Now It Can Be Spoken, Now It Can Be Told

I scooped Charlie Gasparino by like...what...five months? Does Charlie have better sources than me? No. It's just that now such a story is acceptable to run, whereas when I was making my call, we still had a de facto lese majeste prohibition operating within the MSM.

But the bigger point in Gasparino's article than the buyer's remorse is the blackout of all the knowledgable and sensible voices on economic policy within the administration - voices, like Volcker and Summers, which were heavily sold to the public during the campaign, and which I believe enabled Obama to hoodwink folks like Warren Buffett and Lloyd Blankfein into supporting him. I pointed out this disconnect awhile back and wondered why we are getting such miserably destructive economic policy from such brilliant economic stars - either they ain't so brilliant or the administration is not listening to them. The Gasparino scoop suggests it is indeed the latter, which brings up another concern. Why are these folks still working for the administration and in some cases why are they still stumping for destructive policies that they would not have counselled? Furthermore why devote your time and effort if your work and advice is going to be ignored? Is the pay that good? Is the padding of the ole' resume that good?

Watch this space, as I think few economists will want to pin their reputations to this or this. Volcker may be a leading indicator. He has a sterling reputation and nobody doubts his honor, so his recent public jabs at Obama's policy ideas may be an incipient attempt by the economic dream team to regain the attention of the President or else, perhaps, lose their counsel. He may be saying, "Hey, if you want us around (and want to draw on our credibility), you have to listen to us; we're not going to attach our reputations to what you, Axelrod, and Rahm Emmanuel cook up." Let's not forget, Obama had no credibility on economic issues as a candidate. He drew upon the credibility of those he could draw to him, essentially borrowing credibility of people like Volcker and Summers.

The Powerline guys get similar thoughts from Professor Paul Rahe who sees past the putative dishonor of the various economists in Obama's circle to something much more ominous.

Reversal: Obama Up, Market Down

Last week I said that the market was rallying on Obama's stumbles. This week it appears that the market is tanking on Obama's successes. Although the final vote isn't done yet, the administration and Harry Reid successfully peeled off (bamboozled) three squishy Republicans in order to foist this dishonest and dangerous stimulus package on the American people. This constitutes a success for the President. Markets not so much. Previously this week, the one tax scofflaw that Obama did get through the confirmation process - another Obama success - made his contribution to the markets rather inauspiciously.

So far the pattern has emerged. Obama's agenda slows, markets are up. Obama's agenda advances, markets are down. Not that Obama's priority is the stock market, but it is a barometer of the economy and of our future. If it stays in the tank, Dear Leader is a One Termer. How much hedge fund money and Goldman Sachs money will be lining up for Obama 2012 if we've had dead markets for four years? Not much. Maybe that is why Obama is ramming the stimulus, with its government employees' union and ACORN goodies - down our throats. This is not surprising. During the campaign Obama was smooth, he lined up Buffett, Volcker, Furman, Goolsbee and a parade of financial luminaries. That looked like a solid bet economically. What happened? Either he got rolled by Pelosi, Obey, Reid & Co. or he was simply lying all along. The market has to adjust to that new reality, the reality that, in the economic sphere, we bought usselves a pig in a poke.

UPDATE: Wall Street is realizing..."Holy Shit, these guys are awful. Volcker? Where's Volcker? Where is anybody with a brain?"

Two Prominent Guys, "Ah Yeah, Illinois Is Hosed"

High-powered mucky-mucks do a big expensive study to tell us the obvious and try to spur action by using the most useless word in our lexicon of political discourse.

A group headed by Paul Volcker and Richard Ravitch will argue in a report tomorrow that Illinois’s budget is unsustainable and threatens growth in the fifth-most- populous state.

The report from the State Budget Crisis Task Force, which includes policy analysts and politicians and was formed in 2011, will show how “past fiscal choices and future threats challenge Illinois’ ability to meet its population’s basic needs,” according to a press release. Volcker, a former Federal Reserve chairman, and Ravitch, a former lieutenant governor of New York, are co-chairmen of the group’s advisory board.

Powerful indeed, coming from those two dudes, especially since they aptly described things as "unsustainable"!  Whew, am I relieved!  Now something will get done.

Volcker Rule Screwing Up Entire World

First it was the Japanese, now the Europeans are complaining about the Volcker Rule. Not content just to screw up our capital markets, US politicians that voted for Dodd-Frank have succeeded in messing up overseas markets. But this time they've really messed up; don't they know that you don't screw with the political class's ability to feed ever-growing government with debt?? That's a no-no. You don't mess with the Vote Pump.

