1. America Needs More:
(a) Politicians
(b) Welfare Mothers
(c) Wall Street Investment Bankers
(d) Auto Mechanics
(e) All of the Above
(f) a, b and c only
2. The chief problem facing America today:
(a) There are not enough hedge fund managers
(b) There are not enough people scheming to get a handout from Uncle Sam
(c) Journalists are just too honest
(d) More than half of the nation's income is diverted into government sponsored waste
3. I fear for the future because:
(a) Wall Street may not survive
(b) Government is impoverished; private affluence public squalor
(c) George Soros says that the US debt load is too low
(d) All of the above
(e) Government is spending, spending, spending and the way they're going to pay it back is an inflation that subsidizes George Soros
You have 15 minutes to complete the test. Please do not forget to sign your name.
Thursday, February 4, 2010
China Crash?
John Derbyshire of National Review.com has an interesting post (h/t Larwyn) concerning the possibility of a China crash. Derbyshire notes that two previous times in modern history have nations run up large foreign reserve balances:
>"The first time occurred in the late 1920s when, after a decade of record-beating trade and capital account surpluses, the United States had accumulated what John Maynard Keynes worriedly described as "all the bullion in the world." . . . The second time occurred in the late 1980s, when it was Japan’s turn to combine huge trade surpluses, along with more moderate surpluses on the capital account, to accumulate a stockpile of foreign reserves only a little less than the equivalent of 5-6% of global GDP"
In May 2008 I noted that a Chinese tragedy is in the making despite the major strides that the Chinese economy has made. Like the political leadership of all managed economies, the Chinese government is subject to massive errors and missteps that are far worse than would occur under laissez-faire. I wrote then:
"Tragically, the Chinese perceived the spectacular image of large-scale development and have attempted to emulate Robert Moses's approach with large construction projects, continuing to limit the intellectual and economic freedom on which economic development depends. Equally sadly, Americans lost sight of the reason for their success, and passed laws and regulations, and imposed punitive taxes, that have inhibited entrepreneurship, slowing American economic progress, even as they have increasingly provided welfare payments to incompetent bankers, real estate developers, academics and Wall Street stock jobbers who do not produce wealth.
"This country and China have squandered resources in stupid ways. The bubble will burst as all credit bubbles do. America may have enough resources to reassess its errors. The Chinese likely do not, and many there will be hurt."
>"The first time occurred in the late 1920s when, after a decade of record-beating trade and capital account surpluses, the United States had accumulated what John Maynard Keynes worriedly described as "all the bullion in the world." . . . The second time occurred in the late 1980s, when it was Japan’s turn to combine huge trade surpluses, along with more moderate surpluses on the capital account, to accumulate a stockpile of foreign reserves only a little less than the equivalent of 5-6% of global GDP"
In May 2008 I noted that a Chinese tragedy is in the making despite the major strides that the Chinese economy has made. Like the political leadership of all managed economies, the Chinese government is subject to massive errors and missteps that are far worse than would occur under laissez-faire. I wrote then:
"Tragically, the Chinese perceived the spectacular image of large-scale development and have attempted to emulate Robert Moses's approach with large construction projects, continuing to limit the intellectual and economic freedom on which economic development depends. Equally sadly, Americans lost sight of the reason for their success, and passed laws and regulations, and imposed punitive taxes, that have inhibited entrepreneurship, slowing American economic progress, even as they have increasingly provided welfare payments to incompetent bankers, real estate developers, academics and Wall Street stock jobbers who do not produce wealth.
"This country and China have squandered resources in stupid ways. The bubble will burst as all credit bubbles do. America may have enough resources to reassess its errors. The Chinese likely do not, and many there will be hurt."
