Year: 2009

More on Blagojevich/Burris

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The Illinois house just impeached Blagojevich, sending him to the State Senate for trial.

Roland Burris had the State Supreme Court refuse to force the Secretary of State to sign his certificate of appointment to the Senate, which is actually a victory, because they said his certificate is valid anyway:

…Petitioners are not entitled to an order from this court requiring the Secretary to perform those Acts. Under the Secretary of State Act, the Secretary’s sole responsibility was to register the appointment (15 ILCS 305/5(2) (West 2006)), which he did. No further action is required by the Secretary of State or any other official to make the Governor’s appointment of Roland Burris to the United States Senate valid under Illinois law.

One final thought: Please, God, make it stop!!!!

Economics Update

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The big news was the employment data, which I blogged on earlier, but here is the rest:

Wholesale inventories, and wholesale prices fell sharply in November. Even so, the “stock-to-sales ratio” rose because of less buying.

Looks like wholesale deflation to me.

Oil fell on the jobs news, because the unemployed don’t consume much oil.

The Dollar was mixed, losing against the Pound and Yen, and gaining against the Euro.

Hopefully to Be Followed by Jail Time

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It has been reported that former Treasury Secretary Robert Rubin has retired from Citi.

Seriously, if there is one thing that has to be done with the financial collapse, it is to find those players who broke the law and send every one of them to jail.

You start with Rubin because he is a close friend and sometime mentor to Summers, Geithner, etc., which means that we snuff out all the allegations of partisan bias at the start of the process.

As to whether Rubin might be innocent of legal wrongdoing, much of the business as usual at Wall Street is clearly dishonest and deceptive, and so you’ll find something.

Jobless Report Update

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Unemployment numbers are in, and they are grim:

524,000 jobs were lost, and unemployment jumped from 6.8% to 7.2%, the highest number in 16 years.

Note also that the 2.6 Million job loss in 2008 is the largest since 1945.

Also note that the U6, the broadest measure of unemployment, jumped from 12.6% in November to 13.5% in December. It was 8.7% in December, 2007.

Also note that this number is worse than it looks, because the prior months have been revised down:

The change in total nonfarm employment for October was revised from -320,000 to -423,000, and the change for November was revised from -533,000 to -584,000. Monthly revisions result from additional sample reports and the monthly recalculation of seasonal factors.

The same report also notes the explosion of involuntary part timers:

In December, the number of persons who worked part time for economic reasons (some- times referred to as involuntary part-time workers) continued to increase, reaching 8.0 million. The number of such workers rose by 3.4 million over the past 12 months. This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full- time jobs.

According this pretty picture, that number is worse than it was in the Reagan Recession of the early 1980s. (H/T Calculated Risk for the graph pr0n)

Interesting Political Blowback Regarding Gaza

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It looks like the war is reviving the political fortunes of both the Labor Party and Ehud Barack.

It was firmly mired in 3rd place, and at risk of dropping further, with polls showing their winning 8 seats in the 120 seat Knesset, and now the polls are showing 16-18 seats, which might put them in 2nd place.

To my mind, one of the real problems is not security, but the fact that the Labor Party has largely abandoned labor as a movement, and when there is that much buy-in on Thatchernomics, they lose a clear differentiator between them and Kadima, in particular.

It appears that most of Labor’s new support is coming at the expense of Kadima and other members of the coalition, so I think that Likud is still favored to win the election.

And on the Other Side of the Congress

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Pelosi has the right idea.

She is arguing for immediate repeal of tax cuts for people making more than $¼ million a year.

I like this for 2 reasons:

  • It’s good policy.
  • It’s an even better place to start negotiations from.

The you only need two republicans, plus Uncle Joe Lieberman, to get this through the Senate, and you do not even need them on a budget bill, though there other 60 vote (actually 59 right now with 2 vacant seats) hoops to jump through.

Citi Looks to Endorse Cramdown Legislation

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The news that Citi is supporting cramdown legislation (with some conditions) is heartening.

However, it does raise some questions, most notably, “Why, after being bailed out by the US government, do they have a seat at the table at all,” and “Why are they supporting this at all?”

As to the first question, I put it down to the corruption that is Washington, DC business as usual.

