Quotations Between December 17-23, 2009
To Accompany the December 23, 2009 edition of Tidbits
Bob Jensen at Trinity University
U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/
Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm
Video: President Obama lectures China on
The Best One Yet from Saturday Night Live --- http://www.youtube.com/watch?v=yZorJZ5ixOo
Helping Each Other in Times of Need: Financial Help as a Means of Coping with the Economic Crisis --- http://www.rand.org/pubs/occasional_papers/2009/RAND_OP269.pdf
"Harder to buy US Treasuries," Shangai Daily, December 18, 2009
IT is getting harder for governments to buy United States Treasuries because the US's shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday.
The comments by Zhu Min, deputy governor of the People's Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of US government bonds.
Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its US$2.3 trillion reserves are tied to their value, and markets always watch any such comments closely for signs of any shift in how it manages its assets.
China's State Administration of Foreign Exchange reaffirmed this month that the dollar stands secure as the anchor of the currency reserves it manages, even as the country seeks to diversify its investments.
In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.
He then addressed where demand for that debt would come from.
"The United States cannot force foreign governments to increase their holdings of Treasuries," Zhu said, according to an audio recording of his remarks. "Double the holdings? It is definitely impossible."
"The US current account deficit is falling as residents' savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world," he added. "The world does not have so much money to buy more US Treasuries."
China continues to see its foreign exchange reserves grow, albeit at a slower pace than in past years, due to a large trade surplus and inflows of foreign investment. They stood at US$2.3 trillion at the end of September.
U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/
The $61 Trillion Margin of Error, and What "Empire Decline" Means in
This is a bipartisan disaster from the beginning and will be until the end
David Walker --- http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)
Niall Ferguson --- http://en.wikipedia.org/wiki/Niall_Ferguson
Call it the fatal arithmetic of imperial
decline. Without radical fiscal reform, it could apply to America next.
Niall Ferguson, "An Empire at Risk: How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1
Please note that this is NBC’s liberal Newsweek Magazine and not Fox News or The Wall Street Journal.
. . .
In other words, there is no end in sight to the borrowing binge. Unless entitlements are cut or taxes are raised, there will never be another balanced budget. Let's assume I live another 30 years and follow my grandfathers to the grave at about 75. By 2039, when I shuffle off this mortal coil, the federal debt held by the public will have reached 91 percent of GDP, according to the CBO's extended baseline projections. Nothing to worry about, retort -deficit-loving economists like Paul Krugman.
. . .
Another way of doing this kind of exercise is to calculate the net present value of the unfunded liabilities of the Social Security and Medicare systems. One recent estimate puts them at about $104 trillion, 10 times the stated federal debt.
Continued in article --- http://www.newsweek.com/id/224694/page/1
Bank regulators report more than half of modified mortgages back in
default six months after modification
U.S. Department of the Treasury, Third Quarter 2009
Mortgage Metrics --- http://www.occ.treas.gov/ftp/release/2009-163a.pdf
"The Second Wave of Mortgage Defaults," by Jim Nelson, Daily
Reckoning, December 21, 2009 ---
Our economy is about to relapse into the disease that sent us into the Great Depression: Part Deux. Subprime loans caused the initial illness. Option-ARMs will cause the relapse.
In the first half of the past decade, subprime loans were king. They were cheap and easy to get approved. Along with the subprime boom came subprime adjustable-rate mortgages (ARMs), which were equally easy to afford…for a while.
Of course, the “A” and the “R” in ARM meant that the interest rate borrowers pay changes, or resets. The majority of these resets occurred between the summer of 2007 and the summer of 2008.
Continued in article
"70% Of The Q3 GDP Growth Was Cash For Clunkers," Vincent Fernando,
Business Insider, December 22, 2009 ---
Bob Jensen's threads on the U.S. National Debt and Entitlement Disasters
Copenhagen: The Shift from "Global Warming" to "Climate Change" --- http://www.kusi.com/home/78477082.html?video=pop&t=a
Whatever the cause of climate change, a massive investment in carbon reduction is a waste of money since it has virtually zero chance of affecting reversing climate change. The money would be much better spent on learning to live with climate change such as bringing water to people that are losing their drinking water and livelihoods due to climate change.
Copenhagen calls for spending money on the wrong things for helping people hurt by climate change.
Video: Hugo Chavez Calls
Obama The Devil, Will Media Notice? ---
Lawrence Solomon: Wikipedia’s climate doctor
"How Wikipedia’s green doctor rewrote 5,428 climate articles," by Lawrence Solomon, Canada's National Post, December 19, 2009 ---
The Climategate Emails describe how a small band of climatologists cooked the books to make the last century seem dangerously warm.
The emails also describe how the band plotted to rewrite history as well as science, particularly by eliminating the Medieval Warm Period, a 400 year period that began around 1000 AD.
