I Am The Enemy Combatant!

(CNN) — The U.S. Department of Labor recently announced that the unemployment rate fell to 8.2%. That should have been a signal that jobs are coming back and that the economy is about to rebound. But, as many economists say, the numbers fell primarily because unemployed Americans have become so discouraged with trying to find a job that they’ve simply quit looking.

Because nearly one-third of the American middle class, mostly families with children, have fallen into poverty or are one paycheck away from poverty, it is paramount that we dissect the root causes of this mass disenfranchisement within the American workforce. This was the motivation behind “The Poverty Tour: A Call to Conscience,” our 18-city bus tour that traveled across the country last year. It was designed to bring more attention to the plight of impoverished Americans.These citizens do not fit the negative stereotypes and propaganda that weve heard during the Republican presidential primary contests. The candidates who have vowed to cut government subsidies speak of the poor as if their constituents had been exempted from the millions who, despite their middle-class identification and aspirations, now fall beneath the established poverty line.The people we met arent lazy or eager to live off so-called government entitlements. We spoke with formerly middle-class parents who were thrust into poverty when one or both lost their salaries. We heard the stories of single mothers and fathers, military veterans and former high-wage employees desperately trying to re-enter a workforce that no longer pays living wages.

via Promise of the American Dream is broken – CNN.com.

This article is exactly the kind of liberalistic B.S. that prevents this country from doing anything rational about the economic problems we face. Every single problem the article brings up is true, but the remedy the article suggests would be a fool’s errand.

The article suggests that government take over our industries and solve our problems in a great, radical socialist wave. It says capitalism, and the republicans who support it, have failed us.

I’ve got news for the author, but all of our problems were predicted twenty years ago when Ross Perot said that the “sucking sound” NAFTA would cause would be the sound of American jobs going overseas. Ross Perot was right, and NAFTA wasn’t brought on the wings of Republican values. It was signed, sealed, and delivered by none other than President William Jefferson Clinton – whose wife is already starting her election campaign for the next Presidential cycle.

Capitalism built this nation. Capitalism realized the American Dream. Globalization – not capitalism – is what is killing it. Globalization is very quickly undoing 150 years of socio-economic progress in which labor was allowed to operate as a commodity controlled fairly by labor unions. Some of those unions became too powerful (such as the UAW) but the concept of unionization is both fair and practical, and the growth our country enjoyed during the period of unionization was easily the fastest period of growth at any time in our nation’s history. It was also a period of capitalist joy.

Government is funded through taxation. There is no way around that. Because of this, government wages are paid from tax revenues. That means that in order to pay one person a government salary, you have to reduce the salaries of other people by taxing more income away from them. Private sector employees add to our pool of tax revenue whereas public sector employees take from that pool. As you add private sector employees, you spread the burden of paying for government out over a wider base of people and reduce the burden. When you increase the size of government, you add salaries that must be paid through taxation while simultaneously reducing the number of people available to tax, creating a double-whammy on everyone still in the workforce. The pain of government grows with its size.

A higher paid private workforce has the same impact on tax revenue as having more workers. A higher paid public workforce has the same impact as having more public workers. Having more public sector workers who make more than their private sector counterparts (such as we have today – and such as this article says we should continue) is a a relatively rapid form of economic suicide.

None of what I have said is opinion. It’s mathematics. Simply put, it is physically impossible for government to spend us into greatness. Period.

Capitalism loves efficiency. The United States was pretty efficient before NAFTA but NAFTA opened the floodgates of globalization and suddenly companies began to look at the inefficiencies in the global economy. An American automotive engineer in 1998 made an average of $150,000 a year. A Chinese automotive engineer (often trained in an American university) with a doctorate cost only $1,500 that same year.

If you can buy two identical items but one costs $1,500 and the other costs $150,000, which would you buy? We may be more efficient than the Chinese are, but we are not 100 times more efficient. Of COURSE in this environment companies left. Clinton’s NAFTA assured that they would.

In the early 2000s China, facing rising wages (which threatened to shrink their labor efficiency advantage) considered declaring all of their workers property of the state and then renting them out to US manufacturing companies. Our media called this slavery and China backed off.

China next opened fully owned subsidiaries of the Chinese government that acted as placement firms. For a fee – usually around $1,500 (which was a ton of money to a Chinese laborer, especially twenty years ago) they would find you a job. Since the typical worker didn’t have any money, they’d loan the worker the fee. One caveat of course was that you couldn’t leave the job until you paid them back. Interest rates on this loan were high and the worker would pay 1/3 of their wages back to the placement firm for room and board provided by the company where they worked. The system was designed to put employees further into debt – they were never supposed to be able to pay their way to freedom.

In most cases the employer and placement firm were both fully owned subsidiaries of the Chinese government, and those companies that were not owned by the government opened their own placement firms. The result was something very similar to slavery: indentured servitude.

The trend spread throughout much of Asia. Today indentured servitude is the largest industry in most of Asia. That’s what we compete with. Thank you, Bill Clinton!

Luckily slave workers have nothing to gain by working hard, driving down productivity. And there are only so many people even in China so wages in Asia have been climbing quickly. American workers are expensive by comparison but we are also very productive. On top of that, it is expensive shipping everything from Asia, offsetting some of the costs of labor over here. The result is that the tipping point where American workers can compete has largely been reached, and jobs are starting to come back on their own.

That doesn’t mean we are ever going back to the days where unskilled factory workers had upper middle-class lifestyles. Those days truly are gone. But it does mean that we’ve essentially bottomed out and that things are going to start to improve again.

If we do as the author of this article suggests, we’ll double-down on big government to provide wages and relief for the American worker, and pay for it by taxing the rich very heavily.

Boy that sounds tempting – doesn’t it? Unless you are rich, this is the promise of free money! Really there are two separate issues is this promise though. One is big government, and the other is tax fairness. As I’ve already shown, big government is NOT the answer to America’s problems. But that doesn’t mean taxes should not be fairly distributed among the population. Of COURSE they should be! And they currently are not. The rich are not paying their fair share, and taxes on the rich must go up, but we must do that without increasing the size and scope of government. If anything, the burden of government is already too great for our economy to carry. If we increase the burden of government, our economy will break under the weight, as the economies of Europe are doing today.

Another thing we have to consider when looking at the size and scope of government is that while it is executive greed that takes from the poor and gives to the rich, capitalism, left to its own devices, corrects this problem very effectively. Companies that pay fair wages attract better employees who are more motivated to work. Companies who overpay their executives are at least as inefficient as companies who overpay lower-level workers. Capitalism encourages efficiency and that includes efficiency of wages at all skill levels. Without competition however, the capitalist model breaks down, allowing corporate executives to pay themselves more than they are worth while paying their workers less.

There are a handful of industries that if left alone will merge into monopoly or something close to it. These industries are problematic, but there are only a few of them. In the vast majority of industries economies of scale have a cap after which being ‘bigger’ doesn’t help and may in fact hinder. Competition forces efficiency, so in a true capitalist model within most industries it is impossible for a company to get ‘too big’.

Where you have excessive executive pay and ‘too big to fail’ organizations you also have corruption.

Corruption requires government.

We always ask for more regulation to protect us from business, but it doesn’t work that way. Regulation doesn’t protect us from business so much as it protects existing businesses from competitive forces. It is competition – not government – that protects the people.