As to the second, I am sure that part of this is a desire to be in on the process to shape it in the most advantageous way possible, but I think the real interest here is that Citi manages a lot of mortgages for the holders of mortgage backed securities, and as such, they carry much of the costs of a foreclosure process, but they carry none of the costs of s cram-down.

OK, Google™ Adsense™ is Just Fracked

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I’m looking at my blog page, and I have a post excoriating David Frum, and what do I see beneath?

An ad. An ad for “free grants for Republicans”.

As I’ve said before, I do not vet my ads, but when I see something like this, I make fun of them.

This might honk off the sponsor, but their deal is with Adsense™, who should know better that to do ad pitches to ‘Phants on my site.

I’m not worried about the loss of revenue either…I’m generating about $11/month.

On the other hand, if one of you sees a similarly stupid ad, send me a screenshot, and I will make fun of them too.

As a side note, I thought that the ad for the RC model jet fighters was kind of cool.

(No link, just the picture, because the link could be as an inducement to fraudulently click through, which violates Google™ Adsense™ terms of service.)

Obama Staffing Update

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Cass Sunstein as head of the Office of Information and Regulatory Affairs. The position sounds obscure, but it was used to great effect by Reagan, Poppy Bush, and Bush Jr. to prevent meaningful regulation by requiring unrealistic levels of proof that a new regulation would not inconveinence the business in question. I still do not like Sunstein, he is pro torture, and his discussions of Roe v. Wade are appalling, but this pretty much rules out a Supreme Court appointment for him, with is a good thing.

I’m even less sanguine about the reports that he is appointing John Brennan as Counter-terrorism Czar at the NSC. This is someone who has been a vociferous supporter of torture and rendition, doing the talk shows in support of these policies…Ecch.

On the other hand, I am heartened by reports that Obama will keep Sheila Bair as chairman of the FDIC. When I heard reports that Treasury Secretary nominee Eddie Haskell Timothy Geithner wanted her gone for not being a “team player” because she focused too much on home owners, and not enough on banks, I figured that she was on her way out.

Things I Learned from David Frum

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Basically it’s that if he makes a statement, he is at best being deceptive, and worst completely inaccurate, note my little complaint letter to Marketplace about his inaccuracies of discussions regarding European fighter aircraft.

So, I heard him on Marketplace condemning Obama’s suggestion of improved unemployment benefits, and thought, “If he hates the idea it must be a good one.”

So a trip to Google News, and then to the New York Times for the details on the proposal.

I was right, it’s pretty good:

  • Extended unemployment insurance.
  • Subsidies for employers to help laid off employees with health insurance via COBRA.
  • Medicaid for laid off employees without health plans, and hence COBRA.

These are all good things.

Economics Update

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Initial claims for unemployment fell unexpectedly to 467,000, but continuing claims increased to 4.6 million, the highest number since 1982.

We also saw Monster.com’s Online Job Index Stumbles falling in December, which is another indication that we are nowhere near the bottom.

In retail, holiday sales were grim, with even Wal-Mart missing sales predictions.

This is far from surprising when you consider the fact that consumer credit fell by a record amount in November.

People are not buying, they are paying down debt.

Surveys in Europe are showing a precipitous drop in sentiment too.

We are also seeing a rather precipitous drop in port traffic in 2008, it looks to be about 8%, to the lowest level since 2004, according to the National Retail Federation (NRF)

Consumers are buying less, and domestic manufacturers are drawing down inventories, and both of these reduce the demand for imports.

As such, it is no surprise that the Bank of England cut its benchmark rate by 50 basis points (½%), the lowest since its founding…..In 1694.

Interest rates are still trending down here, with the 30-year fixed mortgage rate hitting a record low.

I’m not sure how long the low rates will last though, as Moody’s is reporting that the Federal Home Loan Banks (FHLB) are experiencing serious losses in mortgage backed bonds, and may fall below required capital minimums as a result.

While failure is not imminent, the spreads between their bonds and treasuries are rising as a result.

BTW, we are also seeing holes in one of the panglossian predictions of real estate professionalw, residential rents are dropping too, “apartment rents fell in 54 out of 79 U.S. metropolitan areas in the fourth quarter of 2008.”

