No matter how many of his Fed presidents claim they are not to blame for the high price of oil, the real problem starts with Ben Bernanke. The fact is that when you flood the market with far too much liquidity and at virtually no interest, funny things happen in commodities and equities. It was true in the 1920s, it was true in the last decade, and it’s still true today.
Richard Fisher, president of the Dallas Federal Reserve, spoke in Germany in late March. Reuters quoted him as saying, “We are seeing speculative activity that may be exacerbating price rises in commodities such as oil.” He added that he was seeing the signs of the same speculative trading that fueled the first financial meltdown reappearing.
Here Fisher is in good company. Kansas City Fed President Thomas Hoening, who has been a vocal critic of the current Fed policy of zero interest and high liquidity, has suggested that markets don’t function correctly under those circumstances. And David Stockman, Ronald Reagan’s Budget Director, recently wrote a scathing article for MarketWatch, titled “Federal Reserve’s Path of Destruction,” in which he criticizes current Fed policy even more pointedly. Stockman wrote, “This destruction is, namely, the exploitation of middle class savers; the current severe food and energy squeeze on lower income households … and the next round of bursting bubbles building up among the risk asset classes.”
Category: Current Events
Is Facebook geared to dullards?
Are you ashamed that you find Facebook boring? Are you angst-ridden by your weak social-networking skills? Do you look with envy on those whose friend-count dwarfs your own? Buck up, my friend. The traits you consider signs of failure may actually be marks of intellectual vigor, according to a new study appearing in the May issue of Computers in Human Behavior.
The study, by Bu Zhong and Marie Hardin at Penn State and Tao Sun at the University of Vermont, is one of the first to examine the personalities of social networkers. The researchers looked in particular at connections between social-network use and the personality trait that psychologists refer to as “need for cognition,” or NFC. NFC, as Professor Zhong explained in an email to me, “is a recognized indicator for deep or shallow thinking.” People who like to challenge their minds have high NFC, while those who avoid deep thinking have low NFC. Whereas, according to the authors, “high NFC individuals possess an intrinsic motivation to think, having a natural motivation to seek knowledge,” those with low NFC don’t like to grapple with complexity and tend to content themselves with superficial assessments, particularly when faced with difficult intellectual challenges.
The researchers surveyed 436 college students during 2010. Each participant completed a standard psychological assessment measuring NFC as well as a questionnaire measuring social network use. (Given what we know about college students’ social networking in 2010, it can be assumed that the bulk of the activity consisted of Facebook use.) The study revealed a significant negative correlation between social network site (SNS) activity and NFC scores. “The key finding,” the authors write, “is that NFC played an important role in SNS use. Specifically, high NFC individuals tended to use SNS less often than low NFC people, suggesting that effortful thinking may be associated with less social networking among young people.” Moreover, “high NFC participants were significantly less likely to add new friends to their SNS accounts than low or medium NFC individuals.”
To put it in layman’s terms, the study suggests that if you want to be a big success on Facebook, it helps to be a dullard.
Al Jazeera’s Social Media Experiment “The Stream” Launches Online Today
Al Jazeera’s aggressive expansion into cyberspace hopes to empower a new generation of newsmakers, impact the American news market, and capture the attention of young cable cutters.
Fresh off the wild success of Internet-fueled Middle-East revolution stories, Al Jazeera English today is launching the online component to its forthcoming social media-centered news program, The Stream. It’s the most aggressive integration of social media into a live news program to date. And Al Jazeera says it wants to capture a new generation of cable “cord cutters,” push the limits of so-called “citizen journalism,” and inch into American media territory.
A social storytelling service powers the editorially curated content, which is complimented by community commenting before, during, and after the anchored news show. It’s scheduled to start airing May 2nd.
The Real Housewives of Wall Street: Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?