And that is what the article linked above does not understand.

Prominent public intellectuals in the United States are becoming increasingly vocal in their protestations that their country is not in decline. Robert Kagan militates in his latest book that the United States is still by far the most powerful country in the world, as it has been since the latter days of the Second World War. Walter Russell Mead wrote in The Wall Street Journal last week that the problem is not one of American decline, but the decline of its principal allies, Europe and Japan; while countries that have not historically been close allies such as China, India, Turkey and Brazil, are making swift economic, and therefore, political progress.Both Kagan and Mead are putting forth reasonable arguments — unlike Barack Obama’s blustery assertion in his State of the Union message that declinists “don’t know what they are talking about.” But while Kagan and Mead are telling the truth, they are not telling the whole truth.In 1945, the United States accounted for half the world’s entire economic product, as all other major industrial countries, except to some extent Britain, had been severely damaged by the war. The United States had a nuclear monopoly, was the founder of the United Nations in which great hopes then reposed, and had led the world to victory over Nazism and Japanese imperialism. It was the only Great Power that in the 1930s had been led by a government that, in the aftermath of the Second World War was not shaming: neither an aggressive dictatorship nor an appeaser of them.

Decline from that pinnacle was inevitable. But it did not happen at once. Indeed, the overwhelming and relatively bloodless victory in the Cold War, the fruition of the brilliant American strategy of containment, left the United States as the only seriously Great Power in the world, a condition unique in the history of the nation-state, starting in the Middle Ages. As a result, there was, 20 years ago, a good deal of frothy (and, as it turns out, grossly premature) intellectual blather about the end of history and the political culmination of the world in democratic capitalism.

The unipolar era has not been a success for America. The great irony of these 20-something post-Cold War years has been that while the United States was the indispensable country in the triumph of capitalist democracy — its preservation from 1917 to 1941, and its outright victory in the following 50 years — it is not now one of the world’s best, or even better, functioning democracies.

via America is in decline | Full Comment | National Post.

Conrad Black’s article is interesting and accurate in its assertion that we could not account for 50% of the world’s economic activity indefinitely.  We’re down to 25% now and that is probably not sustainable either.  It is also both interesting and accurate in its assessment of our failed foreign policy initiatives (or lack thereof) since the first Bush Presidency.

The real question however is that of whether or not the United States is a nation in decline.

Before we answer that question, it is important to understand how nations rise and fall.  We tend to think of nations in a linear structure, referring to the ‘Rise and Fall of the Roman Empire’ for example as if Rome rose to its pinnacle, declined, and fell.  Historically however that isn’t what happened all.  Rather, Rome oscillated through periods of expansion and periods of contraction.  Rome was in a period of significant decline for example when the second Punic War started and was almost sacked by Hannibal of Carthage, and yet once Rome defeated Carthage they began one of their strongest periods of growth.

The United States is clearly in an era of contraction and we can see in ourselves many of the same characteristics Rome had during its periods of contraction. 

• Our cultural and moral identity is splintered to the degree that speaking of a cultural or moral identity is not even considered ‘politically correct’ today. 

• While our education system is still strong, our students are not.  Large segments of our population don’t even consider an education to be desirable – in 2007 Detroit had a 27% high school graduation rate, meaning that more than 70% of the people who should have been graduating dropped out instead.

• Our government spends 40% of our GDP and taxes 20%.  It is only half funded, with over forty cents of every dollar spent going straight to our national debt.  About half of this is cyclical and will go away on its own as Americans get off government subsidies and get back to work (it is already changing as the economy improves), but the other half is a problem.

• 50% of our gross domestic product stems from financial services – predominantly  the derivatives market.  Another 25% comes from healthcare.  Neither financial services nor healthcare create wealth but rather redistribute wealth created in other portions of the economy.  75% of our economy is redistributing wealth rather than creating it.  That’s a problem. 

• Whether we look at bankers who flush our national economy down the toilet for a quick buck, business people who run their companies into the ground for short term stock gains, or individuals claiming mental illness after losing unemployment benefits, we have a very real problem with people being willing to sell out others for personal gain.  Throw the normalization of sex as a business on top of that and very clearly we are a nation without moral fiber or substance.

• We have forgotten what America stands for.  The National Defense Authorization Act of 2012 gave the President the right to imprison or assassinate anyone at any time for any reason, including American citizens within the United States.  It also called on the use of the Third Infantry Division as an in-country defense force (aka ‘Gestapo’).  Obama later signed executive orders giving his department heads the power to tell any company or individual to do whatever it is they want us to do provided they cloak the order in ‘security interests’.  This includes the power to incarcerate large swaths of American workers into work camps without pay.  Obama says he has no intention to use these powers, but I can’t think of any time in history where someone took the time to write laws and orders without any intent to use them.  Are we to believe this is a hobby of his and that he writes laws and executive orders for the sheer joy of doing so?  Of course there is an intent to use them – you don’t bother writing laws unless you intend to use them. 

• The polarizing of our political process is troubling as well, and particularly when you look at what we are polarized over.  On the right, you have a Christian version of the Taliban trying to ban personal freedoms.  On the left you have an economic and political Taliban trying to end all economic and political freedoms.  It would appear that the only thing both parties can agree on is that we should no longer be free.

In short, we are culturally, morally, economically, politically, and ideologically bankrupt.  I think that’s a pretty good definition for a period of contraction.

Rome went through many periods of expansion and contraction throughout its history.  It fell when a significant enough external threat came about during a deep contraction.  We have very real external threats too. 

• China openly calls trade with the United States a zero-sum game, and actively works to undermine our economy as its primary mechanism toward building up their own.  Never mind that trade is NOT a zero-sum game.  Our top trading partner thinks it is, and is actively working to take our economy apart on the assumption that this will help their economy grow.  Is our response to protect ourselves?  No.  Instead our response is to appease.  I’ve lost count of all the times I’ve heard or read that this is the natural way of things and that our day in the sun is over.  Obviously, we lack the resolve to protect ourselves.  Yes – we are in a period of contraction.

• Islamic extremists really do want to kill us.  We like to say that they hate us because of our friendship with Israel, but it’s equally accurate to say that they hate Israel largely because of Israel’s friendship with us.  The fact of the matter is that the ‘Spread Islam by the Sword’ doctrine, which is central to a large swath of the Islamic faith, is incompatible with any sense of religious freedom.  It is freedom that these extremists hate more so than religion, and it is the spread of freedom into what they consider their world that makes them lash out against us.  Iran likes to call nuclear weapons the ‘Sword of Islam’.  When you hear the Ayatollah of Iran saying both, “Nuclear weapons are the Sword of Islam,” as well as, “We must spread Islam by the sword,” what he is telling you is that he intends to use nuclear weapons to spread Islam by force.  If Iran gets nuclear weapons, every Jihadist with a minivan will become a nuclear delivery system and it won’t just be Israel they wipe off the map.

