Those Domestic Situations

The New York Times reports today that the Bush administration in 2002 considered sending U.S. troops into a Buffalo, N.Y., suburb to arrest a group of terror suspects in what would have been a nearly unprecedented use of military power.

According to U.S. Sen. James Inhofe (R-OK) and U.S. Rep. Brad Sherman (D-CA) said that as U.S. Treasury Secretary Henry Paulson pushed for the Wall Street bailout in September 2008, he brought up that that the crisis might even require a declaration of martial law, as a worst-case scenario.

The Associated Press notes that dispatching troops into the streets is virtually unheard of. “The Constitution and various laws restrict the military from being used to conduct domestic raids and seize property.”

A 1994 U.S. Defense Department Directive (DODD 3025) allegedly allows military commanders to take emergency actions in domestic situations to save lives, prevent suffering or mitigate great property damage. The Clinton administration had set up the Joint Task Force-Civil Support in October 1999 as a “homeland defense command.”

In 2002 the Pentagon established the U.S. Northern Command, charged with carrying out military operations within the United States. Prior to this, under the Posse Comitatus Act of 1878, the U.S. armed forces had been barred from domestic operations, except in specific, limited circumstances.

So that Associated Press note about “dispatching troops into the streets as virtually unheard of” is a historic note. It is a mistake to say the “constitution and various laws restrict the military from being used to conduct domestic raids and seize property.”

Pentagon officials at one point to end 2008 were projecting some 20,000 active-duty U.S. troops to be stationed in the United States by 2011.

The Minsky Watch

There has been a lot of public discourse over the last year of systemic risk without any real systemic re-pricing of risk in my neighborhood, which would have a deflationary affect. Now my home is located within a few blocks of some famous people, like Joe Mauer and Garrison Keiller. From my own research, the homes around here have barely budged in valuation over the past year. Home now selling for $575,000 that would not have brought $325,000 since the time I moved into the neighborhood in the 1990s. In times when the financial system economy was not overlooking the precipice, trapped in a classic debt-deflation cycle as it seemed now in which falling asset prices and declining consumer demand transmit deflation through the economy. It had not really happened much yet in my neighborhood.

A number of publications have referred to real unemployment to be near 20%, despite the $787 billion stimulus package. State budgets are drowning in red ink, soon to deepen with jobless claims and Medicaid bills, hesitant to spend consumers as paychecks shrink and jobs disappear. I would not be buying stocks with this kind of economic forecast, yet this week the indexes on Wall Street sprouted up like Iowa corn.

The speculators still abound. People who are gambling with their money in these times, as they had gambled turning real estate in this decade. In May 2009, Paul McCulley of PIMCO wrote, “The longer people make money by taking risk, the more imprudent they become in risk-taking. While they’re doing that, it’s self-fulfilling on the way up. If everybody is simultaneously becoming more risk-seeking, that brings in risk premiums, drives up the value of collateral, increases the ability to lever and the game keeps going. Human nature is inherently pro-cyclical, and that’s essentially what the Minsky thesis is all about.”

Hyman Minsky is an economist who has gained a lot of disciples over the past few years. He wrote about bubbles that occur in an economy. He theorized that a bubble begins with displacement caused by a significant invention like the internet. A displacement creates profitable opportunities in any given affected sector but, rather than invention alone, financial innovation is necessary for access to cheap credit before a kick-off to an over-trading phase. Euphoria ensues as people pile into the sector, with a driving demand to affect higher prices, often with borrowed money. Ponzi’ investors join in speculation that someone will buy their assets at higher prices. But markets eventually, whether due to lenders tightening lending criteria or insiders selling out, hit a peak. Panic then sets in. With a stampede out of the market, bankruptcies ensue.

James Fallow’s opening paragraph in this months Atlantic Monthly is: “On March 28, 2007, Federal Reserve Chairman Ben Bernanke appeared before the congressional Joint Economic Committee to discuss trends in the U.S. economy. Everyone was concerned about the ’substantial correction in the housing market,’ he noted in his prepared remarks. Fortunately, ‘the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.’ Better still, ‘the weakness in housing and in some parts of manufacturing does not appear to have spilled over to any significant extent to other sectors of the economy.’ On that day, the Dow Jones industrial average was above 12,000, the S&P 500 was above 1,400, and the U.S. unemployment rate was 4.4 percent. That assurance looks bad in retrospect, as do many of Bernanke’s claims through the rest of the year: that the real-estate crisis was working itself out and that its problems would likely remain ‘niche’ issues. If experts can be this wrong—within two years, unemployment had nearly doubled, and financial markets had lost roughly half their value—what good is their expertise? And of course it wasn’t just Bernanke, though presumably he had the most authoritative data to draw on. Through the markets’ rise to their peak late in 2007 and for many months into their precipitous fall, the dominant voices from the government, financial journalism, and the business and financial establishment under- rather than overplayed the scope of the current disaster.”

Paul McCulley delivered a speech to the 17th Annual Hyman Minsky Conference on April 17, 2008. He stated, “Since August 2007, the shadow banking system – defined as any levered lender who does not have access to (1) deposit insurance and/or (2) the Fed’s discount window – experienced a modern-day run, with asset-backed commercial paper holders refusing to roll over their paper. It has not been fun. It has not been pretty.” And he saw that it was not over, as the ensuing 15 months proved. Whereas James Fallow cited Federal Reserve Chairman Ben Bernanke discussion of trends in the U.S. economy on March 28, 2007, Paul McCulley of PIMCO on April 17, 2008, 25 weeks before the Lehman Brother collapse, talked about a lot of things that Bernanke publicly was oblivious to.

Paul McCulley of PIMCO on April 17, 2008: “Which brings us back to where I began: Minsky’s insight that financial capitalism is inherently and endogenously given to bubbles and busts is not just right, but spectacularly right. And when the financial regulators are not only asleep but actively cheerleading financial innovation outside their direct purview, a disaster is in the making, as the last year has taught us. We have much to learn and relearn from the great man as we collectively restore prudential common sense to bank regulation – both for conventional banks and shadow banks.

In May 2009, Paul McCulley wrote, “Human nature is inherently pro-cyclical, and that’s essentially what the Minsky thesis is all about. He says ‘from time to time, capitalist economies exhibit inflations and debt deflations which seem to have the potential to spin out of control. In such processes the economic system’s reactions to a movement of the economy amplify the movement – inflation feeds upon inflation and debt-deflation feeds upon debt-deflation.’”1

Paul McCulley on April 17, 2008: “Whatever moment you pick for the Moment, we have since been traveling the reverse Minsky journey: moving backward through the three-part progression, with asset prices falling, risk premiums moving higher, leverage getting scaled back and economic growth getting squeezed. Minsky’s Ponzi debt units are only viable as long as the levered assets appreciate in price. But when the price of the assets decline, as we’ve seen in the U.S. housing market, Minsky tells us we must go through the process of increasing risk-taking in reverse – with all its consequences.

“The recent Minsky moment comprised three bubbles bursting: in property valuation in the U.S., in mortgage creation, again, principally in the U.S., and in the shadow banking system, not just in the U.S. but around the world. The blowing up of these three bubbles demanded a systemic re-pricing of all risk, which was deflationary for all risk asset prices. These developments are, as Minsky declared, a prescription for an unstable system – to wit, a system in which the purging of capitalist excesses is not a self-correcting therapeutic process, but a self-feeding contagion: debt deflation.