Obama Orders "Decapitation" Strike

...against Citigroup, AIG, Bank of America, General Motors, and Chrysler. According to this report, Ken Feinberg - the "Pay Czar" - will demand that compensation at bailed out companies be reduced by up to 90% for the top 25 paid employees. This will assuredly cause many of these very valuable and talented executives to quit, thereby hurting their companies and degrading the value of the government's stake in each. But it is not the first time government has undermined its own interests looking to score some cheap points. I can't figure it out. Perhaps Dear Leader thinks that as his poll numbers slide, he has to hang some corporate executives in the public square in order to garner some populist points. With each of these heavy-handed moves, howver, he presses his heel down further on the neck of American business and erodes any sense of optimism or desire to take risk, undermining the economy as a whole. Or maybe he doesn't care, maybe he thinks he's got three plus years to pull himself out of the slide. I don't see it though. I think 10%+ unemployment is in the bag now and we won't see it sub-10% until 2011. Maybe (maybe) some sensible Dems can get him to stop digging, but I doubt it. There ain't any in the top ranks of the party and he apparently still doesn't listen to guys like Volcker (as savvy as Volcker is, he was played like a fiddle during the campaign, lending his credibility to an Obama who had none, only to be shoved in a closet).

Obama is profoundly and disturbingly dangerous to the US economy. Hold on folks, we're in for more tough times ahead.

Gulp!!!

I have been mentioning how Paul Volcker has been used, abused and run over by Team Obama who stole his credibility. This CNBC interview segment is amazing. It lends credibility to my theory. The economic dream team was yet another fiction of the Obama candidacy.

UPDATE: Here is Maria Bartiromo's take on the whole thing. I find it hard to believe that Volcker would stand for being muzzled. What does he fear? He craps bigger than Obama, on the economy at least.

Economy Blogjamming !!

Over at Pajamas Media's blogjam, another PhD economist makes me feel like an idiot for questioning theory when reality contradits it...

In the post below I suggested that we have a mini Volcker/Reagan thing going on, as pro-gowth tax cuts set us on a course of expansion and tightening monetary policy wards off inflation.

I guess James Hamilton hasn't heard of this Volcker/Reagan thing:

"It doesn't make sense to be trying to stimulate the economy with fiscal policy and contract it with monetary policy."

I'm no PhD-holding professor, but might I suggest that removing accomodation to monetary policy is not a linear notion, to wit raising the fed funds target rate from 2% to 4.5% is alot different than raising it 250 bps starting at a higher level, say from 5.5% to 8% ??

We've had rates go up, what, 12 times, and a 30 year fixed is under 6.5%? For a PhD, Hamilton's thinking seems awfully rigid to me. Ah, what do I know.


P.S. Although another PhD economist makes me look smart by reiterating my thoughts about Iran.

Buffett In "No-bama" Dis? NBFPB Readers Know the Answer.

The WSJ finds it very interesting that Warren Buffett's open "thank you" letter to Uncle Sam did not mention President Obama. Readers of NBfPB (all 25 of you) will not find it that shocking. I have chronicled Buffett's subtle public disapprovals Obama's economic policy here, here, and here and extrapolated that Buffett feels his credibility has been abusively co-opted by Obama for the purposes of getting elected. This view is supported by the fact that the exact same thing appears to have happened to Paul Volcker, who seems, like Buffett, none too pleased and unafraid to lay out the clues for us. (A less charitable analysis is that Warren Buffett has terrible political instincts - and is understandably reluctant to admit it - a view supported by the fact that Charlie Munger all but comes out and says that from time to time.)

Palace Coup?

All I said was that TurboTax Timmy was in trouble. Bat One, of the SayAnything team, thinks there is a coup of sorts going on. He pairs this with the rumors that the knives are out for Larry Summers too and draws some conclusions. This morning we are treated to the news that Democrat Sausage Factory Poobah and Obama BFF Elijah Cummings wants TTT to testify before Congress. Methinks Bat One is on to something; a certain adorable little boy who works in the Treasury Dept. may be getting thrown under the HopenchangeLiner. Also, consider that odd incident that I covered with Mr. Fiscal Prudence himself, Paul Volcker.

Let's point out that this is just theorizing right now, but if there is indeed a move to supplant putative economic moderates like Geithner and Summers with more radical, big spenders then God help us. The spending profligacy that we already know about is stunning. What is baked in the cake that will soon be revealed will shock us to the core in my view. But we are gonna bring in even more radical deficit spenders to man the helm of the economic ship? John McCain may be right, Obama is purposefully intent on bankrupting this country. Ordinarily I would consider that a throwaway line of red meat, but McCain is no bombthrower and considering all these dots that may well be connected, it is something to keep close attention to. Stay tuned and, more importantly, hold on.

