, demanding that Iran cease its interference in Iraq, were presented on Saturday during a convention in Ashraf, northeast of Baghdad, the London-based daily A-Sharq Al-Awsat reported.

Representatives of more than 135 parties and organizations, as well as 1,000 tribal elders from Iraq's southern and central regions, attended the conference, titled "Solidarity with the Iraqi People." Also attending the event were representatives from the Iranian opposition group, Mujahidin Khalq.

"We have gathered over two million signatures from Iraqi Shi'ites, calling on Iran to pull its hands off Iraq and especially the southern districts," said the leader of the Al-Humeidat tribe, Sheikh Ka'sid Najm during the conference.

In an interview with A-Sharq Al-Awsat, Najm explained that Iranian interference in the southern regions had become obvious. He warned that if it did not stop, then Iraq would turn into "an Iranian protectorate."

. . . Meanwhile, Iraq and Iran recently signed a security memorandum of understanding, which focused on clearing mine fields, recovering the remains of soldiers killed in the eight-year war and setting border lines between the two nations.

The document was agreed upon during last week's visit of Iraqi Prime Minister Nouri Al-Maliki to Teheran.

Read the entire article. As the DOD Quarterly Report memorializes below, given Iran's refusal to acknowledge their blatant acts of war inside Iraq and instead blame the coallition, it likewise appears that Iran has no intention of giving up its goal of Lebanizing Iraq.

Read More...

Summary only...

EU Chickens Coming Home to Roost In The UK

I wonder how many people in Britain understand that their economic woes are just beginning – and that in one form or another, the EU lies at the heart of those woes. As I’ve blogged here, here and here, the EU portends to cause severe economic distress to the people of Britain because of open borders immigration, energy policy, over regulation of the economy, and rising taxation. There are several articles in the British papers over the last few days that bear out these warnings.

The Daily Mail reports that inflation in food prices and energy are rising at 7% or more, a fact that is having a severe impact on the elderly living on fixed incomes.

The EU has thrown open Britain’s borders. Possibly the best kept secret in Britain is that they do not control their borders. The strain on infrastructure, crime and the impact on natives of Britain are all severe – and in the papers today.

Immigration is at record levels, with close to 600,000 immigrants allowed into Britain. And with record immigration comes record emigration of British natives. Emigration reached 250,000 people in 2007, with most leaving "to escape high levels of crime and tax." This is up by an amazing 20% in just one year.

And as to crime, be it organized or Islamic, that ties into EU mandated immigration also. It was reported today that "most organized crime committed in Britain has its origins abroad. . . [G]un crime, drugs and people smuggling are heavily linked to overseas gangsters. . . . Most of the crimes we are dealing with are international. The source of the trouble starts elsewhere." And don’t forget the problem with radical Islamists. Contrary to what Labour posits, Orwell cannot be enlisted to make that problem disappear. And if you add on top of it a heavy layer of multiculturaly motivated bureaucracy to keep the police from offending any of the minority population, that only compounds the crime problem.

Meanwhile, the BBC has issued a startling report on the tremendous strain on Britain’s infrastructure brought about by the intersection of immigration, procreation and the NHS. The facts they state are:

NHS costs for maternity services have more then doubled in a decade to £350 million.

- "Immigration has raised the birth rate so fast that some units have closed, so that midwives could be moved to areas of urgent need."

- "[M]aternity units have turned expectant mothers away because they could not cope with unprecedented increases in the local birth rate."

- "When Labour came to power, the NHS spent around £1bn a year on maternity services, with one baby in eight delivered to a foreign-born mother. Ten years on, spending has risen to £1.6bn, with almost one baby in four delivered to a mother born overseas."

- "While the number of babies born to British mothers has fallen by 44,000 a year since the mid-1990s, the figure for babies born to foreign mothers has risen by 64,000 - a 77% increase which has pushed the overall birth-rate to its highest level for 26 years."

- "In central London, . . . six out of every 10 babies born has a foreign-born mother."