“Fittingly, the last debt unit on the forward Minsky journey is called a Ponzi unit, defined as a borrower who has insufficient cash flow to even pay the full interest on a loan, much less pay down the principal over time. Now, how and why would such a borrower ever find a lender to make him a loan? Simple: as long as home prices are universally expected to continue rising indefinitely, lenders come out of the woodwork offering loans with what is called negative amortization, meaning that if you can’t pay the full interest charge, that’s okay; they’ll just tack the unpaid amount on to your principal. At the maturity of the loan, of course, the balloon payment will be bigger than the original loan.

“As long as lenders made loans available on virtually non-existent terms, the price didn’t really matter all that much to borrowers; after all, housing prices were going up so fast that a point or two either way on the mortgage rate didn’t really matter. The availability of credit trumped the price of credit. Such is always the case in manias. It is also the case that once a speculative bubble bursts, reduced availability of credit will dominate the price of credit, even if markets and policymakers cut the price. The supply side of Ponzi credit is what matters, not the interest elasticity of demand.

“Clearly the explosion of exotic mortgages in recent years have been textbook examples of Minsky’s speculative and Ponzi units. But they seemed okay, as long as expectations of stably rising home prices were realized. Except, of course they cannot forever be realized. At some point, valuation does matter! How could lenders ignore this obvious truth? Because while it was going on, they were making tons of money. Tons of money does serious damage to the eyesight. And our industry’s moral equivalent of optometrists, the regulators and the rating agencies, are humans too.

“As long as the forward Minsky journey was unfolding, rising house prices covered all shameful underwriting sins. Essentially, the mortgage arena began lending against asset value only, rather than asset value plus the borrowers’ income. The mortgage originators, who were operating on the originate-to-distribute model, had no skin in the game – no active interest – because they simply originated the loans and then repackaged them.
But who they distributed these packages to, interestingly enough, were the shadow banks. So we had an originate-to-distribute model and no skin in the game for the originator, and the guy in the middle was being asked to create product for the shadow banking system.

“The system was demanding product. Well, if you’ve got to feed the beast that wants product, how do you do it? You have a systematic degradation in underwriting standards so that you can originate more. But as you originate more, you bid up the price of property, and therefore you say, “These junk borrowers really aren’t junk borrowers. They’re not defaulting.” So you drop your standards once again. And you take prices up. And you still don’t get a high default rate. The reason this system works is that you, as the guy in the middle, had somebody bless it: the credit rating agencies. A key part of keeping the three bubbles (property valuation, mortgage finance and the shadow banking system) going was that the rating agencies thought the default rates were low because they were low. But they were low because the degradation of underwriting standards was driving up asset prices.

“Both regulators and rating agencies were beguiled by very low default rates during the period of soaring home prices. It all went swimmingly, dampening volatility in a self-reinforcing way, until the bubbles created by financial alchemy hit the fundamental wall of housing affordability.

“Ultimately, fundamentals do matter! We have a day of reckoning, the day the balloon comes due, the margin call, the Minsky Moment.

“If the value of the house hasn’t gone up, then Ponzi units, particularly those with negatively-amortizing loans, are toast. And if the price of the house has fallen, speculative units are toast still in the toaster. Ponzi borrowers are forced to “make position by selling out position,” frequently by stopping (or not even beginning!) monthly mortgage payments, the prelude to eventual default or jingle mail. Ponzi lenders dramatically tighten underwriting standards, at least back to Minsky’s speculative units – loans that may not be self-amortizing, but at least are underwritten on evidence that borrowers can pay the required interest, not just the teaser rate, but the fully-indexed rate on ARMs.
From a microeconomic point of view, such a tightening of underwriting standards is a good thing, albeit belated. But from a macroeconomic point of view, it is a deflationary turn of events, as serial refinancers, riding the back of presumed perpetual home price appreciation, are trapped long and wrong. And in this cycle, it’s not just the first-time homebuyer that is trapped, but also the speculative Ponzi long: borrowers who weren’t covering a natural short – remember, you are born short a roof over your head, and must cover, either by renting or buying – but rather betting on a bigger fool to take them out (“make book”, in Minsky’s words). The property bubble stops bubbling and when it does, both the property market and the shadow banking system go bust.

“The asset class imploded violently, when the conventional basis of valuation was undermined for the originate-to-distribute (to the shadow banking system) business model.

“And the implosion was on Wall Street and next on Main Street, with debt-deflation accelerating in the wake of a mushrooming mortgage credit crunch, notably in the subprime sector, but also up the quality ladder. Yes, we are now experiencing a reverse Minsky journey, where instability will, in the fullness of time, restore stability, as Ponzi debt units evaporate, speculative debt units morph after the fact into Ponzi units and are severely disciplined if not destroyed, and even hedge units take a beating. The shadow banking system contracts implosively as a run on its assets forces it to delever, driving down asset prices, eroding equity – and forcing it to delever again. The shadow banking system is particularly vulnerable to runs – commercial paper investors refusing to re-up when their paper matures, leaving the shadow banks with a liquidity crisis – a need to tap their back-up lines of credit with real banks or to liquidate assets at fire sale prices. Real banks are in a risk-averse state of mind when it comes to lending to shadow banks, lending when required by backup lines but not seeking to proactively increase their footings to the shadow banking system but, if anything, reduce them. Thus, the mighty gulf between the Fed’s liquidity cup and the shadow banking system’s parched liquidity lips.

“The entire progression self-feeds on the way down, just like it self-feeds on the way up. It’s incredibly pro-cyclical. The regulatory response is also incredibly pro-cyclical. You have a rush to laxity on the way up, and you have a rush to the opposite on the way back down. And essentially, on the way down, you have the equivalent of Keynes’s paradox of thrift – the paradox of delevering. It can make sense for each individual institution, for a shadow bank or even a real bank, to delever, but collectively, they can’t all delever at the same time.

“Along the way, policymakers slowly have recognized the Minsky Moment followed by the unfolding reverse Minsky journey. But I want to emphasize “slowly,” as policymakers, collectively, tend to suffer from more than a thermos full of denial. Part of the reason is human nature: to acknowledge a reverse Minsky journey, it is first necessary to acknowledge a preceding forward Minsky journey – a bubble in asset and debt prices – as the marginal unit of debt creation morphed from hedge to speculative to Ponzi. That is difficult for policymakers to do, especially ones who claim an inability to recognize bubbles while they are forming and, therefore, don’t believe that prophylactic action against them is appropriate. But framing policies to mitigate the damage of a reverse Minsky journey requires that policymakers openly acknowledge that we are where we are because they let the invisible, if not crooked, hand of financial capitalism go precisely where Professor Minsky said it would go, unless checked by the visible fist of counter-cyclical, rather than pro-cyclical, regulatory policy.

“That’s not to say that Minsky had confidence that regulators could stay out in front of short-term profit-driven innovation in financial arrangements. Indeed, he believed precisely the opposite. Minsky wrote these words in 1986:

“In a world of businessmen and financial intermediaries who aggressively seek profit, innovators will always outpace regulators; the authorities cannot prevent changes in the structure of portfolios from occurring. What they can do is keep the asset-equity ratio of banks within bounds by setting equity-absorption ratios for various types of assets. If the authorities constrain banks and are aware of the activities of fringe banks and other financial institutions, they are in a better position to attenuate the disruptive expansionary tendencies of our economy.”