The Climategate Emails reveal something else, too: the enlistment of the most widely read source of information in the world — Wikipedia — in the wholesale rewriting of this history.
The Medieval Warm Period, which followed the meanness and cold of the Dark Ages, was a great time in human history — it allowed humans around the world to bask in a glorious warmth that vastly improved agriculture, increased life spans and otherwise bettered the human condition.
But the Medieval Warm Period was not so great for some humans in our own time — the same small band that believes the planet has now entered an unprecedented and dangerous warm period. As we now know from the Climategate Emails, this band saw the Medieval Warm Period as an enormous obstacle in their mission of spreading the word about global warming. If temperatures were warmer 1,000 years ago than today, the Climategate Emails explain in detail, their message that we now live in the warmest of all possible times would be undermined. As put by one band member, a Briton named Folland at the Hadley Centre, a Medieval Warm Period “dilutes the message rather significantly.”
Even before the Climategate Emails came to light, the problem posed by the Medieval Warm Period to this band was known. “We have to get rid of the Medieval Warm Period” read a pre-Climategate email, circa 1995, as attested to at hearings of the U.S. Senate Committee on Environment & Public Works. But the Climategate transcripts were more extensive and more illuminating — they provided an unvarnished look at the struggles that the climate practitioners underwent before settling on their scientific dogma.
The Climategate Emails showed, for example, that some members of the band were uncomfortable with aspects of their work, some even questioning the need to erase the existence of the Medieval Warm Period 1,000 years earlier.
Said Briffa, one of their chief practitioners: “I know there is pressure to present a nice tidy story as regards ‘apparent unprecedented warming in a thousand years or more in the proxy data’ but in reality the situation is not quite so simple. … I believe that the recent warmth was probably matched about 1,000 years ago.”
In the end, Briffa and other members of the band overcame their doubts and settled on their dogma. With the help of the United Nations Intergovernmental Panel on Climate Change, the highest climate change authority of all, they published what became the icon of their movement — the hockey stick graph. This icon showed temperatures in the last 1,000 years to have been stable — no Medieval Warm Period, not even the Little Ice Age of a few centuries ago.
But the UN’s official verdict that the Medieval Warm Period had not existed did not erase the countless schoolbooks, encyclopedias, and other scholarly sources that claimed it had. Rewriting those would take decades, time that the band members didn’t have if they were to save the globe from warming.
Instead, the band members turned to their friends in the media and to the blogosphere, creating a website called RealClimate.org. “The idea is that we working climate scientists should have a place where we can mount a rapid response to supposedly ‘bombshell’ papers that are doing the rounds” in aid of “combating dis-information,” one email explained, referring to criticisms of the hockey stick and anything else suggesting that temperatures today were not the hottest in recorded time. One person in the nine-member Realclimate.org team — U.K. scientist and Green Party activist William Connolley — would take on particularly crucial duties.
Connolley took control of all things climate in the most used information source the world has ever known – Wikipedia. Starting in February 2003, just when opposition to the claims of the band members were beginning to gel, Connolley set to work on the Wikipedia site. He rewrote Wikipedia’s articles on global warming, on the greenhouse effect, on the instrumental temperature record, on the urban heat island, on climate models, on global cooling. On Feb. 14, he began to erase the Little Ice Age; on Aug.11, the Medieval Warm Period. In October, he turned his attention to the hockey stick graph. He rewrote articles on the politics of global warming and on the scientists who were skeptical of the band. Richard Lindzen and Fred Singer, two of the world’s most distinguished climate scientists, were among his early targets, followed by others that the band especially hated, such as Willie Soon and Sallie Baliunas of the Harvard-Smithsonian Center for Astrophysics, authorities on the Medieval Warm Period.
All told, Connolley created or rewrote 5,428 unique Wikipedia articles. His control over Wikipedia was greater still, however, through the role he obtained at Wikipedia as a website administrator, which allowed him to act with virtual impunity. When Connolley didn’t like the subject of a certain article, he removed it — more than 500 articles of various descriptions disappeared at his hand. When he disapproved of the arguments that others were making, he often had them barred — over 2,000 Wikipedia contributors who ran afoul of him found themselves blocked from making further contributions. Acolytes whose writing conformed to Connolley’s global warming views, in contrast, were rewarded with Wikipedia’s blessings. In these ways, Connolley turned Wikipedia into the missionary wing of the global warming movement.
The Medieval Warm Period disappeared, as did criticism of the global warming orthodoxy. With the release of the Climategate Emails, the disappearing trick has been exposed. The glorious Medieval Warm Period will remain in the history books, perhaps with an asterisk to describe how a band of zealots once tried to make it disappear.
Read more: http://network.nationalpost.com/np/blogs/fpcomment/archive/2009/12/19/lawrence-solomon-wikipedia-s-climate-doctor.aspx#ixzz0aLv4L8Rz The Financial Post is now on Facebook. Join our fan community today.