We Need Volcker-Reagan

You can take all the sophisticated economic mumbo-jumbo and toss it. Our predicament is simply diagnosed and simply corrected. We are stagflating. We need higher interest rates (Fed funds around 5%) and lower taxes (Bush '03 tax cuts made permanent and corporate rate cut to 25%). We need them now. Will we get them? Doubtfully.

Buffett Subtly: Strike Three On Obama

Chalk this one up as Warren Buffett's third swipe at the Obama administration's policy efforts. See also strikes one and two. While Warren's political savvy has been rightly questioned, one thing is for sure, you can't trade on Warren's credibility and get away with it for long if Warren doesn't want you to. The Oracle is clearly cutting Obama off from that well.

I stand by my analysis that Obama abusively borrowed the credibility of the (gullible isn't the word, but something quite close) ready to be influenced Buffett and Volcker for the purposes of the election. By all accounts both men are attempting to claw their credibility back gradually over the past year, albeit in their respective gentlmanly ways.

Jeff Immelt Complicit in Jobs Council Charade

I am pretty sure that GE CEO Jeff Immelt didn't just fall off the turnip truck, so the fact that he - and the others on the "jobs council" - have been used as props by Dear Leader, means that they allowed themselves to be used as props by Dear Leader.  I sure hope they got something for it, the American people sure haven't.

President Barack Obama's Jobs Council hit a notable milestone on Thursday: one year without an official meeting. The 26-member panel is also set to expire at the end of the month, unless Obama extends its tenure.

The group, formally known as the President's Council on Jobs and Competitiveness, last convened on Jan. 17, 2012 for a White House session where it presented formal recommendations to Obama. It was the panel's fourth official meeting since it was created in early 2011.

A spokesman for Jobs Council chairman Jeffrey Immelt, who's the CEO of General Electric, referred questions about the panel's future to the White House.

This is much the same as Warren Buffett and Paul Volcker allowed their reputations to be co-opted by Obama the first time around.  What do they see in this guy that they are OK with being used like this?

I Was Early In Calling Exactly Where We Are Today

Just thought I'd reprise some of my perspicacious calls on the inevitable Obama meltdown that is now in fourth gear and headed downhill. Note these are just the greatest hits from 2009...

Oct 1, 2009:

"The die is cast on the overwhelming concern of the American people, the economy. Based on the last nine months' policy coming from Washington DC, decisions have already been made that have cemented an unexciting, jobless, recovery for at least the next 12-18 months. Stumbling on foreign policy has let loose forces that will prove intractable in the short run. Unattainable success on key issues has been over-hyped to the true believers who will almost certainly be disappointed. The loyalist media is just now starting to shine a critical light. The silent majority is no longer silent, exercised over the venality, arrogance, and buffoonery pervading our government. On present course, historians will be able to sum up the Obama presidency quite succinctly: "it seemed like a good idea at the time."

Oct. 22, 2009:

Remember you heard the precise path here:
1 - Media sheen fades
2 - Never loyal hangers-on (essentially everybody) peel off
3 - Effectiveness is gone
4 - America Moves On

Feb. 19, 2009:

"I guess what I am saying is what I have said before...if The One thinks he can shit on capital and business leaders for four years he's got another thing coming. People who hire other people will hide under their desks, the campaign money will dry up, the layoffs will accelerate, and his base will be be too fat and happy with their bailed-out mortgages and welfare checks to get off their asses to vote for him again. Your average, hard-working, tax-paying American...perhaps not. If Volcker and Buffett love this guy so much they'll do him a favor and whisper in his ear to get ahold of himself and just stand down for a spell. Otherwise, it is One Term City for the Big O...this guy's well of goodwill is a mile wide and an inch deep."

Feb. 3, 2009:

"Finally, and this is not a blunder but rather a fundamental flaw, Obama's legislative support is only as good as his public sheen. The reason he had to stack his administration with Clintonites is that he had no decent network to speak of. His limited experience in government, and life actually, has left him lacking in broad and deep connections to people who can achieve things and stand by him. His quick rise to popularity and electoral promise has attracted a cadre of government and business types to fill the ranks now, but they do so for the sake of Democratic power in and of itself. Does anyone think that previously loyal Clintonites/now Obamites will stay loyal if the bloom starts to come visibly off the rose? I truly wonder how much uphill sledding those around Obama now are prepared to endure. I guess some, but not much."