Three years later, we can only bemoan that his sensible counsel was ignored and the economy experienced the explosive growth of the shadow banking system, or what Minsky cleverly called “fringe banks and other financial institutions.”
Minsky’s insight that financial capitalism is inherently and endogenously given to bubbles and busts is not just right, but spectacularly right. We have much to learn and relearn from the great man as we collectively restore prudential common sense to bank regulation – both for conventional banks and shadow banks.

“Meantime, we’ve got a problem: we’re on a reverse Minsky journey. The private sector wants to shrink and de-risk its balance sheet, so someone has to take the other side of the trade to avoid a depression – the sovereign. We pretend that the Fed’s balance sheet and Uncle Sam’s balance sheet are in entirely separate orbits because of the whole notion of the political independence of the central bank in making monetary policy. But when you think about it, not from the standpoint of making monetary policy but of providing balance sheet support to buffer a reverse Minsky journey, there’s no difference between Uncle Sam’s balance sheet and the Fed’s balance sheet. Economically speaking, they’re one and the same.

“I think we’re pretty well advanced along this reverse Minsky journey, and it’s a lot quicker than the forward journey for a very simple reason. The forward journey is essentially momentum-driven; there is a systematic relaxation of underwriting standards and all that sort of thing, but it doesn’t create any pain for anybody. The reverse journey, however, does create pain, otherwise known as one giant margin call. The reverse journey comes to an end when the full faith and credit of the sovereign’s balance sheet is brought into play to effectively take the other side of the trade. No, I’m not a socialist; I’m just a practical person. You’ve got to have somebody on the other side of the trade. The government not only steps up to the risk-taking and spending that the private sector is shirking, but goes further, stepping up with even more vigor, providing a meaningful reflationary thrust to both private sector risk assets and aggregate demand for goods and services.
Thus, policymakers have a tricky balancing act: let the deflationary pain unfold, as it’s the only way to find a bottom of undervalued asset prices from presently overvalued asset prices, while providing sufficient monetary and fiscal policy safety nets to keep the deflationary process from spinning out of control. Debt deflation is a beast of burden that capitalism cannot bear alone. It ain’t rich enough, it ain’t tough enough.

“Capitalism’s prosperity is hostage to the hope that policymakers are not simply too blind to see.

“As long as we have reasonably deregulated markets and a complex and innovative financial system, we will have Minsky journeys, forward and reverse, punctuated by Minsky Moments. That is reality. You can’t eliminate the Minsky journeys. It’s a matter of having the good sense to have in place a counter-cyclical regulatory policy to help modulate human nature.

“Not to say that Minsky had confidence that regulators could stay out in front of short-term profit-driven innovation in financial arrangements. Indeed, he believed precisely the opposite:

“In a world of businessmen and financial intermediaries who aggressively seek profit, innovators will always outpace regulators; the authorities cannot prevent changes in the structure of portfolios from occurring. What they can do is keep the asset-equity ratio of banks within bounds by setting equity-absorption ratios for various types of assets. If the authorities constrain banks and are aware of the activities of fringe banks and other financial institutions, they are in a better position to attenuate the disruptive expansionary tendencies of our economy.”

“While asset prices, and notably property prices, were soaring, it was all quite dandy. Which, of course, propelled the Forward Minsky Journey. There were no regulatory cops on the beat, only regulatory czars in corner offices, actively accommodating growth in the shadow banking system. Most fundamentally, regulatory authorities ignored the systemic liquidity risk imposed by the shadow banking system versus the conventional banking system: without access to either deposit insurance or the Fed’s discount window, and mostly void of any meaningful term financing, the shadow was a sitting duck for a classic run on liquidity. And ever since last August, that has been precisely what has unfolded, punctuated by the run on Bear Stearns last month.

“Along the way, the Fed has taken gallant and bold steps to inject liquidity into the markets, creating lending facility after lending facility. But up until last month, when the Fed opened the discount window to investment banks, who are the largest shadow banks of all, the Fed’s role as liquidity provider of last resort was simply not effective, however valiant it may have been. Channeling liquidity to conventional banks, in hopes that they would pass it along to shadow banks, simply did not work very well, though it did have the salutatory effect of allowing some banks to (reluctantly) expand their balance sheets so as to absorb assets being disgorged by shadow banks.

“As the Bear Stearns rescue forcefully demonstrated, the Fed had no choice but to open the discount window to investment banks, to facilitate the takeover of Bear in particular and even more importantly, to prevent a cascading of runs. This was a moment of truth and clarity, if there ever was one. I applaud the Fed for doing what it had but no choice to do. At the same time, the Fed’s action demands a complete re-think of the bifurcated regulatory regime for conventional banks and investment banks.

James Fallow: “The difference was partly ‘debt versus equity.’ That is, a loss of stock-market value is damaging, but defaults on loans which put banks themselves in trouble had a ‘multiplier’ effect. The difference between this crash and others, Nouriel Roubini said, was that the speculative bubble involved so much more of the economy than the term ‘subprime’ could suggest. ‘It was subprime, it was near-prime, it was prime mortgages. It was home-equity-loan lines. It was commercial real estate, it was credit cards, and it was auto loans. When there’s a credit crunch, for every dollar of capital the financial institution loses, the contraction of credit has to be 10 times bigger.’

“‘Bernanke should have known better. But it’s not really about him. It’s in everybody’s interest to let the bubble go on. Instead of the wisdom of the crowd, we got the madness of the crowd. So when the proverbial stuff hit the fan in the summer of 2007, the Fed and the Bush administration were initially taken by surprise,’ Nouriel Roubini concluded. ‘Their analysis had been wrong. And they didn’t understand the severity of what was to come. And all along, their policy was two steps behind the curve. We’ve had a model of growth in which over the last 15 or 20 years, too much human capital went into finance rather than more-productive activities. It was a growth model where we over-invested in housing, the most unproductive form of capital. We have been in a growth model based on bubbles, and the model has broken down, because we borrowed too much. The only time we are growing fast enough is when there is a big bubble.

And so the government now more than doubled note and bond offerings to $963 billion in the first half of 2009 as it tries to end the recession. It may sell another $1.1 trillion by year-end, according to Barclays. The second-half sales would be more than the amount sold in all of 2008.

“Unless we demonstrate a strong commitment to fiscal sustainability, we risk having neither financial stability nor durable economic growth,” Fed Chairman Ben Bernanke said this week in semi-annual testimony before the House Financial Services Committee. Bernanke said “limited inflation pressures” will allow policy makers to keep interest rates near zero for an “extended period.”

“‘The Fed is now embarked on a policy,’ Nouriel Roubini said, ‘in which they are in effect directly monetizing about half of the budget deficit. The public debt is going up, and the federal government is covering about half of that total by printing new money and sending it to banks. In the short run, that monetization is not inflationary.” But banks are holding much of the money themselves. ‘They are not relending it. So that money is not going anywhere and is becoming inflationary.’”

But at some point the recession will end—Roubini’s guess is 2011–and banks will want to lend the money. People and businesses will want to borrow and spend it, James Fallow’s piece concludes.

Writes Alan Blinder, a Princeton University professor of economics and public affairs, in the Wall Street Journal: “Economic conditions are dreadful at the bottom of a deep recession. Jobs are scarce. Layoffs abound. Businesses scramble for penurious customers. Companies go bankrupt. Banks suffer loan losses. Tax receipts plunge. Government budget deficits balloon. All this and more in what now looks to be the country’s worst recession since 1938. So why is everyone so blue when the U.S. economy is hitting bottom. The good news also is the bad news. As the economy hits bottom, it’s a long uphill climb to get out.

