That 70’s Show

There is no shortage
 of theories as to why Americans are finding themselves staring 
helplessly at rising gas prices, but few of them are real. In fact, much 
of the prevailing wisdom offered by television pundits is false.

He was a relative unknown when he campaigned for president of an America 
that was worn down from foreign intervention, a sick economy and
 Republican rule. His outsider status brought with him a new brand of
 hope that the media devoured allowing his star to rise quickly and shine
 brightly. Upon taking the presidency, however, the beleaguered economy
 stubbornly refused to show signs of life, energy prices rose to 
troubling levels and the Middle East began to spin wildly out of
 control. Things were so bad he even had to step in and bail out an
American car company with government funds.

After only three years, it was all over but for the counting. His star
 faded quickly as the once-media darling became anathema to an
 increasingly conservative American public that spent the last year of 
his term looking for a new “Mr. Right” in every sense.

Such was the fate of Jimmy Carter, who never had a shot at re-election;
 and a good argument can be made that Barack Obama will suffer the same 
fate under nearly identical circumstances.

There is so much involved in the making and unmaking of a president that
 it’s unfair to boil a career down to only a few factors. But in Jimmy
 Carter’s case I believe it is fair to say that three primary issues were
 the undoing of his presidency: the hostage crisis in Iran, stagflation
 and fuel prices at the pump.

Iran wasn’t a military crisis as much as it was an embarrassment to the
United States, though talk of a nuclear Iran was percolating even then.
 Prior meddling in the Middle East came back to haunt us in a situation 
we couldn’t control, with Carter ill-equipped to handle the predicament
 of Americans held hostage in Tehran. Rising oil prices—the result of the 
Iranian revolution in 1979 and the panic that ensued in the trading
 markets—brought about a second shortage within a decade and with it 
hysteria and inflation. This upward pressure from fuel prices in an
 already inflationary environment spurred the Federal Reserve to begin
 chasing inflation with high interest rates.

In his book Currency Wars, James Rickards addresses the impact of 
American monetary policy on the global economy and cites the “50 percent 
decline in the purchasing power of the dollar from 1977 to 1981.” He
 goes on to depict “a world gone mad,” noting that, “A new term, 
’stagflation,’ was used to describe the unprecedented combination of 
high inflation and stagnation happening in the United States.” 
Most people recall the moment when interest rates reached as high as 20 
percent during this period and point to it as the height of insanity
 during the Carter years. In actuality then-Fed Chairman Paul Volcker 
under Ronald Reagan did this as a one-time shock to the system.  It was
 done in conjunction with vigorous tax cuts to spark consumer spending, a 
tightening of the monetary policy to strengthen the dollar and the
 latent effect of increased oil production, both domestic and abroad.
 With the exception of the tax cuts, these policies and factors would 
likely have occurred anyway as Volcker was a Carter appointee and it was
 Carter who loosened the valve on domestic oil production. Furthermore,
 Reagan would go on to reverse many of these initial tax cuts in a way 
that would make conservatives and Tea Party activists blush today.
 Either way, Jimmy Carter was a victim of pitiful economic circumstances 
that will forever be his legacy in the White House.

Rickards draws some comparisons between the ’70s and today, most notably
 deriding Federal Reserve Chairman Ben Bernanke’s actions of Quantitative 
Easing, a fancy name for printing money—the same currency devaluation
 scheme employed by Nixon—calling them “runaway fiscal and monetary 
policies, which were flooding the world with dollars and causing global
 inflation in food and energy prices.”

This is an interesting point to hang on for a bit. There is no shortage
 of theories as to why Americans are finding themselves staring 
helplessly at rising gas prices, but few of them are real. In fact, much 
of the prevailing wisdom offered by television pundits is false. It’s
 not Obama’s refusal to “drill baby drill” or increased demand from 
China. It’s not Libya or Iran, either. It’s the abundance of liquidity 
in the markets matched with the ability of investment banks, hedge funds
 and oil companies to trade energy futures on commodities exchanges
 without any limits or transparency. And this is the result of 30 years
of deregulation beginning with Carter and continuing through Obama.

Before the commodities exchanges were deregulated there were few safe 
places to “park” excess capital during volatile periods. Today these
 exchanges are the perfect shelters for investors with excess liquidity
 because many of them are allowed to stand on all sides of the 
transaction. An investor such as an investment bank or an oil company 
can be the buyer, seller, broker and manufacturer, and can therefore
more easily predict the future behavior of pricing by both forecasting 
the future price of a commodity it owns while moving the market with
 enormous capital infusions. It’s more than the ultimate hedge. It’s a
 scam.