Firewall Needed: Google and the NSA
The Washington Post reports that Google and the National Security Agency are teaming up to identify the hackers who penetrated Google's China system. The article points out the need to balance privacy and security. That is a key libertarian problem that has become increasingly intricate with the advance of technology. Phone tapping posed issues that were unknown when the founding fathers wrote the Constitution, and now Internet technology poses ever more complex privacy problems. Here in the eastern Catskills, "hippies" will not get onto a computer because of fear of government. I'm not sure if this correlates with illegal behavior, but I know two people with good educations who will not get on any computer and never have. The article says that:
"collaboration is not easy, in part because private companies do not trust the government to keep their secrets and in part because of concerns that collaboration can lead to continuous government monitoring of private communications. Privacy advocates, concerned about a repeat of the NSA's warrantless interception of Americans' phone calls and e-mails after the Sept. 11, 2001, terrorist attacks, say information-sharing must be limited and closely overseen."
Another aspect of an arrangement between US spook agencies and information services is the potential for international tension. It is likely that agents of the communist government were in involved in the hacking. Might pressure from the NSA create tensions with China?
The article quotes Matthew Aid, author of "The Secret Sentry":
"I'm a little uncomfortable with Google cooperating this closely with the nation's largest intelligence agency, even if it's strictly for defensive purposes."
Given that the collaboration between Google and NSA is primarily one involving sharing of information about the hackers' techniques and code, it would seem that the collaboration maximizes freedom. But given that Google has a lot of potentially embarrassing information about a large swathe of the American public, it needs to have NSA-proof systems philosophies in place to ensure a firewall between its data and the potentially suppressive activities of the government.
"collaboration is not easy, in part because private companies do not trust the government to keep their secrets and in part because of concerns that collaboration can lead to continuous government monitoring of private communications. Privacy advocates, concerned about a repeat of the NSA's warrantless interception of Americans' phone calls and e-mails after the Sept. 11, 2001, terrorist attacks, say information-sharing must be limited and closely overseen."
Another aspect of an arrangement between US spook agencies and information services is the potential for international tension. It is likely that agents of the communist government were in involved in the hacking. Might pressure from the NSA create tensions with China?
The article quotes Matthew Aid, author of "The Secret Sentry":
"I'm a little uncomfortable with Google cooperating this closely with the nation's largest intelligence agency, even if it's strictly for defensive purposes."
Given that the collaboration between Google and NSA is primarily one involving sharing of information about the hackers' techniques and code, it would seem that the collaboration maximizes freedom. But given that Google has a lot of potentially embarrassing information about a large swathe of the American public, it needs to have NSA-proof systems philosophies in place to ensure a firewall between its data and the potentially suppressive activities of the government.
Blood in the Streets
Kitco reports that gold prices have fallen 4 percent today to 1066, nearing the 1030 mark that Jon Nadler mentioned as a near term support several days ago. Morgan Stanley Smith Barney's ticker says that the Dow is down nearly 200 points and the S&P 500 is about 1074, a 23 point drop. These declines are related to a strengthening dollar.
How far will the Fed allow markets to fall before it prints more money? Like an obsese food addict, the Fed reaches into its candy bag at the slightest impulse. Bernanke and his associates like to see gold fall. But the effects of a stronger dollar and weaker gold include bankruptcies and unemployment. More importantly to the Fed, hedge funds' carry trade and the hundreds of billions loaned to Wall Street each week will be threatened by higher interest rates.
Based on my coin flip test, I am betting $950 gold. Unless the Fed decides to change its philosophy, I doubt the S&P will go below 850. But when inflation kicks in, then the Fed will need to tighten. At that point we could see more dramatic stock market declines. Gold would continue to be fueled by speculation for a while, until raising interest rates mutes the price increase trend. Then gold will fall again.
How far will the Fed allow markets to fall before it prints more money? Like an obsese food addict, the Fed reaches into its candy bag at the slightest impulse. Bernanke and his associates like to see gold fall. But the effects of a stronger dollar and weaker gold include bankruptcies and unemployment. More importantly to the Fed, hedge funds' carry trade and the hundreds of billions loaned to Wall Street each week will be threatened by higher interest rates.
Based on my coin flip test, I am betting $950 gold. Unless the Fed decides to change its philosophy, I doubt the S&P will go below 850. But when inflation kicks in, then the Fed will need to tighten. At that point we could see more dramatic stock market declines. Gold would continue to be fueled by speculation for a while, until raising interest rates mutes the price increase trend. Then gold will fall again.
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