On Reopening For Business, Or, What? No Flying Cars?

So I took a bit of a break this past month, and I figured by the time I came back y’all would have things sorted out: people would be surely by flying around with jet packs by now, God would have sent fires and floods to smite the unrighteous, and, if I really got lucky, Barack Obama would have “grown a pair”.

And now that I’m back, debt negotiations are about to commence between that same Barack Obama and the Republican Congressional Leadership, things like Social Security and Medicare cuts are apparently on the table in order to protect tax cuts for the rich, and certain quarters of the Republican Party aren’t even trying anymore to hide their racism.

All of which suggests that I shouldn’t be looking for a jet pack anytime soon.

But there is some good news: God is apparently working hard, and states like Oklahoma and Arizona and Florida and Georgia and Texas have been alternately aflame or aflood, apparently as a result of their unrepentant behavior…and on the economic front, New York City’s Stonewall Inn is going to make a ton of money this summer hosting weddings.

That gives us a lot to talk about…so let’s get right to it.

Pessimism is cowardice. The man who cannot frankly acknowledge the “Jim-Crow” car as a fact and yet live and hope, is simply afraid either of himself or of the world. There is not in the world a more disgraceful denial of brotherhood than the “Jim-Crow” car of the southern United States; but, too, just as true, there is nothing more beautiful in the universe than sunset and moonlight on Montego Bay in far Jamaica. And both things are true and both belong to this, our world, and neither can be denied.

--From “On Being Black”, by W.E.B. DuBois

We gotta start with the most “WTF?!?” news first: Personhood USA is a group that figures the only reason we want to make sure that abortion rights are protected for women who are raped, either by members of their own family or others…is because we really don’t understand how wonderful it can be for women to enter motherhood in this way, or for those children to enter the world; all of which presumably means that for these folks, the dark cloud of rape and incest has a silver lining that the rest of us never really think about.

To help make the point, and to help advance legislation that basically says that as soon as two sets of haploid chromosomes become a diploid a child is born (this to try to criminalize abortion in the State), Personhood Mississippi sent their representative, Rebecca Kiessling, on a week-long “Conceived in Rape Lecture Series”.

“I am not the rapist’s child!”, Kiessling declares in a written statement, which I personally think is going to be tough to sell to some poor kid who’s been forced by law to sit down at Thanksgiving dinner next to his father and grandfather – and there’s only one guy sitting there. Especially in a State that isn’t exactly big on providing mental health services to these victims.

But let’s move on to happier subjects:

I live in Washington State, and for the past several years Democrats in what you might think is an aggressively liberal State are fighting a losing battle to keep it that way; much of this, frankly, rests on the shoulders of Governor Christine Gregoire, who, not unlike many other Democratic leaders nationally, has simply not chosen to take the fight to the Republicans.

But this may change, as Congressman Jay Inslee is apparently going to announce his candidacy for the State’s top office on Monday.

I have to confess that I personally am looking forward to this, as Inslee has been pushing a lot of issues that I care about over the years, including real health care reform and an energy policy that tries to remove Saudi Arabia from their position as America’s “best frenemy forever”.

I don’t have the exact quote handy, but I once saw Inslee, on the floor of the House, describe a Bush budget as having the same effect on someone as it would be if you hit them over the head with their own artificial leg, and I’ve been a fan ever since; if he takes that attitude to the campaign and governing we’ll be the better off for the effort.

The number of states looking to screw over their workers is growing fast, and so far Barack Obama hasn’t been able to locate those “comfortable shoes” he said he’d be putting on so he could march right alongside those same workers.

I want to be helpful here, Mr. President, not mean…so maybe you might want to check out the Nike Factory Store over there at the outlet mall in Potomac Mills, which is out in Virginia just a bit past Arlington National Cemetery. (It’s right next to the Burlington Coat Factory and that Japanese place in the food court). I have shopped at one of those Nike stores a time or two, and they have lots of comfortable shoes – and boots, too, which are really great for marches.

Now I like these right here – but I wouldn’t pay $120 for ‘em; instead, I’d wait for them to drop to below $50…but workers in Wisconsin and Ohio and Michigan and New Jersey don’t have that kind of time, so if I were you I’d pay the extra money and treat it as a campaign expense or something…and then I’d actually fulfill my promise and get out and wear those shoes, before the Republicans start running that pesky YouTube video as a campaign ad…which, sooner or later, they probably will.