If left alone we’ll bottom out and grow again, but we are unlikely to be left alone, and even if we were how far we have to drop before we bottom out is anyone’s guess.  As we give up our individual liberties for national security against what is a very real threat, what kind of country we’ll have is anyone’s guess.  This is already a very different country from the one I grew up in, and the legislation stripping us of our personal liberty is bi-partisan.  The National Defense Authorization Act of 2012 was co-sponsored by Senators John McCain (Republican from Arizona) and Carl Levin (Democrat from Michigan).  It passed almost unanimously and was signed into law, ironically, on the birthday of the ratification of the Bill of Rights.

There is an old saying that things are never as good nor as bad as they seem, and that is certainly true here.  While we have slipped from accounting for 50% of the world’s GDP to accounting for 25%, that’s happened because the rest of the world has grown rather than because we have shrunk.  That trend can continue and can be a huge positive for the United States.  The idea that the enriching of the rest of the world has to come at our expense is a myth.  There is in fact absolutely nothing wrong with our country that can’t be fixed.  But fixing things will require leadership, and leadership is something our government currently lacks.

Let’s face it: a corporate raider is only able to identify and act upon a situation when a business is poorly run and poorly capitalized. Indeed, the raider doesn’t create the inefficiencies. Quite the opposite. The raider takes the first steps towards correcting the inefficiencies and getting the company back on its feet before it’s too late. Skeptics might argue that the corporate raider is seeking nothing more than to line his own pocketbook. Yes, there’s absolutely an element of truth to this assertion. The raider isn’t going to spend his time, and take risks with his own money, for no return on his investment.

What’s missed, however, in the skeptics’ derision is that the blame should be directed elsewhere. Firstly, skeptics fail to critically assess the management team’s ineptitude that led the company to its vulnerable strategic position. Moreover, what about assigning some blame to the Board of Directors? A key responsibility for Board members is to review and assess the performance of a company’s CEO and the management team. If a corporate raider is knocking on a company’s doorstep, long ago the Board

via Zafran: In Defense of Gordon Gekko – CNBC.

This is an interesting article, and certainly there are cases where a ‘corporate raider’ does step in and save a poorly managed company.  Mitt Romney’s company did a lot of that.  But not all corporate raiders look for poorly managed companies.  Some are more like Jack ‘Chain Saw’ Dunlap, buying healthy companies and then gutting them of value-adding activities to increase cash flow and make the company look like an attractive investment for the short-term.

Imagine what would happen if you took, say, Apple, and eliminated its research and development.  Apple spends a lot of money on R&D.  If it stopped spending any of that money it would immediately become more profitable and its stock price would soar.  In the medium-to-long term it would also stop making new products and go bankrupt as existing products became obsolete, but Jack Dunlop would sell companies long before that happened.

Jack Dunlop was the epitome of ‘bad’ corporate raiders.  Those who truly do pickup troubled companies and fix them – my hat is off to those individuals.  But let us not forget the ‘Chan Saw’ Dunlops of the world, for they are out there as well.

The world economy is in trouble, and governments are making things worse. Here’s the story, right out of the pages of the 2012 Index of Economic Freedom, published Thursday by the Heritage Foundation and The Wall Street Journal:

“Rapid expansion of government, more than any market factor, appears to be responsible for flagging economic dynamism. Government spending has not only failed to arrest the economic crisis, but also—in many countries—seems to be prolonging it. The big-government approach has led to bloated public debt, turning an economic slowdown into a fiscal crisis with economic stagnation fueling long-term unemployment.”

The new index documents a world in which economic freedom is contracting, hammered by excessive government regulations and stimulus spending that seems only to line the pockets of the politically well-connected. Government spending rose on average to 35.2% of gross domestic product (GDP) from 33.5% last year as measured by the 2012 index.

Most of the decline in economic freedom was in countries in North America and Europe. Canada, the United States and Mexico all lost ground in the index, and 31 of the 43 countries in Europe suffered contractions. They ought to know better. These are the very countries that have led the world-wide revolution in political and economic freedom since the end of World War II. But now, weighed down by huge welfare programs and social spending that is out of control, many governments are expanding their reach in ways more reminiscent of the 1930s than the 1980s.

How about the U.S., historically the country more responsible than any other for leading the march of freedom? Under President Barack Obama, it has moved to the back of the band. Its economic freedom score has dropped to 76.3 in 2012 from 81.2 in 2007 (on a scale of 0-100). Government expenditures have grown to a level equivalent to over 40% of GDP, and total public debt exceeds the size of the economy.

The expansion of government has brought with it another critical challenge to economic freedom: corruption. The U.S. score on the index’s Freedom from Corruption indicator has dropped to 71.0 in 2012 from 76.0 in 2007. That’s not surprising, given the administration’s excessive regulatory zeal. Each new edict means a new government bureaucracy that individuals and businesses must navigate. Each new law opens the door for political graft and cronyism.

via Edwin Feulner: A Step Backward for Economic Freedom in 2012 – WSJ.com.

The good news is that we are still 10th on the index.  The other good news is that nothing in this report or in the Heritage Foundation / Wall Street Journal’s methodology support the contention that taxing the rich stunts economic freedom.  I would argue that the avoidance of taxation on the rich stunts economic freedom by shifting the tax burden onto the middle class and making the rift between rich and poor wider.

As a RINO Republican, while I am against ‘big government’ I am in favor of a fully funded government, and no matter what we do with the size and scope of government, the rich do need to pay their fair share.  Many in the tea party will use this report to claim that taxes on the rich must come down, but really the rich should be at least as high of a percentage of their income as the rest of us and they currently do not.  ‘Economic Freedom’ should not only exist for the rich, and any assertion otherwise fails to understand the implications of this report.

According to Paul Gambles, managing partner at MBMG, China’s gross domestic product (GDP) data — widely regarded as a barometer of the country’s economic health — are among the “less reliable” figures from the government.

“We tend to take the view that the least reliable statistics that come out of China are perhaps the GDP numbers, the unemployment numbers and the CPI numbers,” Gambles told CNBC on Wednesday. Instead, investors should place more importance on data like energy usage, new car sales external Purchasing Managers’ Index, which he said pointed to a less robust Chinese economy.

Earlier this week, David Carbon, Managing Director of Economics and Currencies at DBS Bank, told CNBC that China’s economy is accelerating again, basing his argument on the latest inflation data, which came in at a higher-than-expected 3.6 percent in March.

But Gordon Chang, author of the book “The Coming Collapse of China”, argued that inflation in China is under-reported, and has in fact fallen in recent months.

“I think one of the big stories is that the rate of inflation has obviously come down very, very quickly over the last three or four months, which shows a deterioration in the economy,” Chang said. “When you put that together with the bad electricity production statistics, bellwether car sales, new lending, all of those numbers point to either a contraction or essentially an economy growing at 3 to 4 percent.”

Chang added that China can’t be growing at 8.4 percent in the first quarter — as forecasted last week by Zhang Xiaoqiang, deputy director of China’s National Development and Reform Commission.

“China’s not going to grow at 8.4 percent. It grew in low-single digits in January and February, if you combine those two months, from any number of official statistics that the government issued. You’d have to have incredible growth in March, just to average out at 8.4,” Chang said.

via Forget China GDP, Other Indicators Paint Bearish Picture – Asia Business News – CNBC.

China, being a command-economy, can essentially write any official GDP numbers it wants.  It can build empty cities (as it has been doing for years), increase defense spending, or build inventory to boost GDP well above what actual economic activity warrant.  This is in stark contrast to a market economy, where demand drives growth.

