The Market Ticker - Politics

A Very Serious Warning To Nancy Pelosi

nospam@example.com (Karl Denninger) — Tue, 16 Mar 2010 18:50:00 -0400

I know you're not going to listen to me.

I'm going to say it anyway, because as a concerned citizen of The United States of America, I must.

You are making a grave, perhaps nation-ending mistake.

Attempting to "deem" the Health Care bill passed when it has not actually been voted on is not Constitutional. Article 1, Section 7:

All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States; If he approve he shall sign it, but if not he shall return it, with his Objections to that House in which it shall have originated, who shall enter the Objections at large on their Journal, and proceed to reconsider it. If after such Reconsideration two thirds of that House shall agree to pass the Bill, it shall be sent, together with the Objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a Law. But in all such Cases the Votes of both Houses shall be determined by Yeas and Nays, and the Names of the Persons voting for and against the Bill shall be entered on the Journal of each House respectively. If any Bill shall not be returned by the President within ten Days (Sundays excepted) after it shall have been presented to him, the Same shall be a Law, in like Manner as if he had signed it, unless the Congress by their Adjournment prevent its Return, in which Case it shall not be a Law.

This is the black-letter law of the land.

There are millions of Americans who are extraordinarily pissed off right now. Some of them, like me, write scathing columns on The Internet or we rant on Talk Radio and Television (such as Judge Napolitano)

But some just smolder. Some remember the other founding document of our Republic, The Declaration of Indpendence, which says, in part:

That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

That doesn't sound so good. What has tempered these people is largely what always has in all nations, that is:

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed.

Indeed.

Neither you or I know where the line is for that cross-section of the citizens in this land. I cannot speak for them, for I am not inclined toward the sort of actions that they are, nor do I countenance them. As such I'm not exactly on those folks' "A list".

In fact I fear the day they decide to express their disgust, for while in singular number those expressions are horrifying, as a group such actions harken to a time I hope we would never revisit in this nation.

But I do understand, and see, that they are seething in anger at what has befallen this once-great country.

They have watched as thirty years of corruption in Washington DC has turned our economy and government into a bad joke.

They have watched their jobs go overseas to a Communist Nation for the benefit of a handful of corporate oligarchs, while Washington chortles.

They have watched banksters do everything in their power to imprison them in debt, including bribing Congress to remove usury laws, "reform" bankruptcy so as to render a significant percentage of the population under effective indentured servitude (allegedly prohibited by the Constitution) while the very same banksters declare bankruptcy at the drop of a hat and stick lenders with losses, and while these very same banksters peddle fraudulent securities, cook their balance sheets and generally defraud everyone in the nation - then force the taxpayers, at gunpoint (quite literally, if you remember the fall of 2008 - you were in the room with Bernanke and Paulson when they threatened tanks in the streets) to bail them out.

Finally, they have watched Health Care turn into a monstrous mess, with cost increases of 10, 20 even 30% or more a year. These costs are expanding at that rate because ambulance chasers like former Presidential Candidate John Edwards make millions while Congress has passed laws forcing Americans to eat the development expense for every advanced medical technology over the last 30 years. Congress has refused to demand that medical practitioners bill everyone the same price for the same procedures and drugs. Congress has passed laws exempting medical providers and insurers from anti-trust law, so those aggrieved cannot sue in private causes of action for these abuses. And finally, Congress has forced all of us to eat the cost of care for illegal invaders who commit their first crime with their first step over our national boundary. All of these abuses and more could be addressed, but none of them are in the bill you wish to advance, and that, Madame Speaker, is intentional.

But all of this, while it has been outrageous and even criminal, has been, for the most part, Constitutional. It may be the stuff of a Banana Republic, and it may violate equal protection of the law (a founding principle and in fact a guaranteed right), but Congress has never cared about any of that in my 47 years on this planet.

Witness all the laws you, Madame Speaker and the rest of the Government (including this Health Care plan) do not have to obey while the rest of us do under pain of fine or even imprisonment.

What you propose to do now, however, is not Constitutional.

Rather than negotiate, advance and pass something like my four-point plan that would, along with dropping anti-trust protections and ending the practice of preventing reimportation of drugs and devices, attack the problem at the source, you instead are putting forward the Senate's 2200-page monstrosity.

You are doing so because this bill is not about Health Care at all. It is about revenue, and you know it. It is about the fact that The Federal Government is running into a wall at warp speed trying to furiously cover up all the fraud and scams in the financial system while at the same time spending over $1.5 trillion we do not have to replace collapsed consumer demand.

You must raise revenues, and you know it - or this ship called "The USS Treasury" sinks beneath the waves, and the first sacrifices to go overboard will be all the Seniors on Medicare and Social Security - not by choice, but by force of fiscal insolvency.

In short, this is just another Washington scam.

But this time you're going too far, and you're taking a horrific risk.

You must not, Madame Speaker.

You must instead face this nation and tell the truth.

We cannot fund the scams and frauds any more. Those who committed them must go to prison, even if they're campaign contributors.

We cannot borrow 10% of our GDP and spend it forward, as the CBO projects we will try, in a futile and permanent attempt to replace consumer demand.

If we do not stop this idiocy we will soon be unable to fund Social Security, Medicare and Welfare in all its forms, leading to an immediate and critical breakdown of our society.

The mad reach for revenue, Madame Speaker, is why you're in such a hurry - and you know damn well I'm right.

If you succeed, we will get your tax bill now and the promised health care never.

That's a fact.

There is a bright white line for every person in this country who has taken an oath to uphold our Constitution. It is in different places for each of those individuals, but you had better believe it exists.

For some it will be crossed if you try to disarm Americans, as was attempted after Katrina.

For some it will be crossed if you try to occupy their homes.

And for some, it may be crossed if you attempt to "deem" this bill passed, when The House has not actually passed it.

I pray this evening I am wrong, and that for no material number of people - indeed, for no one person - that is where their personal line is.

But I am reasonably certain that this prayer will be offered in vain.

Therefore, the choice is yours, not mine, for all I can do in furtherance of my hopes (and abeyance of my fears) is pray.

You, Madame Speaker, on the other hand, can act to quell this idiocy.

Or you may tempt fate, you may tempt the millions of people who have swore an oath to defend and uphold The Constitution and, having done so, went to war throughout our history. Many of those people, along with millions more who never wore a uniform stand today in defense of that "quaint" old piece of parchment - but not in defense of you, nor any other person.

You may also provoke States to assert their long-dormant 10th Amendment rights for real, not in some quaint "one off" regarding intra-state weapons manufacturing. That, Madame Speaker, harkens back to a time I'd rather not revisit as well.

You will almost certainly lose your Speaker's Gavel come November, as the mortal sin against the Constitution of deeming a bill passed without actually voting on it is so inimical to a republican form of government and displays such gross arrogance that you have forfeited your right to wield that gavel by mere contemplation of the act.

I am quite certain that I stand with millions of other Americans who are willing to put forth whatever effort is necessary to see that occurs come November - at the ballot box - whether you proceed with your abhorrent plan or not.

But what I pray for this evening, as I complete my day and offer homage to God before retiring, is that your office, and those of your fellow Democrats who are about to violate your sacred oaths willfully, intentionally, and with malice aforethought - is all you lose.

Ponzi City Government: Chicago

nospam@example.com (Karl Denninger) — Thu, 11 Mar 2010 13:42:00 -0500

Ok Daley, nice bleat:

Mayor Daley warned today that the day of reckoning has arrived for a financial crisis that’s choking local taxpayers: underfunded city pensions.

Daley said the 32-member pension commission he created more than two years ago will soon recommend solutions to the crisis that won’t be pretty or politically popular.

What's the primary problem? Try right here:

He cracked the door open to raising the retirement age from the current minimum of 50. He said he would consider raising employee contributions and implementing a two-tiered pension system that shifts newly-hired employees to the 401k plans favored by private industry.

Can I have my Social Security - full benefits - along with Medicare at 50? That's only three years form now. Sounds pretty good.

Why not?

Because the Federal Government would go broke in about a year if we tried this nationally.

So who thought it was a good idea to do this with City (and State) employees?

Where the hell were you, Mr. Daley, back in the 1990s when I ran a business in your putrid, corruption-infested town?

I'll tell you where he was: he had the public sector unions under his desk taking turns giving him fellatio in return for endorsements and votes, that's where.

Now, having basically bankrupted the City, he, like a number of other mayors and governors is bleating about how horrible the situation is - a situation he was responsible for creating!

Oh, and instead of facing this years ago his "response" to the early warnings was to sell off the parking meter revenues via a "forward" (in effect) and then blow the money, thereby destroying that which was in fact a decent city asset.

This sort of stupidity is nothing new and now there's no ability to avoid a truly nasty set of consequences.

Of course deposing the Daley monarchy is a bit of a problem when you have a plurality of people who suckle on the teat.

When the teat runs out of milk Daley might want to consider how the fine citizens that would otherwise guarantee his re-election might choose to refill the udder they're used to being able to suckle from.

How Long Before You Wake Up, Politicos?

nospam@example.com (Karl Denninger) — Tue, 23 Feb 2010 09:48:00 -0500

I'm going to write today about a very somber subject. It will be, as it usually is here in one form or another, about math.

First, some background. If you believe that we have "escaped" from the mess that gripped this nation in 2008 and 2009, or that said mess "suddenly appeared" and "nobody saw it coming", stop reading now and have your Thorazine dosage checked. It's way off.

Assuming you accept the truth - that this mess was 20 year or more in the making, that it involved creating credit (that is, debt) which the debtor could never pay, and that it still exists because our government policy has been to extend, pretend and allow lies that should be considered accounting fraud and result in prison sentences, then you're on the right page to understand the rest of this missive. Again, if not, go check your Thorazine dosage.

Yes, I know all about the stock market rally from last March. I know all about the claimed GDP "improvement." But I also know that we got both by adding more than $2 trillion in debt to the United States - or roughly 14% of GDP - over the space of the last 18 months. That's about 10% of GDP annualized, and incidentally, a 10% GDP contraction is the common economist's definition of an Economic Depression.

So let's cut the crap - we are in a Depression right now. We are pretending we are not, just like you can pretend you didn't really lose your job so long as your credit card does not reach its limit. We have been in that depression for about 18 months and there is no evidence that we will exit it, as we have yet to find a way to pull back the deficit spending without an instantaneous collapse in the economy.

Yet at some point we must and will stop. We will either do so of our own volition, or we will do so when the cost of borrowing skyrockets, as others get tired of funding our profligacy. If we attempt to "print" our way out of it the cost of petroleum products will shoot the moon and destroy our economy anyway.

You haven't seen the half of what happened though - not yet. It appears that AIG - the company we have bailed out (thus far) to the tune of some $100 billion plus, in fact isn't done. It appears they may have written credit protection on Greece. If this allegation by the German equivalent to The New York Times is true Americans are going to be asked to pay billions of dollars - or more likely, hundreds of billions (since Greece is almost certainly not the only place - try Spain, Portugal, Ireland, etc) to bail out a bunch of FOREIGN NATIONS.

Do you both think Americans can and will pay that bill? A bill that has been forced on us, and yet benefits not The United States economy, but foreigners?

Wars - big wars - start over much less, my friends.

Oh, and let's not forget - some 30% of Greece's workers went out on strike to protest their "austerity measures." That's right - one in three.

The Fed and our fabulous Treasury Secretary already gave tens of billions of our hard-earned money to foreign banks to prop them up via AIG. That was just a down payment; now we all get to - quite literally - buy all their houses over in Europe. They get to keep living in them.

If you do not believe it is going to get much worse than it is now, economically and otherwise, you once again need to go have that Thorazine dosage adjusted.

A recent Rasmussen poll disclosed that only 21% of the voters in this country believe that the government enjoys the consent of the governed. Put another way, only 21% of the voters in this nation consent to what Washington is doing.

More ominously, 61% say the government does NOT have consent. The remainder (18%) are not sure.

May I remind you that in 1776 less than that 21% of the population (19%, actually) were loyal to Britain?

If you do not believe this nation is wound tighter than a clock spring, you need to have that Thorazine dosage checked again.