Paul McCulley of PIMCO and Bill Gross of PIMCO and Mohamed El-Erian at PIMCO have had a better public perspective than Mr. Bernanke has over the past two years. As did Nouriel Roubini. It is hard to believe his name will be put in nomination at the soon to end current term as Fed chief, no matter his performance since September 2008. Even though the real-estate crisis was working itself out and its problems likely remained ‘niche’ issues, and had not approached my neighborhood.

Those Arizona Diamondbacks

The wife of Senator John McCain did have some tangential relationship to news on the passing of Max Dunlap in prison. Cindy McCain was the daughter of a Budweiser distributor in Arizona who had, according to an investigation in 1976 following the death of reporter Don Bolles, acquired his business from mob connections. And if not for the mob connections of his in-laws family, the Henselys, John McCain would never have been the senator from Arizona. Professional journalists sent a contingent force to complete the investigation begun by Don Bolles.

In 1993, Max Dunlap was convicted of murder and conspiracy to commit murder for arranging the killing of Don Bolles. Bolles’ brother wrote the book What Color Is Your Parachute? Max Dunlap, 81, was serving a life sentence for the car-bomb in a parking lot of a Phoenix hotel of an Arizona Republic reporter Bolles who at the time had gone to meet a tipster as he was investigating land fraud and organized crime. A bomb made of dynamite planted under the car was detonated by remote control. There is a blockbuster movie in the story if anyone ever gets funding to put a production company together.

Newsday’s Bob Greene at the time made a pitch to the Investigative Reports and Editors board, that at the very least, the project to expose corruption “in a community in which an investigative reporter has been murdered,” would result in the Arizona community and other like communities in reflection on what had happened and hopefully would result in thinking “twice about killing reporters.” Thirty-eight journalists from 28 newspapers and television stations across the country descended on Arizona.

“For all of us – particularly newspapers with high investigative profiles – this is eminently self-serving. As individuals we are buying life insurance on our own reporters. If we accomplish only this, we have succeeded.”

Working under Greene, they set out not to find Bolles’ killer but to finish his work of exposing Arizona’s tangled underworld. This piece reflects the result of that investigation, that touched the family of Cindy McCain.

Prosecutors believed Bolles was targeted because of stories that he had written which upset a liquor wholesaler who was a mentor of Dunlap. Bolles’ car exploded as he backed out and he died 11 days later from those injuries. Max Dunlap was one of three men convicted in his killing. John Adamson, who police said put the bomb on the car, was released from prison in 1996 after serving a 20-year sentence. He died in 2002. James Robison, who was accused of setting off the bomb, was convicted of murder and conspiracy, but his conviction was overturned.

The team-produced series made its debut on March 13, 1977, amid continuing controversy. Among those publishing the series: Newsday, The Miami Herald, The Kansas City Star, The Boston Globe, The Indianapolis Star, and The Denver Post. The Arizona Daily Star in Tucson was the sole newspaper in Arizona to publish the series. Many others carried reports from the Associated Press that began on March 18, five days after the first stories started.

It was said that Arizonan would never be told the true background to any of this by the Arizona media, like the Arizona Republic and the Phoenix Gazette, which were started by a guy called Eugene Pullium, at the instigation of Kemper Marley.

James Danforth “Dan” Quayle (born February 4 1947) is an American politician and a former Senator from the state of Indiana. He was the forty-fourth Vice President of the United States under George H. W. Bush (1989–1993). Quayle was born in Indianapolis to Martha Corinne Pulliam and James C. Quayle. He has often been incorrectly referred to as James Danforth Quayle, III. In his memoirs, he points out that his birth name was simply James Danforth Quayle. The name Quayle originates from the Isle of Man. His maternal grandfather, Eugene C. Pulliam, was a wealthy and influential publishing magnate who founded Central Newspapers, Inc., owner of over a dozen major newspapers such as the Arizona Republic and The Indianapolis Star. James C. Quayle moved his family to Arizona in 1955 to run a branch of the family’s publishing empire. While the Quayle family was very wealthy, Dan Quayle was less so; his total net worth by the time of his election in 1988 was less than a million dollars.

McCain’s father-in-law got his start as the top henchman for Kemper Marley, who was for 40 years, until his death in 1990, the undisputed political boss of Arizona, acting as the behind-the-scenes power over both the Republican and Democratic parties. But Marley was more than a politician. He was the Meyer Lansky crime syndicate’s chief Arizona operative front man for the Bronfman family—key players in the Lansky syndicate.

After Prohibition, Lansky-Bronfman associates such as Marley got control of a substantial portion of liquor (and beer) distribution across the country. In fact, Marley’s longtime public relations man, Al Lizanitz, revealed it was the Bronfman family that set Marley up in the alcohol business. However, in 1948, 52 of Marley’s employees (including Jim Hensley, the manager of Marley’s company) were prosecuted for federal liquor violations. Hensley got a 6 month suspended sentence and his brother Eugene went to prison for a year.

The story in Arizona is that Hensley took the fall for Marley in 1948 and Marley paid back Hensley by setting him up in his own beer distribution business. Newsweek implied in an article that Hensley’s company was a “mom and pop” operation that became a big success, but the real story goes to the heart of the history of organized crime. It was the late Tom Renner, Newsday’s mob expert who spent most of his time undercover working “deep and dirty,” on the organized crime background.

Hensley’s sponsor, Marley, was also a major player in gambling, a protégé of Lansky lieutenant Gus Greenbaum who set up in 1941 a national wire for bookmakers. After Lansky ordered a hit on his own longtime partner, “Bugsy” Siegel, who was stealing money from the Flamingo Casino in Las Vegas—which was financed in part by loans from an Arizona bank chaired by Marley—Greenbaum turned day-to-day operations of the wire over to Marley while Greenbaum took Siegel’s place in tending to Lansky’s interests in Las Vegas.

In 1948 Greenbaum was murdered in a mob “hit” that set off a series of gang wars in Phoenix, but Marley survived and prospered as did his protégé, Jim Hensley, whose fortune through his daughter, Cindy, sponsored McCain’s rise to power.

Jim Hensley, McCain’s father-in-law also dabbled in dog racing and expanded his fortune by selling his track to an individual connected to the Buffalo-based Jacobs family, key Prohibition-era cogs in the Lansky network as distributors for Bronfman liquor. Expanding over the years, buying up racetracks and developing food and drink concessions at sports stadiums, Jacobs enterprises were described as “probably the biggest quasi-legitimate cover for organized crime’s money-laundering in the United States.”

In 1955, James Hensley acquired the Anheuser-Busch distributorship for Arizona.

June 2, 1976 – Arizona Republic reporter Don Bolles, one of the founding members of Investigative Reporters and Editors, Inc., was called to meeting in a downtown Phoenix hotel by a source promising him information about land fraud involving organized crime. The source didn’t show up. Bolles left the hotel, got into his car parked outside and turned the key. A powerful bomb ripped through the car, leaving Bolles mortally injured. Bolles, 47, is gravely wounded when six sticks of dynamite are detonated beneath his compact car in the parking lot of the Hotel Clarendon, 401 W. Clarendon Ave. Bolles, who had been lured to the hotel by the promise of a news tip, whispers the name “Adamson” to his rescuers.

Over the next 10 days, doctors amputated both Bolles’ legs and an arm, but could not save him.

