ESPN Sportswriter Gets It

Sportswriters write the darndest things:

Scariest Words I Have Heard All Year: The Federal Reserve's moves to grant special favors to European governments "pose little risk to the U.S. taxpayer, Fed officials said, because the Fed is doing business with foreign central banks viewed as trustworthy." Fannie Mae and Freddie Mac, Bear Sterns, Lehman Brothers, Merrill Lynch, Dexia Bank of Belgium -- they were "viewed as trustworthy," too. U.S. taxpayers once were told they would never, ever have to cover Fannie Mae losses. Now U.S. taxpayers are being told they will never, ever have to cover losses for European bonds.

What happened last week was that the Fed offered deeply discounted "liquidity swap lines" to European banks. This mumbo-jumbo means European banks can borrow U.S. dollars from the United States at 0.5 percent interest. If you need to borrow for a car or credit card debt, can you get a 0.5 percent loan directly from the United States government? Now wealthy Europeans can!

As collateral, the Federal Reserve received promises of euros. Possibly you have read a newspaper at some point in the past year. If so, you know there is a real chance the euro might go out of existence. In that case the collateral becomes worthless. The Fed will have given a large amount of U.S. dollars to Europe to be squandered.

The Federal Reserve did not say how many U.S. dollars have been offered to European governments. The last time transactions of this sort happened, Fed "swaps" to Europe peaked at $580 billion. And as Bloomberg News pointed out last week in an important investigative story by Bob Ivry, Bradley Keoun and Phil Kuntz, the Fed recently has been handing insider companies huge subsidies without even disclosing that it is doing so.

The reason European banks seek dollars in the first place is that, at the moment, companies and investors don't want to borrow euros: corporations and investors know there is a risk the euro will become worthless. Last week that risk was shifted onto American taxpayers. Now European banks can make loans in dollars rather than in euros. If the loans succeed, the rich of Europe keep the profits. If the loans fail, average Americans will be handed the bill. Perhaps that's why the Fed announcement was written so as to be incomprehensible.

At the Fed, when high-level staffers leave, one year later they may seek lucrative jobs at the banks whose profits rise because of Fed actions. Banks and other big businesses often hire former regulators to cushy jobs, in order to send this message to current regulators: sell the public down the river, and there will be a cushy job for you too.

A Fed defender would say that if the economy rebounds and the euro stabilizes, then there will be GDP growth with no losses to taxpayers. Let's hope. Yet in this best-case scenario, the wealthy of Europe get their capital at a half percent courtesy of Uncle Sam, while typical Americans pay 4 to 20 percent interest to borrow. That's the best case!

Washington has not only put the younger generation on the hook for at least $14 trillion in debt -- now young Americans may end up on the hook for money squandered in Europe. TMQ asks again: Why aren't voters under age 30 outraged about this?

~ Gregg Easterbrook

CNBC "experts" should read more ESPN columns and watch more Comedy Central shows. They might learn something.

Newt Gingrich: ultimate hypocrite

A couple different friends have sent me this excellent Ron Paul ad against Gingrich today:



Also well worth reading is George Will's column, Romney and Gingrich, from bad to worse.

Gingrich, however, embodies the vanity and rapacity that make modern Washington repulsive. And there is his anti-conservative confidence that he has a comprehensive explanation of, and plan to perfect, everything.

Granted, his grandiose rhetoric celebrating his “transformative” self is entertaining: Recently he compared his revival of his campaign to Sam Walton’s and Ray Kroc’s creations of Wal-Mart and McDonald’s, two of America’s largest private-sector employers. There is almost artistic vulgarity in Gingrich’s unrepented role as a hired larynx for interests profiting from such government follies as ethanol and cheap mortgages. His Olympian sense of exemption from standards and logic allowed him, fresh from pocketing $1.6 million from Freddie Mac (for services as a “historian”), to say, “If you want to put people in jail,” look at “the politicians who profited from” Washington’s environment.

