The markets rebounded a bit this week, due to Bernanke spending about $40 billion on the week. This coming week there's only three business days, so that will be only $24 billion. Soon some sort of Irish bailout will be announced soon. That coupled with Bernanke's spending should send the market up a couple percent. A lot of people have a bunch of really good reasons why the markets should go down. I have only one good reason for them to go up: the Fed is dumping money out of helicopters.
Ireland is playing chicken with Europe. The European Central Bank wants to bail our Ireland, and force Ireland to raise their corporate tax rate in return. Ireland is home to many of your favorite companies - Intel, Cisco, HP, Google - due to having the lowest tax rates in Europe, and because of that has had great economic and employment growth for over a decade. Ireland says that their government is fine, it's only the banks that need a bail out. Unspoken here is that if the banks aren't bailed out, a bunch of UK and European banks will get stiffed for big money. Ireland has plenty of cash to last them through next April or so, they really don't need a bailout right now. However, if the markets aren't calmed down by some sort of bailout, the fear is that this latest interest rate problem could spread to Portugal, Spain, then Italy and finally France. I think Ireland has the upper hand here.
Pelosi won her bid to be house minority leader. Some democrats think Pelosi's policies were a big part of the drubbing they just received at the polls. Many democrats wanted someone a bit more centrist - Lenin would have been an improvement, imho.
Last week I mentioned the Bowles - Simpson commission paper on how to reduce the deficit. This week we have another report written by retired politicians, the Rivlin - Dominici report. They achieve a similar reduction, with a couple interesting differences: instead of an increase in the gas tax, they propose a 6.5% national sales tax; and they propose that lifetime social security benefits should be the payout target, thus benefits would be indexed to national life expectancy. This latter is very interesting, as something like this is likely a part of a solution to state pension fund problems: you announce that the defined benefit was in terms of lifetime payout, not monthly payout, and index for life expectancy. People retiring younger would get greatly reduced monthly checks. Both proposals include major revision in the tax code with great simplification, lowering of tax rates, and evaporation of most deductions including the mortgage deduction. My sense is that things are going to start to change; we can hope to start to see some movement in these directions over the next three to five years.
The Transportation Security Administration (TSA) deployed 450 full-body imaging machines in March to dozens of airports nationwide. These devices, costing $1 billion, were designed to store, record and transmit the unfiltered image of the naked human body. A test image shown to reporters at Logan International this spring showed the blurry outline of a female volunteer. It has been claimed in court that the machines violate the federal Video Voyeurism Prevent Act, which protects against capturing improper images that violate one’s privacy. There are also questions relating to child pornography laws. Travelers can opt out of going through the imaging machines and instead undergo a pat-down, including the crotch area. One imagines certain sorts of people going through the lines multiple times.
John Charles Tyner, 31, refused to undergo a full-body scan at San Diego International Airport over the weekend. He is opposed on principle to the X-ray machines because it would show an image of his naked body. He also refused to be patted down by a TSA agent. Tyner said he would have gone through a metal detector but that airport security did not give him that option. Instead, they refused to allow him to board his plane and he had his ticket refunded. As he was preparing to leave the airport, another unidentified security official told him he could be sued civilly and fined $10,000 if he exited without undergoing a search. Tyner refused and left the airport. Tyner posted film of the entire episode on Myspace. Clever observation: take the words "Department of Homeland Security" and translate them into Russian. The initials? "KGB," the Kommittee for State Security. I'm certainly relieved that I live in the Land of the Free.
The California Supreme Court decided unanimously Monday that illegal immigrants may continue to be eligible for in-state tuition rates at the state's colleges and universities rather than pay the higher rates charged to those who live out of state. In a ruling written by Justice Ming W. Chin, one of the panel's more conservative members, the state high court said a California law that guarantees the lower tuition for students who attend California high schools for at least three years and graduate does not conflict with a federal prohibition on giving illegal immigrants educational benefits based on residency. Chin wrote, "It cannot be the case that states may never give a benefit to unlawful aliens without giving the same benefit to all American citizens." Note the snazzy triple-negative, I can't write like that. Perhaps Justice Chin would have benefited from a UC education. The lawsuit contended the California law usurped a federal prohibition on giving educational benefits based on residency to illegal immigrants but not all US citizens. The US Supreme Court is expected eventually to decide whether the lower tuition rates also violate federal law. Note that this fight is over children born in foreign countries who come here illegally. It does not include children of illegals that were born in this country, who are currently considered citizens.
Chinese food prices, for a basket of 18 key vegetables, rose by 62% year-over-year in November. Said one Chinese shopper, "The source of China's inflation is America, they are printing too much money. Everything is definitely more expensive than last year." Is it true, is Bernanke causing Chinese inflation? Certainly the Chinese Government has been quite successful at selling that idea, so when the inevitable bubble burst comes they can blame us. China is considering price controls on food, subsidies for shoppers, a crackdown on hoarding and price gouging as well as a system whereby mayors are made responsible for a basket of food items. Note they're not considering slowing the printing of their own money. This is pretty much exactly what Nixon did in 1972. Perhaps soon China will try his other bold idea, printing up 5 million lapel buttons that say "WIN - Whip Inflation Now!" In fact, China is printing money far faster than we are, they're just doing it quietly.
Good news: The Pope has announced that condoms are justified in some cases. The bad news: you're going to have to tell your priest you're a male prostitute trying to avoid AIDS.
Construction of new U.S. homes sank 11.7% to the lowest level in 18 months. As construction is the best potential employer for our 8 million unemployed unskilled male laborers, this is bad news.