Wherefore the Need to UnTARP?

As per usual, in today's WSJ Holman Jenkins delivers an incisive and clear analysis of government meddling in the economy and its ill effects, but in this particular instance I think the estimable Mr. Jenkins falls a little short. His basic thesis is this: in balancing the need to stabilize the banking system with its reluctance to take over one or more large banks that would have gone bust - a reluctance born of the fear of political meddling in the newly government-owned bank or banks - Paulson & Co. gave us the TARP program, which wound up spreading political meddling throughout the banking system, to healthy and unhealthy banks alike. The implication is that the geniuses behind TARP, Treasury Secretary Paulson being the putative jefe of financial poobahs, failed rather stunningly in underestimating the venality and recklessness of the likes of Barney Frank and Chris Dood, posterboys respectively for the feared political meddling . I think this is wrong. I don't accept that Paulson was too dumb to see the woeful influence these Sausage Factory poobahs would try to exert. I think Paulson figured that politicians would caterwaul but would ultimately be walled off from doing too much damage via the legislative process while the financial system healed.

Fast forward to the recent events that highlight the race to unTARP, the unnecessary dilution of shareholders at giveaway prices in order to get out from under TARP and the unsuccessful mating dance between Robert Kelly of BNY Mellon with Bank of America. The situation clearly is a mess but it wasn't for Barney Dodd that it is so. The real fly in the ointement came in the form of pay czar Ken Feinberg who is a creature of prolific czar appointer, Barack H. Obama. Should we really hold Paulson accountable for not foreseeing a new - putatively moderate, Volcker and Buffett-endorsed - President taking office and unleashing a wave of unaccountable czars with union pedigrees to lord over with heavy hand every industry where the federal government has injected aide? I think not. TARP was imperfect, yes. But it was good enough for government work in a tight spot. It's flaw was to allow enough of an opening for a statist-minded executive to come barrelling through that opening. Is that the flaw of the TARP designer or the statist President?? I'm giving the TARP crew a pass on this one.

Early Call...I Think The Obama Meltdown Is Starting...

Folks, as usual, you (all 10 of you) heard it here first.  As soon as the gloss starts to come off The One, all the hangers-on, principally the former Clintonites, will start not to hang on so tightly.  This guy is only as bankable as his media sheen.  When the bloom comes off the rose, the party faithful will abandon him.  Here is how it begins...

And all the Goldman Sachs liberals who love to talk all that Obama-love at cocktail parties will start to realize that The One is gettin' in the way of them makin' their coin.  It's one thing to want the Bushwhacker gone, it's another thing altogether to have GS stuck at $80 when it used to be at $250!

I guess what I am saying is what I have said before...if The One thinks he can shit on capital and business leaders for four years he's got another thing coming.  People who hire other people will hide under their desks, the campaign money will dry up, the layoffs will accelerate, and his base will be be too fat and happy with their bailed-out mortgages and welfare checks to get off their asses to vote for him again.  Your average, hard-working, tax-paying American...perhaps not.  If Volcker and Buffett love this guy so much they'll do him a favor and whisper in his ear to get ahold of himself and just stand down for a spell.  Otherwise, it is One Term City for the Big O...this guy's well of goodwill is a mile wide and an inch deep.

Two Out of Three IS Bad

The market is crapping all over President Obama's economic leadership. The Geithner-announced bank plan...barf. The stimulus bill...barf. Next up is Obama's plan for stabilizing the housing market (which it could be argued doesn't need help). Frankly, I expect a barf on that too. The market has come to the determination that Obama is supine - the stimulus is Pelosi's, with compensation caps by Dodd; the bank plan is, well, nobody's, and the housing plan is likely to be Barney Frank's. Volcker? Buffett? All these other assorted economic geniuses? MIA. Why did we elect this guy if this is what we were going to get?

UPDATE: Shaping up to be strike three. Looks like more heavy-handed, tin ear type of stuff. If I'm running a bank, I'm going to hide under my desk rather than lend and be subject to a cram-down. Hopefully, this is Obama's trial balloon leak, and the plan will get altered. If not, as I said, hang on.