His temperament — intellectual hubris distilled — makes him blown about by gusts of enthusiasm for intellectual fads, from 1990s futurism to “Lean Six Sigma” today. On Election Eve 1994, he said a disturbed South Carolina mother drowning her children “vividly reminds” Americans “how sick the society is getting, and how much we need to change things. . . . The only way you get change is to vote Republican.” Compare this grotesque opportunism — tarted up as sociology — with his devious recasting of it in a letter to the Nov. 18, 1994, Wall Street Journal (http://bit.ly/vFbjAk). And remember his recent swoon over the theory that “Kenyan, anti-colonial” thinking explains Barack Obama.

Gingrich, who would have made a marvelous Marxist, believes everything is related to everything else and only he understands how. Conservatism, in contrast, is both cause and effect of modesty about understanding society’s complexities, controlling its trajectory and improving upon its spontaneous order. Conservatism inoculates against the hubristic volatility that Gingrich exemplifies and Genesis deplores: “Unstable as water, thou shalt not excel.”

Meanwhile, Ron Paul is a strong second in Iowa!

Let's hope Gingrich implodes before, not after, the nomination. And maybe we'll have a chance to vote for a real reform candidate this time.

What is Gold?

We've been huge fans of shiny metals for years. We love gold, silver, platinum, and even nickel. Precious metals are the bomb and when our fiat bubble bursts we believe they'll be worth a tad bit more than the price we acquired them for. But why is that and what kind of investment is it really? Is gold "a put against the idiocy of the political cycle" as Kyle Bass states here?

Seeking Alpha posted commentary on metals and fiat currencies titled "Is Gold A Risk Asset Or A Safe Haven" which offers an interesting argument.

One of the reasons the debate over whether gold is a risk asset or a safe haven seems to live on is the fact that one troy ounce of gold has a monetary value priced in fiat currency. This monetary value fluctuates up and down. As it does, people like to call gold a risk asset or a safe haven, based on how the fiat monetary value is performing relative to asset classes such as equities or fixed income. It seems like every time we see gold, in dollar terms, move in a direction opposite the S&P 500’s (SPY) daily movement, the debate heats up. Furthermore, people like to point out the bear market that dollar-priced gold suffered during the 1980s and 1990s as evidence that gold is neither an inflation hedge nor worth owning over long periods of time.

All of this misses the point about what gold as a store of value represents in a fiat currency world. When owning gold as a store of value in a world dominated by fiat currency, the only thing that should matter to the owner is the number of ounces owned. If gold is being owned to protect against the destruction of the current monetary system, then debating its daily moments when priced under the current monetary regime is pointless. All that matters is how many ounces an investor owns. These ounces, kept as a store of value, would then either be converted into whatever new currency regime comes about, if the current one fails, or continue to be held as a store of value in those instances in which the owner simply doesn’t trust the new currency structure.

Ciao Dr. Socrates

FROM THE WC SOCCER DESK

Last week we lost legendary Welsh player and manager Gary Speed to, still yet to be determined why, suicide. Yesterday we lost Dr. Socrates to a far more reasonable means of exit, death by alcohol abuse.

Socrates was the captain of the greatest soccer team that didn't win the World Cup, in 1982. While some may debate that, what is not debatable was that he was part of the most loved team in Brazil. That 1982 team was the most elegant practitioners of the beautiful game maybe in history. Socrates was their leader. Click here for a link to a fantastic tribute to that 1982 team.

He was known as Dr. Socrates because while playing he earned a medical degree and after his playing career was over became a doctor.

Obrigado Dr. Socrates, boa viagem.....

Jon Stewart viewers learn about the Dirty Fed and the biggest bank bailout in history

Adam Corolla on OWS

Hard to refute this. (Warning: language).

15.1 TRILLION LARGE

On November 17th we noted that the US National Debt hit $15,000,000,000,000. Today we hit $15,100,000,000,000. It took us 14 days to get one tenth of the way to $16,000,000,000,000. Using the most crude of methods that means we will hit that next milestone on April 5th of 2012.

And this guy added 6 trillion by his lonesome in his first 3 years in office:

Zerohedge with the deets.