You are in denial.

After denial comes anger, then bargaining, and finally acceptance.

Let's not do anger on a mass scale in this country, ok?

Neither I or my daughter will appreciate it if it happens; shall we skip that and go right to "acceptance"?

Let's assume your answer is "yes."

Now let's talk numbers.

There are approximately 150,000 federally-attached law enforcement personnel. Another 750,000, roughly, state and local cops are employed by our various government arms. Of those various officers well more than half sit behind a desk and haven't left one gram of shoe leather on a street or in a cruiser in the last year. The majority of you fire your weapons for periodic qualification and they have never been warm or dirty besides. You've never faced death, you've never had a weapon pointed at you in anger, and you've never drawn your service weapon in the line of duty. Those are facts.

Now consider the "bad side" of America. The Justice Department estimates there are at least one million gang members - active gang members - in America. These people, mostly young males, have nearly all drawn or fired weapons in anger. They are responsible for more than three quarters of all crime in this country, and some eight out of ten violent crimes. Those gang members have families - younger males who are "coming up", "friends" (if you can call a murderous thug a friend) and others. Between all of those "loosely attached" folks and the hard-core inner circle itself we probably have somewhere between 5 and 10 million people in this nation who, given the wrong sort of provocation, might decide that "Zombieland" wasn't just a movie.

Our politicians created most of these monsters so the "finest" would have something to do. A nearly-100-year obsession with what consenting adults put in their bodies is largely responsible for this, and an intentional policy of allowing an effective invasion of illegal aliens over our southern border provides some the most-violent core of this group. The illegal drug trade has fueled international wars, international gangs, and virtually all of the organized violent crime in this nation going back to Prohibition. Essentially every automatic weapon in the hands of criminals (and there are plenty of them) comes into the US through this same intentionally-left-open border as do the gangbangers, lies of this (and previous) administrations notwithstanding. Those of you in the Law Enforcement business may not want to accept these facts, but if you reflect on it you cannot escape reality: weapons, ammunition and other means of street thuggery all cost money, and without these drugs being illegal there would be no profit in it, and thus a huge part of the criminal gangland element would not exist. You've cheered on the War on Drugs as it has meant more cops being hired and more, better, fancier toys for you to play with, along with $200,000+ pensions (in some areas.) You've been fools and even self-destructive assholes for having done so. But that, today, is water over the dam - the bad guys are here, they're not leaving, and there's no evidence that the political class is going to suddenly legalize these substances tomorrow, cutting the source of funds for the thugs off at the knees - after all, you won't rise up and demand it happen. So we must deal with reality on the ground as it is (and as you have cheered on the creation of), whether we like it or not.

As I'm sure you're aware all of America sees some of our "finest", not to mention our politicians, in various forms of misbehavior virtually on a daily basis. A girl beaten on a train platform while uniformed rail security stands and watches. A young man who appears to have been executed by a different rail security officer, even after he was subdued, face-down, without a weapon and easily able to be cuffed. The infamous Rodney King incident. The false accusations against the Duke Lacrosse team that threatened young men with many years behind bars for something that never happened. Our current Treasury Secretary who cheated on his taxes, not to mention the chair of the House Ways and Means Committee who did as well (that's the committee that writes tax law, if you're not up on your American Government.) And now, in the latest bit of ignobility we're expected to swallow, we have accusations that a school district has been taking pictures of kids in their bedrooms using state-issued laptops that said kids were required to accept in order to pass their high school classes.

Here's the problem: We the people increasingly don't trust you, the law enforcement community, and we definitely don't trust Washington. It's not just beating a black man within an inch of his life, or shooting a prone, subdued suspect in the back.

Oh that's bad enough, don't get me wrong, but it gets worse.

Much worse.

See, our economy wasn't ruined by accident. These crimes of economic activity were every bit as destructive, if not more so, than the bank robber, rapist or even murderer is. These economic offenses have literally dispossessed millions of Americans of everything they once owned. They have destroyed the hopes, dreams, and lifestyles of entire cities, sent tens of millions of jobs overseas into slave labor camps and stripped off the wealth of our nation through the issuance of securities that were worth nothing, just to add insult (and yet more profit for these banksters) to injury. Take a drive through Detroit if you doubt me, if you dare, and are appropriately armed to defend yourself (you'll need the latter, especially if you're white.)

As I noted above the bad news is nowhere near being over. We're denying as a nation, as corporations, as politicians and as people. You've drank your coffee and eaten your donuts, but what you haven't done is taken the initiative and marched down onto Wall Street and K Street (in DC), along with the myriad bankers, mortgage brokers and yes, even borrowers who were lying and cheating at the same time. You should have broke out the handcuffs by the crate-load and frog-marched these people into the dock en-masse over the last two decades, but you didn't. You should do it today, but you won't.

I know, you don't make the laws and you just follow orders from above.

But you're who we see. You're "The Badge" or "The Squad." And what we, the people don't see is perp walks of those people who richly deserve it - who have in fact broken the law and destroyed our nation's economic vitality for their own personal profit.

Remember, ladies and gentlemen, no matter what branch of law enforcement you hail from, your primary oath was not to a person. It is not to your commander, your captain or your squad.

Your oath is to The Constitution. You swore to defend that Constitution against all enemies, foreign and domestic. You swore to God and countryman alike, and your oath does not have a "use by" date at which point it expires.

Now consider this: the unspoken "social contract" says that the good guys go about their business without harming other people, and the occasional miscreant commits some offense, gets arrested and put in the dock by you. There they face their twelve, and in many cases subsequently do their time.

But what really inhibits the miscreant from his deed? Is it that you will show up and take a report after the stereo is stolen, the car burgled or the bank robbed, and attempt post-hoc to have them face the music?

No.

It is the possibility that he will break into or attempt to rob a home or business that has an armed citizen in it who is prepared and willing to defend him or herself. Armed not only with the ability to fight back but the weapon of familiarity of surrounding, said homeowner or shopkeeper might well splatter the brain of said felonious thug all over the far wall - in righteous and perfectly-legal defense of one's person (except in places like Chicago, of course.) The truth of this is clear on its face - those places where citizens are "restricted" (illegally, I might add, under the clear language of our Constitution) from mounting their own defense to rape, robbery or murder the bad guys pretty much take turns "at will", as opposed to places like Kennesaw Georgia which mandate instead that every homeowner have a firearm and ammunition.

One last thing to consider, and I will leave you be, as I have others to address this fine day.

If it gets bad, and I believe both history and the math says it will, who's going to help you? Do you really think the entirety of the 150,000 Federal Officers will come to your aid? Or will they sit in Washington DC and in their big black Suburbans (armored, of course) issuing orders for you to go into the streets in your (unarmored) Crown Vics and die in their place? Remember that the "bad guys" in such a circumstance outnumber you 10 or even 20:1 and not only are they probably armed as well as you are, they've actually shot - offensively - at other human beings. Unless you're one of the "bad cops" you've never done that, and few of you have had to fire in self-defense. Your only realistic advantage in such a situation is that most of the gangbangers are pretty poor marksman.

What's the outcome of such an event likely to be? Remember, we may distrust you, but the bad guys hate you to the core and would BBQ and eat you for dinner if they thought they could get away with it. If things get bad they might deduce - en-masse - that they can get away with it.

Let's face facts: while today we all count on being able to pick up the phone and call "911" if we need an officer to take a report on our stolen stereo, if the bad times come you will need us, not the other way around. We the people will, under such a circumstance, have the luxury of determining whether your oath of office has been faithfully discharged, or whether the only difference at that instant between you and the gangbanger is that you've got a fancy hat and a nicer car.

Most of us, should we determine that you're just the thug with the fancy hat will hide under the desk. We won't shoot at you - that's not our way. We're law-abiding citizens, for the most part, and while we will shoot back, we won't shoot first. But what we won't do is help you, because your time - your opportunity to help us prevent this catastrophe - will have expired. We will protect our neighbors, our friends, our fellow citizens.

But that's all.

You will get to deal with Zombieland, and in the back of your mind as you're literally consumed will ring that old saw you laid on us for the last two decades: "I just follow orders; I don't make the rules."

Be honest with yourselves: Is this where you want to be, or would changing things now be worthwhile? Would regaining the trust of the people be a good thing? Would replacing the large percentage of law-abiding citizens who now would spit on your shoes with those who will stand shoulder-to-shoulder with you, weapons facing the oncoming zombie hoard, be a good thing?

If so you have some work to do and there's still time left to accomplish it.

To the politicians who are reading this, your Thorazine dosage needs adjustment as well. The math is irrefutable. If, in point of fact, AIG has entangled itself with the European Continent there is no escape from what is to come. There is only destruction, and our only two choices are to cause as much of it as we can to occur there, by pulling the plug on these clowns now, or risk a literal World War. We may get one anyway, but if we bring the bulk of the damage here we'll be dealing with a civil collapse at the same time, and have no chance of being able to deal with the geopolitical implications. We must not allow that to happen. You must not allow that to happen.

We understand you give the orders to the people I've been talking to (mostly) up above. But you have less excuse than they, when it comes to oaths. You all took an oath to uphold The Constitution as well. You've used it as toilet paper, and that's on a good day. The rest of the time we see you gleefully burning it in the Wells of the House and Senate, dancing around the smoke and fire like some odd pagan ritual.

It's time to stop. Not because you want to, not because you fear us (even though you should - after all, we're your employers and can fire you) but because if you don't there won't be a nation worth governing left. You know who the crooks are - including those among you.

Let's talk taking this nation back.

It starts with declaring all CDS written against sovereign debt, directly or indirectly, void as contrary to public policy. Yes, that cuts Europe off from any prospect of a US bailout. So be it.

Next, all the banksters who were involved in these bogus securitizations need to be hauled into the dock. Now. William Black and his merry men sent over 1,000 people to the slammer in the S&L crisis. There are ten times that many who need to go this time.

Third, force all credit-default swaps onto a public exchange with published bids, offers, last trades, open interest and nightly margining. In public, where we all can see it. Either that or ban these obscenities outright. Choose one, and only one of those two options, and do it now. Yes, I know the banksters will howl. Too damn bad, and while you're at it, make it unlawful for any institution that does business in this country to transact in any way in any instrument that does not comply with that rule. This monster, as I've been writing about for almost three years now, must be caged.

Fourth, reinstate Glass-Steagall. Yeah, I know, the Senate doesn't want to do it. The Senate wants a nation that's worth governing though, right? We won't have one if this crap isn't stopped. Mssrs. Glass and Steagall had it right in the 1930s. Put it back.

Fifth, stop lying to the people - and this includes lies told through deficit spending. We don't have the money and can't keep borrowing it. If you don't stop we will find the "knee point" the hard way, at which point once again, you won't have a nation worth governing. Remember the four steps above - neither I or my daughter, nor most of the 330 million Americans in this country, want to see the "anger" phase. Our country is like a powder keg and every time you lie you're playing with matches in the room. Stop it before you blow us all up.

Sixth, we're in a Depression, like it or not, and we're not going to get out of it until the bad debt is defaulted and cleared from the system. Your job is to make that happen and get it over with. That's deflationary. Sorry; this is math, not politics. The housing bubble was a hyperinflationary event - one hidden from the people by bogus government statistics and outright lies. Deflation always follows hyperinflationary credit booms - it's either that, or the destruction of the government, political system and currency. You choose, but if you do not decide, destruction it will be.

Seventh, close the damn border and declare all the illegal immigrants as what they are - invaders. Tell them to either leave or will expel them - and mean it. Declare "LaRaza" a terrorist organization and lock 'em all up. Americans need the jobs and we cannot afford to have five or ten million thugs just waiting for opportunity in the smallest loss of civil order to swoop in and take advantage of us all. At the same time, drop your insane "War on Drugs" and replace it with a taxation, regulation and legalization structure. Yes, I said legalize - federally. While we still have time we must cut off the chief funding source for the murderous thugs who otherwise, given the opportunity, will feast on you after they BBQ the local and state law enforcement crowd in our major cities. Don't BS me or anyone else with your claims that such isn't a real risk - I don't see you strolling around in your fancy suits through the bad parts of Washington DC sans security details. Gee, I wonder why not......

