Sleepycatz

Are We Screwed?

I’ve been meaning to write about all economic lunacy perpetrated by the Federal Reserve for sometime, but this quote from this weekend’s OPEC summit just floored me:

On Friday, Prince Saud Al-Faisal, Saudi Arabia’s foreign minister, warned that the dollar could “collapse” if the US currency was mentioned in the declaration.

His remarks – made in what was supposed to be a closed ministerial meeting – were accidentally broadcast to reporters.

Al-Faisal is stating that the dollar is is in such a precarious position that even mentioning that OPEC needs to consider the effects of a low dollar on its members could cause the currency’s collapse. This would lead to outright panic here in America, as well as many of the oil producing states, such as Saudi Arabia, which use dollars as the basic pricing mechanism for oil. Because of the fall in the dollar’s value –44% since the last OPEC meeting 7 years ago– a number of the oil states are calling for greater oil prices to offset the devaluation. This, of course, will result in deepening the nascent recession here at home –which will, no doubt, result in the Fed cutting baseline rates again, thus, causing greater devaluation of the dollar.

In other words, under current Fed policy, we’re screwed. The Fed, however, sees it differently. By cutting baseline rates they are funding speculative investing, and keeping the equities and option markets (artificially) high. The Fed seems to be counting on foreign interests to keep the dollar from collapsing. The belief, seems to be, is that China, which holds around $1 trillion in US bonds, and the oil states of OPEC cannot afford to see the US currency collapse, and will continue to invest in dollars. But this is a strategy of russian roulette. Eventually, these states will decide they can no longer afford the losses on the dollar and begin to reinvest elsewhere –China, earlier this year began selling off US bonds at an alarming rate.

Last week President Bush charged congressional Democrats with spending money like “a teenager with a new credit card.” This from a man whose administration shipped 360 tons of US dollars to Iraq with no accounting or oversite in place. This from a man who has presided over the greatest increase in national debt in US history; an in increase in spending which has had no positive effects for the majority of Americans. When Franklin Roosevelt and Lyndon Johnson borrowed, they did so to try to enrich the American people. This president has done so simply out of hubris, and has enriched only the wealthy. The American people have found their wages stagnated at levels lower then those 30 years ago. They have found themselves with crumbling infrastructure, a crumbling military, and an inept and crony filled regulatory landscape to protect them.

I don’t generally believe in grand conspiracy theories, but, if I did, I could easily see one here. Thanks to Bush’s tax cuts, and outrageous spending on a never ending war and ‘homeland security,’ coupled with the “spend it now” attitude of the Federal Reserve we find ourselves perilously close to an economic meltdown. When one looks around, one can easily see the ‘free market’ wolves waiting in the wings. They will cry out that the problem with the US is that it spends too much on social programs, like Medicare and Medicaid, and others; that government is too inefficient and we need to privatize more and let the markets run without restraints and regulations. The fact is, they will be responding to a crises of their own making.

The harlequin speech of suicide

I saw the best minds of my generation destroyed by
madness, starving hysterical naked,
dragging themselves through the negro streets at dawn
looking for an angry fix,
angelheaded hipsters burning for the ancient heavenly
connection to the starry dynamo in the machinery of night. . .

So begins, arguably, one of the greatest American poems written in the last 100 years. Today marks the 50th anniversary of the landmark ruling in People v. Ferlinghetti allowing the sale of Allen Ginsberg’s Howl. In 1957 the local authorities in San Fransisco had charged poet, publisher, and bookseller, Laurence Ferlinghetti with obscenity over his publication and sale of Howl. On October 3rd, Judge Clayton Horn, who was a Sunday School teacher and had recently sentenced five shoplifters to read and write essays on the Ten Commandments, wrote:

Would there be any freedom of the press or speech if one must reduce his vocabulary to vapid and innocuous euphemism? An author should be real in treating his subject and be allowed to express his thoughts and ideas in his own words. . . . If the material has the slightest redeeming social importance it is not obscene. . .

Fifty years after Judge Horn’s opinion New York Public Radio changed it’s mind and decided not to air the poem on the grounds that it might be deemed obscene by the FCC. With their new found power to fine stations hundreds of thousands of dollars under obscenity rulings, the FCC has created a climate of censorship which would make any authoritarian proud. How, exactly, the FCC can deem something obscene which the courts have explicitly held is not, is a leap of legal logic which boggles the mind. The great irony, of course, is that the society Ginsberg railed against in Howl is stronger today then when he wrote the poem — and that society which was able to tolerate his words fifty years ago seems unable to do so today. So what are we to say to the FCC and the puritans who would gladly sacrifice poetry, literature and art on the pyres of purity? Are we to acquiesce and accept their fatherly admonishments of what’s proper and decent, or are we to fight and cry, as William Carlos Williams did in his introduction to Howl: “Hold back the edges of your gowns, Ladies, we are going through hell.”

