You are browsing the archive for 2014 October 22.

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The End of QE3, Trouble Ahead for the Bulls?

October 22, 2014 in Economics

By Mark Thornton

Austrian economist Micheal Pollaro writes that with the end of QE3 coming that stock market bulls need to take a note of caution because the Austrian measure of the money supply is already falling. This is typically a sign of trouble for stock markets.

The Federal Reserve’s latest asset purchase program, QE3, is coming to an end. What was once an $85 billion a month program, one in which at its peak had been goosing the financial markets and economy at an annual rate of $1.0 trillion – and over its 27 month life will have pumped $1.7 trillion of money into the economy – is going to zero. Given the outsized impact QE has had on the growth of U.S. money supply and thus the U.S. economy, we say investors take note, especially those furthest out on the risk curve, because what was once your primary tailwind could soon become your greatest headwind, maybe even a gale force.

Thus, when an economy is subjected to a bout of monetary inflation, investors can enhance their performance by correctly positioning their portfolios on the right side of the boom-bust cycle. Though easier said than done, one should buy claims to the malinvestments of the boom; i.e., when the money supply is surging; then sell those same claims after the growth in the money supply peaks and begins to head down. Importantly, the bigger the bout of monetary inflation, the more important it is to be positioned on the correct side of the boom-bust cycle. The reason is simple – lots of monetary inflation means lots of malinvestments in the economy and financial markets. Indeed, correct positioning is even more important on the downside of the boom-bust cycle. You see, booms tend to develop slowly. Busts, complicated by the distortions created during the boom, more often than not do anything but.

Now you know why we call this current monetary cycle the Bernanke Risk-On Boom – Bust-to-Be! Unlike in past monetary cycles where money was largely injected into the real economy via bank asset purchases and loans, this inflation cycle is all about huge swathes of money being injected directly into the financial markets via Federal Reserve’s QE asset purchase programs. The banking system, at least to this point, has had a minor role.

Unless the Federal Reserve changes its mind, the last installment of QE is ending …read more


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Why Oregon Is About to Be the Poster Child for How to Legalize and Regulate Marijuana

October 22, 2014 in Blogs

By Doug Fine, AlterNet

25 percent of tax revenues will go to mental health and substance abuse agencies.

At the International Cannabis Business Conference (ICBC) in Portland last month, the atmosphere was that of a winning NASCAR pit crew during the victory lap. Bullish is too weak a word to characterize the 700 vape pen purveyors and cannabis attorneys in attendance (they’d come from as far as Alabama and India). The vibe was bullish but congenial. Inclusive, not cutthroat. On Day Two, an attendee was doing tai chi in the Portland Convention Center hallway in between speakers.

This was not lost on the producer of the event, 43-year-old Alex Rogers. “Let’s face it, Oregon’s a relaxed place, a collaborative place,” he said. “You can leave your pretentions and hangups at the door and you won’t get kicked when you do business.”

The Oregon business mode, to Rogers, is nothing less than part of  “a cultural transformation. If you’re in the cannabis and hemp industry, you will fail if you’re only about the money with no ethics; no consciousness about this plant.”

But Rogers, perhaps practicing that ethic himself, quickly added that there was another, bottom-line reason for the touchy-feely aura at an event whose entrance fee was $499. “We’re at the point in the cannabis industry’s evolution where even your competitor’s growth is good for you,” he said. 

When not producing one of the traveling ICBC conferences (the next one’s in San Francisco in February), Rogers owns one of Oregon's largest medical marijuana clinics. He told me he has no problems with profit. In fact, Roger’s win-win economic growth curve for legal cannabis is reason number-one why the passage of Oregon’s Measure 91, which will legalize and regulate all forms of cannabis (including hemp) if voters approve it on November 4, matters to my family, even here in New Mexico. It provides a new Green Standard for how to make legalization work for everyone from families to law enforcement to home cultivators. (The measure had a four-point lead in a September poll, though I predict an eight-point margin of victory.)