Finally, to President Obama. You can't serve both the banksters and The American People. You took the oath of office too. Now you have to choose. Not only will you lose in 2012 (badly) if you don't start locking up the jackasses that got us into this mess but if you don't ram the above seven points down the throats of these banksters and others in the next couple of months your party will be decimated in the November elections. Some of your oldest allies in the Democratic Party are resigning; Senator Bayh, for example. Illinois' State financial health is akin to someone with terminal pancreatic cancer, and that's where you're going home to in 2012 if you don't quit being nice-nice with people who have played rape-rape to the American people and economy for the last two decades. You didn't make the mess (you weren't around long enough to do it) but you had damn well better clean it up, or what will be left of this nation is unlikely to be worth governing by the time your term expires.

Health care may be important but not until the above is taken care of. Fixing the financial system is the issue you must confront and fix in its entirety. Not half-way, not by compromise - you simply must fix it. The seven points above are not options, they're not discussion points - they're mandatory. All of them. Don't believe me if you don't want to - believe Charlie Munger, one of the wisest investment professionals ever to live, and, in my opinion, the smarter half of Berkshire Hathaway (with no disrespect intended to Warren.)

The choice is yours Mr. President, but the consequences will belong to all of us.

Choose wisely.

Hmmm... Do We Need To Guillotine The WTO?

nospam@example.com (Karl Denninger) — Mon, 08 Feb 2010 09:59:00 -0500

That sounds dramatic - even drastic.

But is it?

There's an argument raised over at "Washington's Blog" that the real cause of all the financial problems -the global mess - is the WTO:

On March 1, 1999, countries accounting for more than 90 per cent of the global financial services market signed onto the World Trade Organization's Financial Services Agreement (FSA). By signing the FSA, they committed to deregulate their financial markets.

But let's be straight here.

"Deregulate" does not give license to fraud, even though there are some who would argue otherwise.

The root issue with all of these "financial products" is that they are unmarketable unless someone lies.

You can't sell a "structured product" comprised of liar loans if you're honest about the "qualifications" (or rather, the lack thereof) of the borrowers at anything approaching a profitable rate of return. Nobody will buy.

With honest ratings a CDS + Bond will always yield less than the risk-free rate of return. This is because nobody works for free, and the more complex something is, the more it costs.

These are facts, not suppositions.

So WTO or no WTO, without willful blindness toward fraudulent practices the market will take care of the scoundrels. Without the ability to lie - that is, if we simply lock up all those who misrepresent credit quality the liar loan + CDS will yield less than a Treasury of equivalent duration, and as a consequence the purveyor of those liar loans will have to price them at a rate that accurately reflects their risk of default (plus his profit.)

This instantly cuts the BS.

Yes, we could simply tell the WTO to get stuffed, and I can make a cogent argument that we should - for a number of reasons, not the least of which is that "free trade" doesn't make allowance for those working under literal (or near-literal) slave conditions, such as Chinese and Vietnamese workers who are working under effective conditions of indentured servitude and lack the human and labor rights protections we enjoy in civilized nations. "Competing" with a labor source that effectively has a gun in its mouth is not only impossible, the concept is idiotic on its face.

But that's irrelevant to the argument that "we were forced by treaty to deregulate." Among other things deregulation does not mean legalizing fraud and never has.

Second, the WTO's "FSA" appears to have never been sent to Congress and thus has no force of law as a treaty. It is a mere "suggestion" - and one that Congress has every right to ignore, as do our regulators, as under The Constitution all Treaties must be ratified by The Senate - without that consent any purported "international agreement" is of no legal force whatsoever. Treaties cannot be amended once voted upon without being subjected to a second vote (and possible refusal); the FSA was an amendment to an existing treaty, and thus without being considered by The Senate is a nullity in terms of actual United States obligations.

The "globalists" (and scaremongers who believe we have sold out to them) would have you believe that we have somehow obligated ourselves. This is false. We have done no such thing, and whether our government has complied with these wishes (some would say demands) out of a desire to appease those who have bribed legislators with million in campaign contributions the fact remains that when it comes to legal force of law in this regard there is none.

This, by the way, includes the WTO, which has a nice list including the US on the web page referenced above. That too is, as far as I can determine, a lie as the FSA was never put to Senate Ratification, and without that having occurred it is legally void, whether the WTO likes it or not.

(PS: For those who wish to argue that the Republicans are to blame for all of the world's ills, you should look into who was President when the negotiations took place on the predicate parts of the treaty that was ratified prior to the FSA "add-on" that has no force of law. Hint: He tried to hide what he had spilled on a particular blue dress.)

The Republicans Learned Nothing....

nospam@example.com (Karl Denninger) — Tue, 02 Feb 2010 08:20:00 -0500

... from Massachusetts.

This will be their Waterloo:

Nine months after he penned a memo laying out the arguments for health care legislation's destruction, Republican message guru Frank Luntz has put together a playbook to help derail financial regulatory reform.

In a 17-page memo titled, "The Language of Financial Reform," Luntz urged opponents of reform to frame the final product as filled with bank bailouts, lobbyist loopholes, and additional layers of complicated government bureaucracy.

"If there is one thing we can all agree on, it's that the bad decisions and harmful policies by Washington bureaucrats that in many ways led to the economic crash must never be repeated," Luntz wrote. "This is your critical advantage. Washington's incompetence is the common ground on which you can build support."

Uh huh.

So the bad decisions and harmful practices of Washington bureaucrats were all Democrats?

I think not.

Bankruptcy "reform", that left the common man chained to his debts, while big banks and other corporations use the bankruptcy court as a "get out of debt free" pass issuance device? That was a Republican bill.

Removal of the leverage limits from the investment banks, without which the housing bubble would have been stopped dead in 2004? That was a Republican (Paulson) going to a Republican SEC.

A Department of Justice that sued states to prevent them from enforcing anti-predatory lending laws and those that curbed (or outright banned) stated income and other "liars" products? That was a Republican Administration that did that, at the direction of George W. Bush.

Let's not kid ourselves: The looting is bipartisan and so is the responsibility.

But "killing financial regulatory reform" is one of the dumbest things that The Republicans could ever do.

Let me remind The Republicans that I warned McCain's campaign in 2008 that if they did not take the side of the common man in the TARP "bailout" debate, and instead endorsed it, he would lose.

He did.

Paulson's memoirs essentially admit to threatening McCain to force him to come in line. He knuckled under, thereby proving that he was unfit to hold the Office of President, since the first requirement of being President is that you must have a pair of rocks between your legs - and when the tough choices have to be made they better clank (literally or figuratively.)

But now The Republicans are threatening to completely misread the message of Massachusetts and wind up literally destroyed, where Massachusetts gave them the opportunity to take back The House and Senate, becoming the majority party for the next 20 or more years.

Sadly, The Republicans learned nothing from the message in these special elections, of which Massachusetts was just the last. These folks seem to think that the people will tolerate the bankster bailouts, bankster bonuses and the raw theft and scams embedded through our so-called "financial system" - and that the system will both remain stable and not collapse anew if they do not fix it.

They're wrong, and if they listen to Mr. Luntz they're writing their own political obituary.

Calling Out Obama: Bankster "Reforms"

nospam@example.com (Karl Denninger) — Mon, 01 Feb 2010 14:14:00 -0500

Now comes the banksters with their lobbyists and bribes, er, "campaign contributions" to say that:

A proposal by former Federal Reserve Chairman Paul Volcker to limit bank’s proprietary trading will be either be dropped or significantly modified in the Senate, lawmakers and staffers told dealReporter.

Senate Banking Committee ranking member Richard Shelby (R-AL) said he opposes the so-called Volcker rule and the Obama administration’s call to levy a USD 90bn tax on banks.

...

A Dodd staffer said the senator is likely to quietly drop or modify many of the recommendations in the Volcker rule to ensure Republican support for regulatory reform.

Well it ain't gonna be quiet no more!

These goons on Wall Street think they can keep this up. They might want to pay attention to the fact that there's this thing called "an Election" coming in November, and the people are pissed, as noted in this Bloomberg article:

Feb. 1 (Bloomberg) -- Politicians under pressure from angry voters to show progress on financial reform are losing patience with bankers waiting to reach global harmony on new rules.

Yep.

The people are still short of endorsing clanedestine neck tie parties, but I suspect it's not by much. When President Obama said that he was "all that was standing between the banksters and people with pitchforks and torches" he wasn't kidding.

The idea that the people of this nation will simply sit still while the looting continues is somewhat of a fantasy on the part of those on Wall Street. Thus far the retaliatory actions have been both peaceful and lawful - mostly - such as "Move Your Money" and the like.

But there's no guarantee that will remain the case, and the simple reality is that much of what went on during the 2000s was not "an error" or "bad judgment", it was a blatant heist, and the people are wising up to what really happened.

Where the line resides is not something I can accurately predict. I can only note our Founding Fathers seemed to have a good grasp of things in The Declaration:

...all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed.

Indeed we have tolerated far more than we probably should have. But then The Founders warned....

But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

Where and when does that line get crossed? How many people get thrown out of their homes, have 30% credit card interest rates, watch the banksters literally grab over a trillion dollars in printed money and claim "profits" for themselves of over $100 billion in bonuses, evade mandates on long-term holding of those bonuses in the form of stock to prevent cashing out before the sustainability of their practices can be proved up and more?

I do not know where the line is.

I only know that history says that it exists, that no man, no bankster and no government knows exactly where it is, but that once crossed it cannot be "un-crossed" just as an egg cannot be unscrambled.

We need solid, real financial reform. We must renounce "bubble-nomincs." We must shut down the fraud-laced "securitization" machine permanently, prosecute those who have unlawfully concealed risks and lied about asset quality and return our economy to stable, productive output instead of financial speculation.

The Banksters all claim that if we were to do this that society would collapse and that our economy could not survive.

They're wrong, just as Henry Paulson was wrong when he said he had "no choice" when, allegedly (according to his book) the Chinese and Russians threatened to collapse Fannie and Freddie.

Hank had a choice, assuming he's not lying of course. He could have told the Russians and Chinese to bite him - on national television, with George Bush at his side. He could have told them that if they tried it that the United States Treasury would, by executive order, declare their Treasury Holdings worthless.

Yes, that would have stopped the "gravy train" of being able to spend more than we make in the government. Yes, this would have forced immediate austerity and facing of the truth.

Is that bad?

What have we done since? Added what - $2 trillion+ to the national debt - more debt we don't have and can't pay? Emitted another budget proposal, just today, to add $1.6 trillion more? Built yet another artifice - another fraud - on top of the previous ones? Written more "Option ARMs" on our children and grandchildren's backs to prop up a cabal of banksters on Wall Street who then fawn all over The Senate with their "campaign contributions" so they can keep skimming off huge parts of our economic structure for a few thousand residing on Wall Street?

How's that going to work out folks?

How will we settle up and ultimately pay this debt load down?

We won't, of course. Neither will anyone else. Greece, Spain, the UK - all are lessons for us, if we choose to learn them before we get to live them.

Watch those nations. If you think this is just about Greece you're nuts. The public employee pensions there are ridiculous. Guess what - they're ridiculous here too. In the closest "little city" to here there are many retired police officers and firemen who have pensions north of $100,000/year. There are many places where six-figure pensions are considered "normal" or "reasonable" - for public safety workers and teachers. We don't have the money, we can't afford to gold-plate the steering wheels of the cop cars and despite all the bleating the fact remains that the primary function of the police department is to write traffic tickets and take a report after you are burglarized, raped or robbed.

Are these functions important? Yes. Do they call for better than a middle-class wage? Nope. Is a middle-class wage $100,000 a year? Nope. The 2008 Median Household income for California is $61,021. For Florida, $47,778. For New York, $56,033.

So why are we paying out pensions of double that to what should be middle-class employees in retirement?

Let's face the facts folks - we can either stop the plundering across society - by both banksters and public employees - or we will face a crisis similar to what Greece is dealing with now.