Expulsion from the Garden

Someone alerted me this evening to the story of Steve Bitterman, who was dismissed from teaching at Southwestern Community College in Iowa for telling his students that not to take the story of the Garden of Eden literally. Students viewing a simulcast of the class at a neighboring college complained that Bitterman had denigrated their religion and threatened to sue; the college responded by firing the adjunct professor. Here’s the irony: Bitterman was teaching a class in western civilization.

Anyone who has had to go through the intro to western civ sections as a college freshman understands that it was the re-introduction of reason and logic from the ancients which fueled the expansion of western knowledge and civilization. Even as early as the fifth century St. Augustine wrote:

It not infrequently happens that something about the earth, about the sky, about other elements of this world, about the motion and rotation or even the magnitude and distances of the stars, about definite eclipses of the sun and moon, about the passage of years and seasons, about the nature of animals, of fruits, of stones, and of other such things, may be known with the greatest certainty by reasoning or by experience, even by one who is not a Christian. It is too disgraceful and ruinous, though, and greatly to be avoided, that he [the non-Christian] should hear a Christian speaking so idiotically on these matters, and as if in accord with Christian writings, that he might say that he could scarcely keep from laughing when he saw how totally in error they are.

By rejecting the idea that reason should trump doctrine, Bitterman’s students are rejecting the very core of the class they are taking. They are telling their college that knowledge should not challenge their preconceptions or beliefs. By firing Bitterman the college has sided with this ignorance. Instead of telling the offended students that they should grow up — or perhaps find a different class — the college has said all students now must bathe in the ignorance of the few. They have sacrificed Bitterman to the modern inquisition of fundamentalism.

It is very apparent that if the complaining students have their way there would be no western civilization, and certainly no study of it. For they have decided to reject the fruit of the tree of knowledge and embrace ignorance. Unfortunately, they want to drag the rest of us to their fairy tale land with them.

It’s Raining Money

The Fed today decided to drop the target rate for Federal funds by 50 base points, to 4.75 percent. The board felt as though this was necessary to help stabilize investments in the mortgage and stock markets after the recent unpleasantness related to default rates and MSO devaluations. Of course, this sent the stock markets into a buying frenzy — putting the DOW at +300, as I write this. Wall Street loves cheap money that can be bandied about and thrown into risky investments. But at the same time stock trading surged, the global ramifications also became apparent: the dollar dropped to a record low and gold is approaching a record high — two signs that overall confidence in the American economy are waining. As borkafatty succinctly stated on Calculated Risk:

Consider this: In 2000, when Bush took office, gold was $273 per ounce, oil was $22 per barrel and the euro was worth $.87 per dollar. Currently, gold is over $700 per ounce, oil is over $80 per barrel, and the euro is nearly $1.40 per dollar. . . According to economist Martin Feldstein, “The falling dollar and rising food prices caused market-based consumer prices to rise by 4.6% in the most recent quarter.” (WSJ). That’s 18.4% per year—and yet, Bernanke is cutting interest rates and further fueling inflation?!?

With this cut, it appears the Fed is propping up a failing economic model. For the past several years, the American economy has been built on consumer spending and financial shenanigans. 70 percent of US economic activity is related to this consumer spending which has been fed by low interest rates resulting in ever rising consumer debt. As real world wages have remained stagnant, and food and transportation costs continue to rise, this system becomes unsustainable. At some point creditors will have to be paid and consumer spending will have to decline significantly. Without artificially high consumer spending a large portion of service jobs will disappear causing further recession. Our present economic situation is built on an illusion of free markets and a never ending, never inflating, money supply. This is the Bush policy of neo-reality applied to economics — “If I say everything is good, then by nature it is good”. This administration has tried to force their reality on the American people for years whether is was with regards to Iraq, Afghanistan, the War on Terror, Global Warming, or the economy.

Hunters - Gatherers

Johannes Ullrich over at SANS, reminded me of an increasing threat to the telecommunications and power infrastructure: copper and fiber theft. Odd as it seems, we have arrived at a point where people are robbing both construction sites and critical infrastructure of copper in order make a few bucks. Over the past few months several people have been hurt or killed while trying to harvest copper wire from live electrical lines. There is, of course, some kind of sad darwinian justice to these injuries, but the overall success of these thieves seems to be quite high.

Recent copper thefts have caused major phone, Internet, and video outages for Time Warner, AT&T, Verizion, and other carriers. It has gotten so bad, that at the beginning of this month AT&T and Time Warner have started offering rewards for information regarding the thefts, and Pennsylvania and other states are working to pass new metallic theft laws.

Copper prices have been at their highest levels for the past couple of years and scrap copper has been hanging around $3.40/lbs. The high prices are primarily due to the construction boom in the US, and infrastructure modernization in China and throughout Asia. Yes, this is the global trading village where one can pillage copper phone lines from one country, re-mold it to new wire, and sell it to another.

There is something both frightening and sad about people ripping apart their own infrastructure for a few dollars a pound. This problem seems much more prevalent then one would imagine and I wonder if it is a sign of the times, or simple a new avenue of common thievery.