America has two national budgets, one official, one unofficial. The official budget is public record and hotly debated: Money comes in as taxes and goes out as jet fighters, DEA agents, wheat subsidies and Medicare, plus pensions and bennies for that great untamed socialist menace called a unionized public-sector workforce that Republicans are always complaining about. According to popular legend, we’re broke and in so much debt that 40 years from now our granddaughters will still be hooking on weekends to pay the medical bills of this year’s retirees from the IRS, the SEC and the Department of Energy.
Why Isn’t Wall Street in Jail?
Most Americans know about that budget. What they don’t know is that there is another budget of roughly equal heft, traditionally maintained in complete secrecy. After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the “official” budget in size — a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.
Now, following an act of Congress that has forced the Fed to open its books from the bailout era, this unofficial budget is for the first time becoming at least partially a matter of public record. Staffers in the Senate and the House, whose queries about Fed spending have been rebuffed for nearly a century, are now poring over 21,000 transactions and discovering a host of outrages and lunacies in the “other” budget. It is as though someone sat down and made a list of every individual on earth who actually did not need emergency financial assistance from the United States government, and then handed them the keys to the public treasure. The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. “Our jaws are literally dropping as we’re reading this,” says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. “Every one of these transactions is outrageous.”
On The US Budget Deficit & Debt
Obama adds fuel to confusion but no resolution, Mohamed El-Erian:
A friend and former colleague of mine, Paul McCulley, once made the distinction between those who were “responsibly irresponsible” and those who were “irresponsibly irresponsible”. The two notions explain why more unsatisfactory last-minute policy compromises are now likely, despite President Barack Obama’s impressive speech on how America must move forward to tackle its debt ceiling, and its wider problem of budgetary reform.
Mr Obama proposed cutting $4,000bn from deficits over the next 12 years, reducing government outlays to Medicare and Medicaid healthcare programmes, and even considered tax increases. His speech therefore provides an important opportunity to advance this debate, but a much broader context is still needed if it is to succeed in overcoming both domestic political stalemates and growing concerns abroad.
Back in the final quarter of 2008 and the beginning of 2009, it was right for the US to behave responsibly irresponsible. At that moment every available part of the public sector balance sheet, from the Federal Reserve’s to the Federal budget, had to be used to avoid an economic depression. And it worked.
The radical right and the US state by Martin Wolf:
What does the rise of libertarianism portend for the future of the US? This is not a question of interest to Americans alone. It matters almost as much to the rest of the world. A part of the answer came with the publication of a fiscal plan, entitled “Path to Prosperity”, by Paul Ryan, Republican chairman of the house budget committee. The conclusion I draw is the opposite of its author’s: a higher tax burden is coming. But that leads to another conclusion: much conflict lies ahead, with huge implications for politics, federal finance and the US ability to play its historic role.
An analysis of the Ryan plan by the Congressional Budget Office makes the point. Its “extended-baseline scenario” assumes that current law remains unchanged. Under that assumption, revenue would rise from 15 per cent of gross domestic product to 21 per cent in 2022 and on to 26 per cent in 2050. Spending would rise substantially, too, from 23¾ per cent of GDP in 2010 to 30¼ per cent in 2050. As a result, the deficit would fall from today’s levels while debt held by the public would rise to 90 per cent of GDP in 2050.
As the CBO makes plain, this is an optimistic scenario. Current law includes, most notably, the assumption that the 2001 and 2003 tax cuts will expire, as legislated. Together with the impact of fiscal drag from economic growth and inflation, this generates the rising share of revenue in GDP. On the side of spending, the share of social security in GDP rises modestly, from 4¾ per cent of GDP in 2010 to 6 per cent in 2050. The share of all other spending (including defence), apart from that on health, is assumed to fall to close to its long-run average of 8 per cent of GDP. But health spending explodes, from 5½ per cent of GDP in 2010 to 12¼ in 2050.
