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News of the Weird: June 10, 2009 - Eric Janszen

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  • News of the Weird: June 10, 2009 - Eric Janszen

    News of the Weird: June 10, 2009

    Last year’s financial crisis ripped out the thread of credit that held the fabric of our global economy together. Our new iTulip weekly feature of chronicles the unraveling through stories submitted by our readers from around the world. This week’s theme: We demand!

    • Spendthrift government demands spending limits on itself
    • European socialists demand that America try free markets
    • American and French companies demand to not ``Buy American’’
    • Japanese smugglers of $134.5 billion in US Treasury bonds demand... wait, what?

    Spendthrift government demands spending limits on itself

    Last week the Obama administration pushed a brand new government bureaucracy to manage a proposed national health care plan that promised to add trillions to $85.6 trillion in existing public debt and unfunded liabilities. Today the House passed a $4,500 “Cash for Clunkers” rebate program to create an incentive for trade-ins of gas guzzlers for fuel efficient vehicles, presumably to help Government Motors sell their new line of tiny cars that no one wants. The total cost? Who knows?

    Yesterday, President Obama in a speech called for Congress to ramp up of fiscal stimulus spending to “create jobs.” Today, the same administration announced its intention to push for new limits on tax cuts and spending programs to avoid adding to deficits.
    Obama seeks fiscal responsibility mantle
    June 9, 2009 (Reuters - Caren Bohan)

    President Barack Obama sought on Tuesday to show he was serious about improving the U.S. budget picture as he called on Congress to pass new limits on tax cuts and spending programs to avoid adding to deficits.

    Obama urged passage of "pay-as-you-go" legislation that would require any new tax cut or automatic spending program to be paid for within the budget.

    "The 'pay as you go' principle is very simple. Congress can only spend a dollar if it saves a dollar elsewhere," Obama said in a speech at the White House attended by several Democratic members of Congress.

    (Hat tip member RickBishop)


    The theory of fiscal stimulus is to run deficits to stimulate the economy out of recession. Simultaneously stimulating it and not stimulating is a novel and, as far as I know, has never been tried. The Obama administration should consider the advice, or rather, the remonstrance of that model of free market philosophy and fiscal prudence, the European Central Bank.

    Socialists demand that America try free markets
    (ECB) The economic crisis and the response of fiscal and monetary policy

    But let me hasten to add that policy-makers must not get carried away by recent events; they should act in a measured way, and not throw the baby out with the bathwater. While governments have had no alternative but to support systemically relevant financial institutions, they should, as a rule, keep their assistance to specific sectors or firms to a minimum. And when they do intervene, they should prepare clear and credible exit strategies. No matter how serious the current crisis is, the market economy remains the best way to organise our economic affairs. It is only 20 years ago since the breakdown of the socialist system in eastern Europe, which demonstrated the failures of central planning and heavy government involvement. Therefore, once we emerge from the current crisis, the role of government in the economy needs to be scaled back. Its presence in the banking sector must be gradually reduced as the restructuring of the sector starts to take effect. The stimulus measures must be reversed in due course. We have seen in the past how so-called temporary measures ended up being permanent.

    An exit strategy is a comprehensive programme to withdraw and neutralise measures taken during the financial crisis, without causing any harm to the economy. If they have no well-defined exit strategy, governments may get bogged down and the positive impact of the measures taken may be undermined. A well thought-out exit strategy is needed to reassure economic agents that a timely restoration of the level playing field in the different sectors of the economy is the ultimate objective. As such, an exit strategy needs to contain clear criteria about the timing of the withdrawal of the financial support and the reversal of the fiscal stimulus.

    Speech by Jürgen Stark, Member of the Executive Board of the ECB
    Delivered at the Austrian Industrial Organisation

    Linz, Austria, 8 June 2009
    (Hat tip to new member cm)
    We know our government is in serious trouble when supposedly socialistic governments accuse our oligarchs of giving too much “assistance to specific sectors or firms.” That’s ECB talk for shoveling US public funds that originate as Asian, Middle Eastern, and European savings into the FIRE industries that own our legislature. Or maybe Stark is talking up the euro.

    In any case, don’t you already miss our fake-capitalist oligarchs now that they have, post crash, turned fake-socialist oligarchs? In the wake of the collapse of the credit bubble, grotesque public micro-management of the private sector is meant to demonstrate government commitment to protect the little guy from corporate evil doers. The result is to punish an army of the innocent for the malfeasance of the few, most of whom get away but for the few caught up in show trials. The populist post technology bubble crash legislation known as Sarbanes-Oxley, an accountant’s job program, saddled public companies large and small with a minimum million dollar annual accounting bill. It pales by comparison to the intrusions into business by the current administration.