"Time for a Climate Change Plan B The U.S. president is in deep denial,"
by Nigel Lawson, The Wall Street Journal, September 22, 2009 ---
The world's political leaders, not least President Barack Obama and Prime Minister Gordon Brown, are in a state of severe, almost clinical, denial. While acknowledging that the outcome of the United Nations climate-change conference in Copenhagen fell short of their demand for a legally binding, enforceable and verifiable global agreement on emissions reductions by developed and developing countries alike, they insist that what has been achieved is a breakthrough and a decisive step forward.
Just one more heave, just one more venue for the great climate-change traveling circus—Mexico City next year—and the job will be done.
Or so we are told. It is, of course, the purest nonsense. The only breakthrough was the political coup for China and India in concluding the anodyne communiqué with the United States behind closed doors, with Brazil and South Africa allowed in the room and Europe left to languish in the cold outside.
Far from achieving a major step forward, Copenhagen—predictably—achieved precisely nothing. The nearest thing to a commitment was the promise by the developed world to pay the developing world $30 billion of "climate aid" over the next three years, rising to $100 billion a year from 2020. Not only is that (perhaps fortunately) not legally binding, but there is no agreement whatsoever about which countries it will go to, in which amounts, and on what conditions.
The reasons for the complete and utter failure of Copenhagen are both fundamental and irresolvable. The first is that the economic cost of decarbonizing the world's economies is massive, and of at least the same order of magnitude as any benefits it may conceivably bring in terms of a cooler world in the next century.
The reason we use carbon-based energy is not the political power of the oil lobby or the coal industry. It is because it is far and away the cheapest source of energy at the present time and is likely to remain so, not forever, but for the foreseeable future.
Switching to much more expensive energy may be acceptable to us in the developed world (although I see no present evidence of this). But in the developing world, including the rapidly developing nations such as China and India, there are still tens if not hundreds of millions of people suffering from acute poverty, and from the consequences of such poverty, in the shape of malnutrition, preventable disease and premature death.
The overriding priority for the developing world has to be the fastest feasible rate of economic development, which means, inter alia, using the cheapest available source of energy: carbon energy.
Moreover, the argument that they should make this economic and human sacrifice to benefit future generations 100 years and more hence is all the less compelling, given that these future generations will, despite any problems caused by warming, be many times better off than the people of the developing world are today.
Or, at least, that is the assumption on which the climate scientists' warming projections are based. It is projected economic growth that determines projected carbon emissions, and projected carbon emissions that (according to the somewhat conjectural computer models on which they rely) determine projected warming (according to the same models).
All this overlaps with the second of the two fundamental reasons why Copenhagen failed, and why Mexico City (if our leaders insist on continuing this futile charade) will fail, too. That is the problem of burden-sharing, and in particular how much of the economic cost of decarbonization should be borne by the developed world, which accounts for the bulk of past emissions, and how much by the faster-growing developing world, which will account for the bulk of future emissions.
The 2006 Stern Review, quite the shoddiest pseudo-scientific and pseudo-economic document any British Government has ever produced, claims the overall burden is very small. If that were so, the problem of how to share the burden would be readily overcome—as indeed occurred with the phasing out of chorofluorocarbons (CFCs) under the 1987 Montreal Protocol. But the true cost of decarbonization is massive, and the distribution of the burden an insoluble problem.
Moreover, any assessment of the impact of any future warming that may occur is inevitably highly conjectural, depending as it does not only on the uncertainties of climate science but also on the uncertainties of future technological development. So what we are talking about is risk.
Not that the risk is all one way. The risk of a 1930s-style outbreak of protectionism—if the developed world were to abjure cheap energy and faced enhanced competition from China and other rapidly industrializing countries that declined to do so—is probably greater than any risk from warming.
But even without that, there is not even a theoretical (let alone a practical) basis for a global agreement on burden-sharing, since, so far as the risk of global warming is concerned (and probably in other areas too) risk aversion is not uniform throughout the world. Not only do different cultures embody very different degrees of risk aversion, but in general the richer countries will tend to be more risk-averse than the poorer countries, if only because we have more to lose.
The time has come to abandon the Kyoto-style folly that reached its apotheosis in Copenhagen last week, and move to plan B.
And the outlines of a credible plan B are clear. First and foremost, we must do what mankind has always done, and adapt to whatever changes in temperature may in the future arise.
This enables us to pocket the benefits of any warming (and there are many) while reducing the costs. None of the projected costs are new phenomena, but the possible exacerbation of problems our climate already throws at us. Addressing these problems directly is many times more cost-effective than anything discussed at Copenhagen. And adaptation does not require a global agreement, although we may well need to help the very poorest countries (not China) to adapt.
