A Respite...of Sorts.

More evidence, as if we really needed it, (see yesterday's suddendebt blog entry) has arisen asserting that a recession is all but inevitable. While some of us have wondered how oil at 90+ dollars a barrel could manage to translate for so long into sub $3.00 dollar a gallon gas, as the sudden debt entry elucidates, those days are numbered. The fearsome pass through costs of vastly higher raw commodity prices that have heretofore been somewhat restrained are coming our way sooner rather than later, just in time, I imagine, to deleteriously effect the vital Christmas retail shopping season.

The silver lining is that we stand an excellent chance of seeing a cessation in the seemingly inexorable rise in crude prices as the U.S., and then the rest of the planet, experiences a massive economic contraction. Of course the reality of Peak Oil will put a floor under the price of crude oil, but where that floor will be is hard to say. If the all but certain economic contraction morphs into a severe recession or worse, the floor could easily be half again as low as it is presently. Yes, that's right, $45.00 dollar a barrel oil. Sounds cheap, doesn't it? Such a price would be a blessing of sorts, as it would present a last chance for certain gluttonous nations to re-fashion their energy infrastructure. Don't count on the unamed energy gluttons taking advantage of such an opportunity, however, as they are more likely to use the lower prices to return to business as usual and to hoard. Such is the nature of individuals and nations.

I would be remiss if I didn't mention that today is Fed day. Will they or won't they, lower rates that is? To date, and to my knowledge, this question has never been asked about the prospect of The Fed raising rates. Funny that. I operate under the simple, but I hope not simplistic premise, that as the Fed does the bidding of its masters on Wall Street, not Main Street, that the Fed will administer the short term cost of the dollar lower. The only question is by how much? The consensus is a "safe" .25 point reduction in Fed funds. Why safe? Once again, the conventional wisdom would say a .25 point is enough to soothe the Wall Street crowd but not enough to send the dollar swirling the bowl. We'll see, but please know that it's a load of puffed up nonsense, since in truth cuts in the cost of short term borrowing can't even begin to address the massive insolvency that resides just below the fragile crust of the entire financial system, a system that in its toxic, bloated, condition, now manages to hold our entire economy, to the extent it hasn't become our entire economy, hostage.

Hill's got the most bills....

On one of the blogs I visit regularly, sudden debt, the proprietor has bemoaned the financialization of presidential elections such that "even Presidential races have now been reduced to dollar figures?" I must admit that to me this seems something like old news, but I do suppose that a case can be made that where presidential elections are concerned, the "process' has somehow managed to become even more crass than ever. Then again...

I must admit I pay little attention to election year(s) goings on because my strong sense is that the entire process is a fraud. Each ghastly election cycle we are given the false sense that what we voters have before us represents meaningful choice. This is pish. While it is almost certainly the case that had Al Gore made it out of the vile clutches of the Supreme Court he would not have amounted to the same sort of catastrophe as George Bush, I still believe that the general state of the nation would be, give or take a few dozen democracy eroding signing statements, every bit as screwed up as it is under the epic cretin, Bush. But I digress from the precise issue which initiated this discussion, namely the financialization of presidential elections.

Suffice it to say the entire nature of Presidential politics could be radically changed for the better by simply making one significant alteration, that is shortening the election season by roughly two thirds. This would remove the death grip that money, especially big money, has on Presidential politics. But because we have about as flaccid a polity as can be imagined, and since, as Frederick Douglas observed, "power never relinquishes its grip voluntarily", it isn't going to happen.

Goodness, when I think of the capabilities of our modern electronic information apparatus coupled with the vacuousness of what is on offer from the majority of the candidates, there is absolutely no justification for the entire rigmarole of campaigns, debates, primaries, party conventions, (followed by more debates), and finally, mercifully, general elections, to last more than three months, tops. Does anyone disagree?

WEIMARIZATION!

The Fed followed the script today, with gusto, and as a result the currency of the realm is once again fixed on a catastrophic course. The Fed administered a surprise half point reduction of the fed funds rate, and the same for the discount rate. The criminals of Wall Street rejoiced their stay of execution and sent shares crashing upwards. Their stay won't last though, and when the commutation is reversed, as it must be, it will make what occurred in the stock market a mere month ago look like the proverbial Sunday stroll.

