Obama Administration

Having been denied the ability to control guns by the democratically-controlled Senate last Wednesday in the biggest slap to the administration's face in a long time, Obama decided promptly to put as many guns as he possibly can in the hands of US soldiers and various non-Americans. First, it was the announcement that Obama would send more troops to Jordan to prepare for "stability operations" which is a euphemism for Syrian rebel support (much of it controlled by the otherwise dreaded Al Qaeda), and now we learn that Obama is set to announce the sale of $10 billion worth of weapons to Israel, Saudi Arabia and the United Arab Emirates. It appears that Obama, like a true expert of Sun Tzu, is well aware that the only way forward to a Nobel prize winning global peace, is under the barrel of a gun, or on the receiving end of a hot AGM-65 Maverick missile.

No, We Shouldn't Kill Everyone from a Particular Religion

Fresh from his humiliating defeat in the Senate to promote his pacifist gun-control agenda yesterday, in the name of the "90%" of course (who apparently need to pick their senatorial representative just a little more effectively), the Nobel Peace Prize winner has decided that guns just may be the right answer when it comes to promoting peace, or least his agenda abroad. WaPo reports that  the Obama administration has ordered additional U.S. troops to Jordan for possible chemical weapons control, humanitarian response or “stability operations” in Syria. "The new troops, a headquarters element of the 1st Armored Division based at Fort Bliss, Tex., will not greatly increase the number of U.S. forces in Jordan. About 150 troops were sent last year to help train Jordanian military and Syrian opposition forces. Some of those troops will remain, and the new arrivals will increase the total to more than 200."

Following a full court press by the Obama administration, and specifically gun tzar Joe Biden, to legislate "stronger" gun law in the last several months ever since the Sandy Hook massacre, the initiative may have just suffered a terminal defeat following a failure to even pass a bipartisan background check amendment in the democrat-controlled Senate. CBS reports that "In a major setback for gun control advocates, the Senate Wednesday voted down a key amendment to the embattled Democratic gun bill, signaling the increasingly dim prospects of any meaningful legislative action aimed at strengthening America's gun laws. The bipartisan Manchin-Toomey amendment, a background check expansion devised by Sens. Joe Manchin, D-W.Va., Pat Toomey, R-Pa., and a handful of other lawmakers, earned only 54 votes, falling six votes short of the 60-vote threshold. Vice President Joe Biden, who led the Obama administration's months-long lobbying effort on behalf of stronger gun laws, presided over the vote."

Ever since Moody's head economist Mark Zandi, together with Princeton's Alan Blinder, authored a paper in July 2010 titled "How We Ended The Great Recession" (which incidentally is wrong on two key counts: i) it is a great depression not recession, and ii) it has not ended) it became clear that the Keynesian sycophant would not rest until he somehow found a way to penetrate deep inside one or more of the darkest administrative orifices of the Obama regime. Surely, Zandi must have been heartbroken when it was not him but Jack Lew picked to replace Tim Geithner - a post the Keynesian had a desperate craving for. Yet his recent appointment to head up the ADP "payroll" joint venture, which was nothing more than a test of his propaganda skills, should have given us advance notice something was cooking. Further notice should have emerged when the US Department of Injustice launched its rating agency witch-hunt campaign only against S&P, not Moody's, where the abovementioned Zandi still officially works. Last night all of this finally fell into place, when the WSJ reported that Zandi has emerged as the leading candidate to head the FHFA - the regulator in charge of the two zombiest of zombie US institutions: the still insolvent Fannie and Freddie, in the process kicking out current FHFA head Ed DeMarco who recently emerged as Obama's persona non grata number 1 for his stern refusal to espouse socialist practices and wholesale debt forgiveness and principal reduction.

• Obama to report to his bosses today: Obama Meets With Blankfein, Dimon and Moynihan Today (BBG)
• 2007 is here all over again: Seeking Relief, Banks Shift Risk to Murkier Corners (NYT)
• Kuroda Calls BOJ Inflation Target 'Flexible' (WSJ)
• Lagarde warns over three-speed world (FT)
• N. Korea’s Retro Propaganda Calls U.S. Boiled Pumpkin (BBG)
• Luxembourg To Ease Bank Secrecy Rule, Share Data In 2015 (BBG)
• Bank of Korea Keeps Policy Steady (WSJ)
• BOE Stimulus Dilemma Persists as Inflation Seen Higher (BBG)
• EU Sounds Alarm on Spain (WSJ)
• Qatar gives Egypt $3bn aid package (FT)
• RBNZ Says Deposit Insurance May Increase Risk of Bank Failure (BBG)
• Plosser Calls for Reducing QE Pace Citing Gains in Labor Market (BBG)
• Obama budget aims to kick start deficit-reduction talks (Reuters)

“Mad Dog” Bluff Based on Fear of U.S.-South Korean War Games Turning Into Real Invasion