    New populist policies don’t end with meddling in the compensation programs of public companies. US companies must jump through "Buy American" hoops to catch American taxpayer bailout fish. On company balking at the deal is one of our favorite American technology monopolies, Cisco Systems—which monopoly, in case you forgot, was created out of industry consolidation of networking companies after the crash of the technology bubble in the early 2000s wiped out Cisco's competitors, much as the crash of the credit bubble resulted in the concentration of the investment banking industry into a few gigantic firms with little competition.

    Why it’s as if government "regulators" let it happen again on purpose.

    American and French companies demand to not ``Buy American’’
    Cisco, Alcatel Chafe at ‘Buy American’ Mandate in Stimulus Plan
    June 10, 2009 (Bloomberg)

    Cisco Systems Inc. and Alcatel- Lucent want “Buy American” provisions waived for a $7.2 billion U.S. program to expand high-speed Internet access, saying the rules are difficult to meet and undermine the economic stimulus program.

    Requiring U.S.-made parts would be “grossly inefficient” and a “radical departure” from normal markets, said Cisco, the largest maker of networking equipment. The comments were filed with the U.S. agency running the broadband initiative, part of the $787 billion stimulus package.

    The rules may slow projects the stimulus was meant to spur because telecommunications networks contain parts from around the globe, the two equipment makers say. Congress, seeking to boost U.S. jobs, said funds provided under the law passed in February generally can’t be used for iron, steel and factory goods that aren’t U.S.-produced.
    (Hat tip member pksubs)
    The entire unseemly sequence of events that followed the crash of the 1980 to 2007 FIRE Economy V2.0 credit bubble is as horrifically predictable as a bad Hollywood horror movie that returns as an even more horrible remake. Call it The Great Depression II: Return of the Idiot Oligarchs. This time the Democrats play the role of populists played by Republicans in the original movie.
    "Protect Your Home Markets from Cheap Alien Competition—Buy American!"

    "Buy American Made Goods! Keep the Home Fires Burning!"

    "Buy Uncle Sam!"

    Hearstpapers. advertisements, handbills, letters, posters were spreading these slogans throughout the land last week. Organizations to boost the "Buy American" idea, adapted from the "Buy British" movement-(see p. 23), have been mushrooming for the last half year. When the Saturday Evening Post featured an exhortation by Samuel George Blythe to "Buy American" early last month, the movement assumed nation-wide proportions. And last week in its behalf William Randolph Hearst turned on his big publicity machine.

    Mr. Blythe based his arguments for "Buy American" squarely on the fact that countries with depreciated currencies, low wages or both are able to manufacture goods, ship to the U. S., pay a stiff tariff and still undersell the products of U. S. industry. Czechoslovakia, he cited, can lay down rubber boots in the U. S. at $1.16 a pair. They cannot be duplicated by the U. S. for less than $1.48. Japan sells celluloid combat $11.06 a gross against the best U. S. price of $25.86. Certain grades of European steel are so cheap that even if all labor cost was eliminated, U. S. steel mills could not compete, etc., etc., etc. The results, said Mr. Blythe, are closed factories and unemployment. Furthermore, he insisted, the products are of inferior quality.

    Among the first to challenge the article was The New Republic: "[It is] almost a world's record for bad thinking and economic misinformation. It is the quaint notion of Mr. Blythe and the Saturday Evening Post that foreign trade consists exclusively of foreigners selling goods here and taking our money away, as its cartoons show us, in bales. . . . Have these gentlemen 'any suggestions as to how foreigners shall pay for the goods they buy from us?" That, most responsible economists agree, is the biggest flaw in "Buy American." Even last year the U. S. exported about $1,500,000,000 of farm, factory, mine and forest products. Foreign countries must sell to the U. S. goods or services of an equal value or pay in gold. And foreigners have already paid so much gold that many of them have been forced off the gold standard. Japan cannot buy Texas cotton unless she sells electric light bulbs in Boston.

    - Business: Buy American, TIME Magazine, January 9, 1933
    Foreign countries must sell to the U. S. goods or services of an equal value or pay in gold? Not anymore. Shoe’s on the other foot, so to speak. Today the U.S. must sell to foreigners goods or services of an equal value or pay in Treasury bonds that we print ourselves. Pretty neat, huh? Worked for the 26 years era of the FIRE Economy era, but not anymore.



