Sunday, January 31, 2010

Understanding the Derivative Markets

Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers' loans). Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in  Detroit.

By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities then are bundled and traded on international securities markets.

Naive investors don't really understand that the securities being sold to them as AAA secured bonds really are debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi.

Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and Heidi's 11 employees lose their jobs.

Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS prices drop by 90%. The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from their cronies in government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Heidi's bar.

Now do you understand?

The More Things Change the More They Stay the Same

Click on Images to Enlarge for Viewing

Saturday, January 30, 2010

Do We Have the Will to Change Course?

Is this where we're headed and, if so, how far along the path are we? This is lengthy but worth watching to the end.

Happiness Machine

An Insightful Take on the Speech

Click here to see an excellent Wall Street Journal opinion piece by Peggy Noon.

Friday, January 29, 2010

Unlimited Debt; Budget Freeze Joke Not Slowing Spending Express

The clownish scum currently performing in what once was referred to as the greatest deliberative body in the world yesterday voted to raise the illusory ceiling on the national debt. Thus they averted (for the time being) a default by our banana republic government on its staggering financial obligations.

Wouldn't it be wonderful if every time any of us neared a personal credit card payment due date we simply could increase the limit on the account, borrow more from it? This would enable us to use part of the newly borrowed funds to make the required payment and squander the balance as we pleased. Of course the amount owed and the interest on it would go up each time we did this, but that wouldn't matter because we always could do the same thing on future due dates . . . like a perpetual motion machine. 

The ceiling on our national debt clearly is only an illusion put in place by our foolish ruling wastrels to convince the gullible among as that there is some limit to the financial burdens they will inflict on future generations. The lack of responsibility is astounding . . . but they know they will be gone, beyond reach and accountability, when the bills ultimately really come due.

Nonetheless, we the voters, let them get away with this instead of erecting warranted scaffolds and guillotines on Capitol Hill.

No wonder they laugh at us with their limited partial budget hangout spending freeze . . .

. . . while their spending express roars onward


Big Scammers Want Focus on the Piker

Friday, January 22, 2010

Confederacy of Dunces

The danger to America is not Barack Obama but a citizenry capable of entrusting a man like him with the presidency.  It will be easier to limit and undo the follies of an Obama presidency than to restore the necessary common sense and good judgment to a depraved electorate willing to have such a man for their president. The problem is much deeper and far more serious than Mr. Obama, who is a mere symptom of what ails us. Blaming the prince of the fools should not blind anyone to the vast confederacy of fools that made him their prince. The republic can survive a Barack Obama, who is, after all, merely a fool. It is less likely to survive a multitude of fools such as those who made him their president.

   . . . Author Unknown

It should be recalled that an educated, intelligent, and virtuous citizenry was viewed by the nation's founders as essential to the well being and survival of the republic. For one aspect of what the degradation of our electorate, our elected, and our institutions has facilitated and threatens for the future of the country, read and consider this exposition.

Tuesday, January 19, 2010

Year Old Observation

 When much was being made  about the nation's first black president,  Ann Coulter made the following observation in her February 25, 2009, column: 

But as long as the nation is  obsessed with historic milestones, is no one going to remark on what a great country it is where a mentally retarded woman can become speaker of the house?

. . . and a nasty one at that.

Wizard of Oz Today

Is 70 years old.

Today, if Dorothy were to encounter
Men with no brains, no hearts, and no courage -

She wouldn't be in Oz,

She's Be In  Congress!


Monday, January 18, 2010

Another Surprise from CNN

Jack Cafferty realizes that Nasty Nancy Pelosi, Squeaker of the House of Reprehensibles, is a "horrible woman."

Friday, January 15, 2010

Abandoned Commitments

Today's Scam Foretold

The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.
. . . Thomas Jefferson
Letter to John Taylor

Thursday, January 14, 2010

Democrats Vote for New Don't Ask, Don't Tell Policy

Congressional Democrats voted not to take any steps to learn, and to ensure that nobody else finds out how come the Obama Justice Department under Attorney Generalisimo Eric Holder dropped a case against truncheon wielding, voter intimidating members of the New Black Panther Party at a Philadelphia polling place in November 2008l  The Democrat members of a House of Reprehensibles committee voted against having the Just Us Department explain abandoned a case in which it already had won a judgment against the voter intimidating thugs, according to this report.

Candidate's Aid Knocks Down Reporter

A plain case of battery: that's how a goon like aid to the Democrat candidate for the U.S. Senate seat formerly held by Ted Kennedy handled a journalist who asked his boss lady a question she didn't want to answer. Is this a great country or what?

Another Deficit Warning from Nonpartisan Experts

This new report spells out what the government's out of control spending portends for the country.

Media Dopes In a Tizzy Over Discovering the Obvious

Our almost totally useless media had their collective knickers in another bunch yesterday as they shared with us their curiously uncurious journalists' discovery that the guy who heads the Internal Revenue Service hires a professional to prepare his tax returns because our tax laws' requirements are too complicated for him to understand.