It will be more pleasant for us to take our medicine voluntarily rather than having it forced down our gullet, but doing so starts with chaining the banksters and their penchant for offloading risk to others and, for those who refuse, jailing them outright, lest the public get ahold of them and not bother with the pleasantries (and constitutional right) of a trial by jury before handing up a sentence.

At the same time we must fix the public employee entitlement mentality, by firing them and replacing them with unemployed Americans if necessary. We have 1 in 5 working-age men between 25 and 54 out of work - there is no shortage of available people to take these jobs.

It is time to pay the check folks, before we are literally forced to eat it.

Bernanke: Now The Administration Owns The Mess

nospam@example.com (Karl Denninger) — Sun, 31 Jan 2010 14:54:00 -0500

So we got our "Bernanke" reconfirmation on two votes, the first the "real" one and the second the one that everyone is trying to "count."

Let's first look at the real vote - the vote for Cloture, without which there would have been no confirmation vote at all.

The following Senators voted YEA on Cloture and stand for election this November.

AK:Murkowski (R)
AR:Lincoln (D)
CA:Boxer (D)
CT:Dodd (D)
GA:Isakson (R)
HI:Inouye (D)
IN:Bayh (D)
MD:Mikulski (D)
NC:Burr (R) YEA
ND:Dorgan (D) YEA
NH:Gregg (R) YEA (Retiring - to a Goldman affiliate!)
NV:Reid (D) YEA
NY:Schumer (D) YEA (Wall Street's Chief Whore)
OK:Coburn (R) YEA
OR:Wyden (D) YEA
UT:Bennett (R) YEA
VT:Leahy (D) YEA
WA:Murray (D) YEA

Ignore the actual confirmation vote. Some of the clowns in the Senate, like Babs Boxer, tried to obfuscate reality by voting for Cloture and then voting "Nay" on the final vote itself, in an attempt to play "I voted against it before I voted for it." This sort of symbolic malarkey must not be allowed to stand.

More importantly though is that Bernanke is now officially President Obama's child. He put him up for renomination, he did not pull that nomination, and he personally lobbied for his reconfirmation. He owns it.

There are many who believe that Bernanke "saved us from another Depression." I will note that there were many in 1930 who thought we had been "saved" as well. They were wrong.

They were wrong for the same reason they're wrong this time. From SIGTARP's latest report:

It is hard to see how any of the fundamental problems in the system have been addressed to date.

To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.

To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.

To the extent that large institutions’ risky behavior resulted from the desire to justify ever-greater bonuses — and indeed, the race appears to be on for TARP recipients to exit the program in order to avoid its pay restrictions — the current bonus season demonstrates that although there have been some improvements in the form that bonus compensation takes for some executives, there has been little fundamental change in the excessive compensation culture on Wall Street.

To the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices — as discussed more fully in Section 3 of this report — risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.

Stated another way, even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car.

Yep.

That report is 224 pages, and ought to be required reading. But the executive summary above that I have excerpted is the base of it all.

There is one place that I disagree with Barofsky - that is the "reinflation" of the housing bubble. That's simply not going to happen, because the bubble itself was (as are all bubbles) predicated on false credit quality claims.

Bubbles all depend on credulity. That is, they rely on the ability to find more and more suckers upon which one can offload over-rated securities, each of which is worth less than claimed (and in some cases literally "worthless"!) They pop when the number of suckers is exhausted and the mad scramble for chairs begins as the music suddenly stops. Those left holding a bag with no sucker to offload it to go bankrupt and since the essence of bubble economics is the overuse of leverage the bagholders inevitably are geared and those who lent them their money are imperiled as well.

The natural check and balance on such behavior is the risk of bankruptcy. That fear prompts underwriting and proper margin supervision, thereby limiting the impact to those who actually speculated.

But we have failed on two accounts: We first allowed regulated banks and insurance companies to speculate, effectively allowing private parties to gamble with the credit of The United States, where they keep the winnings but pass on the losses to the taxpayer. Then, when the bust came, instead of punishing those who gambled and lost by forcing them through bankruptcy (even if it meant the taxpayer would take a huge hit) we instead took the hit but left those who did the evil things with operating businesses!

Bernanke is one of the chief architects of this structure. He has repeatedly engaged in "bubble economics" with scant regard for the common taxpayer - the citizens of this nation. Instead, his focus is on the few thousand brigands found in New York, who are plundering our society to the limit of their ability.

The last two weeks have treated us to a few ugly realities in regard to where the markets are and what Bernanke has done. By pumping a literal trillion dollars into the markets via his above-market-price purchase of mortgage and treasury securities along with a zero interest rate for short-term fed borrowing he has engendered a monstrous stock market bubble. This has come about due to the inherent disconnect between real valuations and yields in markets where he has interfered (when you overpay for something you drive its yield down.)

But that stock bubble has in turn been predicated on growth numbers that simply cannot arrive in the real world. The realization that "we've been had" may be coming now - but whether it is now, a month from now or six months from now, it will come, and instead of producing a flattening of the market (which would be the likely outcome were we trading in the 800s or even low 900s now on the S&P) the potential for an outright crash instead exists as people run for the door.

We should know better - after all, the same dynamic took hold in the housing market. But that sort of dynamic was ignored then ("subprime is contained") and is being ignored now ("I don't see any asset bubbles") by Bernanke, and will continue to be - right up until the market implodes.

Perhaps this is his (and President Obama's) intent. After all, our dear President intends to send a nearly $4 trillion Federal Budget to Congress in the coming days, while we are running a deficit of nearly half that. With China increasingly unwilling (or unable) to continue to recycle hundreds of billions annually back to US Debt (a losing strategy for them in the longer term as they'll never be paid off) and both Japan and England drowning under their own debt issuance one has to wonder exactly where Obama and Bernanke think they can source the over $1.5 trillion in net issuance they need to continue the charade.

Perhaps the answer is nothing more complex than intentionally cranking the stock market one more time, then crashing it again, scaring everyone into Treasuries. Recent changes in money-market fund rules to permit them to throw up gates without prior approval of the SEC may be part of this, as may the rumblings about "annuitizing" people's retirement accounts. Anyone care to take a bet on there being some sort of "conversion to something safe" option being thrown about if and when the stock market dives once more?

In any event the key items here are that we now have a "hit list" of Senators that must go from their seats come November, and a reminder that President Obama can no longer blame what I believe is an upcoming collapse of the stock market - a multi-year affair that will be much worse than what we suffered in 2008 and early 2009 - on President Bush. He had the opportunity to name either Volcker or John Taylor (to name two) to the position that Bernanke has, and decided instead to go with the guy who has been a chief architect of the "Brigand-and-Loot-Em" society - for better or worse, it's all his now.

Bonne chance mes amis.

Bernanke: Pound Your Senators NOW!

nospam@example.com (Karl Denninger) — Fri, 22 Jan 2010 12:14:00 -0500

NOW IS YOUR OPPORTUNITY.

GET ON THE PHONE NOW and call your Senators. Tell them:

VOTE NO ON BERNANKE OR YOU'RE FIRED; INSTEAD, BRING BACK PAUL VOLCKER!

This is Janet Tavakoli's take:

What has the financial crisis taught us? Among other things, we should show Bernanke and Geithner, enablers from the previous administration, the door. Paul Volcker is right to ask for a return to Glass-Steagall. It worked until it was eroded over several decades by bank lobbying. Banking and speculative trading activities--even when done for "customers"--don't mix.

"Financial innovation" must be limited, since much of it in recent years was the financial equivalent of card cheating. Banks should not be allowed to sponsor hedge funds and private equity funds, and furthermore, they should not be allowed to lend to them through prime brokerage units or other means. Financial institutions must be allowed to fail. Hedge funds require regulation. Malfeasance should be investigated and prosecuted. Credit derivatives should be traded and cleared through exchanges and made transparent. Compensation and financial incentives at banks must change. Bank employees cannot continue to reap huge rewards at no personal risk while shoving risk into the global financial system.

President Obama promised us change, and he should seize this opportunity to demand sweeping financial reform.

Support is literally crumbling across the board - and it should.

This is not about whether Bernanke "saved the system" - I argue that he did not, in point of fact, in that everything he said wouldn't happen, including the market crash from fall 2008 to spring of 2009, happened anyway even though Congress gave him everything he demanded and more! Further, the only "success" Bernanke's policy has shown is that he blew another asset bubble - this time in stocks where a huge number of issues in the S&P 500 are trading with P/Es over 60 - in clear bubble territory having no relationship of any sort to fundamental value or forward earnings potential. Employment is still in the tank, spending ex-government has not recovered and real-time indicators of forward demand continue to be extremely weak - two years after Bernanke said "he could and would save us."

No, the real reason he cannot be reconfirmed is that he has continued to refuse responsibility for anything related to the mess in the first place, and yet Ben Bernanke has the lion's share of individual responsibility for what has happened.

He has refused to regulate the banks.

He has refused to protect consumers against predatory acts.

He has intentionally grown credit aggregates at a rate dramatically faster than GDP over the space of his entire term and in fact influenced Greenspan doing the same, which is the root cause of the last two bubbles and market crashes.

He has dogmatically stuck to his doctoral thesis even after it has been proved wrong by the passage of time and the market.

He has intentionally concealed the terms of bailouts and handouts that were funneled through the banks on his watch, including but not limited to AIG's bailout that was funneled to Goldman Sachs among others.

He has not supported the market - he in fact became the market for Fannie and Freddie securities, putting himself into a box from which he has failed to explain how he will exit (likely because he now realizes he can't!)

He has been dead wrong in virtually every public pronouncement related to the economy over the last five years, including his repeated claims that there was no housing bubble, that subprime would be contained, that the economy would avoid a recession and that his monetary policies were "supportive" of sustainable growth in the economy. Not one of those claims from 2003-2007 was in fact true.

For all these reasons and more Bernanke cannot be reconfirmed.

We need an adult in the room. While there are others who could do the job, Paul Volcker is the obvious choice. He has proved his willingness and ability to take steps unpopular with the banking cartel when it is necessary, despite the heat that reflects back upon him. He understands the need for separation between the subsidized and protected lending function and speculative activity by financial institutions. And finally, and perhaps most importantly, he understands the difference between sound lending and fraudulent asset stripping and value destruction.

Freedom Of Speech: How Quaint

nospam@example.com (Karl Denninger) — Fri, 22 Jan 2010 09:32:00 -0500

I'm probably going to draw a lot of fire for this, but I believe the US Supreme Court made the right decision yesterday:

WASHINGTON—A divided Supreme Court struck down decades-old limits on corporate political expenditures, potentially reshaping the 2010 election landscape by permitting businesses and unions to spend freely on commercials for or against candidates.

President Barack Obama attacked the ruling and said it gave "a green light to a new stampede of special-interest money in our politics," particularly "big oil, Wall Street banks, health-insurance companies and the other powerful interests" that "drown out the voices of everyday Americans." He pledged to work with lawmakers to craft a "forceful response."

What sort of "forceful response" might that be? The use of force (that is, the government's stash of guns), right? "Do as we say, or we (maybe literally) shoot you!"

Hmmm....

Let me make my viewpoint clear on this, lest a whole swarm of lemmings start trying to put words in my mouth:

"Congress shall make no law.... or abridging the freedom of speech, or of the press" - This is very clear. Laws restricting speech are unconstitutional. Period.
Money is not speech. However, money buys amplifiers in all of their forms. If you stand on a street corner and talk, people within 10 feet can hear you. If you buy a $2 megaphone people within 30 feet - in front of you - can hear you. If you buy a $100 powered megaphone, people can hear you to a range of perhaps 100'.
So long as I don't drown out other people's ability to speak and be heard I should be able to buy and use as big an amplifier as I would like (and can afford.) This is the old libertarian (little "L") principle: I can swing my arms around all I want so long as my fist does not connect with your nose.

As a consequence if you honor the black-letter law as expressed in The First Amendment, you are led to the inescapable conclusion that The US Supreme Court came to the correct decision - whether it is personally distasteful or not.