When Osama Bin Laden was killed just a mile or so from Pakistan’s military academy we all wondered how it was possible for the world’s most wanted man to be there and, somehow, no one in authority knew about it.

And now (alleged serial killer, notorious Mob boss, FBI informant, and “Next Most Wanted Man”) Whitey Bulger was just captured a few blocks from the Santa Monica pier, in an apartment he rented for 15 years, which just happens to be 4.5 miles from the FBI’s Los Angeles field office up on Wilshire Boulevard.

Just sayin’.

Not a word from me about Anthony Weiner. Instead, go read what K.Flay had to say about all this, as she has it exactly right. (If you visit she will also, out of the kindness of her heart, hook you up with lots of her music, free of charge, which is très sweet.)

Olbermann is back, if you did not yet know, on Al Gore’s Current channel, which means you probably have to go to the website to see him (unless you have either DirecTV, or Dish, or a cooperative cable company), but it’s worth the effort.

Since Current lacks content, he can be seen “on air” at nearly any hour of the day (the “official” time: 8 PM weeknights on the East Coast, 5 on the West), which reminds me of “Spahn and Sain and pray for rain” in a couple of ways (much respect, “Vanguard”); we’ll be watching to see how that shapes up over time with great interest.

Next up, perhaps the best story of “taking your enlightenment where you find it” in history:

So the Dalai Lama walks into a bar and tells the bartender:

“Make me one with everything”

Does everyone remember that guy in Florida a few weeks back who said God wanted him to burn the Qur’an, so he went out and burned him some?

Has anyone noticed that, just a few weeks later, Florida is now so overwhelmed with fires that they are running out of people to send to fight them…and that most of them, evidently, were started by lightning?

So…does that make you more or less likely to be an atheist – or a comic – or do you find that compassion in the face of the bad karma of others is the right way?

In our final comment today, we offer congratulations to New York’s LBGT community, who, thanks to the passage of marriage equality legislation, are now just as free to be just as miserable as any other married couple in the State. In your honor, we’ll close out today’s story with a joke, courtesy of the great Henny Youngman:

So the wife and I are laying in bed, and she looks over at me and says: “What’s the matter, honey? Can’t you think of anyone else either?”

On Hole Cards, Or, "Drill, Baby, Drill"? Why? Is Canada Out Of Sand?

In America, today, there are three kinds of drivers: those who look at the other gas pumps down at the ol’ gas station and think: “Oh my God, I can’t believe how much that guy’s spending on gas”, those who look at their own pump down at the ol’ gas station and think: “Oh my God, I can’t believe how much I’m spending on gas” – and those who are doing both at the same time.

Naturally, this has brought the Sarah Palins of the world back out in public, and once again the mantra of “Drill, Baby, Drill” can be heard all the way from the Florida coast to the Arctic National Wildlife Refuge.

But what if those folks have it exactly backwards?

What if, in a world of depleting oil resources, the last thing you want to do is use yours up?

To put it another way: why isn’t all our oil part of the Strategic Petroleum Reserve?

Consider the inexorable logic of the Big Lie. If a man has a consuming love for cats and dedicates himself to the protection of cats, you have only to accuse him of killing and mistreating cats. Your lie will have the unmistakable ring of truth, whereas his outraged denials will reek of falsehood and evasion.

--From the book “Ghost of Chance”, by William S. Burroughs

So here’s the thing: we produce a surprising amount of our own oil right here in the USA (in fact, we’re the world’s third-largest oil producer), but we don’t produce enough to cover our current use, and that’s why we import about half of the roughly 19 million barrels of oil we use daily. The vast majority of that is used in vehicles or for heating; almost none is used to generate electricity.

Our largest suppliers of oil, despite what you might think, are not all from the Middle East: instead, it’s Canada, Saudi Arabia, Mexico, Nigeria, and Venezuela, in that order.

(Perhaps you’re thinking: “Canada? Oil?” Yes. Canada and Oil. They provide us with more than twice as much as Saudi Arabia from huge “oil sand” resources, primarily in Alberta; the exploitation of those resources has created a huge environmental controversy.)