We are also getting rumblings that the Chinese are losing their appetite for US debt, though Brad Setser says that this article is bogus, and he has the number to show this.

Really, the important thing here is not that people are not investing in US debt, it’s that they are talking about not investing, in the New York Times no less, which is the first step to a drying up of foreign lending.

The only foreign lending that does not seem to be decline is that of central banks to commercial banks. Case in point: the Bank of Japan decided to shovel $13 Billion to banks in the hopes of jumpstarting their lending.

In currency, the dollar fell today, largely because the 50 basis point cut of the BoE was less than had been predicted.

In energy, oil fell again, on the expectation that the recession would continue to suppress demand.

Zimbabwe Update

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It’s been about 3 weeks since I posted on Zimbabwe, and the news remains remarkably depressing.

While there were indications of some level of dissention within the ZANU-PF at their party congress, Mugabe is still casting all this as an attempt by white farmers to keep their farms, and that was eaten up by the party faithful.

The problem with the land distribution was not that land was seized, but that it was not redistributed, it was simply given to party cronies who have little inclination or interest in farming.

Of course, Mugabe and ZANU-PF are not really to well attached to reality anyway, as evidenced by his claim that he sent invitations for Tsvangerai and Mutambara to further meetings about a unity government, when he hadn’t.

Even if he were to have sent invitations, the meetings would clearly not be in good faith, with mass arrest of opposition and human rights activists, along with his refusal to obey judicial orders to release and/or present them to the court. (also here)

Needless to say, the fact that South Africa is once again covering for this, saying that, this should not delay the formation of a unity government, is depressing.

Both the United States and Britain are now publicly saying that Mugabe cannot be trusted as an honest broker in any unity government.

Finally, Mugabe is saying that he will unilaterally form a new government in February.

On the brighter side, it looks like there is a COPE, the ANC splinter party, calling for sanctions against Zimbabwe.

Given that South Africa supplies much of the power, fuel, and food that Zimbabwe needs, there is a fairly good chance that this stick would have real meaning.

What’s more, Desmond Tutu is suggesting that there needs to be a credible threat of military force against Zimbabwe in order for their to be real change.

When a Nobel Peace Prize winner calls for the Marines…..

The humanitarian nightmare is also continuing unabated, with Cholera still running rampant, and increasing problems with severe malnutrition, particularly among children.

House Rules Update

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Well, the incoming House of Representatives has adopted the new rules for the 111 House of Representatives.

Because the house is elected every two years, it’s easier to change the rules than in the Senate, which is technically a continuing body, because 2/3 of its members are returning every Congress.

The changes made are generally fairly obscure, but the important ones are changing the motion to recommit such that a report must returned “forthwith”, rather than “promptly” and eliminating term limits on committee chairs.

The change in the motion to recommit means that a motion to ammend a bill must be voted on then and there, as opposed to being sent back to committee, where, at best it is delayed, and frequently dies.

The Republicans have been using it for some time to obstruct legislation.

The end of term limits for committee chairmen is also an improvement, though less of one.

It return the chairman system to one that is largely based on seniority, though the case of Waxman beating out Dingell at the Energy and Commerce Committee shows that it is not universal.

I’m not a fan of seniority determining who is chairman of a committee, but under the Republicans, it became pay-to-play for chairmanships, which is worse.

Also interesting is a provision for the House to continue its contempt of Congress actions against Harriet Miers and Josh Bolton, which means that they might have a receptive Attorney General actually enforce the subpoenas for them to testify.

Of course if I were in Congress, I would trying to get the House Sergeant at Arms to arrest them and lock them in the House basement, which was last done in the 1930s.

This is why you should be glad that I am not in Congress.

OK, so I Finally Have a Handle on What is Going on in the Ukraine Gas Fiasco

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First, the prior contract on natural gas prices, which covered both gas and transit fees across Ukraine expired.

So Gazprom its Ukranian counterpart Naftogaz were negotiating, and then, because there was no deal on prices, Russia reduced shipments to the Ukraine but shipped more to the EU, on the far side of the pipeline, along with routing as much gas as possible via Belarus.

Russia then shut down the feed Ukrainian pipeline, because they said that the Ukrainians were stealing the gas, which has led to gas disruptions across Europe.