Drafted by Portland’s Anthony Johnson and his …read more


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The German Economy Needs Reforms, Not More Spending

October 22, 2014 in Economics

By Dalibor Rohac

Dalibor Rohac

It takes two and half hours by train to get from the Spanish capital Madrid to Barcelona, almost 400 miles away. Since the 1980s, Spain has been among the pioneers of the development of high-speed railways, with a network that is the longest in Europe, and second only to China’s, spanning over 1,900 miles. The construction of the Spanish AVE (high-speed) network has continued even after the country’s debt crisis. By 2020, practically all provincial capitals are expected to be connected to Madrid in less than three hours.

Yet, the shiny railway network and the massive infrastructure spending did not make the burst of the real-estate bubble, the sovereign debt crisis, and Spain’s sharp economic downturn any less painful, nor have they accelerated the recovery. In spite of large government spending, with a budget deficit exceeding six percent this year, youth unemployment in Spain is stubbornly above 53 percent and per capita incomes are at lower levels than 10 years ago.

Spain hardly seems as a model worth emulating. It is therefore odd that The Economist, normally demure about such matters, recommends that Germany — which may now be slipping into a recession — follow the Spanish example by boosting its infrastructure spending in order to increase both short term aggregate demand and lay foundations for long term growth.

One reason for skepticism about salutary macroeconomic effects of increased infrastructure spending is that most estimates of fiscal multipliers are extremely modest, especially during peacetime. When Harvard University economist Robert J. Barro attempted to estimate the multiplier associated with peacetime government purchases, he “got a number insignificantly different from zero.”

Regardless of what one thinks is the proportion of demand- and supply-side factors behind Germany’s current economic malaise, more government spending is the wrong answer.”

If Germany — and the rest of the Eurozone — do indeed require a demand-side stimulus, it should come in the form of a monetary expansion. Eurozone-wide, inflation has been consistently below the target of 2 percent since the beginning of 2013. Maybe now is the time for Germans to rethink their opposition to a more accommodative monetary policy in the Eurozone — or one which would, at a minimum, try to hit the inflation target during bad economic times. However, the last thing that the European Union as a whole needs is to see Germany, the most important force fostering fiscal responsibility on …read more

Source: OP-EDS

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I Only Read It for the Articles! Rothbard’s Penthouse Interview

October 22, 2014 in Economics

By Matt McCaffrey


G-Rated (Almost) Edit of October 1976 Cover

In the 1970s, Penthouse magazine had a reputation for featuring the ideas of unorthodox political thinkers and movements. That’s why in October 1976 it interviewed Murray Rothbard to ask about the rapidly-growing philosophy of libertarianism. This interview is now difficult to find, but was recently excavated from the archives at the Mises Institute.

The article begins with an introduction that provides a great snapshot of both Rothbard’s work and personality:

The Murray Rothbard wall poster depicts a graying professor pecking at a typewriter. His words rise magically from the machine and blend into a black flag of anarchy rippling above his head. Beneath the drawing is this caption: “Murray N. Rothbard—the greatest living enemy of the state.” The poster, like almost everything else relating to politics, causes Rothbard to laugh… If someone mentions the name of almost any establishment economist or political figure, Rothbard will respond with a nasal guffaw… Jerry Ford, John Kenneth Galbraith, Alan Greenspan, Ronald Reagan—they all receive the same response: a laugh followed by a theoretical disputation in which Rothbard employs buzz-saw logic to rip into these persons he views as enemies of liberty, prosperity, and the common good.

There are some entertaining stories as well. For instance, the interview points out that Rothbard’s criticism of conventional economics made him an unpopular choice for private consulting, which is often a lucrative line of work for economists. In Rothbard’s case though, “Only one firm—a mushroom factory—has called on him for consulting advice in the past twenty years.”

The bulk of the interview consists of Rothbard offering up his trademark analysis of economics and public policy. He tackles a long list of objections to the free society, explaining how government causes war, depression, poverty, and pollution, and how the market fixes these problems.

One of his best responses, especially relevant today, regards socialized medicine:

Penthouse: What about efforts to socialize medicine in America?