With a crisis brewing in Iran, the markets and pundits are once again in 
a tizzy, and consumers are bracing for the worst. This brings us to what 
might be the nail in Barack Obama’s coffin: inflation.
 When fuel prices rise, even for a brief period, it shows up within
 months in our food and other consumables. It’s a necessary evil in the
 production of nearly everything we consume on the planet, which is why
 it’s so utterly dangerous to leave the process of trading energy futures 
unregulated. Oil doesn’t have to reach $200 per barrel to destroy any
 hope of economic recovery and, worse, force mass starvation around the
 globe.

If the price is sustained at $100-plus per barrel without relief
 while we continue to suppress interest rates and flood the market with
 the dollar, Bernanke and Co. will have difficulty stemming the natural
 tide of inflation as it works its way around the globe in the things we
 buy and the food we eat.
 Bernanke’s announcement that the Fed will continue to artificially 
suppress interest rates through 2014 and the government’s steadfast
 refusal to implement any reasonable regulation in the markets is a 
self-fulfilling prophecy as investors continue to seek safe harbor for
 their funds in the only market they have any ability to control. This
 will prevent any crash in oil prices that would naturally occur, as we
 witnessed in 2008 when oil hit $147 per barrel then plummeted shortly
 thereafter.

Further fracture in relations with Iran and high oil prices 
will also crush any hopes the European Union has of recovery. And with 
the determined stance that austerity is the EU’s chosen path to
 prosperity, the United States faces the additional problem of having its 
No. 1 consumer of U.S. exports absolutely cash-strapped and constricting
 even further.
 Barack Obama’s re-election hopes are really a matter of timing more than 
anything because the conclusions above are simply common sense and
 arithmetic.

Any chance he had to calm this gathering storm has already
 passed, leaving him at the mercy of the global markets, which are
 teetering on a gigantic bubble. His oratory and confidence are outgunned
 by a conservative media machine pouring on the pressure by falsely 
blaming his energy policy for high oil prices and stoking the fire with
 Iran, thus creating all the necessary traps for his demise. Even if he 
were able to truly force real change in the oversight of the financial
 markets, it would spook Wall Street and could incite panic. And any 
attempt to quiet the saber-rattling between Washington and Tehran would
 make him appear weak compared to a bloodthirsty slate of GOP opponents.

Obama’s only option is to pray the storm doesn’t touch down between now
 and Nov. 6. If it does, instead of occupying the White House in January, 
he’ll be building houses with Jimmy Carter, while Mitt Romney tries to 
figure out where to park all of Anne’s Cadillacs.

Obama’s Iago – The ‘Indispensable’ Man

True to his Harvard Law School roots, the current occupant of the White House opted for an elitist approach to the worst economy since the Great Depression. He signed up central banker types, including a former Treasury Secretary and a former Fed Chairman.

“In following him, I follow but myself.”

“Your legacy,” the newly installed Treasury Secretary counseled the recently elected President, “is going to be preventing the second Great Depression.”  Quite a legacy if one ignores on-going recession, permanent high unemployment, rampant health care and higher education costs, legislative gridlock, China ascendant, all played out to the distant fiddling of the inflamed Euro-economy.

“Your Money, Your Vote” debate kicked off by asking Republican presidential wannabes what they would do to buffer America’s anemic economy against the bunga, bunga of Italy’s economy, the world’s seventh largest.  One-time frontrunner Herman Cain announced he would “assure that our currency is sound. Just like — a dollar must be a dollar when we wake up in the morning. Just like 60 minutes is in an hour, a dollar must be a dollar.”  Dollars to donuts, most folks wouldn’t be hiring a financial advisor based on fortune cookie advice.  Clearly, though, there is an element out there that has no problem subjecting the world’s biggest economy to master plans scribbled on the back of bev-naps.

True to his Harvard Law School roots, the current occupant of the White House opted for an elitist approach to the worst economy since the Great Depression.  He signed up central banker types, including a former Treasury Secretary and a former Fed Chairman.  Timothy Geithner, whose five years heading the NY Fed placed him at the helm for the economic meltdown of ’07-‘08, was named T-Sec.  Given his renowned intimacy with New York financiers, Geithner knew how to serve his masters by covering them with a $700 billion TARP at crunch time.  No man is a hero to his valet and Geithner says he could’ve “cared less about Wall Street.” But he had to get credit flowing again, even it went to core perpetrators of the meltdown.