Paul Gambles and Gordon Chang are looking at market indicators that the government can’t manipulate, like how many cars are being purchased.  For inflation, rather than looking at official rates driven by state-owned banks, they look at non-state lending where the rates are much higher.

When you look at the indicators that would drive China’s economy were it market-driven, you get a very different picture than the Chinese government paints.  Rather than a strong, robust economy moving forward at breakneck speed, you get the picture of an economy on the brink of collapse, being held up by government programs and government projects that have nothing to do with actual demand.

The question isn’t whether or not China will collapse.  Their collapse is just as certain as the Soviet Union’s was.  The question is how long it will take and how spectacular it will be.

While central bank action ostensibly is geared toward using monetary policy to control the levers of prices and employment, the era of quantitative easing has brought with it increased focus on how the equity markets push the economy, and not the other way around.

As such, Chairman Ben Bernanke and his fellow Fed officials will be paying great attention to whether the sharp stock decline Wednesday, as well as the market’s generally lackluster performance the past three weeks, signals a need for more stimulus.

Gross: Fed “Trapped in a Conundrum.”"Mr. Bernanke and (former Fed chair Alan) Greenspan made it clear that the stock market is the transmission mechanism for monetary policy,” said Quincy Krosby, chief market strategist at Prudential Annuities in Newark, N.J. “They know that a stronger stock market feeds into a stronger economy, which feeds into investor confidence.

via Why the Fed Will Intervene If Stocks Fall Too Far – US Business News – CNBC.

I’m going to call this what it is:  The Federal Reserve using inflation as a way to take from the general public and give to the banks.

Think about how this works.  First, stocks are artificially inflated in value by a cheap money asset-bubble that banks make money on.  As the cheap money dries up, stocks start to fall back to where market fundamentals say they belong.  The Fed throws more cheap money into the mix, causing another asset bubble and making the banks even more money.  Eventually all of that cheap money causes inflation.  Since stocks are assets, their value rises relative to the dollar when inflation hits, allowing them to return to legitimate market-driven values without dropping relative to the dollar.  The end result is that the banks make oodles of money and the rest of us suffer the pains of a weaker dollar and higher commodity (i.e.: food and gas) prices.

The article says that the Fed will act to keep the asset bubble going.  I agree.  But I disagree with the reason.  Stock prices do not drive economic growth, but rather economic growth drives stock prices.  The Fed knows this.  The Fed however is at its heart a bank cartel, and the cartel likes money.  Today they are taking it from the consumer.

The senior leadership of the Chinese government increasingly views the competition between the United States and China as a zero-sum game, with China the likely long-range winner if the American economy and domestic political system continue to stumble, according to an influential Chinese policy analyst.

China views the United States as a declining power, but at the same time believes that Washington is trying to fight back to undermine, and even disrupt, the economic and military growth that point to China’s becoming the world’s most powerful country, according to the analyst, Wang Jisi, the co-author of “Addressing U.S.-China Strategic Distrust,” a monograph published this week by the Brookings Institution in Washington and the Institute for International and Strategic Studies at Peking University.

Mr. Wang, who has an insider’s view of Chinese foreign policy from his positions on advisory boards of the Chinese Communist Party and the Ministry of Foreign Affairs, contributed an assessment of Chinese policy toward the United States. Kenneth Lieberthal, the director of the John L. Thornton Center for China Studies at Brookings, and a former member of the National Security Council under President Bill Clinton, wrote the appraisal of Washington’s attitude toward China.

In a joint conclusion, the authors say the level of strategic distrust between the two countries has become so corrosive that if not corrected the countries risk becoming open antagonists.

The United States is no longer seen as “that awesome, nor is it trustworthy, and its example to the world and admonitions to China should therefore be much discounted,” Mr. Wang writes of the general view of China’s leadership.

In contrast, China has mounting self-confidence in its own economic and military strides, particularly the closing power gap since the start of the Iraq war. In 2003, he argues, America’s gross domestic product was eight times as large as China’s, but today it is less than three times larger.

via China Views US as Declining Power, Says an Insider – Asia Business News – CNBC.

Wang Jisi is an insider both in Washington as well as within the Chinese Communist Party and is uniquely qualified to discuss relations between our two nations.  When he says that China views our relationship as a zero-sum game, what he means is that China believes that the best strategy to strengthen China is to undermine the United States.  When he says that China views Washington’s policies as things aimed to undermine China, what he means is that China views the United States as a nation whose strength comes at China’s expense, and that the best way to strengthen China is to do whatever China can to hurt the United States.

China’s goal is not to create mutually beneficial trading relationships with the United States, but to screw us as hard and as quickly as possible, and to keep screwing us until there is nothing left.  This is an open declaration of economic warfare, and if we do not take is seriously we are crazy.

That’s not to say we should go to war with China, but if you were at a barbecue with your neighbor and he told you his one goal in life was to burn your house down and sleep with your wife, you would probably stop associating with that neighbor.  We should have a similar policy toward China.

This year’s college graduates are being offered more jobs and fatter paychecks. Members of the Class of 2012 are being offered median starting salaries of $42,569 — up 4.5% from last year, a new report from the National Association of Colleges and Employers shows.

Meanwhile, they have more jobs to choose from. Employers expect to hire 10.2% more graduates this year than they did last year, according to NACE’s survey of 160 employers.

These employers have posted 15,767 job openings for college graduates this year — up about 10% from the 14,341 that were posted for the Class of 2011 and more than triple the mere 5,174 job postings for the Class of 2010.

via College graduates of 2012: More jobs, bigger paychecks – Apr. 3, 2012.

Let’s be honest – a 4.5% boost in pay isn’t exactly a ‘giant leap for mankind’ coming off the back end of a major recession, but it is a positive development and it does denote improvement in the economy over last year.

Unfortunately, with government easing still in place it is impossible to tell how much of our economic growth is based on fundamentals and how much is based on government intervention. Eventually the economy must stand on its own feet.

In September 2008, Steven Chu said to the Wall Street Journal “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” and Barack Obama picked him for Secretary of Energy.

When President Obama was inaugurated, gas was selling for $1.90 a gallon, and it is now nearly $4.00. Not quite European levels, but doubling gas prices is a good start.

Mr. Obama says he needs four more years to change America—if reelected can we look forward to $8.00 a gallon?

Don’t laugh. Messrs. Obama and Chu are good at the economically imprudent.

Dr. Chu and President Obama share some rather radical notions that the nation has overinvested in oil and under invested in solar, wind and other alternative energy sources.

The President has continued bans on drilling in the Eastern half of the Gulf, offshore on the Pacific and Atlantic coasts, and the richest fields in Alaska, and he has thrown onerous regulatory barriers to drilling where it is still legal.

via Morici: $8 a Gallon Gas? – CNBC.

Dr. Morici doesn’t even touch on our oil shale.  He doesn’t talk about natural gas either.  He does however show that US oil production has only grown by 12% over the past four years when it should have doubled.  The President says that there is nothing he can do to bring down the cost of oil overnight.  That’s true, but it’s also true that the President can impact the price of oil a great deal over a four or eight year period, and our President has done so.  Gas prices have doubled as a result.