This is another of the blinding glimpses of the obvious in which the press specializes when it isn't treating us like mushrooms -- keeping us in the dark and covering us with B.S.

The real news in the items was and is the happy discovery and revelation that the IRS chief actually files his returns and, in contrast to so many other members of our ruling class, presumably pays his taxes. Also, by admitting that he is baffled by the tax code's complexity, the IRA chief showed himself to be a normal human being, a rare creature in our government.

Wednesday, January 13, 2010

Necessary and Overdue Thoughts About the War Against Terrorists -- Part 1

We need  a strategy to win our purported war against terrorists, and if we currently have any such strategy, it needs to be changed.

As things stand, we are squandering our resources -- the lives of our troops and the funds being expended -- to no avail. The U.S. military victory in Iraq did nothing to stop terrorist attacks against our country, and nobody expects victory in Afghanistan, whatever that means and even if it is achieved, to do so. 

Our adversaries have demonstrated that they are capable of moving to, and initiating strikes against us from any number of different locations. Nor are those hostile to us lacking in daring, imagination, or resources. Furthermore, they have the luxury of being able to select from a plethora of soft, vulnerable targets in our homeland, and to pick and choose optimum times to strike such targets. 

No nation ever has won a war by engaging only in defensive actions. Nonetheless, that is what the U.S. is doing by only taking defensive measures and responding to individual attacks as they occur against us. We are losing and will continue to lose if we allow the contest to continue as such a low level war of attrition. Our response to every attack that has been mounted against us together with our losses in the strike has been far more expensive to us than it has been to our attackers in terms of  both personnel and monetary costs. Furthermore, that is true even without taking into account the enormous burdens of purported defensive measures our government has put and is continuing to put into place. Most of these measures are wasted except insofar as they create popular illusions that the government is doing something to protect America and Americans.

This disparity in the expenditure of resources means that we are losing the war, albeit slowly -- so slowly that the inevitable end result seems to be escaping public notice. Ultimately, however, our present course can lead only to ruin and defeat.  

We need a strategy that will make hostile actions against the U.S. and its people more costly to our adversaries than it is to us, sufficiently more costly to dissuade our adversaries from attempting attacks against us. Or, as President Reagan famously said of his cold war strategy: 

We win, they lose!

K.R., your not-so-humble blogger, intends in future parts of this series to suggest such a strategy. Part 2 will deal with a way or ways to go on the offensive by economic and/or perhaps other nonmilitary means, and Part 3 will suggest a coherent military strategy. These suggestions will not be hampered or circumscribed by political correctness.

A British View of Our Economy

According to this London Telegraph analysis, the U.S. economy still is bad and continuing to worsen.

Real, Effective, and Unintrusive Airline Security: It's Possible and Being Achieved -- Just Not in or by the U.S.

To see how Israel has achieved a perfect record in protecting its airliners without inconveniencing travelers, take a look at this Wall Street Journal video:

Tuesday, January 12, 2010

Addenda to 1/11/10 Immaculate Failures Post

Addendum No. 1:  In this Wall Street Journal essay, John Bolton points out the need for eliminating bureaucratic and political influences from intelligence, supports replacing our current and obviously flawed unified lowest common denominator structure with a return to competing independent agencies, and suggests ways that he thinks this might be accomplished (which is something K.R. doubts can be done in the current political climate). 

Addendum No. 2:  The subject initial post was not intended as a criticism of our intelligence agents in the field. This working level generally is staffed by loyal, hard working, dedicated, and courageous individuals, who often display great initiative and inventiveness.  They too often are stifled, and receive short shrift or worse from their bureaucratic time serving superiors and the politicians in charge.

Spot On Observation

Democracy is two wolves and a lamb deciding what to have for dinner. Liberty is a well-armed lamb. 
. . . Benjamin Franklin

Cut the Creep Some Slack

As is shown by my April 9, 2008, post entitled Kerr's Excellent Adventure with Lightweight Harry Reid (which can be accessed in the Older Posts section below) few, if any, people detest our sorry senate majority leader more than I do.

However Senator Reid currently is receiving a good bit of undeserved cudgeling for remarks he made in the course of the nation's most recent presidential campaign. He is being berated for having referred to certain racial and ethnic characteristics of Barack Obama.

The resulting uproar did serve a couple of useful purpose: It again demonstrated that liberals and Democrats circle the wagons and rush to defend any of their number who has said or done something  that is perceived as being untoward -- a marked contrast to conservatives and Republicans who in such situations quickly cast the transgressor from their ranks and distance themselves from him. The incident also illustrates again the continuing social and political unacceptability of publicly discussing any racial matters openly and honestly.

Notwithstanding his apology for his utterances, there was nothing whatsoever wrong with the remarks by Senator Reid that started the uproar, which at this writing shows no signs of abating. What the otherwise loathsome Lightweight Harry said in this instance was accurate, relevant to the Obama candidacy, and, except for being politically incorrect, unobjectionable.