The docudrama “Too Big to Fail” portrayed current Fed chair Bernanke, dropping the D bomb on congressional and banking leaders: go along with the Bush economic team or detonate the next Depression.  Exiting from the actual meet, John Boehner looked drawn and quartered as if he had just faced the Grim Reaper.  But Depression prevention was “not enough” for the incoming President, so he set about to reform a bloated, inefficient health care system by extending it to the 45M uninsured.  The jury is literally still out on that aspect of Obama’s legacy and, like almost everything else in America today, subject to slow death by deadlock.

Meanwhile, Treasury actually realized a profit on the widely despised TARP bailout, even as the banks have opted to sit on trillions while taking record bonuses for themselves.  Mad Money’s Jim Cramer gushed recently that “Tim Geithner did a lot to make our institutions stronger…. He’s one of the greatest Treasury Secretaries we’ve ever had!”  He has become this Administration’s Indispensible Man, the President beseeching him to stay on through the end of his first term.

Geithner’s bank-centric approach has not come without collateral damage.  Bloomberg reported that Geithner-led NY Fed instructed crippled mega-insurer AIG to cross out references to $62B in swap payments to banks like Goldman Sachs, which were made at 100 cents on the dollar, no haircut.  Geithner reportedly assured the banks that the dreaded doyenne of consumer financial protection, Elizabeth Warren, would never head the newly formed bureau.  Though he denied “slow-walking the President,” the T-Sec reportedly ignored Obama’s early directive to dissolve troubled Citigroup (which had previously offered Geithner CEO).

Nothing has suffered more in T-Sec priorities than jobs.  Geithner has intermittently lip-serviced the problem, lately with a Jobs Bill he knows is not getting past Republican blockades.  In fact, the most arbitrary job barrier was thrown up on Geithner’s own turf by federal agencies closely interconnected with Treasury.  On July 6, 2010, OCC, FDIC, NCUA and FHFA, the conservator for mortgage giants Fannie Mae and Freddie Mac, unloosed a coordinated strike against Property-Assessed Clean Energy (PACE) programs.  PACE obligations, they contended, would pose a threat to “the safety and soundness” of mortgage products.

Launched in 2008, Long Island Green Homes was the first operational residential energy efficiency retrofit program in the nation.  A typical retrofit is $9,400, averaging yearly savings of $1,114 that generally covers the homeowner’s monthly obligation, secured by the property.  Energy use and emissions are cut over 25%, saving homeowners money, enhancing property value all while putting hard-hit tradesmen to work.

None of this matters much to the holders of a couple of trillion dollars of toxic subprime mortgages.  In PACE, legislatively affirmed in 27 states and promoted by a Vice-Presidential White Paper, they imagined the second coming of toxic instruments and the chance to demonstrate what tight-fisted regulators they’d finally become.  Fact is that if 5% of the nation’s 80M houses were retrofitted it would amount to a 0.6% rounding error of Fannie & Freddie’s total exposure.  At the same time, this shovel-ready work would create 435,000 job years nationwide never to be outsourced.

The Town of Babylon, along with the State of California and several counties, filed suit against FHFA who fundamentally argued that they were accountable to none, even the courts.  A Federal judge in California’s Northern District ruled otherwise and appeals are heading to the next level.  In its suit, Babylon argued that FHFA had unilaterally abrogated state and local sovereign rights in determining what infrastructure could be remediated for a public purpose.  In an aberrant departure from Washington gridlock, a bipartisan group of congressmen (23 Reps/29Dems, with Peter King the sole Long Islander to date) has embraced this principle by sponsoring the PACE Protection Act.  Message to Feds: ‘Hands off our incandescents and back off of our local energy efficiency programs!’  Go figure.

Watching this mountain be made out of a mole hill, Geithner has held himself back behind the wizard’s curtain, as if PACE could conceivably be the straw that breaks the economy’s back.  The Indispensable Man, who corralled the world’s most powerful bankers, could put the leg in legacy by delivering a swift kick to his in-house regulatory bureaucrats.  As Othello’s Iago knew, so should Obama’s Iago, that, “Reputation is an idle and most false imposition; oft got without merit and lost without deserving.” 