Facing Default, Publisher Lee Enterprises Sells ‘Junk’ to Foil Distressed Investors
Newspaper chain Lee Enterprises Inc. is on the verge of saving itself from bankruptcy–and many of its debt holders are livid.
Lee, weighed down by about $1 billion of debt, has long been high on the list of potential bankruptcies. But thanks to the roaring market for debt of risky companies, Lee is preparing to sell junk bonds that would enable it to pay off its obligations and give it a new shot at survival.
But what is good news for the company has thwarted the plans of a flock of “vulture” investors–Monarch Alternative Capital, Alden Global Capital, Marblegate Asset Management and a unit of Goldman Sachs Group Inc.–which have been buying Lee’s loans. The group had been betting the company would default, and that they could turn their holdings into an ownership stake, giving them access to the company’s assets, which include St. Louis Post Dispatch and the Arizona Daily Star newspapers.
…..
Lee incurred much of its debt in 2005 when it paid top-dollar to buy Pulitzer Inc., a chain of 14 newspapers including the St. Louis Post-Dispatch. The combined company would have been a particularly valued prize because, unlike many of the other publishers that went bankrupt in recent years, the company generates over $100 million of free cash flow despite its debt load. The publisher’s focus–running small and midsize papers and keeping a rein on costs–has insulated it from the worst of the decline in subscriptions and advertising affecting newspapers in metropolitan markets.
Lee owns half of Capital Newspapers, publisher of the Wisconsin State Journal.
God’s Glory: Spring Flowers begin to Appear on a Gorgeous Sunday
Tiësto: Electronic Music’s Superstar
If we needed evidence that electronic dance music is a force in pop culture, last weekend’s Ultra Music Festival held downtown here provided it. Some 150,000 tickets were sold to the three-day event–about equal to the total for last year’s Coachella Music & Arts Festival in the desert town of Indio, Calif., and about twice the number for June’s Bonnaroo Music & Arts Festival in Manchester, Tenn.
Whereas Coachella 2011, next month, will feature Arcade Fire, Kanye West, Kings of Leon and the Strokes as its rock and pop headliners, and Bonnaroo will offer Eminem, Robert Plant & Band of Joy and a reunited Buffalo Springfield (as well as Arcade Fire and the Strokes), the biggest name at Ultra Music–at least to a mainstream audience–was Duran Duran, which was here to promote its new album. But traditional measurements for rock-and-pop success are irrelevant in the electronic-dance culture. Witness Tiësto, the stage name of the Dutch disc jockey, producer and composer Tijs Michiel Verwest, the headliner on Friday, Ultra’s opening night. Though he’s never had a crossover radio hit and his solo albums sell modestly, Tiësto is a major international star, as confirmed by one familiar evaluation: His annual income apparently exceeds $20 million.
Consumers have a beef with Fed over inflation
Food riots, deposed Middle Eastern despots and now this? Last week, a Texas man brandishing an assault rifle was involved in a three-hour shoot-out with police and had to be subdued with tear gas after ordering seven Beefy Crunch Burritos at a Taco Bell drive-through and being informed that their price had risen from 99 cents to $1.49.
Late night comedians and serious pundits alike had a field day with the story, opining on issues like fast-food culture, obesity (the seven burritos contain 3,600 calories, double the recommended daily intake) and gun control.
With his petty gripe, the gunman, Ricardo Jones, is no Muhammad al Bouazizi, the self-immolating Tunisian fruit seller who inspired millions across the region to throw off the yoke of tyranny, but 50 per cent is 50 per cent in San’a or San Antonio. Food inflation is a global phenomenon.
Dynamist Blog: The Chart Every Journalist Covering the Fukushima Plant Should Read
For the past week, I’ve been complaining that journalists covering possible radiation dangers from Fukushima plant have abandoned the old convention of putting radiation exposures in context (usually by comparing them to chest x-rays). The result is that all “radiation” sounds equally dangerous, and people in Plano, Texas, start stocking up on potassium iodine.