Now if you ask me, an ideal situation would be one where we decided to get out of the business of using oil altogether – and to help make my point, we have some helpful numbers from a guy that you pay every day to figure this stuff out: Mark Doms; he’s the Chief Economist for the US Department of Commerce, and, to paraphrase Little Feat, he’s always handy with a chart.

According to Doms, 60% of our 2010 trade deficit (about $265 billion) represents the cost of imported petroleum products, and if things continue through December as they did the first three months of this year, in 2011 every American, man, woman, and child, will pay a “tax” of about $1000 to import all that petroleum.

Do you know what we, individually, spend on gas? In March of this year, the average household spent just over $300 on that month’s gasoline; 5 months ago that number was $56 lower. The way it works out, every time gas goes up 10¢ a gallon, it costs the average household another $7 a month.

And that’s not all: less than half of the total cost of imported oil is paid at the pump: about 44% of imported oil is used by businesses; another 15% is used by governments across the USA, and that means almost 60% of the cost of imported petroleum is “folded into” the price of everything else.

(A quick author’s note: you’ve seen the words “oil” and “petroleum” used liberally in this story; the exact literal reality is that in each instance we should really be referring to “petroleum products”, and that’s because we import and export not just crude oil, but a variety of other petroleum products. I get tired of using the phrase “petroleum products” over and over, and I’m probably using “oil” and “petroleum” more interchangeably than I should.)

So get this: if we were out of the importing oil business, we’d save about $300 billion a year – and as it turns out, over a 10-year period we could actually convert the entire US auto fleet to electric cars powered by windmills by providing $15,000 cash “buy-outs” for today’s 135,000,000 gasoline cars and building the wind generation and “smart grid” we’d need to support the effort…and doing all that would cost…wait for it…about $250 billion a year.

If I get the math right, 20 years after we first started building windmills and subsidizing cars, everything would be paid off; and every year after that the US economy would generate a $300 billion “profit” on our investment – unless the price of a barrel of oil goes up. If it does, the amount of money coming back to our wallets every single year from then on, obviously, also goes up.

And if we were out of the “using oil for driving” business, once everything was paid off we could put almost $4000 a year (in today’s dollars) right back in the pocketbooks of every family in this country – which, if you ask me, represents a pretty good “tax cut”.

Let’s also keep in mind that any new oil drilled on our public lands might not necessarily end up in the US; that’s because even if oil companies were 100% free to “Drill, Baby, Drill” in our waters to their hearts’ content…they’d also be perfectly free to sell as much of that same oil, anywhere in the world, to whatever entity might end up being the highest bidder – and today, our friends in places like India and China are desperate to be that high bidder.

Put all of this together, and you get back to the question I posed at the top of the story: why in the world would we be in a hurry to “Drill, Baby, Drill”, when we could, instead, put all our efforts into getting out of oil, which would save us so much money that the conversion pays for itself?

Then, when oil’s running $400 a barrel or so, let’s use our oil to pay China back the trillion dollars we owe ‘em…which, at current production rates, would only take about 400 days, assuming it were possible to divert all our production for that purpose.

To state it a bit more ironically, it may be that the smartest thing we can do right now is to conserve every possible drop of oil we have…until we don’t need it any more, and it becomes a sort of Strategic Cash Reserve that can help strengthen the dollar and reduce the national debt in the years to come, both at the same time.

Or to put it another way, the next time someone tells you they want to “Drill, Baby, Drill”...you can step right up, look them square in the eye, and ask: “Why do you hate America?”

And won’t that be fun?

On Crying Wolf, Or, Why I Don’t Want To Give You $700 Billion

As this is being written we are in the midst of the second day of testimony before Congress by Ben Bernanke and Henry Paulson in support of the Administration’s proposed financial rescue package.

The basic sales pitch is that the Nation’s financial problems are at this moment so severe that the only solution is to expose to risk $700 billion dollars of taxpayer money to buy assets with a currently unknown price…and to give the absolute and total power over what those valuations are, what should and should not be bought, what repayment terms will be sought—and additionally, what happens to any money recovered--to one man, Henry Paulson.

There are those who are not on board. They have critics, who continue to stress the dire consequences of inaction.