Beyond adaptation, plan B should involve a relatively modest, increased government investment in technological research and development—in energy, in adaptation and in geoengineering.
Despite the overwhelming evidence of the Copenhagen debacle, it is not going to be easy to get our leaders to move to plan B. There is no doubt that calling a halt to the high-profile climate-change traveling circus risks causing a severe conference-deprivation trauma among the participants. If there has to be a small public investment in counseling, it would be money well spent.
Lord Lawson was U.K. chancellor of the exchequer in the Thatcher government from 1983 to 1989. He is the author of "An Appeal to Reason: A Cool Look at Global Warming" (Overlook Duckworth, paperback 2009), and is chairman of the recently formed Global Warming Policy Foundation ( www.thegwpf.org ).
"Journal Archives The WSJ Guide to ObamaCare: A comprehensive collection
of our editorials and op-eds," The Wall Street Journal, December 16,
"Obama vs. the Banks: Why make risky loans when you can
exploit the Fed-Treasury interest rate spread?" by Gerald P. O'Driscoll,
Jr., The Wall Street Journal, December 16, 2009 ---
Over the weekend, President Barack Obama went on the offensive against Wall Street for not lending more to Main Street. On CBS's "60 Minutes," the president declared, "I did not run for office to be helping out a bunch of fat cat bankers on Wall Street." He was joined on the Sunday morning circuit by his chief economic adviser, Lawrence Summers, who echoed the message of intimidation.
Wall Street fat cats are always a convenient political target, but bankers are responding to the incentives generated by the economic policies of the Treasury and the Federal Reserve. First and foremost is the Fed's policy of near-zero interest rates.
What this means is that banks can raise short-term money at very low interest rates and buy safe, 10-year Treasury bonds at around 3.5%. The Bernanke Fed has promised to maintain its policy for "an extended period." That translates into an extended opportunity for banks to engage in this interest-rate arbitrage.
Why would a banker take on traditional loans, which even in good times come with some risk of loss? In today's troubled times, only the best credits will be bankable. Meanwhile, financial institutions are happy to service their new, best customer: the U.S. Treasury. That play on the yield curve is open to banks of all sizes.
The Fed's policy makes sense if the goal is restoring bank profitability by generating cash flow. It is a terrible policy if the goal is fueling small business, the engine of economic growth and job creation. Large, nonfinancial corporations have access to banks. They can also tap the public credit markets and have access to internally generated funds. Not so for small business, which depends heavily on banks for credit.
Since the financial crisis began, the Fed has worked in tandem with the Bush/Paulson Treasury and now with the Obama/Geithner Treasury. One must assume its policies have the administration's approval. That puts the administration's policies at war with its stated goals. Larry Summers is a first-rate economist and must understand the economic incentives those policies have created. In short, the weekend interviews, along with the president's meeting with bankers on Monday, was political theater.
While the public is upset with $10 million to $20 million banker bonuses, public policy should focus on what is generating them. The largest banks have had their risk appetites whetted. They are not looking to traditional lending, but to proprietary trading and a renewed commitment to innovative financial products. But as Obama adviser and former Fed Chairman Paul Volcker noted, financial products such as credit default swaps and collateralized debt obligations brought the economy to the brink of disaster. It is excessive risk-taking by Wall Street that is generating the profits from which the bonuses are being paid. Curb the former and you curb the latter without government planning of banker pay.
Has recent experience taught the leaders of large financial institutions the need to curb their risk appetite? Not really. The lesson they have learned is that presidents of both parties, the Fed and Congress will come to their rescue when they get in trouble. Under a vague set of ideas, scarcely a theory, some banks are viewed as too big to fail. They will be propped up, bailed out and generally protected from the consequences of their own bad decisions. That generates incentives to engage in excessively risky activities.
A few bankers lost their jobs or quit in the aftermath of the financial crisis, but that small risk is evidently one most of Wall Street's fat cats will accept. Mr. Obama may not have run for president in order to reward them, but that is the effect of his policies.
Sending scarce resources to major banks in the form of funds from the Troubled Asset Relief Program (TARP), ultra-low interest rates, and the Fed's targeted credit schemes has diverted needed capital from real, productive activity. Now the politicians feel the public's anger and are complaining about the lack of lending and the size of executive compensation. If Congress wanted banks to lend and to limit pay packages, it should have put those in as conditions in the TARP legislation.
The TARP was hastily arranged, poorly designed and badly executed. Nonetheless, Congress acted in haste and now gets to repent at leisure. Meanwhile, the totality of the policies to aid the major financial institutions is delaying the recovery of the broader U.S. economy and the hiring of its unemployed workers.
Mr. O'Driscoll, a senior fellow at the Cato Institute, was formerly a vice president at the Dallas Federal Reserve Bank and a vice president at Citigroup.
Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm
Return to the Tidbits Archives ---
Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm
Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm
Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/