The true test of whether you believe in liberties and rights is not whether you support them when they coincide with what you'd like to see happen - it is whether you support them when they are adverse to what you would prefer.

But with that said, I do believe there is a serious problem with campaigns and politicians - and corruption thereof.

And here, I have a solution.

Public employees - that is, politicians - should not be able to receive a campaign donation (in any form) from anyone except an actual constituent - that is, someone who is qualified and registered to vote in their district or state.

Let the corporations (and individuals), along with PACs, Unions and others buy all the issue and even candidate ads they want - so long as they honestly identify who is funding the speech in question.

But bar all public employees from receiving any campaign contribution from anyone other than a natural person who is registered to vote in the area represented by that particular politician, with violators subject to felony prosecution. If such an act is traced to a corporation the firm's charter is revoked.

Isn't it funny how we never address the actual problem - the fact that candidates have huge war chests funded by corporations (directly and indirectly) and instead try to focus on trying to restrict people's desire to speak - a right that is guaranteed under our Constitution?

Solve the problem instead of allowing politicians to play Kabuki Theater with this (very legitimate) issue.

Ring, Ring: CITIZENS CALLING! (Bank Limits)

nospam@example.com (Karl Denninger) — Wed, 20 Jan 2010 23:32:00 -0500

So President Obama is going to put forward some sort of proposal to limit bank risk tomorrow eh?

Mr. Obama's proposal is expected to include new scale restrictions on the size of the country's largest financial institutions. The goal would be to deter banks from becoming so large they put the broader economy at risk and to also prevent banks from becoming so large they distort normal competitive forces. It couldn't be learned what precise limits the White House will endorse, or whether Mr. Obama will spell out the exact limits on Thursday.

Mr. Obama is also expected to endorse, for the first time publicly, measures pushed by former Federal Reserve Chairman Paul Volcker, which would place restrictions on the proprietary trading done by commercial banks, essentially limiting the way banks bet with their own capital. Administration officials say they want to place "firewalls" between different divisions of financial companies to ensure banks don't indirectly subsidize "speculative" trading through other subsidiaries that hold federally insured deposits.

Firewalls eh? Oh, you mean like the "chinese walls" that were supposed to prevent things like banks shorting things they're securitizing and selling to customers?

If the proposal took effect it would reshape Wall Street. Big banks would be forced to break off their investing banking units—which trade and underwrite securities and make their own bets on markets—from traditional businesses, which make loans and take deposits.

Oh, you mean that banks would not be able to use their access to sovereign credit to speculate and then shove off their losses on the taxpayer?

How about the massive fraud - you know, claiming that securities are "money good" when they're really used dog food?

I'm sorry, but a year into this, and having watched Paul Volcker be ignored for that entire year, I'm not impressed by words any more.

I might be impressed by action, and as soon as there's an actual concrete proposal I'll write again on it.

But for now, I will simply note that the President Obama promised not to play banker stooge during the campaign, but in fact voted for TARP (the primary act of banking stoogery), had Timmy Geithner put an unlimited guarantee on Fannie and Freddie, and has done exactly nothing about investigating and prosecuting the massive and pervasive fraud that underlay the entirety of the housing bubble.

I will also point out that a big part of the Massachusetts loss of the former Kennedy Senate Seat was due to "Bailout Nation" - where the citizens got screwed every time and the banksters make off with billions in bonuses.

We the people are done being nice about this, and unless we see action - not words - YOU'RE FIRED will be the mantra that rings out in November.

And no, you don't have until then to show us you mean what you say.

We expect to see results - and actions - NOW - if those in the House and Senate would like to keep their jobs.

STOP THE LOOTING AND START PROSECUTING!

A Warning To The Washington DC Establishment

nospam@example.com (Karl Denninger) — Tue, 19 Jan 2010 23:01:00 -0500

Tonight the Republican Party rejoices at that which was just a month ago thought to be impossible: Senator Kennedy's former seat in The Senate is now held by a Republican - a state that is so blue you may think the entire state is choking to death when you cross its border.

Tonight the Democratic Party is busy pointing fingers (I saw it on "mainstream TV") over what went wrong, blaming everything from a sports faux pas to the President showing up and performing a negative campaign act by attempting to tie Coakley's prospects to "the need to keep the agenda on track."

Neither party should be doing any of this.

Let me point out that in the summer and fall of 2008 I sent a letter to the McCain campaign in which I outlined the facts for him on the ground at that time. It was and always is the economy stupid!

The McCain campaign ignored me, of course.

And lost.

Tonight Senator-Elect Brown made what, if Senator McCain has not woken up from his slumber, will prove to be a critical error. He said:

"I’ll never forget the help of another man who took the time to meet with me months ago – who told me I could win, and gave me confidence for the fight. It was all so characteristic of a truly great and heroic American, and tonight I thank my new colleague, Senator John McCain."

Really? Heroic eh?

So heroic that he turned a blind eye to the fraud that led us into this economic morass and not only refused to demand prosecution, clawbacks and justice during his campaign but has utterly refused to atone since?

Should Senator-elect Brown bring that attitude to Washington DC, unless Senator McCain has changed his tune (and I've yet to hear him sing differently) he will have made a critical error of judgment in regard to the message sent tonight.

Tonight the message that should be taken from Brown's victory is not "President Obama sucks" or "The Democrats' policies suck" or even "we don't want the Democrat Health Bill."

Nope.

The message that should be taken from Brown's victory is simple, succinct, and clear:

Ramrodded policies are not going to be tolerated. It doesn't matter if it's The Fed doing it, President Obama doing it, or Congress doing it. PUT THE FACTS ON THE TABLE, DEBATE OPENLY, AND MAKE NO MORE CLOSED DOOR DEALS IRRESPECTIVE OF THE SUBJECT MATTER!
President Obama said he was NOT an agent of the banksters and fraudsters on Wall and K Streets alike. HE LIED. Neither party has been willing to address this problem but it must be addressed right here and now. Those who committed fraud during the bubble years, and this includes most particularly those on Wall Street, must be held to account. Each and every firm on Wall Street must be subjected to a full forensic audit with all indications of criminal wrong-doing turned over to a Grand Jury - NO EXCEPTIONS.
Start listening to The American People. NOW. America will NOT tolerate a ramrodded health care bill. America will NOT tolerate being ripped off with 30% credit card rates while banksters rake in billions in bonuses - "earned" through phony accounting and government handouts. America will NOT tolerate being ignored when they tell Congress by 100:1 margins (or more) to NOT PASS TARP. America will NOT tolerate so-called "trading partners" who exploit effective slave labor conditions and then rob our nation's secrets and her corporations blind, then sell us poison toys and costume jewelry. And America will NOT tolerate any more of the BS from Washington, Wall Street and foreign nations that are in Congress' pocket - and that got us into this mess. WE DEMAND JUSTICE NOW.
Want to lose your job Senators? VOTE TO RECONFIRM BERNANKE AND YOU'RE FIRED.

STOP THE LOOTING (and spending) AND START PROSECUTING RIGHT DAMN NOW!

Politicians cannot take from this win that either party is "safe" or "has favor" with The American People.

This win was about one thing above all others:

WE THE PEOPLE HAVE HAD ENOUGH OF THE DUPLICITY, LIES AND CON JOBS, AND IF YOU DO NOT LISTEN TO US AND STOP IT - BOTH IN WASHINGTON DC AND ON WALL STREET WE WILL THROW YOU OUT ON YOUR ASS.

DO YOU HEAR US NOW WASHINGTON?

IF YOU DO NOT WE ARE COMING FOR YOU ON NOVEMBER 2^nd 2010 - THAT'S A PROMISE.

Obama: Time To Keep Your Promises

nospam@example.com (Karl Denninger) — Tue, 12 Jan 2010 14:34:00 -0500

Do you want to have a Republican House - and possibly Senate - come November?

No?

Then you better put a stop to this crap.

The Fed is telling a bailout watchdog not to share documents requested as part of a House investigation into the bailout of failed insurance conglomerate American International Group Inc.

A letter from the special inspector general for the financial bailout to California Rep. Darrell Issa says, the Fed "has directed us not to provide you with the documents it has provided to us."

Your own party is having none of this:

Jan. 12 (Bloomberg) -- Edolphus Towns, chairman of the House Oversight and Government Reform Committee, said he will issue today a subpoena to the Federal Reserve Bank of New York for documents related to American International Group Inc.

“This subpoena will provide the Committee with documents that will shed light on how and why taxpayer dollars were used for a backdoor bailout,” Towns said in an e-mailed statement.

I know you didn't solicit my advice, but I'm good at providing unsolicited advice in this regard. I tried to warn John McCain prior to the election that his standing with the TARP/EESA "bailout nation" BS would cost him the election, and it did.

Most of The American People have no problem with anyone making an "unholy" amount of money provided they do so legally, without ripping anyone off.

I know few people who object to a farmer who works his entire life to provide for himself and his family, manages his crops, makes a lot of money, socks it away, and retires to enjoy his last years in comfort.

I know few people who object to the American who invents something new and never-before seen, like an automobile, an operating system for a computer or a new gadget that everyone wants and buys, becoming rich as a consequence.

But nobody, except for the crooked banking cabal on Wall Street and their paid shills, finds it acceptable to sell worthless trash as "money good" securities to states, retirees, pension funds and ordinary people simply trying to guarantee that they have a decent retirement income, whether those securities are bonds and CDOs backed by mortgages made to people who the sellers of the money knew couldn't pay or whether they're Internet bubble companies that never had a snowball's chance in Hell of being able to sell anywhere near enough product or service to cover their expenses.

Americans find it even more outrageous when, after doing the above, that very same banking cabal got caught holding too much of their own garbage and faced bankruptcy - so they forced the American people to bail them out while at the same time jacking up ordinary Americans' interest rates on credit cards to 29.9%, imposing new and outrageous fees, and then paid out tens of billions of dollars in bonuses!

One very small piece of this scam is in fact AIG and the role of the NY Fed in both the "regulation" of the banks under its purview during the time that AIG was selling what later proved to be worthless credit default swaps to those institutions under its regulatory umbrella and, later, "negotiating" a back-door transfer of funds from the US Taxpayer to bail out those very same regulated firms that bought worthless "protection" for the purpose of claiming that their risky "assets" were in fact money good.

For the NY Fed to now claim that Tim Geithner knew nothing of the negotiations, public filings and transactions between AIG and these institutions, both prior to the blow up and after it happened, stretch credulity. After all these institutions were specifically under the regulatory authority of the NY Fed in the years prior to this crisis and the NY Fed's charter explicitly includes oversight and management of systemic risk posed by these firms to the banking system as a whole.

You, President Obama, ran on the platform and claim that you were coming to Washington to, in part, STOP THE LOOTING AND START PROSECUTING.

Well Mr. President, there's a hell of a lot of looting that has taken place, and yet we've seen damn little prosecuting.

Millions of Americans have been dispossessed of their homes due to jobs lost in the economy during this mess, and there is no indication at all that the job problem is going to go away any time soon. Indeed, we are now back where we were in 1983 in terms of the percentage of the population that is employed and contributing to the Federal Tax Base, yet the total debt outstanding in the US is, as a percentage of GDP, twice as high.

Every American invested in the public markets has just completed a "lost decade" in which they have in fact lost money over a 10 year time, and that's without counting inflation. These are not small losses - about 35% if you were in the S&P 500, 35% in the DOW and more than half in the Nasdaq 100.

Pension plans, both public and private, have been decimated. Your core constituents, including organized labor of all stripes have taken it in the shorts as a direct and proximate consequence of the outrageous and pernicious fraud heaped upon the public debt and equity markets.

When you add all of this up Mr. President virtually every American has been touched by this mess. Lower-income earners have lost their jobs, middle-income workers have lost jobs, homes and retirement security and upper-income earners have suffered all of the above plus in many cases had their nest eggs literally stolen by scammers like Madoff.

Yet thus far you have focused your prosecutorial attention on Madoff, Stanford and a handful of others - all of whom attacked "high wealth" people.

Here's a hint Mr. President:

The rest of the nation is pissed off and tired of the excuses and lies, and we know who was responsible for all of the bogus securities and lending activity - and it wasn't Madoff.