The Radicalization of Muslim Americans

Does King expect American Muslims to take the stand and collapse under his glare, profess their allegiance to Allah and try to massacre everyone in the room? The “war on terror” conducted by the United States is a legitimate, and by my count, successful endeavor that in the past 10 years has resulted in several foiled plots, kept our enemies on the run, and prevented another major attack on our soil. That’s not to say we’re out of the woods, but this fight belongs in covert operations and intelligence circles. Pernicious public hearings isolating Muslims in America is like putting Islam on trial as far as our enemies around the world are concerned and will only serve to agitate them further and provide real fodder for their own propaganda.

I should like to organize a hearing to examine the radicalization of Congressman Peter King. Yes, I should like that very much. I wouldn’t want to host it, mind you. Not because it wouldn’t be a gas, but because our pugilist representative could and would quite handily kick my ass.

An open investigation into his own personal link to terrorism might provide an interesting look into the mind of Peter King. A recent article published in Mother Jones delves into his early career as “one of the nation’s most outspoken supporters of the Irish Republican Army and a prolific fundraiser for the Irish Northern Aid Committee (NorAid), allegedly the IRA’s American fundraising arm.” King would be undoubtedly truculent in his response to accusations that he gave financial assistance to what some consider a terrorist organization. So, too, would he undoubtedly miss the irony in his calling for hearings regarding the radicalization of American Muslims, slated to begin March 10.

The querulous King has often said that 80 percent of mosques in the nation are run by extremists. He asserts that Muslim extremists pose more of a threat to society than other radical elements. To place this assertion in context it’s helpful to understand who else King believes to be a threat to the nation. This is his comment on a Fox News clip, which he’s obviously very proud of because it’s on his website: “We’ve always had radicals here or there. We’ve had Neo-Nazis, we’ve had environmentalists.”

(Chokes, gasps, does spit take:) I’m sorry, did he just lump environmentalists together with Neo-Nazis?

That’s for another column. Let’s move on. The real question here is: What does the chairman of the House Homeland Security Committee expect these hearings to produce? Does King expect American Muslims to take the stand and collapse under his glare, profess their allegiance to Allah and try to massacre everyone in the room? The “war on terror” conducted by the United States is a legitimate, and by my count, successful endeavor that in the past 10 years has resulted in several foiled plots, kept our enemies on the run, and prevented another major attack on our soil. That’s not to say we’re out of the woods, but this fight belongs in covert operations and intelligence circles. Pernicious public hearings isolating Muslims in America is like putting Islam on trial as far as our enemies around the world are concerned and will only serve to agitate them further and provide real fodder for their own propaganda.

Click on the picture to expand Pete King's view of the world. (So to speak)

Read closely, all of those who would accuse me of extreme liberalism. There is a formula to beating terrorists, and it’s not pretty. It pushes against the boundaries of our civil liberties and makes us wince when we catch a glimpse of the real dirty work we do abroad. Wire-tapping works. So does undercover shit from spy movies. No need to air out our grievances in public, Pete. Big Brother is already listening. These hearings are the worst kind of political theater by a man who should know better than to throw gasoline on the fire of anti-American hatred. At a time when democracy is bursting around the globe, he embarks upon the most near-sighted and dim-witted undertaking possible to tweak the hard-liners who hate us most.

Holding this hearing is like battling cancer with Tylenol. It ignores the root cause of radical extremism, which is fairly obvious and proven. A lifetime spent in poverty or under the thumb of an oppressive regime is what can breed fundamentalism. In this sense America has been instrumental in fostering these circumstances by supporting foreign dictatorships who have strategic economic importance to our hunger for fossil fuels and ignoring nations that hold none.

Here again I return to my oft-beaten drum-warning of the evils of oil speculation in the financial markets. The steady, determined increase of commodity prices is directly correlated to the conditions of poverty around the globe. The lack of regulation on the commodities exchanges has allowed prices to skyrocket, endangering the global recovery (Fed Chairman Ben Bernanke’s words, not mine) and made access to food increasingly difficult for those who need it most.