With all due respect to those critics…we have been down this road before with this Administration—and last time, they weren’t so big on telling the truth…or getting the job done effectively.

We’ll cover that ground, we’ll talk a bit about “mark to market” issues—and on a positive note, we’ll address the role of “warrants”, the negotiating power of Warren Buffett, and how the taxpayer could actually see substantial recoveries of money down the road.

So let’s start with the biggest elephant standing in the Plan’s way:

Weapons Of Mass Destruction.

This Administration flat-out lied to the American people to justify the current Iraq adventure. “Just trust us” was the basic message at the time, followed by “we absolutely know that Saddam is an imminent threat because of his Weapons Of Mass Destruction”, followed by “this will cost maybe $50, 60 billion…maybe as much as $200 billion”--which turned out to be possibly the worst estimate in the history of budgeting--followed by variations on The “I’m not the Commander-in Chief, General Petraeus is” Theme…followed by flag-draped caskets that the Administration still hides from public view.

All of this to find not one single operable WMD.

Now comes before us Federal Reserve Chairman Henry Paulson and Treasury Secretary Ben Bernanke, who tell us of imminent threat, who tell us to just trust them…who tell us that they are the most qualified people to understand the issues and take the appropriate action…and who, to top it off, must be left to the task unsupervised and uncontrolled, otherwise the plan will fail.

We are also being told that if we were just economically sophisticated enough we would understand why this plan must be put into place, and that our objections must be related to our economic ignorance.

To which I pose a question to the Joe Kernans of the world (well, one of them anyway): what if the public fully understands that the system is at risk…but we don’t trust the leadership?

(Ever watch “Sex And The City”? This would be the part where they would cut to Carrie’s laptop screen and we would see the words appear as she types them...)

…What if we think the Administration is lying?

I have heard so many lies from the President and his advisors that if Jesus Christ was Treasury Secretary and Mohammed (PBUH) was Chairman of the Federal Reserve I would have doubts about this proposal.

Back in March, Paulson (who, it turns out, is not a Deity) was telling us that “the worst is behind us”…meaning he either does not really understand what is going on here—or that somebody is trying to blow smoke up some unpleasant places, using Paulson as a sort of economic “General Petraeus” who is intended to divert attention from the real economic Commander-in-Chief.

So can this Administration be trusted to handle this without outside supervision?

“Trust, but verify”, Ronald Reagan used to say, and without outside oversight this proposal should be instantly dead on arrival to the Congress.

This might be the most critical issue surrounding this entire plan…and we must demand Congressional oversight. This is far too big a process for any single individual to manage—and too big for any single branch of Government, as well.

Go watch this satirical slap at Bernanke from a wannabe Bernanke.
It’s hilarious—and revealing.

That issue resolved, some economic education is in order:

What, you may ask, is “mark to market”?

Holders of assets are required, for accounting purposes, to report the value of those assets based on what they are worth at the current time. Normally you do this by seeing what “the market” thinks your asset is worth—something that is fairly easily done if the asset is, for example, your house.

On a larger, corporate scale, this marking to market each accounting period can cause the state of your company’s balance sheet to lurch around and gyrate from time to time—sometimes violently…which is the source of much complaint from corporate interests, but for the most part, it all works out. Recently, it has not.

The challenge in today’s economic environment is to figure out what an asset is worth when no market exists for that asset.

Banks are holding quibzillions © of dollars worth of paper that represent streams of mortgage payments that will continue for years into the future…but some unknown number of those mortgages will not be repaid.

The concerns about what can be repaid (or not) and who is holding how many of these “nonperforming” loans has caused virtually all the normal buyers of these kinds of assets to run away in fear, which is the simplest way to explain the “credit crunch” we hear so much about.

The Paulson proposal is based on you and I buying some portion of those assets, today, from the current holders and reselling the assets later. This will allow banks and other institutions to begin making loans, and will hopefully create the confidence needed to induce investors to again buy “pools” of those loans from those banks…after which, the lending cycle begins anew.

The hoped-for outcome, from the perspective of ordinary mortals such as you and I, is to minimize any losses to the taxpayer…or maybe, if we get lucky, generate a profit.

The hoped for outcome, for the current holders of these assets, is to minimize their loss.