It is important to remember that this President ran on a promise of $8 a gallon gasoline in 2008.  Given four more years, he seems poised to keep that promise.

In fairness to President Obama – some of the increase in gasoline prices stems from inflationary pressure.  We are staring inflation in the face and commodity prices always move before wages.  But we are staring at inflation because of government easing policies this President owns.  Either way – a vote for Obama may be a vote for $8 a gallon gasoline.

Runaway government debts have triggered uncontrolled money printing that in turn will lead to inflation that will decimate portfolios, according to the latest forecast from “Dr. Doom” Marc Faber.

Investors, particularly those in the “well-to-do” category, could lose about half their total wealth in the next few years as the consequences pile up from global government debt problems, Faber, the author of the Gloom Boom & Doom Report, said on CNBC.

Efforts to stem the debt problems have seen the Federal Reserve expand its balance sheet to nearly $3 trillion and other central banks implement aggressive liquidity programs as well, which Faber sees producing devastating inflation as well as other consequences.

“Somewhere down the line we will have a massive wealth destruction that usually happens either through very high inflation or through social unrest or through war or credit market collapse,” he said. “Maybe all of it will happen, but at different times.”

via ‘Massive Wealth Destruction’ Is About to Hit Investors: Faber – US Business News – CNBC.

Inflation is not a mystery. My MBA economics professor explained it this way.. Imagine you have an economy that consists of two dollars and two apples. Each apple would cost one dollar. If you add a third apple and want to keep the value of each apple the same, you also need to add a dollar such that you will have three apples and three dollars. That’s growth. Each apple will still be worth one dollar. But what if you add another three dollars such that you have three apples and six dollars in your economy? The answer is that each apple will suddenly be worth two dollars. That’s inflation.

Our economy works in exactly the same way. If we want to keep the value of the dollar stable, we have to grow the money supply at the same pace the economy grows. If we want a little inflation we need to grow the monetary supply a little faster than the economy grows. A 2% rate of inflation is often considered optimal – that would require the money supply to grow at a rate 2% faster than the growth of the economy.

A real economy is of course more complex than this, and because of that inflation is more difficult to track. The money supply is also more complex such that inflation does not spread through the entire economy all at once. But we’ve been printing money at rates between 5% and 12% since 2008, and during the recession the economy shrank by 5.1% though, so clearly we have some inflation heading our way.

The last time our government printed money at this pace was during the Viet Nam war. Nixon postponed inflationary pressures through the use of price controls, and Carter was the one holding the bag when the piper came calling. If we look at 1966 as start of that monetary expansion we can see that inflation went from 3% in 1972 to over 12% in 1975, and almost 15% in 1980. After that it started to come back down again. There was about a seven-year gap between the time the government started printing money and the time inflation hit. Really it was a four-year gap, but price controls and other government measures postponed it by another three years.

The level of easing is very similar this time around and we can expect a very similar pattern. We will likely see the value of the dollar halve over a ten-year period. The inflation should start sometime over the next year or so, but could be postponed by a few years through price controls or other similar measures.

The fed says it can stop inflation, and in theory it can, but inflation does not run through the economy all at once. Gold prices go up first, followed by other commodities. Labor rates rise last. By the time the fed starts to see inflation in its ‘core index’ it is too late to stop all of it, and with a government that is addicted to the easing policies of the Fed, spending will force the Fed to continue easing even after the inflation hits. It was the same pattern in the 70s. It will be no different this time around. If anything, our government is even more addicted to Fed easing policies than it was before, making the spectre of inflation even more severe.

The bottom line is to hold onto your hats, and to invest in commodities and mutual funds that deal in commodities.

A recent survey of American Meteorological Society members shows meteorologists are skeptical that humans are causing a global warming crisis. The survey confirms what many scientists have been reporting for years; the politically focused bureaucratic leadership of many science organizations is severely out of touch with the scientists themselves regarding global warming issues.According to American Meteorological Society AMS data, 89% of AMS meteorologists believe global warming is happening, but only a minority 30% is very worried about global warming.This sharp contrast between the large majority of meteorologists who believe global warming is happening and the modest minority who are nevertheless very worried about it is consistent with other scientist surveys. This contrast exposes global warming alarmists who assert that 97% of the world’s scientists agree humans are causing a global warming crisis simply because these scientists believe global warming is occurring. However, as this and other scientist surveys show, believing that some warming is occurring is not the same as believing humans are causing a worrisome crisis.Other questions solidified the meteorologists’ skepticism about humans creating a global warming crisis. For example, among those meteorologists who believe global warming is happening, only a modest majority 59% belie

via Shock Poll: Meteorologists Are Global Warming Skeptics – Forbes.

The importance of this article cannot be over-stated.  If global warming is not a scientific concern then we have to wonder why it is a scientific concern.  What is the agenda?

The Iron Mountain Report listed a fake impending ecological disaster with a scope similar to nuclear war as the best unifying factor for a post-war world society.  The Iron Mountain Report went so far as to say that a fake impending ecological disaster is better than a real one, because a real one would have to be corrected whereas a fake one could be perpetuated indefinitely.

Today’s argument was a classic demonstration of the craft of oral argument. The Justices asked penetrating questions and raised difficult hypotheticals that the attorneys fielded with professional skill and varying degrees of effectiveness. What occurred inside the Supreme Court today is a model for reasoned analysis, challenging questions, and the overall seriousness of purpose that defines the Supreme Court. What was most striking to me was that the questions and arguments were not as predictable as I had anticipated. Some of the hypothetical questions such as Justice Alito asking whether the government could require individuals to purchase burial insurance or Justice Roberts asking whether the government could require individuals to purchase cell phones seemed to throw the Solicitor General off-stride. The questions from the usually conservative Justices seemed to focus on the broader philosophical concerns underlying the extent of congressional power, while the questions from the usually liberal Justices focused more on the specific deficiencies in the health care market that the Act was designed to rectify. Verrilli never seemed to take or retain control of his narrative, while Clement never had to move far away from his core points.

via MNG Contributing Health Law Expert: Today’s | Medicare News Group.

Dr. Jacobson misses the critical point in this article.  The question isn’t whether or not the court has, since the New Deal of the 1930s, allowed the federal government to do whatever it wants with regards to the commerce clause.  The question is whether or not the Constitution gives congress the authority to mandate that individuals purchase health care insurance from private companies and whether or not the CURRENT Supreme Court Justices are going to go with an interpretation of the Constitution that resembles what the Constitution actually says.

The Supreme Court’s job is to interpret the law.  Conservative justices figure that means to determine what the Constitution actually says and to force government to live within the authority the Constitution gives it.  Liberal justices are far more apt to look at the pros and cons of a case and then frame their opinion based on whether or not they think the bill in question is a good or bad idea with little or no thought toward whether or not congress has the authority the bill requires.

The commerce clause doesn’t give the federal government the right to tell private citizens to buy health insurance (or anything else) from private companies and a conservative justice is consequently going to strike the individual mandate down.

Liberal justices have a different outlook.  They aren’t worried about government authority so much about ‘doing the right thing,’ and will consequently give congress a great deal of latitude in crafting a bill that could benefit our health care system.

It looks like the individual mandate is going to be struck down.

