The Fiscal Cliff is actually a good thing, because it reduces government outlays, which is money that government takes from the real productive wealth creators in the economy and gives to wealth destructive spenders. Therefore, any GDP shrinking you see is due to the loss of current wealth destructing waste funded by government.So although deflation will ensue sometime in the Spring of Summer, over time this leaves wealth creators with more money and the economy should grow permanent wealth creating jobs that need no subsidies from government.The Fiscal Cliff is a good thing, and it will happen sooner or later.If we don't go over the Fiscal Cliff government outlays will be $3.3T, but if we go over the Cliff the outlays will be $1.7T. President Obama probably wants to the former rather than the latter, so I say call his bluff, grab his hand and depress the accelerator Thelma.
The BP-Transocean Rig (NYSE: BP, RIG) disaster has been so politicize that BP (NYSE: BP) continues to make public estimates of the amount of oil being spewed into the Gulf of Mexico waters that reside in the low part of range, and environmental scientist and activists continue to predict disaster conditions that reside on the high part of the range. The fact is that there is a lot of uncertainty and without knowing much of the details, and I don’t think anyone really knows the details, as a scientist I can only be skeptical of all of the numbers that are thrown out. This has been so politicized that President Obama came out yesterday to take responsibility for something over which he has no control. BP (NYSE: BP) has the equipment, the expertise, plenty of money and the incentive to stop the leak. There is nothing the federal government can do, except obstruct and I believe that is exactly what the President is likely trying to avoid. The BP-Transocean Rig (NYSE: BP, RIG) disaster continues to be compared with the Exxon-Valdez accident in Alaska. Nevertheless, this may be a poor comparison since the location of the spill relative to specific ecosystems seems much different. The location of the rig may actually promote the sinking, dissolution, evaporation, and mixing of the crude with all kinds of organic matter making it less prone to spreading once it reaches the coast. This may be a beneficial effect in terms of damage, and may also be hindered by dispersants which may cause the oil to remain as an oil sheen on the surface that once reaching the coast may spread and affect wildlife more readily. There is likely to be a lot of damage to ecosystems and wild life, nevertheless there is plenty of that with hurricanes, and ecosystems do bounce back. Frankly, this is all speculation on my part, but my point is that it is all speculation from everyone and the uncertainty is being exploited by both sides in order to advance their agendas. This is unfortunate because we need oil. Oil is the cheapest source of energy available to mankind, whether is clean or not depends on the technology used to burn it. Therefore this should be an opportunity to learn and understand how rigs can be made safer, how real are the environmental fears of a disaster and what government policy should be in regards to rig safety. But forget about all that, this situation has been so politicized by both sides that the learning process will never happen. Whatever the damage is in real term, all we will know is those low and high end-of-the-spectrum political estimates that both the politicians, the oil industry and environmentalist (this include the so-called scientific kind) need in order for their gravy train to continue rolling along while the rest of us pay.
Is it me or am I the only one who realizes that Paulson was made rich by the government? Although what Paulson did was questionable, he would have lost a lot of money also, had the government not bail out the banks, which then were able to pay people like him. Schemes like his only work if the market you are playing doesn't collapse. If it does, then everyone looses. Of course that is only true in a Free Market, if the government steps in and bails you out, then that is more like a wild card. But it is possible to do, if you convince politicians that it will be to their detriment to let you fail. Nevertheless this is no easy task, since you have to also provide a story that they can sell to the public in order for them to bail you out. This is the genesis of the “Too-Big-to-Fail" non-sense, or shall we call it “Too-Big-to-Fail” scheme. These bankers took our uneducated politicians for a ride and convinced them of the fantasy that the bank failures would spread throughout the whole economy, just so that they themselves would not go out of business by paying themselves. The financial system froze anyway, lending is still trickling and for good reasons. This is likely the biggest scam in the history of the world, but it was done legally, since every act of Congress is law. This is all too embarrassing to admit, so don't expect politicians to look back and show regret. [more]
"Treasury Secretary Timothy Geithner said Thursday it's "deeply unfair" that some financial institutions that got taxpayer-paid bailouts are emerging in better shape from the recession than millions of ordinary Americans." - AP [more]
After catching the House of Representatives' Financial Services Committee Hearing Monetary Policy Report with Fed Chairman Ben Bernanke this week I have yet another reason confirming why the Fed has an impossible job to do. He could not admit that the main reason that after the current Fed quantitative easing policy, read ultra-low interest rates, banks are still not lending is that banks can't unload depreciating loans on unsuspecting investors anymore. So if you as a bank lend money to a borrower in good standing, inflation will make your loan worthless, to the point of loosing money by the time it gets repaid. Yes, the same inflation cause by the quantitative easing the Fed is using to help us recover from The Bust of the last year and half. The only way for banks to lend and make a profit is by charging high interest rates, which people do not want to accept. These same people will turn around and say that the banks are not lending. Well, they are, you just want the interest rate to be lower.
But the worst part of this political dance is that all representatives present had requests. Can you fix this? Can you fix that? Can you get them to lend to businesses? Can you get the regulators, whom ever they are, to ease of the banks so that they can lend? Can you make a political statement here about the current administration’s budget? Thereby saying something I can use in the next election? Can you…? Again, and again... According to the Fed quantitative easing is not working because banks do not want to take access to the money because it is stigmatized by the political environment. Genius… This is the way to blame every one and no one. The representatives are having a hard time believing the Keynesian policies are full of contradictions and never work. They have no problems asking the Fed for more wonder economic plans. Maybe next Christmas he’ll deliver, just remember to be nice. [more]