And with the massive immigration comes rationing of healthcare as there are now many more people competing for it. In a tax payer funded, government run system, supply and demand are not the decisive factors. And you thought just because you paid your taxes your entire life that you would be entitled to free NHS treatment your government had promised?

And then there is taxation. I blogged a few days ago that local council taxes are outpacing inflation – and the strain of immigration is the cause of that. And there have also been other significant, if stealth, rises in taxation that seem actually more like Labour greed than directly related to the EU. But I will include the story here to the extent that there is a relationship.

There are a few things that amaze me about all of the above. The EU role at the heart of each problem named above is clear. Yet in none of the stories is the EU even mentioned. Further, Britain is strangling under uncontrolled immigration. Yet, to even complain about that or suggest bringing to a halt is political and social suicide even now. The chattering classes have a stanglehold on Britain at the moment. But hit the bulk of Brits in the pocketbook enough times, subject them to enough crime, and eventually what you will get is a revolt.

At any rate, the EU chickens are coming home to roost in Britain. Indeed, they have just begun to cluck and mess on the floors. I wonder how long it will be before the average Brit wakes up and decides that EU chicken tenders are on the menu.

Read More...

Summary only...

Interesting News From Around the Web

An interview with an Iraqi Shiite cleric and politician who calls for secular rule, religious opposition to the Iranian concept of theocratic rule, and who says that "President Bush and America should be thanked for saving us from . . . Saddam Hussein. . ."

In Iraq, a series of raids target the Mahdi Army and, in a separate action, the capture of two men suspected of involvement in the May 12 kidnapping of three American soldiers during an insurgent attack against their checkpoint 12 miles south of Baghdad.

A sharp rise in inflation has provoked fierce criticism of hard-line President Mahmoud Ahmadinejad—not only from his reformist opponents, but also from senior conservatives who helped bring him to power but now say he is mismanaging the economy.

The story of Naomi Wolf and the incredible sophistry of our modern left.

EU propaganda - in reality, its what the EU does most effectively.

Iran expanded their terrorist activities in Iraq after the 2006 elections in America, but they have been beaten back by a combination of effective U.S. military action and an Iraq that does not buy into the Iranian theocratic model, despite the surge of mullah money and weapons into Iraq. The assertion the reduction in violence in Iraq is due in part to a conscious decision of the mad mullahs in Iran is counterfactual according to Michael Ledeen.

Der Spiegel has a timeline of "the most important political events and violent attacks in Pakistan since March 2007."

The Bhutto assassination, seen in light of the assassinations in Lebanon and elsewhere in the Middle East, is an example of how radical Islamist, both Wahhabi / Salafi and Khomeinist Shia, register their vote in elections.

An analysis of Bhutto’s legacy and the ramifications of her assassination from the Jerusalem Post.

From Wafa Sultan: "The Quran states: ‘Allah hath purchased of the believers their persons and their goods, for theirs (in return) is the Garden (of Paradise ): They fight in His Cause, and slay and are slain" (9/111).’ I believe that Muslim clerics in the US have explained this verse in the same way that the clerics in Syria had explained it to me at young age. Growing up, I had always believed that suicide bombing was justified for the cause of being a martyr."

The UK resorts to bribing criminals to self deport themselves in an attempt to deal with a glut of foreign criminals that cannot be deported under the EU’s insane immigration and deportation laws.

How utterly screwed are British multiculturalists: . . . Amis recently put to his impeccably liberal audience at the ICA: 'Do you feel morally superior to the Taliban?' Only about a third raised a hand to say they did, a nice demonstration of relativist liberal guilt.


And there is this gem from the multiculturalists in Germany: "Many of us in the West are convinced that our presence in Afghanistan cannot be justified, that our troops should withdraw and that Afghanistan should be left to the Afghans. They ask themselves: Who are we to believe that it is inhumane to sell an 11-year-old girl? Who are we to impose our values so vehemently on the Afghans, on this [40 year old] man . . . [who purchased] this girl [and married her]?"

Read More...

Summary only...