Spot oil prices have rallied nearly $20 since the start of the year and traded above $125 a barrel yesterday, on the back of supply disruptions and geopolitical fears over Iran.

Over the same period, oil for delivery in December 2018 has risen $1 to about $95. This has opened a record gap of more than $30 between spot and five-year contracts. “The market has the perception that oil supply will increase in the future and that is holding back the price of forward contracts,” said Mark Thomas, head of energy futures at commodities brokerage Marex Spectron, citing expectations of higher output in Iraq, Brazil, the US and Canada.

Saudi Arabia, the world’s largest producer of oil, has also pointed to higher supplies emanating from these countries for its belief that current oil prices are “unjustified”. US oil production has surged to a 10-year peak after companies tapped so-called shale reservoirs, using a technique called hydraulic fracturing or “fracking”.

via Oil Futures Spark Debate on $100 Level – Business News – CNBC.

I don’t know as much about oil as someone who trades in it for a living, but the people who set oil futures do.  Speculators set the current, or ‘spot’, price.  Banks set the futures price.  Really the banks are speculators too, but they set the spot price by manipulating markets on the ICE exchange to increase current profits.  Futures are a much better indication of where oil prices are heading going forward.

And the banks say oil prices are heading markedly down.

The truth is that though the world is starting to run out of ‘economically recoverable reserves,’ the phrase ‘economically recoverable’ is somewhat tricky – accounting only for oil that can be pumped up at about $10 a barrel.  Oil shale formations can be run profitably when oil sells at $40 a barrel.  Back in the 1990s, when oil was selling at or below $30 a barrel, oil shale cost more to extract than it was worth and was thus not economically recoverable.  At $100 a barrel, pumping shale oil is just as profitable as printing money.

How much oil shale do we have?  We’ve found 2.6 trillion barrels so far, and there are many parts of the Unites States that are rich in shale oil where the EPA won’t let us look.

That’s about ten times what Saudi Arabia has, with the knowledge that if we keep looking we’ll find more.

Then you have coal.  At $60 a barrel it is economically profitable to liquefy coal into oil.  Then you have natural gas.  You can’t turn natural gas into oil, but you don’t have to – for about $1,000 you can convert your car to run on it directly.

The United States has the world’s largest oil reserves (followed by Canada) as well as the largest coal reserves and natural gas reserves.  We are swimming in cheap, fossil fuels, and that’s a fact.

So yes – with spot prices running near new records, futures prices all point down.

But the president scoffs at all this. In his energy speech this week, he suggested that the drill, drill, drill crowd (of which I have long been a member) would have founded the Flat Earth Society. He says we might even have sided with 19th-century president, Rutherford B. Hayes.

Ha, ha, ha. Very funny.

But the reality is, oil, gas, and coal — not wind, solar, geothermal, and algae — are going to be crucial to America’s transportation, electricity, and economic growth for many decades to come.

What’s particularly galling about Obama’s riff is his constant use of a false statistic. The president argues that America uses more than 20 percent of the world’s oil, although “even if we drill in every square inch of this country, we still only have 2 percent of the world’s known oil reserves.”

This is just patently untrue. According to the Institute for Energy Research, when you include oil shale, the U.S. has 1.4 trillion barrels of technically recoverable oil. That is enough to meet all U.S. oil needs for about the next 200 years, without any imports.

With the technology revolution in the energy business, including horizontal drilling and hydraulic fracking, the old idea of proved oil reserves that Obama keeps using is replaced with the new concept of recoverable resources. Many thanks to Investor’

via King Dollar Will Cut Oil Prices – US Business News Blogs – CNBC.

That’s from The Kudlow Report, and you read it correctly.  We have 1.4 trillion barrels of recoverable oil, which is sixty times as much oil as President Obama claims we have.  That’s not six times.  It’s sixty times.

What would the impact on oil prices be if the President of the United States told the world that we have more oil in the United States today than the Persian Gulf had when oil was first discovered there?  We have at least three times as much oil as the Persian Gulf ever had, and exploration is banned over huge swaths of land where we know oil exists – that oil isn’t even included.  Some estimates say we have four times more oil than we know of so far – that would be 240 times what the President tells us we have.  What would the impact be if the President made it a national priority to get to that oil?

Never mind all of the things the President could do in the short-term.  He could reduce ethanol requirements.  That’s worth forty cents a gallon.  Never mind the President’s ability to control round-trip trading, reducing the cost of gas by forty percent.  Never mind the Fed’s ability to control inflation and return us to a sound dollar (reducing the price another forty cents).  These things can all reduce the price of oil today, and can do so dramatically, but that’s just the tip of the ice burg.

The real reason oil is expensive is because people are betting that we are running out, and this false premise is being underwritten by environmentalists who wish we would run out.  The President knows we have at least sixty times as much oil as he says we have (and could have as much as 240 times), but he doesn’t like oil, and so he is lying to us.

The head of the Department of Energy said, as recently as 2008, that what we really need is gasoline running at $8 or $9 a gallon.  Obama campaign on the same thing in 2008, promising to tax us off of ‘our addiction to fossil fuel’.

Why on Earth would we want to tax ourselves out of fossil fuels after we find that our country is swimming in the stuff?  Finding cleaner ways to burn it makes sense.  It would be nice to reduce or eliminate the carbon footprint from our cars.  But taxing ourselves out of it?

The real solution is to tell the world that we are not running out of oil, and that in fact the United States is going to regain the lead as the world’s number one oil producer.  Eliminate the fear of ‘peak oil’ and the price will plummet.

A President who wants to end our use of fossil fuels is not going to allow us to develop our oil vast oil reserves though.  Doing so would be great for our economy, but to him it isn’t good politics.

Remember that next time you fill your car – and remember it again when you vote.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.  It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

via Why I Am Leaving Goldman Sachs – NYTimes.com.

Wow.  An upper-level Goldman Sachs executive calls the company right out on the tarmac.  America – this is the #1 reason you are underwater on your house.  This company RUNS THE UNITED STATES FEDERAL RESERVE like its own private little fiefdom.  The heads of both the federal Reserve as well as the treasury both came from Goldman Sachs – and will both go back there unless they retire from their current government positions.  Goldman Sachs for all intents and purposes IS the Fed – and they will do whatever they can to make themselves more money.

You want to know why our economy was flushed down the toilet?  Read the article.  You want to know why we have no manufacturing base?  Read the article.  You want to know why China is kicking our teeth in?  Read the article.  It’s because our entire economy is nothing more than straw Goldman Sachs uses to suck money into the bank cartel they are at the head of.

You don’t have to take my word for it.  Read the article – get it right from the source: Goldman Sachs.

“Every retailer wants to think ‘Everything I sell is worth it! Shoppers will love it’, but the hard reality is 52 percent Americans feel they barely have enough to afford the basics,” said Candace Corlett, president of WSL/Strategic Retail.Corletts comments are based on a survey WSL/Strategic Retail conducted of 1,950 consumers in December regarding their shopping habits.Consumers have moved past the fear that was seen in the firms 2010 How America Shops survey, Corlett said. However, they are returning to stores, but with limits.Feeling the StrainAnd it’s not just the lower-income consumers feeling the strain. Three groups are experiencing higher rates of financial struggle: those with incomes between $100,000 and $150,000, those aged 18 to 34 years old, and women. According to this years “How America Shops” survey, it now takes an income of more than $150,000 to be able to afford the basics, some extras and to save too. As for the once-coveted 18- to 34-year-old market, it is now the demographic struggling the most when it comes to buying power.

via The Basics, Some Extras & Savings—Youll Need $150,000 a Year – US Business News – CNBC.