So how do you decide what price the taxpayer will pay for these assets?

Picture, if you will, a $100 US Savings Bond. If you bought that bond today, it would cost you $50, and in 17 years the US Treasury will pay you $100, representing the interest income to you from that loan to the Treasury.

The “hold until original maturity” value of that bond is $100.
The “mark to market” value, if you’re “marking” it the day you bought it, is $50.

If you became convinced the Treasury might not pay back the loan, or all the interest, you might sell the bond for less than the original $50, just to recover something from the deal.

That process will work as long as someone else is willing to believe the bond will be repaid, and is willing to put up enough money on that bet to get you to sell.

If no buyer can be found, your bond’s value becomes either “unknown” or “zero”, your personal assets decline—and maybe, down the line, your credit score is affected by some small amount.

Picture that on a massive, quibzillion © dollar scale, and you can see what is happening in the mortgage market today—and to the investors, all over the world, that hold the debt from our collective mortgages.

When the Treasury prepares to buy a CDO or some other mortgaged-backed security from an investor in the near future, Paulson will have to decide, with no help from any market mechanism, if that paper is worth the “hold to maturity” value, zero, or somewhere in the middle…and he has no way to know if the pool of mortgages he’s buying with our money will be 100% repaid, 0% repaid, or something in between.

This issue will be one of the most contentious parts of the entire deal (and the most ripe for abuse…as it would be very easy indeed to reward friends and punish enemies in a system with no oversight), so watch carefully to see how it plays out.

Hint: when asked about this today, I heard Bernanke answer that he expected the Treasury to pay prices similar to what are seen “…in a more normal market…”.

Another satirical video: “Damn, it feels good to be a Banka”.

What’s a warrant?

It sounds all technical and tricky, but actually it’s not.

Warren Buffet invested $5 billion dollars this morning in Goldman Sachs, and as part of the deal he got the right to purchase up to $5 billion in Goldman Sachs stock, at a time in the future of his choosing, for $115 a share (roughly 43.5 million shares). That right is referred to as a warrant.

At this moment, the stock’s last trade was at $130.48. The difference between $115 and $130 is the current available profit to Buffett if he were to “execute” this warrant right now (which is just over $650 million profit in less than 12 hours)…but it’s not the maximum potential profit executing this warrant might bring.

In November of ’07 Goldman Sachs traded at $250 a share…and if Buffett is able to someday execute the warrant at that “strike price” (fancy technical term) the profit on his 43.5 million available shares would be $5.8 billion.

When we take assets from banks and other investors with depressed stock prices, we as taxpayers need to make the same deal Warren Buffet made—we need to demand warrants, and later, sell that stock back to the market, reducing the cost to the taxpayer over the long term…and maybe even making us actual profit….which could help to repay some national debt, perhaps?

There is precedent here. In the 1980’s the US did a bailout deal with Chrysler that involved issuing warrants…and the profit to the Treasury was substantial.

This is an additional huge part of the deal…and you can bet that there will be investor stockholder groups that will lobby—and lobby hard--to stop us from getting warrants.

We need to demand that we get our cut of the profit our tax dollars create…and to do that we need to get warrants as part of these deals…so bug your Member of Congress loudly and quickly on this one.

So, for the moment, let’s recap:

If the Administration wants to sell this plan they better acknowledge that it isn’t economic ignorance that’s the issue…that, instead, the problem is the basic element of distrust that they previously created by lying about matters of war and peace and Katrina…and if you want any plan at all, this is the issue you need to fix first.

Next, we need confidence that the prices paid for bad assets are not going to be excessive, we need oversight that allows us to be confident this isn’t another typical “reward and punish with taxpayer dollars” operation; and finally, we need to demand warrants, the tool that could make this something that turns the transactions, for a change, to the advantage of the taxpayer.

If we insist on these sorts of protections we have the chance to make this at least a fair deal for the taxpayer—and maybe even a good one. After all, if Warren Buffet can get good terms for a mere $5 billion investment…imagine the negotiating power $700 billion should be able to get us.

Even without the Priceline Negotiator, we should still demand the best deal possible…and if the currently frozen financial services industry doesn’t like that, perhaps they should borrow $700 billion somewhere else.