It's important to draw a line between two very different flavors of banker: "restrained" (Dr. Jekyll) and "unrestrained" (Mr. Hyde). The key feature of a sustainable, non-parasitic banking sector is that banks and bankers have "skin in the game," i.e. they personally suffer losses when their loans and bets go bad. This is the essence of moral hazard: the separation of risk from consequence. Put another way, those who are insulated from risk will have an insatiable appetite for risky bets because any gains will be theirs to keep but any losses will be covered by the central bank or government: this is known as "privatizing profits and socializing losses." The Federal Reserve, the Obama Administration, the housing agencies and the U.S. Treasury are all offering bankers and financiers high-payoff tables that require no skin in the game. No wonder our system is dominated by the unrestrained bankers, sociopathological Mr. Hydes who offer a few coins in compensation for running down the nation.

A sign of "economic and political turmoil"

The jobs recovery is a complete and total myth.  The percentage of the working age population in the United States that had a job in March 2013 was exactly the same as it was all the way back in March 2010.  In addition, as you will see below, there are now more than 101 million working age Americans that do not have a job.  But even though the employment level in the United States has consistently remained very low over the past three years, the Obama administration keeps telling us that unemployment is actually going down. Anyone that tells you that "a higher percentage of Americans are working today" is telling you a complete and total lie.  The sad truth is that there has been no jobs recovery whatsoever. If things were getting better, there would not be more than 101 million working age Americans without a job.

The witch-hunt against the "rich" (as defined by a random group of people) through the establishment of creeping global capital controls continues. First, it was Europe deciding that €100,000 in savings is the "fair" threshold on savings above which any haircut goes, with Cyprus demonstrating first and next Italy making it clear local depositors above the threshold will also be impaired in the future; then a group of journalists mysteriously lands millions in top secret files exposing essentially every offshore bank account: a perfectly legal option, however when mixed in with the implication that this money is all tax-evasion gotten it provides for a combustible mix, and now it is America's turn to fire the first shot across the capital control bow, because as part of his proposed budget, Obama plans to set a limit of how much one can spend per year on retirement through tax-preferred retirement plans. As it turns out, according to the Obama administration it is only fair to spend a total of $205,000 in nominal dollars per year on retirement, but not more. This means that as a result of the artificial limit, the Budget will set a total cap on retirement plans of about $3 million. Anything above that, feel free to please spend on your peas instead of saving, or just invest in Bernanke's stock market ponzi. After all, that is the only artificial indicator Obama has to point to, when "proving" his policies are working.

Yesterday we reported that the conclusion of the MF Global Trustee's 124 page report is that the collapse of MF Global, and the illegal commingling of billions in customer funds which may or may not have been recovered yet from JPMorgan and others, was all Jon Corzine's fault. Of course, courtesy of his special rank in the Obama administration, Corzine will never go to jail: after all justice in the crony states of America is only for the little people - those who don't bundle millions for the president, and those who don't run Too Big To Prosecute banks, or both at the same time, get a get out of jail card (literally). So if he isn't in minimum security prison, where on earth is Mr. Corzine to be found these days? The WSJ answers.

Today, we got the laughable news that the unemployment rate declined even as those not in the labor force grew by over 660,000, while the total civilian non-institutional population grew by just 167,000 to 244,995, meaning the actual labor force declined by 496,000. Which is precisely the issue: fudging the labor force participation rate is how the Obama administration has managed to maintain the myth the economy has grown under his leadership for the past 4+ years. It hasn't, and in fact if one renormalizes for the recent long-term average participation rate of 65.8%, one gets a very different number. How different? A difference that is now at a record compared to what is reported. As the chart below shows, a "renormalization" process indicates a massive and record 4% difference between the reported unemployment rate of 7.6%, and what the real unemployment rate is assuming normal growth of the labor force, which in March was 11.6%, up from 11.3% in February, and the highest since August 2012 when it was 11.7%. More importantly, as the real unemployment chart shows, the economy has not improved by one bit since 2009!

David Stockman’s New York Times Op-Ed has ruffled a lot of feathers. Paul Krugman dislikes it, saying Stockman sounds like a cranky old man, and criticising Stockman for throwing out a load of meaningless numbers that sound kind of scary, but are less scary in context. What Krugman overlooks is Stockman’s excellent criticism of crony capitalism, financialisation, systemic rot and Wall Street corruption of Washington, something Stockman has seen from the inside as part of the Reagan administration. There are plenty of other writers who have pointed to this problem of propping up casino finance, including myself. But very few of them are doing so on the pages of the New York Times. In the long run, I think it will become patently clear that throwing liquidity at the financial system won’t solve anything other than immediate liquidity concerns. The rot was too deep. The financial sector needed real reform in 2008. It still needs it today.

I disagree with the “addiction” metaphor because it implies that the markets/ addict could potentially become healthy if the dealer stopped dishing out the drugs. This ties in with Bernanke’s claims that everything is under control and that he can remove the excess liquidity anytime he wants to.