His shocked IRE colleagues reacted in a way unprecedented and never copied since. They descended on Arizona for a massive investigation. They set out to find not Bolles’ killer, but the sources of corruption so deep that a reporter could be killed in broad daylight in the middle of town. They were out to show organized crime leaders that killing a journalist would not stop reportage about them; it would increase it 100-fold.

The project was exceedingly controversial and remains so. The New York Times and The Washington Post, giants in the business, chose not to participate. Some journalists, including IRE members, disliked the idea of reporters on a crusade.

June 13, 1976 – Bolles dies. Phoenix Police arrest John Harvey Adamson, racing-dog owner and a former tow-truck operator.

June 16, 1976 – Max Dunlap, a Phoenix contractor, is questioned by Phoenix Police homicide detective Jon Sellers, the lead investigator. Police say Dunlap had been observed delivering cash to Adamson.

Jan. 15, 1977 – In an agreement with prosecutors, Adamson admits planting the remote-control bomb and pleads guilty to second-degree murder. He agrees to cooperate with prosecutors in exchange for a 20-year, two-month prison sentence. Dunlap and James Robison, a Chandler plumber who allegedly helped Adamson by triggering the bomb, are arrested.

July 6, 1977 – Trial begins for Dunlap and Robison, who are charged with first-degree murder. During the trial, Dunlap’s attorney tries to cast suspicion on Phoenix attorney Neal Roberts, who had dealings with both Adamson and Dunlap, as the real mastermind in the murder plot.

Nov. 6, 1977 – A jury finds Dunlap and Robison guilty primarily on the strength of Adamson’s testimony. They also are found guilty of conspiring to kill then-Arizona Attorney General Bruce Babbitt and advertising man Al Lizanetz, because Babbitt had filed an antitrust lawsuit against the liquor industry in 1975. Adamson testifies that Dunlap wanted the three killed because each had angered Dunlap’s friend, millionaire rancher and liquor wholesaler Kemper Marley Sr., who never is charged in the case. Adamson testified he was hired to kill Bolles by Max Dunlap, a Phoenix contractor and close associate of Marley’s. Marley had extended a $1 million loan to Dunlap, which had not been repaid. Adamson said Dunlap hired him to kill Bolles because Marley was upset over Bolles’ stories.

Jan. 10, 1978 – Dunlap and Robison are sentenced to death.

Feb. 25, 1980 – The Arizona Supreme Court, saying defense lawyers should have been allowed to question Adamson more closely, overturns the convictions of Dunlap and Robison and orders a new trial.

June 2, 1980 – The murder charge against Dunlap is dismissed after Adamson balks at testifying against him again. Adamson had asked prosecutors to grant him certain concessions, but was denied.

June 6, 1980 – The Arizona Attorney General’s Office withdraws Adamson’s 1977 plea bargain and reinstates the original charge of first-degree murder.

June 13, 1980 – The murder charge against Robison is dismissed after Adamson refuses to testify.

Oct. 17, 1980 – In a trial held in Tucson, a jury finds Adamson guilty of first-degree murder.

Nov. 14, 1980 – Adamson is sentenced to death.

May 9, 1986 – The 9th U.S. Circuit Court of Appeals in San Francisco overturns Adamson’s death sentence, saying that he improperly was condemned to die after a trial judge had ruled that a prison term was appropriate.

Dec. 22, 1988 – Adamson’s death sentence having been reinstated, it is again overturned by the circuit court.

Nov. 27, 1989 – After a renewed investigation by the Attorney General’s Office, led by investigator George Weisz, James Robison, the Chandler plumber is recharged with the murder of Bolles.

June 25, 1990 – Kemper Marley, Sr., 83, dies of cancer in La Jolla, Calif. In 1976 Bolles had written a series of articles exposing organized crime’s involvement in land fraud. Three men were convicted of Bolles’s murder. The three men were connected with Kemper Marley, Sr., an Arizona liquor wholesaler who was reportedly angered by Bolles’s articles and thought they had cost him a seat on the Arizona Racing Commission. Marley was not charged in Bolles’s murder. Mr. Marley, one of Arizona’s wealthiest men, was the son of an early pioneer family cottonseed oil, produce, a liquor distributorship and cattle and sheep ranches. He also had holdings in Sonora, Mexico, and the Imperial Valley of California, and was a founder of the Farmers and Stockmen’s Bank in Phoenix. (Don Bolles. Bolles wrote extensively about Marley’s lucky past. And about how the Hensleys (Marley’s managers) bought Ruidso Downs racing track in New Mexico. He wrote about Eugene Hensley spending five years in federal prison for a skimming scam. And about the Hensleys selling their track to a buyer linked with Emprise Corp. And about Marley’s liquor ties with Emprise … one of Bolles’ final dispatches appeared as Marley was about to become a member of the Arizona Racing Commission – the agency that regulates racetracks, including those run at the time by Emprise … the story dispatched Marley’s appointment. Two months later, a car bomb killed Bolles.)

June 28, 1990 – The U.S. Supreme Court leaves intact the 1988 appeals court ruling overturning Adamson’s death sentence.

Dec. 19, 1990 – Dunlap is recharged with Bolles’ murder. Dunlap and Robison also are charged with conspiring to obstruct a criminal investigation into the slaying. Adamson agrees to testify against the pair in return for the reinstatement of his 1977 plea bargain and 20-year, two-month prison sentence.

Jan. 11, 1993 – Dunlap and Robison are granted separate trials.

March 22, 1993 -An attorney for Dunlap, John Savoy, is sentenced to two years’ probation on perjury conviction for telling a grand jury he didn’t have any records dating from 1977 related to Dunlap. Prosecutors believed some of the records detailed secret cash payments from Dunlap to the girlfriend of James Robison, the Chandler plumber .

April 20, 1993 – Dunlap is found guilty of first-degree murder and conspiring to obstruct the investigation of the case, and is later sentenced to life in prison without possibility of parole for 25 years.

Dec. 17, 1993 – Robison is acquitted, despite admitting under cross-examination that he asked a fellow jail inmate to arrange for the murder of Adamson, the chief witness against him.

July 26, 1995: Robison, having pleaded guilty to soliciting an act of criminal violence for trying to have Adamson killed, is sentenced to five years in federal prison.

Aug. 12, 1996: Adamson is released from prison and goes into the federal Witness Protection Program, which he will voluntarily leave a few years later.

1998: Robison, 76, is released from prison.

Jan. 28, 1999: Phoenix attorney Neal Roberts dies in poverty at the age of 66 of coronary artery disease, cirrhosis and emphysema. His former secretary says Roberts told her he was involved in the Bolles murder at various levels, but investigators say his statements may have been influenced by his heavy drinking and taste for melodrama.

In a subsequent lawsuit against Investigative Reporters and Editors Inc.. an investigative group that was formed after Mr. Bolles’s killing, a jury in Phoenix awarded Kemper Marley, Sr., $15,000 for emotional distress resulting from a news article that was written about the slaying. The same jury found that the article, which linked Mr. Marley to figures in organized crime, had not libeled him and that his privacy had not been invaded.

Mr. Marley was never charged in the case. In 1989, State Attorney General Bob Corbin said new leads indicated that Mr. Marley had no connection to the killing.

http://www.ire.org/history/

I READ THE NEWS TODAY, OH BOY!