    Japanese smugglers of $134.5 billion in US Treasury bonds demand... wait, what?
    US government securities seized from Japanese nationals, not clear whether real or fake

    Milan (AsiaNews) – Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.

    Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.


    (Hat tip member Sapiens)





    Can you imagine the encounter at the border?
    “Nothing to declare?”

    “Nope.”

    “Got cash or other items in excess of $10,000?”

    “Ugh, uh.”

    “Mind if I have a look in that briefcase?”

    “Errrr...”

    “Aha! Just as I thought. You’re carrying hundreds of US Treasury bonds in $500 million and $1 billion denominations worth $134.5 billion.”

    “Darn! You caught us.”

    “What were you planning to do with these?”

    “Buy Estonia, Latvia, and Lithuania. Great price!”
    Smuggle? What kind of illicit market exists for $135 billion worth of any security, never mind US government securities?

    Fake? Hard enough to sell real ones.

    Just ask Geithner.

    The only possible buyer for $135 billion worth of anything? A government.

    Where did the bonds came from and where they are going? Answer that and we may solve a great mystery: how Japan intends to sell its US Treasury bond hoard before China sells theirs.

    It's a scam

    Here's our best guess at the scam.

    Step 1: Take a large short position in US Treasury bonds.

    Step 2: Get your Japanese friends to "smuggle" forged Treasury bonds into a country where you are likely to get "caught."

    Step 3: When the rumors fly and the bonds tank, close out your shorts.

    Beats working.

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    Last edited by FRED; 06-18-09, 10:12 AM. Reason: The bonds are fake.

  • #2
    Re: News of the Weird: June 10, 2009 - Eric Janszen

    Wow. Might need more gold. Fiat going down.

    Comment


    • #3
      Re: News of the Weird: June 10, 2009 - Eric Janszen

      I really don't understand much about this stuff. Why smuggle US bonds anywhere? Secret sale? Why?:confused:

      Comment


      • #4
        Re: News of the Weird: June 10, 2009 - Eric Janszen

        Originally posted by EJ View Post
        Where the bonds came from and where they are going? Answer that and we may solve a great mystery: how Japan intends to sell its US Treasury bond hoard before China sells theirs.
        That story has been boggling my mind ever since Sapiens posted it.

        If that is indeed what is going on (Japan quietly selling off its US bond hoard), then the shit is hitting the fan.

        Of course, if one government is selling to another, as is implied by the sums involved, then it also boggles the mind as to whom would like to accept the risk that the Japanese wish to offload. Unless, you know, it's the issuer of the bonds... and then I wonder what could be offered in return.

        ==========

        Edit: My wife points out that this may not represent an actual transaction, but rather a market manipulation. Say someone is short the dollar, and hires some Japanese to get caught carrying $135B in (forged) bonds across the Swiss border, trusting the market to put two-and-two together from the headline to conclude from the size of the sum that a government is selling out of the dollar. Perhaps they can trigger a panic and realize some huge trading gains before the forgery is detected?

        For that matter, if this is the work of a government, one wonders why a courier would be employed who is subjected to inspection? Isn't there such a thing as diplomatic mail? Could not a government get the bonds into and out of Switzerland without risking detection at a border crossing? Diplomatic niceties aside, wouldn't any entity transacting in these sums have the resources required to move a few reams of paper undetected? Assuming the story isn't a hoax or misreported, this smacks a little of someone who wishes to be caught.
        Last edited by ASH; 06-10-09, 10:59 PM.

        Comment


        • #5
          Re: News of the Weird: June 10, 2009 - Eric Janszen

          Originally posted by ASH View Post
          That story has been boggling my mind ever since Sapiens posted it.

          If that is indeed what is going on (Japan quietly selling off its US bond hoard), then the shit is hitting the fan.