Fraud is against the law Mr. President. It always has been. You need no new laws, you have plenty of existing ones.

It is my belief that there are literally tens of thousands of people and hundreds of companies, including some very large public ones, you should have under investigation if not indictment right here and now.

You can, right here and now, solve your flagging popularity problem. You need only give a speech that is roughly this:

My Fellow Americans.

The last three decades have been marked by outrageous scams and frauds throughout our financial system. This is not a partisan political issue and has consumed both Democrat and Republican administrations and Congresses alike.

As of today, that era has ended.

To those who believe that blowing bubbles, making homes unaffordable for the common man in this country or driving stock prices to ridiculous levels based on hype and false claims is a means to become wealthy, your days of being able to strip the wealth of the common American have come to an end.

Those federally-chartered institutions that promote a "bubble economy" based on unreasonable and unsustainable levels of debt will find that this administration will do everything in our power to revoke those charters. This includes but is not limited to The Federal Reserve.

To those who have ripped people off, including those who marketed and sold worthless securities, those who claimed to have "protection" against market events when they knew the person they bought from had no money to pay, or who worked together to make loans and sales to people through the use of various lies, such as falsely overstating incomes, you will soon be facing a jury of your peers.

I am today directing the FBI and Department of Justice to open and begin investigations, starting at the top. Each and every one of the large financial institutions in this country, including the banks, GSEs and their officials that operate under a federal charter or banking license will face a forensic audit. We will identify and bring to justice all of those who have robbed this economy of its vitality and stolen your futures. Where possible we will claw back every penny of these individuals and firms' wealth so as to provide you with whatever compensation we can recover. Those firms who have committed wrongdoing will be broken up and their officials barred from serving in the banking or securities industries in the future.

Our own administration and the people in it will be subject to this investigation, as will all members of Congress, the lobbying firms and interests that interact with our government. There will be no sacred cows and no rocks that will be left unturned.

We will investigate homebuilders, realtors, appraisers and mortgage brokers. We will look into the FHA, Ginnie Mae, Fannie Mae and Freddie Mac and determine exactly how all of these loss-producing loans came to be made. Where we can identify persons or corporate procedures that led investors, firms or people to be misled, we will bring charges.

The days of theft and fraud from the American public, followed by demands to be bailed out when these scams and schemes reach the end of their rope, are over. Civil and criminal penalties have and do exist for these offenses, and they will be enforced to the fullest extent of the law.

All Americans deserve to be able to invest with confidence and rely on the statements and publications put forward to them. Americans deserve to be told the truth. When Americans are ripped off, they deserve justice. Beginning today, every American will receive exactly that.

The days of the "Wild West" on Wall Street and K Street alike are over.

Thank you.

If you don't, and soon, you will have a Republican Congress come November, and in 2012, you will be headed home to Chicago, where you can live in the bankrupt State of Illinois - bankrupted, in no small part, by the same fraud and rip-offs that have infested the rest of this nation.

You've had a year to survey the landscape.

It is now time to keep your promises.

We, the voters and citizens of this nation, are not asking any longer.

We're now demanding you do so.

California Grows A Brain?

nospam@example.com (Karl Denninger) — Tue, 12 Jan 2010 12:41:00 -0500

Prohibition - the worst mistake our federal government ever made when it came to restraining freedom, in that all it did was provide the fuel for criminal gangs to buy weapons, bullets and harm lots of innocent bystanders - was ended by The Depression and a need for tax revenues.

Now California in the crunch of a massive budget deficit is considering the first act of sanity in a nearly-100-year old drug war that has similarly done nothing to promote general societal welfare, but has locked up hundreds of thousands of non-violent Americans who have engaged only in consensual adult transactions and acts, wasted hundreds of billions of dollars, fueled wars in foreign nations and provided the money that criminal gangs in the United States have used to buy weapons with which they have terrorized the population.

I am speaking of Assembly Bill 390 - The Marijuana Control, Regulation, and Education Act.

From the summary:

This bill would remove marijuana and its derivatives from existing statutes defining and regulating controlled substances. It would instead legalize the possession, sale, cultivation, and other conduct relating to marijuana and its derivatives by persons 21 years of age and older, except as specified. It would set up a wholesale and retail marijuana sales regulation program, including special fees to fund drug abuse prevention programs, as specified, to commence after regulations concerning the program have been issued, and federal law
permits possession and sale consistent with the program. It would ban local and state assistance in enforcing inconsistent federal and other laws relating to marijuana, and would provide specified infraction penalties for violations of these new marijuana laws and regulations, as specified.

It's about damn time.

Never mind that there's a lot of use for the hemp plant that has nothing to do with getting stoned, and virtually none of it is legal with our insane prohibition on growing of this plant.

Specifically, hemp makes an excellent biofuel feedstock, it is suitable for very high-quality paper production at lower cost than made from trees and the fiber is useful for a whole host of industrial and consumer end product uses, yet it is virtually impossible, given the insane "public policy" view toward the plant, for any of this to be exploited.

Let's face reality here folks: we currently allow the sale and consumption, under regulation, of two substances that are far more dangerous than marijuana, specifically:

Tobacco. Nicotine, the active ingredient in tobacco, has been characterized as "the most addictive substance known to mankind" (Dr. Everett Koop, former US Surgeon General, among others) by many in the medical profession. The preferred route of consumption (smoking) liberates dozens of known carcinogens including four nitrosamines that are formed from the natural components of the tobacco plant when it is burned. Nicotine is a direct poison in addition to being highly addictive; the nicotine in just four cigarettes, if extracted and injected into the blood is sufficient to kill an adult. The smoke, in addition to the known components unique to the tobacco plant contains benzene, toluene, polonium, acetone and many other known poisons and carcinogens. Tobacco, irrespective of the route of consumption (including "smokeless" uses) has an extremely high addiction rate (near 100%) and the addictive property is chemical (that is, it is a physical addiction formed by alterations of brain chemistry.)
Alcohol: Alcohol is a direct bodily poison; 50% of those who reach a blood alcohol level of 0.5% will die. It is physically addictive with heavy, repeated use. It is a known carcinogen, particularly potent with cancers of the liver and stomach. It produces profound impairment of motor skills and coordination in most users with blood alcohol levels of 0.08% and above.

In contrast marijuana produces motor impairment with consumption, although there is no generally-accepted "level" of intoxication that produces a profound impairment, as the common tests currently available do not test for actual THC (the active ingredient in marijuana that produces intoxication) content of the blood or breath, but rather they test for metabolites - that is, what the body produces when marijuana is consumed and is eliminated in the body. These tests thus check for previous use, not current intoxication. Nonetheless intoxication is readily perceived by impairment of fine and gross motor skills.

Marijuana has no known "LD-50", or toxic dose sufficient to produce death. It is psychologically addictive (as are all things someone "likes", including sex) but has no known route of physical addiction in the human body due to permanent alterations of brain chemistry (as with tobacco or alcohol.) It is harmful when smoked as is tobacco, but there are alternative means of consumption (including devices that heat but do not burn the material as well as through eating either of the plant itself or through extracts, as the active ingredient is oil-soluble and thus is trivially extracted into, for instance, butter) that do not involve the risks inherent in smoking (of anything.)

Despite claims that police do not "target" marijuana offenders about half of all persons arrested for drug offenses are in fact arrested for marijuana violations in the United States - and that number is close to 750,000 persons a year. Some 90% of those arrested are charged only with possession of the substance - not "sale or manufacture", which includes those growing the plant for personal (whether medicinal or recreational) use and consumption. This number of arrests dramatically exceeds the number of people arrested and charged for all violent crimes combined, including murder, manslaughter, rape, robbery and aggravated assault. Many of these arrests result in permanent felony records for the person who gets "busted" - a legal disability that can and often does follow the smoker for life, resulting in severely-damaged employment prospects, never mind (in many states) the revocation of one's right to vote and a permanent federal bar on the lawful ownership of a firearm.

Nobody that I'm aware of claims that smoking weed is good for you. Certainly, I do not. But I also don't argue that having a drink is good for you, or smoking a cigarette - yet within a couple of miles of my home there are literally a dozen commercial establishments that will happily serve me as much poison in the form of alcohol as I wish to purchase and consume in their restaurant or bar.

All of this consensual adult activity is of course taxed, and ostensibly the taxes thereby generated go toward education and help for those who become addicted to these substances and wish to quit.

For those who operate a motor vehicle (or fly a plane, or otherwise endanger the public) while intoxicated irrespective of what they're intoxicated on, I say arrest 'em, prosecute 'em and stop 'em from doing it again. For the driver who gets caught while stoned (on whatever) there are currently-available ignition interlocks that amount to a coordination tester (a "video-game" like device) that will refuse to allow the vehicle to start if the driver is intoxicated. Mandate the installation of one of those on your vehicle for five years for a first offense (you pay for the device too of course!) and permanently for repeat offenders. If the offense is related to a commercial operation (e.g. truck driver, train driver, pilot, etc) permanent revocation of one's commercial operating privileges are appropriate on the first offense. We already charge drunk drivers who kill someone in an accident with manslaughter, and this should continue.

But we as a society should have thrown off the BS racist arguments (not to mention the corporate hegemony) used to "support" marijuana prohibition decades ago when the transactions and consumption involved are entirely between consenting adults. It is simply none of my damn business what you choose to do on your private property so long as your actions do not harm me, and smoking a joint in your living room or growing a half-dozen dope plants in your closet does me no harm at all.

Today we simply can't afford this sort of stupidity - anywhere - in our government and law-enforcement spending.

Three quarters of a million people a year who have to be processed through the legal system, each at a huge cost ($10,000 or more each - assuming there's no jail involved - for those who go to prison it's $30k/year/each+!), furthering a political agenda we do not have the money to support.

Never mind that I have plenty of use for the extra jail cells, cops and prosecutors - we can start by locking up Jamie Dimon, Lloyd Blankfein and Timmy Geithner for openers, along with everyone else involved in actually ripping other people off during the bubble years.

100,000 jail cells vacated and our "narco" cop divisions should be just about right to divert to a far more productive pursuit.

Don't bogart that bill California.

Gettin' While The Gettin' Is Good

nospam@example.com (Karl Denninger) — Wed, 06 Jan 2010 14:04:00 -0500

So here's "I never apologized for kneeling before bankers in my entire life" Dodd's "retirement" announcement:

In my usual snarky editing style....

I have been a Connecticut Senator for 30 years. I'm proud of the job I've done and the results delivered to and for the banksters who have robbed every citizen of this nation of their wealth, savings, and futures.

Our country is a work in progress. And I am confident it always will be. That is what I thought about as I stood on that hillside in Arlington on Christmas Eve morning. That is what I've talked about with Jackie over this holiday season and pondered whether, when I lost my seat next year, I would return to Connecticut to a BBQ thrown by the citizens of my state in my name - and at which I'd be the main course.

In case that wasn't clear enough it is my belief that the two major "successes" that Dodd cites - Health Care and Financial Regulation - with both in the fullness of time be proved boondoggles, and might ultimately prove sufficient cause for rebellion.

I sincerely hope that not to be the case but I am not particularly optimistic about the future in this regard.

Our Congress - both House and Senate - has become so badly captured by both the financial and medical industries that any hope of actual "reform" coming out of this Congress without a massive turn-over or a President who actually has a set of gonads is flatly impossible. Those who believed President Obama would be that leader have been proved sadly mistaken over the last year - he simply smiles better when he lies than George W Bush did.

It is therefore my conclusion that Senator Dodd has, after many years, come to the conclusion that it is far better to get while the getting is good, fuel up the Gulfstream and keep his offshore property warm and stocked - just in case his "welcome home" reception is a bit warmer than he would prefer.

Starve The Beast: Airlines

nospam@example.com (Karl Denninger) — Sat, 26 Dec 2009 16:29:00 -0500

I've had it with this sort of half-assed response to terrorism:

Air Canada said in a statement that new rules imposed by the Transportation Security Administration limit on-board activities by passengers and crew in U.S. airspace. The airline said that during the final hour of flight passengers must remain seated. They won't be allowed access to carryon baggage or to have any items on their laps.