The Government Accountability Office reported yesterday that while funding of the Food and Drug Administration has increased since 2004, so has the agency’s responsibilities. In a previous report 20 years ago, the GAO first raised concerns about FDA’s inability to determine how much money it really needs to do its job. According to the report, the Food and Drug Administration isn’t able to reliably determine how much money it needs to regulate medical products because FDA staff can’t track all the adverse-event reports it handles. The New York Times did a magazine piece on October 31, 2008 about the FDA and the uphill battles they are up against as they attempt to oversee an industry that over the last 30 years has moved to China, in which the FDA maintains two separate data base which indicate either 3,000 foreign drug plants exporting to the United States or as many as 6,800. In the age of diversity, the Chinese do not use many different names and it is hard to distinguish what constitutes a separate plant. And you thought identity theft was a problem here?
When it comes to quality contol, when asked, the Generic Pharmaceutical Association was “largely silent on the issue of the difficulty of regulating factories across several times zones, 6,000 miles, and a vast linguistic and cultural divide.” And the unregulated drug industry now in China would result in death through toxicity, in places that the FDA regulated, based on American law.

In China, in the wake of the melamine-tainted baby formula scandal. In China, where thousands of drug manufacturers sell products in the local markets, where profit margins are razor thin. In China, where contamination and counterfeiting are common, with the Pharmaceutical Association estimating that as much as 8 percent of over-the-counter drugs sold in China were counterfeit in 2002. In an age of moral relativism, what was the cost to the United States imposing FDA standards in China? In China, where the American government was trying to account for things way beyond the mandate of the constitution? We had become the policeman of the world, in China with how many people? And now Congressional lawmakers from both parties have raised concerns about FDA’s inability to determine how much money it really needs to do its job. To police the world. Like in Iran. Like in Afghanistan.

It was not about whether the FDA has enough money to oversee an increasingly complex array of medical products. It was about the use and abuse of power, in the age of globalization.

Another Minsky Moment

According to Elizabeth Moyer in Forbes in November 2008, fighting the financial crisis has put the U.S. on the hook for some $5 trillion, one report says. According to a report by the inspector general for the $700 billion Troubled Asset Relief Program, government’s maximum exposure to financial institutions since 2007 could total nearly $24 trillion. The watchdog overseeing the federal government financial bailout, Neil Barofsky, examined the 50 programs set up by the Federal Reserve as well as by the Bush and Obama administrations, and sent his report to Congress. Barofsky was to give testimony today to the House Oversight and Government Reform Committee.

By the end of October 2008, more than half of the U.S. banks were pretend banks. A failure by the government to support the U.S. financial system could lead to “a depression,” Senator Charles Schumer, a New York Democrat told reporters in September 2008. “To do nothing is to risk the kind of economic downturn this country hasn’t seen in 60 years.” Now, we were all going to have pretend dollars in those pretend banks. Like Citibank and all the other that needed rescue.

Those pretend banks? Providing a broad glimpse at how TARP recipients used federal capital, the report shows 43% of the banks used the money to meet capital or reserve requirements set by regulators. “Absent an infusion of capital [the bank] was unable to continue to meet the needs of its retail and commercial customer base,” one institution wrote.

What was the scale of the problem?

World GDP $47 trillion

World stock valuation $121 trillion

Bond market $85 trillion

Credit derivatives $473 trillion

Bloomberg had reported the total bailout and loan guarantees, the stimulus, totaled $9.7 trillion. As a result of big banks in too many businesses, this republic is threatened. This was not just a sub-prime crisis when people cannot buy homes and cars from a banking system. And the rest of us cannot sell. Where half of the banks are on the brink.

In a world with street smarts, you learned eventually that the “gang” problem had come to a neighborhood near you. Now you learned that the
same thing happened in the world of pretend banks.

With the system of government, why did we let financial institutions concoct a fix to the problem that in their greed they created? It was a worldwide bailout which would take 30 years or more to resolve and end up costing more than $350 trillion in the credit derivatives written, from what I had read.

No one would escape the world of “pretend” banks, where 43% of the banks used the money to meet capital or reserve requirements because there was no money there.

This was the latest version of gang warfare afflicting modern society.

What did you want to own in all of this? China’s reaction to this question, with currency, would determine the next chapter of American history.

Checking from Behind: Gypsies Come To Canada

A refugee is defined, according to the 1951 Geneva Convention on the status of refugees, as someone who “owing to a well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group, or political opinion, is outside the country of his nationality, and is unable to or, owing to such fear, is unwilling to avail himself of the protection of that country…”

With 600,000 refugees claims made in Canada over the past 20 years, the Roma believe based upon mistreatment across Europe that Canada is an ideal destination. A refugee applicant is allowed to stay in Canada on the average 17.8 months waiting for a claim to be processed until their Canadian Immigration and Refugee Board hearing. There are now 60,823 applications held in border facilities in Canada while each claim is assessed under the above definition by Canadian Immigration and Refugee Board (IRB) members.

Canada determines whether a claimant is fleeing a country for legitimate fear of unfair persecution, deciding who is eligible for asylum as a refugee. On April 4, 1985, the Canadian Supreme Court handed down its “landmark” Singh decision which established de facto that the Canadian Charter of Rights and Freedoms applies to anyone who sets foot on Canadian soil. Based on the Canadian Charter of Rights and Freedoms, any person who claims refugee status in Canada has an inalienable right to a formal hearing.

Seventeen years later, Harjit Singh, a convicted criminal in his native India and a known credit card scammer in Canada, was finally put on a plane and sent home in 2005, after a national political scandal and the downfall of an immigration minister, Judy Sgro.

In Canada, all that is needed is a valid passport, and once you set foot on the tarmac at Winnipeg’s Pearson Airport, the machine kicks into gear, and can drag on for years and usually does. A refugee may not be eligible to apply as a refugee if they entered Canada by way of the Canada-U.S. border as part of their “safe 3rd country” agreement which states that someone must seek asylum in the first safe country where they arrive. Thus, with arrival first in the U.S., a “refugee” cannot seek asylum in Canada but must apply in the U.S. There is no eligibility as a refugee on security grounds because of past criminal activity or human rights violations, and no eligibility after rejection by the Canadian immigration board or a withdrawn or previously abandoned refugee claim.

Nearly 10,000 Mexicans and 3,000 Czechs now seek asylum here each year. The vast majority, according to the government, are economic migrants. Both Mexico and the Czech Republic are democracies, more or less. Neither is beset by war or famine now. The Harper government in Ottawa announcement this week Mexican visitors to Canada will immediately need visas to enter Canada. Canadian Immigration Minister Jason Kenney announced as well the new visa requirement for residents of the Czech Republic, along with residents of Mexico on Monday, sparking widespread anger in both countries. Previously there was no permit required for Mexican students staying less than 6 months, a North American Free Trade Agreement partner.

Some 200 deserters from the U.S. military are believed to have fled to Canada, some living incognito. Kimberly Rivera, a mother of 3, had requested permission to remain in Canada on humanitarian grounds but her appeal was rejected. She could face up to five years in prison when she returns to the US. In a memo to Kenney in February, then-deputy minister Richard Fadden provided a thorough review of why all Iraqi war deserters’ claims for refugee status had failed so far with the Immigration and Refugee Board, the Federal Court of Canada and the Court of Appeal. Fadden, now head of the Canadian Security Intelligence Service, wrote that whereas the UN High Commission for Refugees Handbook suggests a relevant factor to consider in a refugee claim is whether a deserter was drafted or joined the army voluntarily, deserters now coming to Canada from the U.S knew the risks and the consequences when they enlisted. Everyone who is there had volunteered for military service. Nobody is serving in Iraq who did not voluntarily sign on.

