Markets climbed uneasily this week on news that both American and European politicians didn't do anything. The markets opened up every day, then lost much of that progress over the course of the day. It seems clear to me that the upward bias is substantially due to Bernanke's $40 billion per month injected into our banks.
Eurozone unemployment hit 11.4%, a new record. Car sales are collapsing all over Europe. Car sales in Greece are down by roughly 65% compared to last year; they're off 37% in Spain and 18% in France.
In the US unemployment dropped to 7.8% as apparently over 850,000 jobs were created. Immediately there were cries all over Wall Street that the Government's numbers were cooked. Further investigation suggests that there were a lot of jobs created, but most were part-time McJobs; and that the major shift in the unemployment number was due to people dropping out of the job market. The fraction of our population that either has a job or is actively looking for a job continues to drop. If you keep the fraction of our population working or looking for work constant since Jan.1, our unemployment rate would be 8.35%, not 7.8%. If you keep that fraction constant back to when Obama took office, our unemployment rate would be 11%. Decide for yourself if you think that means the unemployment numbers are cooked; all I know is moving workers into disability or early retirement doesn't count in my mind as creating jobs.
Iran says if talks fail, whatever that means, they will enrich their uranium to 60%. Power reactors need 5% enrichment; breeder reactors can handle something like 20%. 60% will burn up most reactors. Iran says the 60% uranium will be to power submarines and is for peaceful uses. Apparently peaceful submarines. You know, like the ones at Disneyland with windows to look at the fishies and mermaids. There is no way I can imagine to interpret this but that Iran says they will build a bomb. Now we've all known for years that this is so, but this is the first time they've more or less admitted it publicly - previous to this every public statement by Iran denied that they ever wanted a bomb. I interpret this as "Israel and US: we dare you." Meanwhile some Iranian magazines are calling for a new peace between the US and Iran, noting correctly that we share interests in the post Arab spring world. So there is perhaps an element of carrot and stick here. How will it end? War? Detente? Peace? It sure looks like war to me, but perhaps people will back down at the last second.
Why is Iran suddenly doing this carrot and stick thing? Iran's economy is being hit hard by the sanctions. Internally, Iran's Rial has lost half it's value compared to the dollar this year and they're close to the edge of runaway inflation. Anecdotes of life in Iran say that meat is getting very hard to come by, and people are rioting against the Iran central bank and government. Lennon famously said "no society is ever more than three meals away from a revolution." This may be a time to be patient and see if Iran can pull back from their economic cliff. On the other hand, if estimates are wrong and they have some sort of nuclear capabilities - for example, a conventional missile / warhead combination coated with radioactive material that can render an area uninhabitable for centuries - perhaps backing Iran and Israel into diagonally facing existential corners is a risky proposition.
Henry Kissenger said recently in an interview, "In 10 years, there will be no more Israel." A recent 82 page analysis by sixteen US intelligence agencies, "Preparing for a Post-Israel Middle East," concludes that Israel cannot withstand the coming pro-Palestinian juggernaut consisting of the Arab Spring, the Islamic Awakening, and the rise of the Islamic Republic of Iran. The report states, "In the past, dictatorships in the region kept a lid on the pro-Palestinian aspirations of their people. But those dictatorships began to topple with the fall of the pro-Israel Shah of Iran in 1979 and the establishment of a democratic Islamic Republic, whose government had little choice but to reflect its people's opposition to Israel. The same process - the overthrow of dictators who worked with, or at least tolerated, Israel - is now accelerating throughout the region. The result will be governments that are more democratic, more Islamic, and far less friendly to Israel." Washington, for the first time ever, is considering the cost of supporting Israel in terms of money, lives, and damage to the US reputation among dozens of countries against the likelihood that Israel is a lost cause. In order to normalize relations with 57 Islamic countries, the report suggests, the US will have to follow its own national interests and pull the plug on Israel.
Default rates on student debt have been climbing and recently hit 9%. Many think this is a big part of the reason the housing market refuses to recover: first time buyers don't exist. The average college graduate is now carrying $27,000 in student loans. Marry two of them to each other and you have $54,000 in debt before you buy your first marital saltine cracker. The PEW institute estimates that 40% of households headed by someone under 35 has student loans outstanding. How do you buy a house when you already have half a mortgage payment each month for your student loans?
Supap Kirtsaeng, a native of Thailand, came to America in 1997 to study at Cornell University. When he discovered that his textbooks, produced by Wiley, were substantially cheaper to buy in Thailand than they were in Ithaca, NY, he rallied his Thai relatives to buy the books and ship them to him in the United States. He then sold them on eBay, making $1.2 million profit according to court documents. Wiley, which admitted that it charged less for books sold abroad than it did in the United States, sued him for copyright infringement. Kirtsaeng countered with the first-sale doctrine. Kirtsaeng lost in federal appellate court; later this month the case will be heard by the Supreme Court. Right now the appellate court decision means you don't have the right to resell anything which was originally made outside of the US - your cell phone, your TV, anything you ever bought at Walmart, perhaps even your car. Ebay and Craigslist would be shut down almost entirely. If the Supreme Court upholds this decision, many manufacturers will move yet more production out of the US for the added copyright protection. Then they'll just contact EBay and tell them their articles may not be resold. That's it, you're down to garage sales.
Venezuela's president Hugo Chevez stands for re-election today. There are a couple interesting questions: Will he allow the vote to be counted in such a way that he loses? If he does lose will he stand down? If he refuses to go, will there be a coup? If you buy your gas at Valero gas stations, you should be curious about this, as Valero is the US marketing arm of Venezuela's state oil company.
Election Watch: Here's some telling statistics: Obama's approval rating remains under 50%. Unemployment remains at levels that have never led to a president getting re-elected. Pretty much everyone believes we're still in a recession. I believe the electorate would embrace any reasonable alternative to Obama. But they haven't been given one.
Giving out free IUDs to young women drops the abortion rate by about 75%. Since Roe v. Wade there have been about 55 million abortions performed in the US; about 3500 per day so far this year, just about a million to date this year. A bit under 1% of all abortions are due to rape or incest; 99% are just a convenient way to get un-pregnant. I think this is morally reprehensible, and anything that lowers the abortion rate, like free IUDs, is a good thing.
Science: Since 1976, the NSA has been using the KH-11 spy satellite. Recent versions with improved electronics are said to have a 1" resolution when looking at the earth - they can read a license plate. When the Hubble telescope was being designed, it was decided to use the same 2.4 meter (8') diameter mirror, as then the same production line could be used which would cut down on costs. In fact it can reasonably be said that the Hubble telescope is a KH-11 spy satellite turned around to look out instead of looking down. The NSA just donated two complete 2.4 meter telescopes to NASA, worth about $250m. Each of these telescopes is comparable, indeed in many ways identical to the Hubble, but they're newer, lighter, and have improved imaging. Said Dr Matt Mountain, director of the Space Telescope Science Institute in Baltimore, Maryland. "These are very large telescopes, and from their design specifications they appear ideal for carrying out large surveys of the heavens, including searches for Earth-like worlds orbiting stars near our solar system." There was no warning on this, NASA just got a knock on their door from a truck driver, "Hey buddy, where do ya want the telescopes?" Unfortunately these are just telescopes, not satellites - no cameras, no instruments, no steering or power. NASA says they won't have funding to finish or launch them until 2020. Building and launching a new KH-11 costs about $3 billion, about half the cost of a new aircraft carrier. Meanwhile Google and others have developed commercial versions which have resolutions of about a foot and can be launched for well under a billion dollars - the NSA is apparently now using military versions of the Google Earth satellite.