Rothbard: That would be a monstrous development. In countries with socialized medicine, for instance, Britain, the result has been a tremendous decline in the quality of the medical service and a huge burden of taxes on the public and on the economy. The usual advance estimates of how much socialized medicine would cost are always extrapolated from the current number of people going to doctors and other statistics. What most people don’t realize is that if a visit to a doctor …read more


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Breitbart Op-Ed: Religious Freedom Dying at Altar of Political Correctness

October 22, 2014 in Politics & Elections

On October 31, 1517, Martin Luther posted his Ninety-Five theses on the door of the Castle Church of Wittenberg. Christianity was for all time changed by one man’s confrontation with authority.

For his audacity, for alleging that one’s path to heaven could not be purchased, Luther was excommunicated. It took great bravery to challenge what was then considered to be the ultimate arbiter of God’s will. Luther was told, effectively, that his pathway to heaven was foreclosed.
When the Mayor of Houston, sent her legal attack dogs to demand the sermons of ministers who opposed an ordinance that might prevent churches from hiring people who adhered to a traditional faith, my first thought was of Martin Luther and my hope was that someone would, in elaborate calligraphy, stencil the First Amendment upon parchment and nail it to the doors of city hall.
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”
The Amendment was clear, and its intent was not to keep religious people out of government, but rather to keep government out of religion.
There has been, and will be, an ongoing debate about the role of government in marriage—what our laws should be, and where they are made.
But make no mistake—that’s not what this is about.
Some will make this debate about freedom of choice, but the only way this is about choice is if we are talking about the choice with regards to expression. No one, no law is advocating any restriction on the choices of consenting adults, but for goodness sakes are we so politically correct that we will stifle dissent? Will there be no room for people who have traditional beliefs?
In the same way the law should not restrict consenting adults, likewise the law should have nothing to do with restricting or restraining the free exercise of a religious people who object.
Consenting adults of a religious persuasion should not have their ideas monitored. Religious beliefs cannot and should not be trumped by political correctness.
No law should prevent religious people from coming together and discussing what they believe to …read more


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Khrushchev and the Comedy of History

October 22, 2014 in History

October 22, 2014 12:00 p.m.

Nikita Khrushchev’s delightfully absurd 1959 trip across America was a hilarious journey that illustrates a truth most historians choose to ignore: History is sometimes comedy.

Historians tend to chronicle the past in two somber moods—the heroic and the tragic. And of course, there’s plenty of heroism in history—and plenty of tragedy. But history is the story of what human beings have done on this planet, and—as every human knows—much of human life is absurd, preposterous, inane, insane and laughable.

Most historians ignore the comic side of history, perhaps because they want to be taken seriously. But I wrote my book on Khrushchev’s trip, K Blows Top, precisely because the event illustrates just how funny the world’s most powerful humans can be, even when they are threatening to unleash nuclear Armageddon. Cold War Roadshow goes one step further by letting us actually watch these powerful people at their most ridiculous.

Khrushchev’s trip was a picaresque journey across America, sort of like Huckleberry Finn or On the Road or maybe National Lampoon’s Vacation. It’s the story of a stranger in a strange land. The stranger is a fat-bellied, thin-skinned, cantankerous, funny, earthy man who loves to show off—a Communist dictator as portrayed by Zero Mostel or Danny DeVito. The strange land is America in the Fifties—a nation of movie stars, tail fins, rock and roll, segregation, pugnacious politicians, shameless hustlers, missile silos, fallout shelters and duck and cover drills.

The trip was, as historian John Lewis Gaddis put it, “a surreal extravaganza.”

Which event was the most surreal? It’s hard to choose. Was it Khrushchev and Nelson Rockefeller staging a fake fistfight for news photographers? Was it Khrushchev getting stuck in an elevator at the Waldorf Astoria hotel, then climbing out while Henry Cabot Lodge pushed on the dictator’s pudgy rump? Was it Khrushchev and Vice-president Nixon arguing in the White House about which of them had said meaner things about the other one in his speeches? Was it Khrushchev’s visit to an Iowa farm where reporters got so obnoxious that the irate farmer threw silage at them and kicked a New York Times writer in the shins?