So they are now in negotiations, and there are a number of sticking points:

The first is that Ukraine wants to cut the contracted agent for the gas sales, RosUkrEnergo, because they believe it to be corrupt, which is probably true, but it also gives them the ability to monitor just how much gas enters the Ukraine from Russia.

The next big issues are over price. Ukraine was paying $179.50/tcm (thousand cubic meters) with a transit fee of $1.70/tcm/100 km, and has offered $201/tcm with a transit fee of $2.05/tcm/100km.

When you consider that a lot more gas goes through Ukraine than is used there, it sounds like a wash in terms of cost to the Ukranians.

Gazprom wants to keep the transit fee the same, and charge $480/tcm, which is much closer to the market rate, it’s selling gas to the EU at around $420/tcm.

So the numbers offered by Gazprom seem to be in line with the market, plus about 20% because you always start negotiations that way as the seller.

In any case, the EU has gotten agreement from both sides to act as an independent monitor of gas flows, because they want their gas:

After phone conversations with Prime Minister Vladimir Putin of Russia and his Ukrainian counterpart, Yulia Tymoshenko, on Wednesday, the European Commission president, José Manuel Barroso, said both leaders had agreed in principle to allow monitors to verify gas movements. But he also warned both countries — and particularly Ukraine — that failure to help restore supplies could have consequences for their relationships with the European Union.

(emphasis mine)

It turns out that the best guess here is that reductions of gas leaving the Ukraine side were far greater than the reductions that the Russians reported on their side, and the implication is that the Russians are actually telling the truth when they are saying that the Ukrainians are stealing gas from the pipeline.

Also Wednesday, Chancellor Angela Merkel of Germany spoke with Putin by phone, and in Moscow, Putin met with a former German chancellor, Gerhard Schröder, who now serves as chairman of the board of a Gazprom-controlled company planning to build a pipeline from Russia to Germany under the Baltic Sea, cutting out Ukraine.

(emphasis mine)

It appears that the Germans certainly think that the Ukraine is taking more than it buys from Russia, and I’m inclined to agree.

Much of recent Ukrainian economic expansion, before the world wide recession hit, was driven by below market gas supplied with the implied quid pro quo that Ukraine would be an ally of Russia, and having to pay fair market value for the gas is a real hardship, particularly now that FSU countries’ economies seem to be in free fall.

Like the chicken said, “You knew the job was dangerous when you took it.”

That being said, we are not seeing a punitive price, and best evidence is that the Ukrainians are stealing the gas.

If the ‘Phants Can’t Kill the Stimulus Package

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They will do their level best to ensure that whatever passes is so broken as to be useless.

Case in poiny, Mitch McConnell is suggesting that instead of revenue sharing grants to the states, that they be loans:

But back to my original point: This idea was tried once before, in the depths of the Depression. In 1932, Congress appropriated $300 million to the Reconstruction Finance Corporation to send to the states for unemployment relief. (Unemployment insurance did not exist until the Social Security Act of 1935 was passed). Unfortunately, Herbert Hoover’s RFC didn’t offer the funds to the states as grants but as loans. Already all-but-insolvent, many states didn’t take the offer. And the economy continued its plunge into the abyss.

This is Mitch McConnell’s idea of a policy worth reviving.

I would note that for a non trivial number of states, I think that it’s around 15, this loan would not allow them to prevent draconian cuts in services, because they are not permitted to take out loans for operating expenses, only for capital investments.

These folks are not concerned that a stimulus package will not work, they are concerned that it will work, because if government works, then they are fracked politically.

Gaza Update

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Well, there was a 3 hour truce to deliver supplies, and then the fighting started up again, and the Israeli cabinet has OK’d continued conflict.

On a brighter note, things seem to be developing diplomatically, with a lot of people on both sides in Cairo.

Finally, if you think that the Middle East can make you cynical, you haven’t ever truly experienced real cynicism. Just check out the War Nerd’s latest, it’s on Gaza, and it makes everyone else that I’ve ever heard of sound like Little Orphan Annie.

To paraphrase Paul Hogan in Crocodile Dundee, that’s isn’t cynicism, this is cynicism