A strong hint of the ugliness that lies ahead occurred in the dollar pit as the greenback was hammered lower on news of the rate cut. Going forward it will be beaten down even more savagely than heretofore as the upshot of a precipitously falling dollar will likely result in capital flight from the U.S. That's right, foreigners and foreign governments, who, to put it mildly, have been shafted over and over in myriad ways for years, are going to say "no mas" to any substantial investments in dodgy dollar denominated assets. Today's action in the bond market, a market which dwarfs equities, evidenced long rates staying put, and in some cases even moving higher. The bond market, which has an I.Q. of 130 compared to the equity market's double digit I.Q., gets it. And It is screaming that interest rates at the long end will ineluctably head higher and higher and higher as they must to attract foreign capital that is just now running for the exits. Make no mistake, the ever increasing cost of capital going forward will be massively deflationary as business and government alike starve for the lack of funds available to conduct their affairs. So the Fed's action is for naught except for temporary albeit wild partying. In the meantime, while we wait for the bull to finally croak, you and I will be paying a lot more for absolutely anything that is imported, which is pretty much everything.

As a banker client of mine recently observed, once governments embark on an inflationary course to relieve indebtedness, it is fiendishly difficult to control. Just so. So as unthinkable as it is to imagine financial conditions here in Freedom's Land becoming as dire as, say, Argentina circa the 1980s, or Zimbabwe today, or perhaps the most infamous case of hyper-inflation ever recorded, 1920s Weimar Germany, we should not kid ourselves that we are so special as to be exempt from the sort of future where wheel barrels full of money are required, literally, to put (a loaf of) bread on the table.

Protesting the Protesters.

There hasn't been an anti-war protest of note since January, so yesterday's large demonstration on the Capitol steps was something of a revival for the anti-war movement. Likewise, it was an opportunity for a bit of vile counter protest by some of the more mindless members of the populace who have swilled the toxic balderdash served up by such folks as President Bush and Senator John McCain. It's beyond fathoming how anyone with a grain of intellect could subscribe to the idea that, "Even though the parents have paid the price, they know the price of losing this war would be too much for any of us to bear." Equally stupefying, though considerably more revolting, is the thought expressed by Marilee Carlson, a chairwoman for Families United for Our Troops and Their Mission, that war protesters are "despicable."

I have news for folks of your persuasion. The WAR was won long ago, but the AFTERMATH of the war- you know, that critical part of the political/military operation that has been going on since the Commander in Chief, (the one I bet you voted for twice), stood on an aircraft carrier attired in a flight jacket sporting "Mission Accomplished"- was lost long ago. And though you may not care, for some time now a substantial part of the nation has decided it can no longer support the continued cost, in lives and taxpayer dollars, to maintain U.S. involvement in what is, by any reasonable assessment, an absolute catastrophe.

For my own part, I see no reason to compound the nation's already considerable discomfort on behalf of an endeavor that was clearly launched in bad faith. In defense of the anti-anti war crowd, (if the following can be considered a defense) they seem to be suffering from a kind of psychosis such that they simply can not admit into their consciousness the possibility that a.) a fundamental and profound mistake has been made, and b.) that extricating ourselves from the aforesaid profound mistake makes far better sense than wallowing indefinitely in a lethal quagmire.

NO WAY OUT!

A recession, and not one of those tepid kinds either, is coming soon to our shores. In fact, a recession is likely already here. The BLS stats are so doctored that when the numbers turn definitively weak, as they did according to last week's official release, one must assume that the employment picture is far worse than advertised. This is just one piece of evidence pointing to an impending recession, but there are far more.

I am not one to crow, well maybe a little, but so far my prognostications from a few months back have been spot on. And since the conditions that informed those predictions have not changed, but rather intensified, I must expect a continuation of events whereby the dollar and the stock market fall, and precious metals, especially Gold, do the opposite. Oh, there will be lots of volatility along the way down, which might serve to fool some folks, but don't be fooled, as a steady deterioration is in the cards for the greenback and for shares.