Or maybe it was what Marilyn Monroe told her maid after meeting Khrushchev: “He was fat and ugly and had warts on his face and he growled. Who would want to be a communist with a president like that?” …read more


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The Fed as Stock Market Manipulator

October 22, 2014 in Economics

By Mark Thornton

The notion that the Federal Reserve has been acting to manipulate stock markets has been active for decades, but rarely has that notion been openly discussed in the mainstream media. In this article by Howard Gold the Fed is praised for its “market timing” as Fed official quickly responded to recent volatility in the stock market with promises of more quantitative easing if necessary.

Investors got the message. The S&P 500 Index advanced for three straight days and the VIX fell under 20 again.

Bullard was only the latest Fed official whose words or actions “just happened” to boost the stock market when it was down.

“They are definitely in the market-manipulation business, and nothing has changed,” said James Bianco, president of Bianco Research LLC in Chicago and a longtime student, and critic, of the Fed.

Called the “Greenspan/Bernanke put,” the Fed’s willingness to jump in when stocks fall dates back a quarter-century.

“The put option is back. If the market sells off enough, they will give us QE4,” Bianco told me.

Conspiracy theorists have pinned it on a government “Plunge Protection Team” that wants to keep stocks from crashing at all costs.

But conspiracy or no, consider these actions:

Aug. 31, 2012: In his annual speech in Jackson Hole, Wyo., Fed Chairman Ben S. Bernanke all but announced the third round of QE, extraordinary bond buying of $85 billion a month. The S&P 500, which had languished after a nearly 10% decline, rallied from 1,399 points and hasn’t corrected substantially until now.

Sept. 22, 2011: Following a 19.4% stock sell-off amid a debt crisis in Europe and the U.S., the Fed launched Operation Twist, in which it sold short-term and bought long-term securities to push down long rates. After first slipping, the S&P 500 resumed a multiyear take-off that, with a little help from the Fed, ultimately drove it 80% higher.

…read more


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Nothing's Wrong with Renee Zellweger's Face—Something's Wrong With Us

October 22, 2014 in Blogs

By Jennifer Gerson Uffalussy, The Guardian

All the actress did was pull back the curtain on our hypocrisy by letting herself be seen in public past a certain age.

To be a female celebrity is to lose at every turn. Dare to age? Face-shame at best and be out of work at worst. Get noticeable plastic surgery on your face to combat the inevitable aging? At best, you will be mocked for your narcissism and delusional attempts at hanging onto your youth; at worst, you’ll be out of work again.

The continued evolution of our obsession with famous people has birthed a strange phenomenon: the bodies of total strangers are considered collective public property to be casually evaluated, critiqued and discarded.

As disturbing as it may be sometimes to see a public figure physically transform before our eyes, it’s even more troubling to see how effortlessly we rush to say something about that transformation.

“Where did Renee Zellweger’s face go?”

To ask a question like that, as so many did on Tuesday is to cut in all directions, commodifying a woman’s body even as you seemingly seek to champion it.

What did Renee Zellweger do to deserve that kind of knee-jerk reaction? She attended Elle magazine’s 2014 Women in Hollywood event on Monday night to mark her first appearance in a film in more than five years. But no one, it seems, was happy to see her again: instead, on Tuesday morning, the media gatekeepers—includingmany women—were aghast at the appearance of Zellweger’s face, which seemed markedly different since her last memorable red-carpet appearance, which was more than five years ago. The outcry was loud and universal, which is exactly, sadly, the kind of thing a woman in Hollywood has learned to expect anytime she does anything to her appearance.

From fashion blogs to CNN, the horror and disgust was palpable: What kind of monster is this, the world seemed to beg, that would shed her skin so easily, hoping to avert aging and death—or at least the death of her career by physically becoming another person altogether? Heavy Internet-sighers bemoaned how akin Zellweger has become to Jennifer “No One Puts Baby in a Corner” Grey, who infamously cut …read more


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Research Behind Dr. Oz-Endorsed Diet Supplement Was Bogus, Authors Admit

October 22, 2014 in Blogs

By Cliff Weathers, AlterNet

“America’s doctor” promoted spurious weight-loss products to his audience.