          Of course, if one government is selling to another, as is implied by the sums involved, then it also boggles the mind as to whom would like to accept the risk that the Japanese wish to offload. Unless, you know, it's the issuers of the bonds... And then I wonder what could be offered in return.
          google "134.5 billion"

          story's two days old yet not one other news source has picked it up. hmmmm.

          google Guardia di Finanza italiana 134,5 miliardi di US


          134 miliardi di dollari in Bond Usa nel doppiofondo della valigia. Titoli sequestrati al confine con la Svizzera


          ultimo aggiornamento: 05 giugno, ore 09:13
          Milano - (Adnkronos) - I valori erano posseduti da due cinquantenni giapponesi scesi alla stazione ferroviaria di Chiasso da un treno proveniente dall'Italia. Un'accurata verifica dei bagagli ha consentito di trovare i titoli occultati sul fondo di una valigia

          Comment


          • #6
            Re: News of the Weird: June 10, 2009 - Eric Janszen

            Originally posted by metalman View Post
            google "134.5 billion"

            story's two days old yet not one other news source has picked it up. hmmmm.

            google Guardia di Finanza italiana 134,5 miliardi di US
            Huh. Is "miliardi" Italian for million or billion? (Yeah, I suppose I could Google that, too.) And is it possible that a misunderstanding of translation resulted in inflated numbers reported in the English language press?

            =============

            Edit: Okay... apparently billion.

            Comment


            • #7
              Re: News of the Weird: June 10, 2009 - Eric Janszen

              Originally posted by ASH View Post
              Huh. Is "miliardi" Italian for million or billion? (Yeah, I suppose I could Google that, too.) And is it possible that a misunderstanding of translation resulted in inflated numbers reported in the English language press?
              miliardi = billion
              milioni = million

              Comment


              • #8
                Re: News of the Weird: June 10, 2009 - Eric Janszen

                Originally posted by metalman View Post
                miliardi = billion
                milioni = million
                There's also the issue that even the Italians make typos... I'd love to see some corroborating reporting on this.

                =================

                Edit: Okay... guess my mind is blown, then.
                Last edited by ASH; 06-11-09, 01:10 AM.

                Comment


                • #9
                  Re: News of the Weird: June 10, 2009 - Eric Janszen

                  Originally posted by ASH View Post
                  Huh. Is "miliardi" Italian for million or billion? (Yeah, I suppose I could Google that, too.) And is it possible that a misunderstanding of translation resulted in inflated numbers reported in the English language press?

                  =============

                  Edit: Okay... apparently billion.
                  Apparently billion with a B.

                  http://dictionary.reverso.net/italian-english/miliardo

                  miliardo sm thousand million, billion


                  Whoops, not fast enough!


                  Last edited by Jay; 06-10-09, 11:06 PM. Reason: Damn beaten to the punch!

                  Comment


                  • #10
                    Re: News of the Weird: June 10, 2009 - Eric Janszen

                    Originally posted by metalman View Post
                    miliardi = billion
                    milioni = million
                    We checked it out before running the story here.

                    The Italian authorities documented the arrest and seizure carefully. Here is a short video.



                    They really did carry it in a briefcase!
                    Last edited by FRED; 06-10-09, 11:37 PM.
                    Ed.

                    Comment


                    • #11
                      Re: News of the Weird: June 10, 2009 - Eric Janszen

                      Originally posted by ASH View Post
                      That story has been boggling my mind ever since Sapiens posted it.

                      If that is indeed what is going on (Japan quietly selling off its US bond hoard), then the shit is hitting the fan.

                      Of course, if one government is selling to another, as is implied by the sums involved, then it also boggles the mind as to whom would like to accept the risk that the Japanese wish to offload. Unless, you know, it's the issuer of the bonds... and then I wonder what could be offered in return.

                      ==========

                      Edit: My wife points out that this may not represent an actual transaction, but rather a market manipulation. Say someone is short the dollar, and hires some Japanese to get caught carrying $135B in (forged) bonds across the Swiss border, trusting the market to put two-and-two together from the headline to conclude from the size of the sum that a government is selling out of the dollar. Perhaps they can trigger a panic and realize some huge trading gains before the forgery is detected?

                      For that matter, if this is the work of a government, one wonders why a courier would be employed who is subjected to inspection? Isn't there such a thing as diplomatic mail? Could not a government get the bonds into and out of Switzerland without risking detection at a border crossing? Diplomatic niceties aside, wouldn't any entity transacting in these sums have the resources required to move a few reams of paper undetected? Assuming the story isn't a hoax or misreported, this smacks a little of someone who wishes to be caught.

                      maybe this is some sort of recycling agreement b/t the Japanese and American governments.

                      this keeps the Japanese showing up at the now weekly 50+ billion dollar treasury bill/note garage sales and they secretly dump it out the back door to us.

                      if this is the case, what do the Japanese get in return? American securities from the PPT?

                      or is the Japanese govt so far into our debt, that they are willing participants to keep the Ponzi/Madoff US Tbill scam going?