The Neophyte's Curse

I have been saying it and saying it, Obama's critical flaw - for him politically, not for us as citizens as those are too many to list - is the utter lack of broad or deep networks on which to draw support, expertise, and, as is needed now, patience. As a newcomer and as inexperienced as he was, he did not have a life's worth of connections, friendships, and associations on which to draw to sustain his administration. I oversimplified it thusly: Obama doesn't own the Democratic Party, he's only renting it. As a rising star out of nowhere, everything was borrowed, from Warren Buffett's and Paul Volcker's credibility to his vast Clintonite advisory team. Everything was borrowed and thus he, and his Presidency, was on borrowed time. Keep performing and the loans won't be called, stumble and it all gets yanked back. I have analyzed the debate that has to be raging now within the party, and today Politico weighs in on the subject with a stark assessment.

CEO Summit Charade

Bloomberg News puts a ridiculous spin on Obama's CEO Summit today into the title of its coverage - "Obama Meeting CEOs Shows Business President Who Delivers Gains". All the usual sycophantic CEOs get quoted as to how lovey-dovey they are now are with the President, who now apparently loves business. Of course, crony capitalist poseur Jeff Immelt leads the list, there is, after all, no charade that he will not go along with these days. Of course the truth here is, just as in the tax issue, Obama has his back to the wall and is doing this because he has to, not because he wants to. At least Bloomberg gives some nod to the many CEOs who see through the charade. Mort Zuckerman sums it up nicely, "The president's relationship with the business community has not improved" and Ivan Seidenberg delivers the delicious backhand compliment, praising Obama for "a willingness to learn." Translation: the dumb ass is finally coming around. (And if you know anything about Seidenberg, you that that is exactly what he is thinking.)

UPDATE: This was Obama's entire purpose in hosting this event, he wanted to say it so he can refer back and say he said it in order to combat the (truthful) accusation that he is anti-business. The other soundbite from the CEO Summit was that Obama...get this...wants ideas. He's two years in to his term, we were led to believe he has Buffett and Volcker at his beck and call, his entire (clueless) economic team has turned over, but he wants ideas??? My Bullshit Meter is beyond redlining. He doesn't want ideas. He wants to deflect this kind of stuff.

and a footnote...how lame are Eric Schmidt and David Cote? These guys are always at every damn Obama publicity stunt and they've probably been to a zillion meetings that we don't know about. Do they still have real, constructive ideas to give Obama that they have not yet shared with him? Puhleeze. They are the last two remaining O-Bots left in the Fortune 500. Note that Jim Owens of Caterpillar was not there, he clearly won't let himself be a tool of Obama again.

UPPDATE: The Daily caller has the honest take.

Stock Market is Safe...for Now

The lower chamber of the Great Sausage Factory passed the Tax Relief Extension Act today by a vote of 234-197. So don't sell your stocks just yet. The lower chamber must consult with the upper chamber, where there seems to more hostility to the stock market.

Interestingly, Dr. Ed Yardeni's daily email commentary yesterday goes over the doomsday scenario for the US economy that is fast becoming common wisdom on the street. Simplified, it goes like this - the Fed continues raising interests rates and mortgage rates follow, shutting off the cash-out home equity refinancing spigot that has fueled any and all consumer spending, and all goes to hell in a handbasket from there, not just us, but the whole damn world, especially China. (This actually causes instability in China and we have a global political conflagration on our hands, but that is a little off topic...) Anyhew, I don't ascribe to this theory but what I do believe is that a failure to extend the dividend and capitall gains tax cuts will have dire consequences. The big risk to the economy is not raising rates, it is capital-centric tax policy.

As I have blogged before, it will kill the stock market, and as happened at the end of the dotcom bust, tax receipts at the state and federal level will dry up. In 2001, California saw tax receipts plummet and it was almost entirely due to the disappearance of capital gains taxes paid by all those new zillionaires. The resulting fiscal crisis in California was the worst example but states all across the country found themselves in deep yogurt. Of course the real problem is government spending levels, but since monkeys will fly before there will be discipline in that regard, we have to pursue policies that keep the economy humming and extract tax receipts from the increased economic activity. The dividend and cap gains tax cuts have done just that as tax revenue from these activities pours into state and federal coffers. If that all comes to an end, government finances are going to suffer just as states and cities are coming out of their troubles, and we'll be back to where we were in 2002, which is to say, looking for a way out of the mess and having these policy debates all over again.

There is no need to have this debate again when we could be compounding our success to date, creating more jobs and wealth, and increasing our standard of living. What we have going on now is a mini version of the Volcker/Reagan One Two Punch that brought us out of the 1970s malaise, rising rates to stem inflation and pro-growth tax cuts to spur savings work and investment. We've been here before and we know what happens, we just have to have the vision to see it clearly and courage to ignore the doomsayers. Stay tuned.