A research paper that touted the weight-loss benefits of an extract from green coffee beans has been retracted by the researchers that published it. Green coffee had been touted as a “miracle” supplement by television host Dr. Mehmet Oz on his eponymous Dr. Oz show.

Retraction Watch, a website that reports on repealed and repudiated scientific research, says the paper’s two authors have now admitted that they are unable to defend their work.

“The sponsors of the study cannot assure the validity of the data so we, Joe Vinson and Bryan Burnham, are retracting the paper,” the authors conceded on Dove Press, a British site dedicated to the peer reviews of scientific research. The study, titled “Randomized, double-blind, placebo-controlled, linear dose, crossover study to evaluate the efficacy and safety of a green coffee bean extract in overweight subjects” was originally published in the journal Diabetes, Metabolic Syndrome and Obesity: Targets and Therapy.

Last month, the company behind the study, Applied Food Science, agreed to $3.5 million settlement with the Federal Trade Commission, after government regulators found that some key data, including research the recorded weight of research participants, was likely cooked. Additionally, the study had a very small sample of only 16 overweight adults. The feds said that the research, sponsored by supplement manufacturer, was “so hopelessly flawed that no reliable conclusions could be drawn from it.”

Reportedly, Applied Food Science sold some 500,000 bottles of the green coffee extract supplement.

In May 2012, Dr. Oz heralded the study on his television program, professing that it linked green coffee to weight loss, and said that those who took it lost an average of 18 pounds in six weeks. Apparently the expert nutritionist that praised green coffee one episode of the show, Lindsey Duncan, also had an ulterior motive; he was the CEO of Genesis Pure, a nutritional supplement company that markets green coffee as a weight-loss product. Dr. Oz did not disclose this obvious conflict of interest.

Recent laboratory research by the American …read more


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Supreme Court Shirks Responsibility in Avoiding Sixth Amendment Case

October 22, 2014 in Economics

By Ilya Shapiro

Ilya Shapiro

While conventional wisdom among U.S. Supreme Court watchers is that the narrowness of many of the justices’ recent decisions has created a “faux-nanimity,” the court’s docket control — its ability to pick and choose which cases to hear — goes even further in explaining why the justices are agreeing at record rates. Last week’s denial of review in a key sentencing case — Jones v. United States, on which more anon — is just the most recent example of the court side-stepping its responsibility to grapple with issues that demand its attention.

It’s not just high-profile culture-war issues like same-sex marriage and the right to bear arms that the Supreme Court is avoiding like the plague. On issues ranging from federalism to property rights to broadcasting regulation, the court increasingly declines to hear any case it doesn’t absolutely have to — no matter how critical the questions presented — especially if there’s a threat of an irreconcilable split among the justices.

This extreme selectivity goes a long way to explaining the growing unanimity and is a reflection of the “judicial minimalism” that Chief Justice John Roberts has vowed to instill. To extend a metaphor he used during his confirmation hearings, it’s much easier to call balls and strikes when all the pitches are either right down the pipe or way outside.

It’s not just high-profile culture-war issues like same-sex marriage and the right to bear arms that the Supreme Court is avoiding like the plague.”

Jones, a constitutional criminal procedure case, was the court’s latest big “decision not to decide.” The issue there was whether a defendant can be sentenced for conduct of which he was acquitted, based on facts that the judge determined. (Read that sentence again; I’m not making this up.)

In United States v. Booker (2005), the Supreme Court held that the Sixth Amendment prohibits a judge from sentencing a convicted defendant to a prison term exceeding the law’s maximum penalty for the crime committed unless additional aggravating facts are found by the jury or admitted by the defendant. The court also held that all sentences must be reasonable.

In a subsequent case, Justice Antonin Scalia wrote a concurrence in which he expressed concern about situations in which judges issue sentences below the statutory maximum, but which would only be reasonable in light of additional facts found solely by the judge. He proposed a doctrine in …read more

Source: OP-EDS