                      dunno - all speculation

                      Comment


                      • #12
                        Re: News of the Weird: June 10, 2009 - Eric Janszen

                        Now we know where that remaining $134.5 billion in TARP money was supposed to go- to buy bonds back from Japan

                        http://online.wsj.com/article/SB123828522318566241.html

                        WASHINGTON -- The Treasury Department said it has about $134.5 billion left in its financial-rescue fund, giving the Obama administration a cushion as it implements expensive programs aimed at unlocking credit markets and boosting ailing industries.
                        The figure means that about 81% of the $700 billion in the Troubled Asset Relief Program, or TARP, has been committed. It also means that the Obama administration may not have to go to Congress to request additional funds, at least until well into the year. Many lawmakers who criticized the administration's bank-rescue efforts have vowed to oppose any requests for more money for the fund.
                        The Treasury had until now declined to give an up-to-date tally of how much remained in the fund, but some outside estimates had put the figure at about $50 billion. The government has provided few specifics on how it is spending the TARP money since the Obama administration announced a slew of new, multibillion-dollar programs to help stem foreclosures, unlock tight credit markets, revive consumer and business lending, and rescue domestic auto makers.
                        Treasury Secretary Timothy Geithner said Sunday that the projection of how much is left in TARP funds represents "a very conservative judgment about how much money is likely to come back from banks that are strong enough not to need this capital now to get through a recession." Several banks in recent weeks have announced plans to pay back the bailout funds they received.
                        In its estimate, the Treasury projects that it will receive about $25 billion back from banks that have participated in TARP. Factoring in those so-called paybacks, the Treasury estimates that its commitments for rescue programs so far total $565.5 billion.
                        Speaking on ABC's "This Week," Mr. Geithner said the amount remaining in the fund "gives us -- and this is very important -- substantial resources to move ahead with this broad-based suite of initiatives to help get the financial system back in the business of providing credit."
                        Some outside analysts described the Treasury estimates as "squishy" and suggested the numbers could be overly optimistic. Virginia-based banking consultant Bert Ely agreed that while the Treasury's $25 billion estimate for repayments is conservative, "the timing of the paybacks is in the air" amid questions over the procedure for repaying funds and any needed approvals. "Maybe eventually they'll have $135 billion, but they don't have it now," he said.
                        In addition, Mr. Ely said, he expects the Treasury to soon open up TARP funds to credit unions, insurance companies and other financial firms.
                        Mr. Geithner declined to say whether the administration thinks it would need additional TARP money from Congress. The administration has a number of potential obligations that will need to come from the fund's remaining money, including an expected request from General Motors Corp. and Chrysler LLC for as much as $22 billion in new loans.
                        Proving just how controversial the bailout has become, Capitol Hill Democrats last week decided against including a $250 billion placeholder in their budget that the Obama administration had included in its plan to warn of the potential need for a larger bailout.
                        There are several reasons for the difference between the Treasury's and outside estimates of how much TARP funds remain.
                        For example, the Treasury's projections don't include all of the $250 billion for a program launched last year to inject taxpayer funds into banks. The Treasury projects that program at $218 billion. A Treasury official said Saturday that while the program could cost as much as $250 billion, the $218 billion number is a more-accurate estimate given that a key application deadline for the program has passed.

                        Comment


                        • #13
                          Re: News of the Weird: June 10, 2009 - Eric Janszen

                          Originally posted by rdgmail View Post
                          Now we know where that remaining $134.5 billion in TARP money was supposed to go- to buy bonds back from Japan

                          http://online.wsj.com/article/SB123828522318566241.html

                          WASHINGTON -- The Treasury Department said it has about $134.5 billion left in its financial-rescue fund, giving the Obama administration a cushion as it implements expensive programs aimed at unlocking credit markets and boosting ailing industries.
                          what a coincidence.

                          make that 'The Treasury Department thinks it has about $134.5 billion left in its financial-rescue fund' but doesn't!

                          Comment


                          • #14
                            Re: News of the Weird: June 10, 2009 - Eric Janszen

                            Does the guard who found the stash get to keep it if nobody claims it? Might result in some interesting law enforce activity bout the borders in the world...no?

                            Comment


                            • #15
                              Re: News of the Weird: June 10, 2009 - Eric Janszen

                              Isn't the paper itself worthless?

                              These aren't bearer bonds, are they? Presumably the money is in some account somewhere, and the only way you can move it around / sell it / etc is to talk through some pretty restricted / official / established channels.

                              My guess is there is either a forgery or mis communication here.

                              Comment

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