But the majority of news outlets, to my eye, are ignoring market fundamentals by propagating the myth that tensions in the Middle East and Northern Africa are responsible for the spike in commodities pricing, oil in particular. If ever there was an argument for the price of oil being linked directly to speculation and not actual market forces, this is it. We are not experiencing a true oil crisis like the one in the 1970s because this is not a supply-and-demand issue. If $90 per barrel is the true baseline of oil pricing, can you imagine what it would be if demand was pressuring supply? I have also repeatedly heard the argument that the price of oil is related to the weak dollar, not speculation. And yet, inherent in this reasoning is the very definition of speculation! Commodities are a more lucrative, albeit risky, place to park money when the dollar is weak.

The opaque exchanges that govern the commodities market provide cover for those pressing their bets and lining the pockets of oil companies and dictators alike, thereby putting an artificial lid on economic growth and keeping food out of reach for impoverished nations. These are the seeds that grow into terrorism. This is the hearing that needs to be held.

Peter King is a fighter, literally. As a boxer he should understand that brawlers don’t always win and in this case he’s not even squaring off against the correct opponent. I believe Peter King is a patriot, no matter how misguided he sometimes is. He is also my congressman. For both reasons, I’m in his corner. But I urge him to throw in the towel and pass on this fight because in this one he is in the wrong weight class.

Don't Believe the Hype

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I'm telling a lie thiiiiiiiiis big

I, for one, could use a break from all the bullshit the government is trying to pass off on us. It’s toying with the American psyche and causing mass confusion from top to bottom. Every person, every corporation and every layer of government is living off the fat of the stimulus package and acting as though everything is OK.

Americans clearly believe that things are looking up, as consumer spending rocketed back for the month of August. Despite near-double-digit unemployment, factories running at fractional capacity, historic foreclosure rates and an expensive double-down bet in Afghanistan, the American consumer peeked out of the hole and didn’t see its shadow.

Congratulations America, the recession is over! Why do we think it’s over? Because the Fed said so. How clever. Look what our government can do when it pumps $800 billion of our children’s dollars into the economy in just a few short months—instant confidence. Don’t get me wrong, bully for the retail sector, but in the meantime, local, state and federal government are sneaking up behind us with black masks on and revolvers at our backs.

Take, for example, Nassau County, which now taxes energy consumption in our homes, gives us tickets for rolling right on red and fills in budget gaps with federal stimulus money. County Executive Tom Suozzi claims he can now magically hold the line on taxes even though budgeting to increase spending (amazing) while waiting on revenue-generating items that require approval from the (incompetent) New York State Legislature. Here’s the worst part:  Most of us are going to buy into this and probably put this guy back in office in November.

Not only did Suozzi raise our taxes an egregious 19 percent at the start of his term, but he stepped into the largest sales tax receipts in Nassau County history. In short, the two biggest reasons for revenue growth during the past eight years were from the same source: the taxpayer. Even though he campaigns on having reduced waste and abuse, he spends far more than the Gulotta administration did in 2001, and has taken on so much debt that it can no longer be serviced. During the good years, when he was flush with and drunk on our tax dollars, he blew it all.

Giving Suozzi this money was like giving your pension to your degenerate uncle and sending him to Vegas. He put it all on black but it came up red and now we’re fucked.

Instead of paying down debt, he took on more. Instead of addressing the broken tax certiorari process, he let it ride and made law firms rich on our backs. His answer to everything is to point the finger at Albany, which is like blaming the stupid kid in class for making you dumber. Albany’s answer to the crisis: tax our fishing permits, soda, bottled water, cell phones, bridges, tunnels, stores, gas, smokes; whatever they can get their grubby hands on. Now that state and local government have exhausted the taxpayers’ stash, they look to get a fix from the federal government and inject stimulus money into their collapsing municipal veins.

Unfortunately, Congress is a little strung out itself from arguing over a $900 billion healthcare bill that does everything but address the real issues with the healthcare system. A bill that screws doctors, small business owners and patients who already have health coverage in order to protect pharmaceutical companies against generic drug manufacturers and keep private insurance companies busy processing paperwork. Maybe they should have a death panel that euthanizes every Senator that passes this piece of garbage.

Hopefully the healthcare bill will fund treatment for our addiction to stimulus money because it’s dulling our senses and making us immune to some outrageous happenings in government. When $800 billion in bailout money and $900 billion on bad healthcare seem like no big deal, you know we have lost touch with reality. When local government starts taxing the energy we use in our homes, the fish we pull from the sea, and water without a peep from the taxpayer, we have slipped into a coma.

And if we believe that this recession is over because the Fed said so, just sign the DNR form now.