The Obama administration has also opened the way for foreign women to receive asylum in the United States if they are victims of severe domestic beatings and sexual abuse, reversing a Bush administration stance in a protracted and passionate legal battle over the possibilities for battered women to become refugees. With the peculiarities of the United States immigration system, asylum cases are heard in courts that are run by an agency of the Justice Department, with Homeland Security officials representing the government, not the federal judiciary.

Those Czech gypsies. The European Commission Thursday said it is investigating why so many Czech Romanies are seeking asylum in Canada. The Romanies complain of being discriminated against in the Czech Republic.

In October 1997, Canada for the first time re-introduced visa duty for Czechs as a result of increased immigration of Czech citizens of the Romany community. In 1996-97, approximately 1,500 Czech Romanies applied for asylum in Canada. In April 2001, the Czech Republic reciprocated and Canadian citizens needed visas when traveling to the Czech Republic until the entry of the Czech Republic into the European Union. On November 1, 2007, Canada cancelled the visa duty for Czech citizens, and since that time until the end of March 2009, 1,565 Czech citizens sought asylum in Canada, according the the Czech government. Of the total number seeking asylum in Canada, Czechs represented 4.33% in January 2009 and i 5.77% in n February 2009.

It is has been speculated in the Czech Republic that the Czech Romanies’ departures are organized and that some people profit from them. A part of the refugee wave of Czech Romanies to Canada has been taken aback at the difficult conditions in refugee camps and some of them are returning home. Dozens returning in the recent time who “have found out that Canada is no fools’ paradise,” Dzeno chairman Ivan Vesely told the Czech News Agency.

Critics have speculated that because of the Czech Republic’s membership in the EU,the European Union may debate whether to show solidarity with the Czech Republic by imposing visa requirements on Canadians traveling to any of its 27-member nations resulting in a “visa war” hurting trade relations with the European Union. The European Commission said it is investigating what has been going on in the Czech Republic before making any judgment on decisions by the Canadian goverrnment.

Michael Den Tandt writes in the Winnipeg Sun: “A foreign visitor steps ashore in Halifax and enters the customs lineup. He claims asylum. He’s immediately ushered into a comfortable waiting room. In short order the foreign visitor speaks one-on-one to a senior customs officer. The foreign visitor tells his story and presents any supporting evidence. That process takes 15, maybe 20 minutes. If the story doesn’t measure up, the refugee is politely ushered into another waiting room. He’s offered a meal and a selection of in-flight magazines. As soon as a flight is available off he goes home, courtesy of the government of Canada.

That new policy: “It is causing an uproar in Mexico,” one Mexican reporter bluntly told Foreign Affairs Minister Lawrence Cannon. Cannon defended the controversial decision, saying Canada’s asylum system needed a major overhaul to reduce delays and to stem abuse of fraudulent claim abuse from the waves of refugee claimants from Mexico and the Czech Republic which are now the top two sources of refugee applicants. “People who are traveling at the end of this month should have very little difficulty. We regret the inconvenience,” said Canadian Immigration Minister Jason Kenney with a straight face. He also is the MP for Calgary Southeast.

Gwendolyn Albert, a native Californian, characterized Canada’s move as “clumsy” and warned that it will not only harm Canadian-Czech tourism and other business, but Kenney’s reference to false asylum seekers could inflame anti-Roma sentiment in the Czech Republic. Albert has been an activist on Roma issues. She first came to Prague as a Fulbright scholar in 1989, participating in the Velvet Revolution as a translator for Civic Forum, returning to the Czech Republic in 1994, said “Kenney has gone out of his way to claim there is ‘no discrimination’ against the Roma here, which is a completely laughable assertion.”

Czech Foreign Affairs Minister Jan Kohout blasted Canada, saying its reintroduction of visas was unparalleled, according to the Czech News Agency. “This is not an approach [that] partner and allied countries take to each other,” he said. He further warned the Czech Republic will appeal for solidarity with the European Union to impose visa restrictions for all Canadian travelers.

There used to be a difference between Canadian hockey and the European game, with a lot more concussions suffered by Canadian players. The EU member had to wonder about the after affects of too many checks to the head.

Meanwhile the information has appeared that Canada is considering changing its social advantages for the applicants waiting for the processing of their applications.

The Canadian policy is based upon a ‘holier than thou’ attitude towards the Czech Republic, and their treatment of gypsies. This is seen in the requirement for Czech citizens to apply prior to travel for a visa by sending an application to the Canadian embassy in Vienna, Austria. Maybe the Canadian government is angered over the success of the Czechs against Canada in hockey.

Summer Recess

The outlook on future economic behavior: One in five people in California who desire full time work are not now working. That rate reached 23.5 percent Oregon this spring,, 21.5 percent in both Michigan and Rhode Island, and 20.3 percent in California according to a New York Times analysis of state-by-state data. The rate was just under 20 percent this spring in Tennessee and Nevada.

Mortimer Zuckerman, the chairman and editor-in-chief of U.S. News & World Report wrote today in the Wall Street Journal: “Unemployment has doubled to 9.5% from 4.8% in only 16 months, a rate so fast it may influence future economic behavior and outlook. How could this happen when Washington has thrown trillions of dollars into the pot, including the famous $787 billion in stimulus spending that was supposed to yield $1.50 in growth for every dollar spent? State budgets are drowning in red ink as jobless claims and Medicaid bills climb. Next year state budgets will have depleted their initial rescue dollars. Absent another rescue plan, they will have no choice but to slash spending, raise taxes, or both. As paychecks shrink and disappear, consumers are more hesitant to spend. The combination of a weak job picture and a severe credit crunch means that people won’t be able to get the financing for big expenditures, and those who can borrow will be reluctant to do so. The paycheck has returned as the primary source of spending. Businesses will not start to hire nor race to make capital expenditures when they have vast idle capacity.”

I would not be buying stocks with this kind of economic forecast. The next 12 months are going to be the hardest in 70 years. And in my view, Congress and the president have the same insight into how to resolve pending current affairs as FEMA did during Hurricane Katrina.

Professions and Professionals

It was the age of enhancements.

Those women in the movies. Those athletes in the all-star games.
Enhancements might only attract attention for a short while. That was the nature of enhancement while the human mind figures out what was underneath the next layer.

Ascending into the ranks of the elite, surrendering to individual, partisan, and class interests, people no longer try to preserve their ethnic heritage. Or their belief system. That was the secular world. Those were my thoughts listening to the hearings of a nominee for the U .S Supreme Court.

David Brooks wrote in the New York Times this week that the lure of work provides an organizing purpose and identity. “Until the strains of a multicultural establishment become visible. You see the way that people not only choose a profession, it chooses them. It changes them in a way they probably didn’t anticipate at first.”

Ascension into the ranks of the elite. Business that cut back workers. Parking lots now with money slots instead of attendants. Every business with voice mail instead of real people. The Microsoft world. Where even the armed forces lived and died by computer outages, susceptible to hackers in North Korea. Young people with priceless educations susceptible to outsourcing in India or the Philippines.