That’s called ‘inflation’, and it is what happens when the Federal Reserve prints money.  Neither Obama nor Romney will do anything about it – both work for the banks.

“As China’s leaders know, the country’s current growth model is unsustainable,” World Bank President Robert Zoellick said in Beijing at the launch of the “China 2030 Report”.

“This is not the time just for muddling through. It’s time to get ahead of events and to adapt to major changes in the world and national economies.”

An executive summary of the 400-plus page report, made public by Zoellick, had six broad recommendations for Beijing: strengthen a market-based economy, foster innovation, go “green”, provide social security for all, improve the fiscal system and seek mutually beneficial relations with the world.

Among other specific recommendations, it urged Beijing to commercialize banks and allow interest rates to be set by the financial market, develop its private sector, protect farmers’ rights and cut local governments’ dependence on land revenues.

The outcome of these changes would produce a China that is more socially stable and equal in wealth distribution, relies less on exports and investment for economic growth, and more on domestic consumption that can be sustained, the Bank said.

“The reforms that launched China on its current growth trajectory were inspired by Deng Xiaoping who played an important role in building consensus for a fundamental shift in the country’s strategy,” the report said.

via China to Be Largest Economy Before 2030: World Bank – Asia Business News – CNBC.

You’ve got to love misleading titles.  The title says that China will be the largest economy in the world faster than previously thought.  The actual article says that China must make all kinds of reforms that they are not going to make before that can happen.

Yes – if China becomes a free market economy based on capitalist principles, allows income to redistribute fairly (not equally) among its population, allows its currency and all assets to trade freely on world markets, and does all kinds of other things they are never going to do, then it would be natural for the country with the largest population to also have the largest economy.  But it will not happen in the foreseeable future.

What the article doesn’t discuss is what happens if China does not implement these kinds of changes.  The answer is that China will eventually implode.

This site gets between 15,000 and 50,000 spam comments every day.  The diluge makes it imposible for me to administer comments.  I appologize for that.  If you wish to have a comment posted, please e-mail me at wgarneau-at-umflint.edu and I will post your comments (replace -at- with the @ character).

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Because oil prices are so much higher than gas prices, it’s still much more profitable to drill for oil than gas. And energy explorers can use the same technologies to drill for either. All that means you should see a shift in productive resources from gas to oil, as companies seek to maximize their short-term profits.

Even gas giants such as Chesapeake are moving into oil because of the price disparity between oil and gas. For example, Sandridge Energy (NYSE: SD ) snapped up Arena Resources in 2010 for its oil reserves. All else equal, the shift will help push the prices of oil down and gas up. It’s estimated that gas prices could rise to at least $6/mcf from their current level of $4.80 and that would still leave plenty of opportunity for explorers to exploit the price differential between gas and oil, if oil remained at current prices.

So even while many energy players scramble for short-term profits on oil, gas looks like an increasingly compelling long-term play. As my Foolish colleague Dan Dzombak explains, you want to be buying commodities such as gas when they’re cheap and blood is in the streets. That’s what Exxon did a couple years ago with its purchase of XTO, but there’s still time to act since oil prices sit at historically high prices relative to gas.

via The Coming Golden Age for These Energy Stocks (UPL).

When I was in Poland this past April, roughly half the cars on the road ran on natural gas.  You can actually convert a conventional car for around $1,000, and a car built from the ground-up to run on natural gas would not cost more than  a conventional gasoline car.  The problem, ironically, is that natural gas is far too plentiful to be profitable, and because of this there is little incentive for the oil companies to change directions.  Instead they are, in the short-term at least, buying up the natural gas companies and making them look for oil instead.

The article says that the long-term trend will be for more natural gas.  I can’t disagree with that, but I do question how long-term that trend is.  Right now the oil companies are only second to the banks in terms of their stranglehold on our country (and in fact when you look at stock ownership, the oil companies are primarily owned by the big banks), so for the time being I expect more of the same – oil that is artificially elevated in price to just below the price that would send our economy into the ground, and alternatives that our legislature does everything it can to keep us away from.

Notice how all of the green energy companies are being funded by government and at the same time going bankrupt.  Don’t believe for a minute that this isn’t intentional.  The government funds them to get them reliant on government support, and then lets them go under.  Big oil wants it that way.

Any time you see excessive profits, you will also find excessive corruption in government.  One is not possible without the other – the laws of free market economics won’t allow it.

Restore Our Future, the independent “Super PAC” that supports Romney’s campaign, has been a machine of destruction in the race for the Republican presidential nomination, swamping Republican rival Newt Gingrich with attack ads each time he has seemed to threaten Romney’s frontrunner status.

Until late on Tuesday, the engines behind the PAC—its donors—were largely secret.

But the group’s financial reports to the Federal Election Commission (FEC) reveal that private equity executives, hedge fund managers and other financial heavyweights are key contributors to the fundraising juggernaut that Restore Our Future has become.

Political action committees (PACs) are groups with great clout in U.S. politics that are legally separate from candidates. In this campaign, they have unleashed negative advertising against the rival of the candidate they favor.

The filings reveal that Restore Our Future had $23.6 million in the bank as of Dec. 31 – more than the Romney campaign itself. The PAC has spent $17.4 million in support of Romney, including nearly $11 million in Florida before Romney’s decisive victory in the Republican primary there on Tuesday.

via Mitt Romney Donors – Romney’s High-Finance Political Donors Named – Business News – CNBC.

The banks are funding Mitt Romney.  There is no surprise there, but even I am surprised by just how much money they are giving him.  Goldman Sachs alone has put $10 million directly into his campaign, and who knows how much they have had other corporations they own donate?  The real question is whether or not anyone believes banks would invest this heavily into a particular candidate unless they expect a return on that investment.  And the banks are very smart – they also heavily finance Barak Obama.  But NOT Newt.  The banks do not like Newt Gingrich.  As a consequence, The Enemy Combatant does like Newt Gingrich.

Wall Street is about to make $100 million thanks to a once obscure law passed nearly 50 years ago.

The law is a 1964 amendment to the Securities Exchange Act of 1934 that requires companies with over $10 million in assets and 500 shareholders to register under the Exchange Act.

Since registration carries all the costly disclosure of going public, many companies that hit the threshold decide that they might as well go public.

Facebook is in no hurry to go public. It has unlimited access to private capital, as last year’s Goldman Sachs [GS 113.45 1.98 (+1.78%) ] sponsored deal demonstrated. Even after Goldman excluded U.S. investors from its offering, its Goldman funds were oversubscribed.

But because Facebook has far more than $10 million in assets and exceeded the 500 shareholder limit last year, the company is required to register with the SEC by April 29, 2012. It is likely to go public when it registers or sometime shortly afterwards.

Although the 500 hundred shareholder rule is often thought to be a shareholder protection provision, it has really never been anything more than a hidden subsidy for Wall Street. The principal beneficiaries of the rule are Wall Street investment banks and the stock exchanges.

