Bearish News

It seems that the Federal Reserve is unwinding faster than many, including myself, thought possible. Revulsion over QE2 is certainly stronger than I could have hoped for.

And after being repeatedly blocked from chairing various financial committees, Congressman Paul may finally get the chance to do something he’s been working towards for 40+ years: Call the Fed on their bullshit from a position of authority, and attempt to implement desperately-needed reform.

Lew Rockwell, long-time ally of Dr. Paul, explains:

Ron Paul won easy reelection in the 14th district of Texas with almost 77% of the vote. (His opponent, a police chief, had signs that said, “Tell Dr. No he has to go.” No one took up my suggestion for opposing signs: “Send the cop to the donut shop.”

If the Republicans weren’t dishonest, and entirely in the pocket of the big banks, Ron Paul would be taking Barney Frank’s place as chairman of the finance committee. Not satisfied with blocking him there, they have even kept him out of the chairmanship of the monetary policy subcommittee, as Barney has frequently remarked. The first time the Republicans erased Ron’s seniority; the second time, they imported a congressman from another committee to take the job; the third time, they temporarily abolished the subcommittee. This time, I think they would fear the backlash, so Ron will probably be chairman. If so, I can’t wait for his hearings on the QE2, the gold, the business cycle, and much else.

If Dr. Paul somehow does not get the nomination, the backlash will be substantial, as Mr. Rockwell states. I am starting to think banksters may lack the credibility necessary to fight such firestorms. (time to sell silver, so soon? my anxious side says).

I am not sure yet what this means for further QE efforts. My gut says the Fed will win, and continue printing, bullying other countries into acceptance. But their opposition has become rather strong, rather fast.

Since QE1, the dissenters have grown from a fringe group led by Dr. Paul, to include the majority of developed nations. Plus a growing percentage of domestic dissenters, most notably Fisher and Hoenig. The banks are still my favorite to win the flation-currency wars, but at least the match is getting interesting.

More:

Ron Paul: Bernanke’s Worst Nightmare – CNN

An anonymous commenter on the official TSA blog asked the best question I’ve seen thus far:

If these scanners are so vital to keeping people safe, why aren’t they used at TSA headquarters? Why aren’t they being used on TSA screeners when they come to work?

The second question there is extremely valid. If these a-holes plan on using X-ray scanners on my 18-month old son, you’re goddamn skippy that TSA agents better be getting X-frisked too. What’s to fear? The images are so innocuous that they shouldn’t mind their colleagues seeing ultra-softcore nude pics of themselves. It’d certainly make water cooler conversation a lot more awkward, and interesting.

Besides the obvious privacy concerns, there are equally important ones about health safety which need answering. Declarations by the TSA and device manufacturers that new scanning devices are “100% safe” ring 110% hollow to me, as there are no long-term studies to back up their hypothetical findings.

Even if the devices are safe under normal conditions, what happens if one malfunctions? As the NYT reports, accidental radiation overdoses are common. Can you imagine the effect if just a single scanner was malfunctioning for a week? 100,000 people could be over-radiated, in no time.

I realize that the device manufacturers have safety checks in place, but everyone always does. Yet shit still happens. Software misfires happen, humans have been known to make mistakes, abuse power, and nap on the job.

And on top of the safety issues, there are cost-effectiveness concerns to boot. Are X-ray scanners a good way to stimulate the economy? Maybe, if you follow the full-retard logic employed by Bernanke or Krugman.

Yes, airports need effective security. But it must be done in a smart way, one which respects constitutionally-protected rights to privacy and health.

Occasionally history is kind enough to give us a crystal-clear example of how ludicrous such decisions may look in hindsight. From the 1930′s to 60′s, X-ray machines were widely used by shoe salesmen. The gimmick supposedly helped match the customer with the perfectly fitted shoe. With x-rad shoe box technology, you can see your toes through the shoe! Ask your local Al Bundy for a free test-fitting, today!

In reality, it was a marketing tool, of course. Yet it was declared safe by contemporary authorities and regulators, despite the fact that radiation was known to be potentially hazardous. The radiation from such machines went on to harm an unknown number of people, mostly its’ operators.

Point is, x-ray technology should only be used when absolutely necessary (AKA, medically). Be sure to read this excellent piece by Declan McCullagh over at CNET on the scandal. And these too:

• National Opt-Out [of body scans] Day
• Child rape charge rocks TSA
• Contemporary warning about shoe-fitting X-ray machines, 1950
• In praise of Michael Roberts, body-scan rebel
• Redditor breathlessly describes “new” TSA search protocol
• Please Remove Your Shoes, a documentary

Bravo to whoever came up with the poster above. It’s editorial cartooning/lampooning at its best. The watermark credits this site, but I can’t find it on there. Via Boing Boing.

Most Austrian Economists would jump at the chance to debate Paul Krugman. Under traditional arrangements, such a debate is extremely unlikely to ever happen. Krugman has little to gain, and much to lose.

So Mises.org’s Robert P. Murphy is using a carrot, of sorts, in an attempt to lure PK into debate. He is using ThePoint.com, a site that collects charitable donations in escrow, to be paid to a charitable organization (FoodBankNYC.org, in this case) if the desired individual participates in the debate.

The plan in essence: Raise $100k for a NY food bank, on the condition that Mr. Krugman participate in the debate. It’s a simple incentive program, like Celebrity Jeopardy.

$17k has been raised so far.

If you need a reminder on why effectively rebutting Mr. Krugman is so important, refer back to this July 2010 column from Krugman’s objectively-titled Conscience of a Liberal blog, in which he scolds the Fed for not printing enough money.

What should it be doing? Conventional monetary policy, in which the Fed drives down short-term interest rates by buying short-term U.S. government debt, has reached its limit: those short-term rates are already near zero, and can’t go significantly lower. (Investors won’t buy bonds that yield negative interest, since they can always hoard cash instead.) But the message of Mr. Bernanke’s 2002 speech was that there are other things the Fed can do.

It can buy longer-term government debt. It can buy private-sector debt. It can try to move expectations by announcing that it will keep short-term rates low for a long time. It can raise its long-run inflation target, to help convince the private sector that borrowing is a good idea and hoarding cash a mistake.

Nobody knows how well any one of these actions would work. The point, however, is that there are things the Fed could and should be doing, but isn’t. Why not?

Summation: Whatever the Fed could be doing, it should. Punish savers, reward borrowers.

He admits that he has no idea if any of this will work, but argues that we have to do something — no matter the logic or chance of success. Shovel the banks more money, essentially. Mr. Krugman has been a strong supporter of high inflation. A supporter of so-called “price stability”, which somehow involves 2% + inflation per year.

This is the faulty logic of PK. He continues to ignore the fact that stimulus/easing is inevitably wasted. It is put in the hands of appointees with little accountability, used to pay back political favors, and wasted in countless other ways. Also see this.

More:

• ThePoint.com Donation Page
• Debunking Krugman’s Debt-to-GDP Defense (from Aug 2009)
• Mises.org discussion
• Exhibit A: Horrible Krugman Column, proving his lack of understanding re: Fed, inflation, banks

Good read over at Zero Hedge, by Nicholas Colas: Nicholas Colas Laments The Passage Of The Stock Market, Blames High Frequency Trading And The Federal Reserve.

This seems appropriate, my friend Angela whipped it up for an article I wrote a few weeks back.