Flight attendants on some domestic flights are informing passengers of similar rules. Passengers on a flight from New York to Tampa Saturday morning were also told they must remain in their seats and couldn't have items in their laps, including laptops and pillows.

Let me make myself clear: I am very interested in not being blown to smithereens by some Islamic Nutjob who believes his personal path to a bunch of virgins lies in killing "infidels."

But let me also be very clear: It is not little grandmas, 40 year old white businesspeople, or families with a couple of young kids (all of whom have the same, non-muslim or arabic last name) that have or are attempting to blow up airliners.

In this case said nutjob recently visited a place known to be a terrorist hotbed, we knew he was there, and even more damning, the NSA knew he was on the plane before it entered American airspace - yet that flight was permitted to proceed all the way to Detroit where he tried to set off his device (and it failed to detonate, most likely because he was tackled by another passenger, thank the Christian God!)

Even better, this jackass' name is "Umar Farouk Abdulmutallab". Is that your first clue that there's a materially higher risk that he's a terrorist than, say, "Sam Smith"?

The American people have been subjected to outrageous and insane restrictions and inconvenience with regards to air travel since 9/11, all in the name of "improving security."

Let me remind everyone of the following facts, lest anyone forget:

The terrorists of 9/11 were in the United States for a long period of time before they launched their murder spree. They were in fact taking flight lessons but refused to learn how to land, which prompted a report of suspicion from the flight school. These nutballs then overstayed their visas which was plenty-sufficient reason to deny allowing them to board any aircraft and in fact was sufficient to arrest them at security in the airport and deport them. Had we done so the 9/11 attacks would have failed.
The terrorists of 9/11 did not take any prohibited item onto an aircraft. Box cutters were not prohibited items prior to 9/11 - short-bladed knives were considered acceptable in the cabin. We simply did not (as a collective consciousness) think of an aircraft as a potential bomb, and therefore did not foresee someone trying to hijack one as a means to acquire a bomb.
Flight 93 on 9/11 is proof positive (as is this incident) that once Americans understood what was going on they were both willing and able to rise to the occasion and stop the terrorists. It would be even better if we could carry on board aircraft as civilians, but I understand the concern over bullets penetrating things that could cause the aircraft to crash. However, no such reasonable expectation of aircraft damage is associated with Tasers - so why can't a law-abiding citizen carry one on board? Had the citizens on 9/11 been armed with Tasers (even a few) "Sir Boxcutter" would have met his twitchy demise in short order instead of being able to carry out his plan.
ALL recent terrorist activity targeted against The United States has been Islamic. Argue with that if you'd like. Tim McVeigh is the last reasonable incantation of "non-Islamic" terrorism you will find. 9/11, attacks over in Europe (e.g. Madrid, etc), Mr. Shoebomber, Ft. Hood and now this - all Islamic Terrorism.

What has been our response?

We have refused to profile even though the threat is clearly, at this time, subject to profiling. While profiling wouldn't stop every attempt, it sure would have stopped this nutball! Been to Yemen of late have you? You ain't getting on the plane. You have a Muslim name? You get the "special" security screening. You don't like it? Tough crap - we'll stop being selective when the muzzies stop trying to blow up our airliners and people!
We have severely inconvenienced travelers without doing one thing to actually address the problem. Again, the simple fact of the matter is that changing the prohibited item list all on its own would have prevented 9/11 from succeeding. Instead of a 30-second change by the FAA to the rules we built another bumbling federal bureaucrazy. (Yes, I spelled it that way on purpose.)
We call the TSA "security" but we refuse to make them legally responsible for the luggage they allegedly have control over from the time we check it until it is on the carousel. Theft from luggage remains a problem and the TSA is explicitly exempted from financial responsibility. Why? If someone can steal something from your bag, they can also put a bomb IN YOUR BAG! The latter makes you (and everyone else on the plane) dead. Why do we accept this half-ass claim of "security" when it is not backed up by financial responsibility - that what is in your bag when you check it will still be there when you retrieve it?
I don't particularly mind taking my shoes off so they can go through the scanner, nor having some TSA dude see my computer turn on (so he knows it's an actual computer) nor do I care if they throw all my carry-on crap through the scanner as well. Letting them see that there's nothing that goes "boom" in my bag (or more importantly, the bag of the guy who I don't know sitting next to me!) suits me just fine. But if the TSA is so good at this and so are foreign security checkpoints how is it that this jackass got on a plane with a bomb in his possession?

Now that the TSA and its foreign counterparts have proved they are clearly unable to stop someone from getting on a plane with both a bomb and the means to set it off we're being told that we must "remain seated for the last hour of flight" and that we "can't have access to carry-ons."

Of course you've never been on a flight where the "last hour" is in fact the entire flight less climb-out, right? Let me clue you in - if you fly from the East Coast to anywhere east of the Mississippi, your flight time - actual in air time - is likely under two hours, and about 10-15 minutes of that is climb-out - that is, before the "seat belt sign" goes off.

Nor have you ever had a "last hour" that was three hours, have you? I have - more than once. Indeed, I was once on a flight into Detroit that was literally turned around and returned to the point of origin, allegedly due to "conditions", even though I later discovered that Detroit Metro airport was open at the time and accepting flights. That "last hour" turned into four, and it was entirely because the prior delay in departure (for which I sat on the tarmac waiting - two more hours!) meant that the airline didn't want the equipment in Detroit. That's the only reason they turned around.

I won't even get started on the games airlines play with government approval, where "on time departure" means the jetway was cranked back and the aircraft left the gate. This is why they strand you on the runway with nothing to eat or drink, forcing you to sit in your seat with no access to the bathroom for hours. It is all about the possibility of being penalized for "late" flights - anathema. Don't believe for a second the "three hour" rule just adopted will change things materially - is three hours sitting in a tin can with no A/C, food, beverages or access to the can (say much less your carry-ons that might include a book, music player or laptop) "ok" with you? It's not ok with me.

What this means is that if you brought your laptop to do some work, forget it. If you want to listen to your iPOD, forget it. If you want to read a book, forget it - that's a carry on item too.

Further, let's not forget that the Islamic Terrorist who tried to blow up this plane allegedly hid the bomb in his underwear. That's not a "carry on item", so exactly what does preventing people from getting up to go to the bathroom or using their laptop have to do with preventing someone from setting off a device sewn into their skivvies?

What's next - handcuffs and leg irons at each seat and/or strip-searches for all?

I'll give you my answer to this crap: Screw that and screw the airlines.

I don't have to fly. You don't have to fly. Nobody has to fly except for government bureaucrats, and they're welcome to put up with all the crap that we shouldn't and I won't.

I had planned a nice vacation this summer that, surprise surprise, included giving some of my hard-earned money to the airlines.

NOT ANY MORE.

I have tolerated the insane changes in rules that demand I be at the airport more than an hour before departure for domestic flights and two hours for international, simply because the TSA can't manage to run checkpoints efficiently nor put in enough people and machines to keep the line from snaking out the goddamn door. There is no reason for there to be ANY wait for security screening - the TSA knows how many counters are open at check-in, and they COULD have enough lines and agents to screen everyone with no more than "X" (a small number, say three or four) people in queue for each line - maximum.

I have tolerated my luggage being pillaged (literally) and then being told by the TSA that "they're not responsible" even though the pillage clearly happened while the bag was in their so-called "sterile area" - all the while wondering if the jackass who stole my (expensive electric) razor and a couple of CDs stuck a bomb in someone else's bag while they were at it.

I have tolerated the TSA goons telling me that I can't bring a goddamn tube of toothpaste with me in an overnight bag because it is slightly over 3oz, never mind that I'm perfectly happy to demonstrate by eating some of it that it is indeed toothpaste and is of a particular type that I use on recommendation of my dentist. Never mind the sealed, unopened 12oz can of Dr. Pepper that I can't bring through security so as to avoid being bent over the table for $4 to buy the same thing 20 feet beyond the scanner. Guess where I was flying that day? To assist the NY Attorney General, at their request and without charge. Do you think that abusing those who are willing to take a couple of days out of their personal and professional life to help law enforcement catch bad guys and put them in prison will encourage people to do that in the future?

Never mind the obvious - 3oz (by volume) is more than enough to make a big bang if something bad is in there. The TSA justifies this of course on the premise that "well we had to balance things out."

I strongly suggest that every American refuse to patronize the goon squad until we do the right thing - that is, profile, staff checkpoints appropriately so there are no obscene waits, make the TSA legally responsible for the contents of luggage in their care and make unlawful the detention of passengers on the ground in an aircraft for longer than is reasonably necessary for that plane to taxi from the gate to the threshold, wait for a couple of planes to depart in front of it, and take off. That is, force the airlines to not close the door and push back a plane until that flight has a take-off slot on an actual runway within the next 15 minutes.

In the 1980s I flew on People's Express Airlines. You want to know what "hassle free" air travel was like? Let me tell you how it worked:

You showed up at the airport.
You got on the plane.
You paid on the aircraft.
You got off at your destination.

It was a freaking city bus that happened to go a thousand miles or more between stops, and it worked. Yeah, I know the business failed, but let me tell you - that was hassle-free air travel.

I have tolerated the gradual erosion of what was an enjoyable experience for more than twenty years.

My limit of tolerance has been reached, and I believe yours should be as well.

Vote NO with your wallet.

PS: If you're wondering what PETN, the explosive that allegedly this guy and Richard Reid tried to use will do, here's an example from Youtube. This is supposedly 50 grams of the stuff - less than two ounces - taped to a tree. Still think that 3oz "liquid or gel" restriction is all about safety eh? Still think this was a "firecracker"? Uh, no.

McCain's Redemption?

nospam@example.com (Karl Denninger) — Thu, 17 Dec 2009 09:39:00 -0500

John McCain may be searching for redemption here....

Dec. 16 (Bloomberg) -- U.S. Senators John McCain and Maria Cantwell proposed reinstating the Depression-era Glass-Steagall Act that split commercial and investment banking to rein in Wall Street firms in response to the financial crisis.

“Under our proposal, too-big-to-fail banks would be forced to return to the business of conventional banking, leaving the task of risk taking or management to others,” McCain, an Arizona Republican, said at a Washington news conference. A former bank regulator said splitting up companies is “crazy.”

I will reiterate what I said back in the summer and fall of 2008: I am absolutely convinced that McCain's endorsement of the TARP bailout bill, and his refusal to stand up and take a strong position in favor of the common man, is why he lost the election.

Reinstating Glass-Steagall would be a near-total reversal of his previous position. It would be recognition of the facts: Banks that are allowed to gamble in the financial markets inherently are gambling with the sovereign credit of The United States, and inevitably transfer their losses to the taxpayer while keeping ALL of the profits for their overpriced staff and executives.

This is often said to be of "benefit" to the public because these banks are public companies. This is a flat lie: Goldman typically bonuses out roughly half of their gross profits, with only a minuscule piece being paid in dividends to shareholders. Other banks have similar compensation policies.

There is no "free market" way to prevent such distribution. You can only prevent it by prohibiting lending and/or depository institutions from speculating in any form or fashion in the markets.

For those firms that wish to speculate they should be free to - with their own funds (that of their shareholders or bondholders) but they must be accountable to the last penny for each dollar at risk, and unable to transfer that risk to the taxpayer.

Wall Street will, of course, fight any such law tooth and nail, because speculating with other people's money and being able to force the taxpayer to eat all risks of loss is the time-honored fashion by which these institutions steal hundreds of billions of dollars from taxpayers each and every year.

This has ratcheted up the government's obligations to the point that there is a very real risk the government may be unable to meet its obligations. That, of course, would be an unmitigated disaster and quite literally could result in the end of our Republic.

The truth is right here:

“We cruise along for 80 years without a major calamity infecting the entire financial system and then less than eight years after the repeal of Glass-Steagall we have a financial meltdown in this country,” Camden Fine, president of the Washington-based trade group for about 5,000 smaller U.S. banks, said in a telephone interview. “That’s no accident.”

Exactly.