The rule was passed following the publication of the 1963 “Special Study of the Securities Markets,” an investigation into the markets called for by President John F. Kennedy following an insider trading scandal involving an AMEX market maker.

via Why Facebook IPO Is a Bonanza for Wall Street – US Business News Blog – CNBC.

There is always a story behind the story.  The story this time is that the rule forcing Facebook into an IPO is one written by the banks, for the banks.  I honestly did not know that a company’s growth as a private company is limited and that this rule was put in place to force companies to pay huge fees to the big Wall Street firms after they grow to a certain size.  But I know it now – and thanks to CNBC, so do you.

But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?

Not long ago, Apple [AAPL 427.409 7.109 (+1.69%) ] boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.

via How the US Lost Out on iPhone Work – US Business News – CNBC.

This is a fascinating story.  There are two particularly important elements to it.  One is that Steve Jobs moved Apple’s production to China specifically to take advantage of the kinds of flexibility only slave labor (spelled ‘indentured servants’) provides, and secondly – not only did he know it was happening but he told President Obama that because we don’t have the same kind of labor here, there is zero chance of Apple ever coming back or of any significant economic output ever resurfacing here.

That’s right – Steve Jobs essentially called slavery the wave of the future.

Note when you read the article that the word ‘slavery’ or ‘indentured servant’ never comes up – but if you have been paying attention to labor practices in Asia you’ll know by the descriptions of labor practices that this what they are referring to.

If you post a comment and it doesn’t show up, I apologize.  The site is being flooded with comment-spam.  I had to quarantine everything to keep the site functioning.

Worries about France’s economic and political problems are continuing following Friday’s high-profile downgrade of its credit rating by Standard & Poor’s.

“France is probably the most retarded country in Europe in considering the fact that its social model is broken,” David Roche, President & Global Strategist, Independent Strategy, told CNBC Monday.

“Unless they plan a new relationship between the people and the government then France is probably the most dangerous country [in Europe].”

A crisis in the euro zone’s second-largest economy, which is expected to hit a debt-to-gross domestic product ratio of 90 percent this year and is heavily exposed to troubled Italian banks, would be more critical than in the peripheral states.

On Friday, Standard & Poor’s downgraded the credit ratings of France, Italy and seven other European countries, renewing concerns about the impact of the euro zone debt crisis on France.

The CAC 40, [.FCHI 3269.99 44.99 (+1.39%) ] slid Monday morning following the downgrade.

There is also political uncertainty in France, with right wing President Nicolas Sarkozy facing an election later this year. His main contender, Socialist Francois Hollande, promised on Sunday to reduce the “dominance of finance” if elected.

via France: Downgrade Not Worst of France’s Problems: Analysts – CNBC.

France, perhaps more than any other country in Western Europe, actually believes in the Socialist model.  That is why they are in such trouble.

FLORENCE, S.C. — Under new pressure to release his tax returns, Mitt Romney on Tuesday acknowledged that he pays an effective tax rate of about 15 percent because so much of his fortune comes from past investments.

“It’s probably closer to the 15 percent rate than anything,” Mr. Romney said. “Because my last 10 years, I’ve — my income comes overwhelmingly from some investments made in the past, whether ordinary income or earned annually.”

The vast majority of the income Mr. Romney reported over 12 months in 2010 and ’11 was dividends from investments, capital gains on mutual funds and his post-retirement share of profits and investment returns from Bain Capital, the firm he once led. And Mr. Romney also noted that he made hundreds of thousands of dollars from speaking engagements.

“I got a little bit of income from my book, but I gave that all away,” Mr. Romney told reporters after an event here. “And then I get speakers’ fees from time to time, but not very much.”

Financial disclosure forms that candidates are required to file annually shows that Mr. Romney earned $374,327.62 in speakers’ fees from February of 2010 to February of 2011, at an average of $41,592 per speech. That acknowledgement came as Mr. Ro

via Romney Says His Effective Tax Rate Is ‘Probably’ 15% – US Business News – CNBC.

I’m a Republican and I do NOT believe in redistributing wealth or in punishing the rich, but I think it is a natural disgrace that someone for whom $375,328 in speaker fees (at $41,592 per speech) is ‘not significant’ would only pay a 15% effective tax rate.

I’ll bet everyone who reads this pays a higher rate.  And this guy wants to lower taxes.  For whom, Romney?

Even as we pass judgment on countries we consider unfree, Americans remain confident that any definition of a free nation must include their own — the land of free. Yet, the laws and practices of the land should shake that confidence. In the decade since Sept. 11, 2001, this country has comprehensively reduced civil liberties in the name of an expanded security state. The most recent example of this was the National Defense Authorization Act, signed Dec. 31, which allows for the indefinite detention of citizens. At what point does the reduction of individual rights in our country change how we define ourselves?

via 10 reasons the U.S. is no longer the land of the free – The Washington Post.

By our own definition we are a totalitarian state.  If we allocated sanctions fairly, we would sanction ourselves.  We may not use all of the powers at our disposal, but they are new and it will take time for our population to get used to living under the very rules we revolted against when founding our nation.

Do you wish to live in a nation where the President has the power to assassinate anyone he wants - including you – without so much as an OK from the courts?

Do you want to live in a nation where the streets are patrolled by uniformed soldiers looking to arrest ‘suspected’ terrorists and lock them up indefinitely without due process and without proof?

Do you want to live in a country that uses arbitrary justice with warrantless searches and secret evidence?

If you live in the United States, then you do live in such a country.  The government has these powers today.

Secret evidence is particularly interesting.  Not only does our government cite national security to keep evidence secret, but it also cites national security to keep previous court precedence secret.  If that isn’t enough, our government can and sometimes does move trials to the Foreign Intelligence Surveillance Court, declaring the entire procedure secret.  That is correct – our government has given itself the right to try you without even allowing you to be present.

And that is if the government decides to try you at all.  Under current law, they can lock you up or assassinate you without a trial.

Please read the attached article.  It doesn’t come from some strange unheard of source.  It comes from the Washington Post.

In what some analysts said may be a high stakes poker game at the last stretch of intense negotiations to convince private bond holders to voluntarily take some losses to avoid the worst, both sides appeared to be digging in their heels.

A Greek default would be far worse for both Greece and the banks than reaching some form of deal.

“Discussions with Greece and the official sector are paused for reflection,” said the Institute of International Finance (IIF), which leads talks for private bond holders.

“Unfortunately, despite the efforts of Greece’s leadership, the proposal put forward … has not produced a constructive consolidated response by all parties.”

Greek debt swap negotiators said earlier they were less optimistic about reaching an agreement to avert a disorderly default, warning failure to reach a deal would be disastrous for Greece and Europe.

“Yesterday we were cautious and confident. Today we are less optimistic,” said a source close to the Greek task force team in charge of negotiations.

“It is important to remind all parties that the consequences of failure would be catastrophic for Greece and the Greek people, Europe and Europeans,” the source said on condition of anonymity.

via Greek Debt Talks Halted, Appear Close to Collapse – Europe News – CNBC.

Germany will not allow Greece to have a disorderly default – but they might let Greece have four or five orderly defaults, with the promise each time that it would be the last.  I’ll let you decide which is worse.