The outward signs were there that our institutional arrangements seem to be failing the community. The signs were all around us. In world with too many divorces, more cohabitation, where the equilibrium was lost pursuing self-interests at the cost of the common good. Too many leaders who were not leading. Because the electorate can no longer come together. In board rooms across the country, in state houses, and on Capitol Hill, there was the pursuit of self-interests.

Milwaukee Bucks II

“With stocks tied to bonds, bonds tied to housing, housing tied to the credit crisis, and everyone hitched to the government, this was all like the conga line to the poor house.” -Craig Rappaport, wealth manager at Janney Montgomery Scott

Todd Harrison writes: In a free-market system –such as we used to have –inefficiencies would be naturally resolved by supply and demand. In the current world, a “man made” readjustment, such as a meaningful currency move that significantly devalues the U.S. dollar becomes increasingly likely.

Todd Harrison wrote in January: “Our current course has ominous ramifications for the dollar. As the greenback is the world reserve currency, those implications extend throughout the global landscape. A currency holds a nation together and the economy — perhaps society at large — assumes more, not less, risk as a function of the path of our attempted fix.

“Structural: As the equilibrium between asset classes remains elusive, the single greatest risk remains a seismic shift in currency markets. Therein lay perhaps the most profound path of maximum frustration, one that punishes the savers who proactively prepared for the current crisis. While negative sentiment creates fertile ground for bear-market rallies, aggregate risk appetites contract and voluntary and involuntary thrift collide. This continues to manifest despite efforts by government officials to induce borrowing rather than allowing for the painful, yet necessary, debt destruction required for a more stable economic foundation. Social mood and risk appetites will determine our financial fate and, by extension, the way we live our lives. That proved positive during the era of conspicuous consumption but is troublesome as we edge through the age of austerity.”

Writes Todd Harrison, reviewing his January thoughts: “The age of austerity has officially arrived and we’ll see a steady stream of social strife as the rejection of wealth increases in size and scope. While societal acrimony began to percolate last year, this dynamic will manifest through social unrest and geopolitical conflict as we edge ahead.

”This is, without question, the single biggest socioeconomic risk as we stand at a critical crossroads. On the one side, there is orderly debt destruction that will ultimately pave the way for true globalization. On the other, there is isolationism and protectionism as sovereign nations protect their interests at any cost. If calmer heads don’t prevail and the global community takes a turn for the worse, history books will likely point to Shock & Awe as the beginning of WW III. You don’t have to agree with this assessment; you simply have to respect it.”

“With saber rattling on the currency front (not to mention the general direction of stateside social mood) is proof positive that this unfortunate theme seems to be playing out.

“There is a palpable likelihood that the global balance of powers will fragment into 4 primary regions: North America, Europe, Asia and the Middle East, with ramifications which would manifest through social unrest and geopolitical conflict,” writes Todd Harrison at Marketwatch.com.

Writes Todd Harrison, the seeds of discontent have been sowing under the surface for years, with the greenback off 30% since 2002. It is his view that the stealth recovery actually began at the turn of the century, with the March 2000 top for the NASDQ. And we then are halfway towards what he calls a stealth recovery one way (globalization via debt destruction) or the other (isolationism and global friction).

Todd Harrison now writes about the dollar: “If drugs continue to be injected which mask symptoms rather than address the disease (medicine in the form of debt destruction), the likelihood of a seismic readjustment increases in kind.

“As governments take on more risk—as they price assets on behalf of the market and transfer debt from private to public—the common denominator, or release valve, becomes the currency.”

Asset classes will, as a whole, deflate, and my economic condition measured in greenback will appreciate. And so will my taxes. To pay for it all.

With quantitative easing came a concern for flight of capital from the U.S.

A position paper was written by the Federal Reserve a few years back, discussing the option of a two-tiered currency, one for U.S. citizens and one for foreigners.

Harrison’s January thought was: “The unfortunate aspect of our current conundrum is that in many ways, the cancer is bigger than the patient. It is analogous to a financial dike springing holes faster than the government can invent fingers.”

Joining the growing chorus questioning the U.S. dollar’s unofficial position as global reserve currency, in India, chairman of the Prime Minister’s Economic Advisory Council, Suresh Tendulkar, is urging India to diversify its foreign-exchange reserves and hold fewer dollars, according to Bloomberg News.

Zeng Peiyan, the head of China Center for International Economic Exchanges and the former Chinese Vice-Premier, in a speech in Beijing on Friday called for a new system to ensure the stability of the major reserve currencies, the China Daily reported.

Tensions mounting between the People’s Bank of China’s economic concerns over China’s holdings of dollars, with the earlier call by central bank chief Zhou Xiaochuan for the development of a new super-sovereign currency largely taking the place of the dollar, and the Chinese government, with their “diplomatic reasons” for toning down their criticism, said Stephen Gallo, head of market analysis at Schneider Foreign Exchange. The Chinese government is still more happy to play to the tune of the Bernanke-Geithner camp which sees leaning against the wind in order to protect the U.S. dollar as a necessary evil,” Gallo said.

Writes Todd Harrison: “There is clearly risk to that region but we must remember they have a 25-year head start down Deflationary Road. Japan has the highest level of savings relative to private debt. Their public debt is horrendous but what is happening over time—and why the Yen is appreciating—is that Japanese savers are bringing those savings back to Japan.

He notes that thee Nikkei entered the 2009 half-time up 13% vs. a 3% loss in the DJIA and a 2% gain in the S&P.

“You can’t spend relative performance, we know, but I expect Japan to out-perform U.S. equities this coming year.”

Those Milwaukee Bucks

The story over the next 3 years will be about the value of the U S dollar.

If drugs continue to be injected which mask symptoms rather than address the disease (medicine in the form of debt destruction), the likelihood of a seismic readjustment increases in kind, writes Todd Harrison, about the dollar. “As governments take on more risk—as they price assets on behalf of the market and transfer debt from private to public—the common denominator, or release valve, becomes the currency.” Asset classes will, as a whole, deflate, and my economic condition measured in greenback will appreciate. And so will my taxes. To pay for it all.

The seeds of discontent have been sowing under the surface for years, with the greenback off 30% since 2002.

With quantitative easing came a concern for flight of capital from the U.S. A position paper was written by the Federal Reserve a few years back, discussing the option of a two-tiered currency, one for U.S. citizens and one for foreigners.

Joining the growing chorus questioning the U.S. dollar’s unofficial position as global reserve currency, in India, chairman of the Prime Minister’s Economic Advisory Council, Suresh Tendulkar, is urging India to diversify its foreign-exchange reserves and hold fewer dollars, according to Bloomberg News.

Zeng Peiyan, the head of China Center for International Economic Exchanges and the former Chinese Vice-Premier, in a speech in Beijing on Friday called for a new system to ensure the stability of the major reserve currencies. China Daily reported.

Tensions mounting between the People’s Bank of China’s economic concerns over China’s holdings of dollars, with the earlier call by central bank chief Zhou Xiaochuan for the development of a new super-sovereign currency largely taking the place of the dollar, and the Chinese government, with their “diplomatic reasons” for toning down their criticism, said Stephen Gallo, head of market analysis at Schneider Foreign Exchange. The Chinese government is still more happy to play to the tune of the Bernanke-Geithner camp which sees leaning against the wind in order to protect the U.S. dollar as a necessary evil,” Gallo said.

There is a palpable likelihood that the global balance of powers will fragment into 4 primary regions: North America, Europe, Asia and the Middle East, with ramifications which would manifest through social unrest and geopolitical conflict, writes Todd Harrison at Marketwatch.com.