What seems increasingly clear to this observer is that the Fed can do little if anything to salvage the situation, so those hoping for a rate cut to buoy stocks and other financial instruments really ought to prepare themselves for the worst. In fact, the most recent comments made by the Philly Fed Chief (see link below) seem to be telegraphing that a rate cut is not in the cards when the Fed convenes in roughly two weeks. What would you do if you were a Fed governor, cut rates and risk a run on the dollar with all that entails, or let rates stand pat and watch the equity scene, among others, turn to liquid excrement faster than you can say sub-prime sinkhole? Ultimately the Fed will be forced to cut rates because a depression is more to be feared than hyper-inflation. And while the inevitable rate cuts probably won't have the desired result, one still has to try.


http://www.bloomberg.com/apps/news?pid=20601087&sid=aun1ssvumPyM&refer=home

Sociopath?

I watched football star Michael Vick's recent press conference in the hopes that he might have justified some measure of pity. After all, the man, whose reputation as a decent citizen is severely tarnished, if not ruined, is facing the loss of his career, hundreds of millions of dollars in income, and jail time. Unfortunately, what I saw, and I am no expert in psychiatry, was someone who appeared sociopathic. I do not say such a thing lightly. After all, sociopaths are people without conscience and are therefore the perpetrators of the most heinous crimes imaginable...like murdering a kennel full of dogs by electrocution, hanging, drowning, bludgeoning, etc. etc.

Typically, those with Anti-Personality Disorder, which is a common diagnosis among the criminal element, display no hint of authentic remorse for or real understanding of their crimes. Equally typically, when caught, clever sociopaths, who generally well know the difference between right and wrong but have no compunction about issues of ethics, let alone morality, will cop to understanding the moral compass they clearly lack, and preposterously, quickly claim that they have inculcated it. This is what Michael Vick appeared to do. Dog fighting is wrong he now claims to understand. There is only one problem. Why, after who knows how many years of engaging in such activity, should he? One doesn't anymore unlearn and discard such things in a few days than one walks blindfolded and backward to work.

Ahh, but sociopaths would like you to believe they not only get it, but get it in record time. In this case, the motives are easy to suss out. Vick's sentencing is months away, so finding Jesus (poor Jesus) and offering up that he now knows that dog fighting is wrong, is just the thing to say to get a dog owning judge and one's detractors off one's back. Unfortunately, Mr. Vick, at least to this observer, just wasn't credible.

For me, he gave the game away as to his real nature when he systematically referred to himself in the third person, a typically narcissistic trait. He also, by my runes, did himself no favors by continually referring to himself and his actions as "immature." No, as my wife observed, immature is living with your parents for too long, or not committing to your girlfriend. Training perfectly innocent animals to engage in a savage blood sport, and then cruelly slaughtering the less able ones isn't a sign of immaturity. It's a sign of something badly warped.

NIMBY!

My wife and I just moved to The South End of Boston only to discover that a government high security lethal virus lab attached to the Boston University Medical Center is slated to become part of the neighborhood. By lethal virus, I am referring to the most virulent viral strains known to man like Ebola, Marburg and Anthrax to name a few. The community is being assured by the Feds that the planned lab represents "no serious threat" to the community. I must admit to a personal outbreak of, um, concern at this news. And as language goes, at least for me, "no serious threat" falls well short of seriously assuaging my worries. After all we do live in a time rife with terrorism and false flag events, so who in their right mind would want to tempt fate. I would have preferred a statement that offered that the lab was no threat at all, none, nada, zip, zilch. After all, given that Ebola, for example, causes its victims to bleed profusely from every orifice, and that's just for starters, I have to wonder what a less than serious threat constitutes.

So why couldn't this lab have found a host, I mean home, somewhere other than in the middle of New England's biggest city? I realize that there is a wonderful medical infrastructure here in Boston, but aren't there other considerations, like public safety? Oh, that's right, I forgot, "no serious threat." My wife supposes some zealous administrator, looking to feather his cap, is responsible for luring the government facility here. If so, good for him, and God Forbid it isn't for the rest of us.