NOW CUT THAT CRAP OUT.

If John McCain has finally thrown his "trusted economic advisor" Phil Gramm (of Gramm-Leach-Bliley fame, which repealed the last pieces of Glass-Steagall, and who proclaimed that we were in a "mental recession" during the campaign) over the side of the boat with cement shoes attached it is long overdue. If he truly is willing to get behind and press this bill through the Senate and raise hell - in public if necessary - to get it passed, I will take back all the ugly things I said about him during the 2008 campaign, and should he run in 2012, I would be likely to vote for him as well.

John McCain can demonstrate he's serious about REAL financial reform and not just bloviating by joining - and rallying others to join - a block on Bernanke's confirmation for a second term.

Treasury Handed Out $38 Billon Tax Exemption?

nospam@example.com (Karl Denninger) — Wed, 16 Dec 2009 08:25:00 -0500

What sort of BS is this?

The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.

What?

How much?

The "exemptions" are on roughly $38 billion in "future earnings." The actual value of this exemption could be anywhere between zero (if Citi makes no profit) to roughly 40% of the whole, or $15 billion.

Obama was touting the "profits" made by Treasury on the TARP repayments. What he wasn't saying is that not only did we flush the money (from TARP) that went into Chrysler (disclosed last night), we now find out that at the same time he was "touting" the so-called "profits" The President was handing that money straight back to the bailed-out companies via tax breaks!

So no, Mr. President, Treasury (and The American People by extension) did not "make a profit" on TARP, nor "will we recover every penny" that was paid out.

There have been several banks that have failed after receiving TARP money - we will get zero from them. We will get zero from Chrysler and GM. We lost 100% of the money injected into CIT, and now you have handed out billions of tax credits to Citibank.

Where's the so-called "populism" - that is, the protection of "the little guy" while making those who were responsible for this economic mess pay for their sins Mr. President?

If you're a Democrat and believe that you were electing "Hope and Change", you might want to think about what you actually bought with your vote - not what you were sold.

To Congress: Your Loan Has Been Called

nospam@example.com (Karl Denninger) — Tue, 15 Dec 2009 11:02:00 -0500

Leaders are considering a hike of roughly $300 billion to the nation's $12.1 trillion deficit, though the final figure has not been nailed down, congressional aides said on condition of anonymity.

Democratic leaders had previously hoped to raise the limit by at least $1.8 trillion, enough to take care of the government's debt needs through the November 2010 congressional elections.

What was your first hint the former $1.8 trillion increase attempt was a bad idea? Perhaps this?

Or was it China buying a literal zero of Treasury debt in October?

Or was it the TIC report this morning (which I'm sure you had "early") that showed a near-zero appetite for foreign funding of our idiotic spending proclivities?

Or was it the fact that this morning PPI numbers came in hot, especially in crude goods, strongly implying that we're in for a nasty bout of either cost-push price inflation or collapsing corporate profits?

Perhaps it is the numerous anecdotes of "seasonal help" already being laid off, stacks of "Black Friday" merchandise still in the stores, and Best Buy's earnings report this morning in which they disclosed margin compression in the 4th quarter - which promptly hammered their stock for 7.2%.

None of this should be a surprise.

We have fixed nothing in the last two years. We have not forced bad debt to default yet worse, despite the incessant pumping and attempted "forcing" of credit into the system via government borrowing the pump has now officially failed, as the new Z1 data shows.

Note that despite all the Federal Deficit spending - $1.4 trillion last fiscal year (ending in September) and $300 billion more in the last two months - approaching two trillion dollars - the total credit outstanding in the system - including the new Federal borrowing - went negative in the third quarter of this year.

The bottom line:

Your attempt to play "pump prime" over the last two years has FAILED.

For the first time in the modern era you have run into the mathematical realities of too much debt for the amount of payment capacity in the private sector.

You can either stop now, or you can stop when the government's ability to borrow is cut off forcibly by radical increases in the bond interest-rate curve.

You WILL stop gentlemen. The only question remaining is whether it will be voluntary or whether the market will force an involuntary cessation of Treasury Coupon issuance.

Attempting to avoid this by monetizing debt, as Bernanke has done while being your handmaiden (while lying about his actions to The American People AND in sworn testimony before Congress) forced currency devaluation which in turn (as expected) cuts off foreign debt demand.

That in turn, as you are now seeing, causes the coupon increase to happen anyway.

You're trapped folks, exactly as I predicted you would be two years ago.

I stand impressed that you got away with this for as long as you did, but I also stand behind the view I expressed in 2007 - that the root problem is an excessive level of debt in the system at all levels, a level of debt that exceeds capacity to pay, and as a consequence any and all attempts to restart the credit-driven consumption economy would fail, and if pressed too far the government will fail.

The evidence strongly suggests that you are getting awfully close to your last chance to stop being stupid before the market hands you a lesson that has the potential to destroy both our economy and government.

You would do well to listen.

The Consequences Of "The Big Lie"

nospam@example.com (Karl Denninger) — Sun, 13 Dec 2009 15:27:00 -0500

It may be "politics as usual" to never talk about how bad the economy really is - never talk about the budget deficit in honest terms - and never talk about how revenues are and have been cratering across the board for governments.

But when you are facing a truly horrific situation in this regard, and you need everyone on board to make sacrifices - especially government positions where employees feel especially entitled - "politics as usual" is particularly dangerous.

This weekend Ireland's largest public sector union has called the situation "explosive":

Speaking today Peter McLoone, the general secretary of Impact and the chairman of the Public Services Committee of the Irish Congress of Trade Unions said that trust had effectively broken down between unions and the Government and that there was no basis that the parties would be able to go back into discussions in the short term.

Mr McLoone told RTE’s “This Week” programme that he could not rule out the possibility of all-out strikes as the reaction from members to the pay cuts was very strong.

He also indicated that public sector workers would no longer be prepared to engage with the Government on reforms along the lines of those proposed in the talks on an alternative for reducing the public sector pay bill without cutting pay rates.

And by the way, what's "especially dangerous" mean? Strikes? Many government workers would do us all a favor if they went on strike. That would solve budget problems, you see - you don't pay people who don't work voluntarily, and a strike is voluntary! To that I say: Go ahead and strike as it will HELP the budget situation.

If this is a thinly-veiled threat of violence, well, we're already seeing that in Greece. I guess we can add Ireland to the mix without too much trouble eh? Or shall we talk about Italy, where it appears Berlusconi was punched - that is, literally assaulted:

OME (AP) -- Italian Premier Silvio Berlusconi was punched in the face at the end of a rally on Sunday by a man holding a small statue in his hand, leaving the 73-year-old media mogul with a bloodied mouth and looking stunned, police said. The 42-year-old man accused of attacking Berlusconi in Milan as he signed autographs was immediately taken into custody.

How far are we away from boiled rope and lamp posts folks?

The problem here, like in New York and other US States, is that Ireland, like The United States, refuses to confess to the full extent of the economic damage - nor will they confess to the fact that it is not getting better at any material rate.

Instead, we have the litany of "pumpers" and misleading (if not outright false) so-called "economic indicators" that are put forward with a smug smile, claiming that "we are out of recession."

Oh really?

Then why is New York's financial situation so bad that Governor Paterson has felt the need to do this?

ALBANY - Gov. Paterson will announce Sunday that he is taking the dramatic step of unilaterally withholding 10% in scheduled payments this month to schools and local governments, including New York City, the Daily News has learned.

"He's basically paying out 90 cents on the dollar," one source said.

This of course is going to provoke some pretty strong responses - including lawsuits. Not that it matters; you can't get what doesn't exist, no matter how much you want to complain about it.

This is not limited to New York and Ireland. Indeed, it is pretty much "pick your state" in the US, and among other nations, the list is long and distinguished - especially in Eastern Europe.

The distortions that governments (and traders acting on the "free money" paradigm) have applied to the markets in the last two years are unprecedented. Oil, for example, is trading around $70 - but why? Cushing (the main oil terminal in the US) is full to overflowing, banks are literally parking tankers full of oil at anchor rather than selling it, and every place you can buy and cram a barrel, it has been bought and crammed. This has "created demand" for that oil, but since the oil has not been actually consumed it is false demand - and that supply must, at some point, go to the market.

Kuwait's recent announcement that they may pull their deposited funds (custodial funds) from Citibank is more likely due to their government's knowledge of the book cooking (and oil demand cooking) and radical deterioration in their state finances. Eventually the piper must be paid, and these distortions will disappear. When they do, so will the oil price - and I suspect Kuwait knows this full well.

Never mind the usual government game: When challenged, simply black it out.

Yes, that's an actual FOIA response. I guess I should go long Sharpie markers?

Don't even get me started on the financial reform bill. Oh, I'll have commentary on it - but my first read is that the lobbyists have once again done it to us, cold, dry and hard. The most-blatant example that I found with about 30 seconds of skimming are subtle changes in the so-called derivatives "regulation" section that allows a person to be an alternative "exchange." That's right. That would include an artificial person (e.g. Corporation) since it doesn't say otherwise, which means that our dear old big banksters (represented in their lobbying by "Do-we Cheatem and How") have managed to actually remove what little regulation currently exists - while claiming to be for "strong and sound regulation of derivatives."

That's right - this "bill" will actually weaken financial supervision of the most dangerous part of the markets, and therefore increase, not decrease, systemic risk.

Pay no attention to Obama's faux "anger"; he's lying as well.

If he was actually pissed he would have directed Geithner to refuse to allow TARP repayments. He didn't and what's more important, he and Summers are playing kabuki theater with you:

One of the White House’s economic advisors, Larry Summers, also stated his frustration with Wall Street on CNN’s “State of the Union” Program. Summers commented, “Here is what I think they don’t get…It was their irresponsible risk-taking in many cases that brought the economy to collapse.”

That's why you and Obama have put a stop to that irresponsible risk-taking, right? All derivatives are now on a public exchange, all positions marked to the market nightly with appropriate posted margin, the former 14:1 leverage limit has been re-imposed and Glass-Steagall is being put back together and enforced on the banks.

Oh wait - none of that is actually happening, is it Larry? You're a liar and so is your boss. You, in particular, were one of the chief architects of this mess with your "deregulate everything" approach to financial institutions.

How long will you sit for this folks?

Will it be before or after you are out in the street, jobless, homeless and hungry when you finally wake up and say "enough damnit!"

Oh No..... (To The US Government - This Is No Joke)

nospam@example.com (Karl Denninger) — Mon, 07 Dec 2009 14:32:00 -0500

Look, I know people have said that Iran's Ima-dinnerjacket has in the past not really meant that he intended to nuke Israel to Mars the moment he got his hands on a bomb.

I realize that many think he just wants peaceful use of atomic energy, even though he has claimed - in public - intent to enrich to 20% U235, a level roughly sufficient for a (fancy) implosion-style nuke, but more importantly, roughly sufficient to build a fast breeder reactor which can produce Pu239 (simple and easily-extracted bomb material, since it can be chemically separated.)

But I have never seen anything quite like this attributed to him - yet.

Ahmadinejad reportedly claims he has documented evidence that the U.S. is blocking the return of Mahdi, the Imam believed by Muslims to be the savior.

"They have devised all these plans to prevent the coming of the Hidden Imam because they know that the Iranian nation is the one that will prepare the grounds for his coming and will be the supporters of his rule," Ahmadinejad was quoted as saying.

I hope you wake the hell up to what this nutjob is saying.

Radical Muslims believe that the "Return of Mahdi" is the Muslim equivalent to the second coming of Christ.

If this is an accurate quote then we must assume that Iran has an intention to remove that which is preventing the attainment of what, for Muslims, is equivalent to the Christian Rapture!

Folks, I am willing to give almost anyone the benefit of the doubt when it comes to international affairs. After all, what we do inside our borders is our business, and we must respect that which we demand of others.

But religious fanatics are not rational. They cannot be reasoned with. Their threats have to be taken at face value - whether you want to or not.

It is my opinion that Imadinnerjacket has just threatened to nuke The United States, and he is clearly acquiring the material necessary to do so.

I pray I'm wrong but I fear I'm not.