Economic Path We're On Has Been Tried Before

Anyone not filled with apprehension and dread about where we're headed economically would be well advised to take a look at this Strong Lesson From Argentina.

Monday, January 11, 2010

Immaculate Failures

America and Americans in recent weeks have been attacked by several murderous Mulims as a result of what the President, after numerous earlier denials and evasions, finally labeled a series of "systemic failures" by our homeland security agencies.

That's putting it mildly. With the information that the failed agencies had of the identity and intentions of the Islamic terrorists either the Keystone Kops or Inspector Clouseau would have figured out what was going on, intercepted the attackers, and prevented the attacks.

Nonetheless, it seems that the failures were some kind of disembodied occurrences, taking place in vacuums, beyond any human control -- immaculate failures for which no human being bears any responsibility.

Am I the only one who thinks that those responsible for the failures should be held accountable and fired?

In the long ago days of my youth, I was involved and in contact with some of our intelligence agencies and even then, in that simpler time, they constituted a bureaucratic nightmare -- competing agencies and even competing divisions and offices within each agency, each zealously hoarding information and guarding its own turf. Everything had to go through labrynthic channels at multiple levels. Interestingly, an Israeli counterpart at the same junior field officer level that I occupied could, at his own initiative, communicate directly and instantly with the chief of his agency if something warranted his doing so.

In the intervening years  our intelligence and security agencies have been reorganized many times . . . and virtually every reorganization has been detrimental, as governmental reorganizations invariably are. Except for the name of the box in the organizational chart nothing changes at the working level -- the same people are left in the same jobs. A new agency, a new box, is added at the top of the organizational chart and the old organizations that formerly operated independently are slid in beneath that top box, sometimes with new names. Again, except for the new agency at top of the pyramid, the same people continue in the same jobs. But lots of new jobs are created to communicate -- they call it liaison -- with the new top agency . . . and that agency of course has lots of new employees to communicate, control, and coordinate the work and output of the lower boxes. All of the new positions are filled with politicians who are, or at risk of being voted out of office.  Of course, none of these folks will have any qualifications for, experience in, or knowledge of the the agency's function and responsibilities. (Incidentally, I witnessed this again in the 1980s when the collapse of the savings and loan industry led to a reorganization of the nation's financial regulatory agencies . . . and we've now unhappily seen how well that worked out.)

The dysfunctional nature of all this was recognized, believe it our not, by George W. Bush, who as president, appointed a CIA director  committed to rationalizing intelligence work and transforming the function into a lean, coordinated, and professional system. But the time-serving old boys got rid of him in short order and Bush gave up on the effort. 

What we're left with is a pitiful helpless giant bureaucracy that continues to trip over its multiple channels and levels -- doomed to continue to fail, endangering the country and its citizens in the process. But the denizens of the system are and will continue to be safe as the failures will be systemic -- immaculate ones for which nobody bears responsibility.

Saturday, January 9, 2010

But What Did He Know?

"The multiplication of public offices, increase of expense beyond income, growth and entailment of a public debt, are indications soliciting the employment of the pruning knife." 
. . .Thomas Jefferson
Letter to Spencer Roane

Even CNN Is Starting to Get It

Wrong and Getter Even More Wrong on Airline Passenger Screening

Why is Israel is so much more successful than the U.S. in averting attacks using or on its airliners?  An Israeli security officials is reported to have given this devastatingly accurate and succinct explanation:

"We screen for terrorists. You screen for tweezers."

In addition, unlike their counterparts in the U.S., the Israelis are not handicapped by political correctness. Thus they don't waste a great deal of attention, energy, time, or any other resource on unwrapping and examining presents being carried by members of a blue-eyed blond family trying to fly to grandma's house for Christmas. The Israelis instead are able to focus on those with the characteristics displayed by those who have engaged in prior terrorist activities.

In the wake of the narrowly averted Christmas Day tragedy involving a Detroit bound flight, the U.S. now is moving to acquire and install more high tech screening machinery at the nation's airports. More stuff even though it is clear that imaginative motivated people always can circumvent and defeat stuff. That, however, misses the point. 

If the point truly was to prevent or disrupt and defeat terrorist attacks, we would hire, train, and pay for highly intelligent and perceptive screeners. Instead, we utilize machinery and Transportation Security Agency personnel who appear to have been recruited from the nation's Society of Mental Midgets and are eager to exercise authority over, and humiliate those subject to their whims. 

What is going on under the guise of security screening at American airports is a campaign to convince the public in general and travelers in particular that the government is "doing something" about their legitimate safety concerns. And the rationale is that the more expensive, inconvenient, intrusive, and time consuming the screening, and the more costly, extensive, and sophisticated the utilized gadgetry, the more the government will be perceived as doing, irrespective of how often the effort is shown to be little more than an ineffective comical charade. 

Thursday, January 7, 2010

We the People Sing Along With Ray Stevens

ScienceDaily Report

ScienceDaily (Dec. 31, 2009) — Most of the carbon dioxide emitted by human activity does not remain in the atmosphere, but is instead absorbed by the oceans and terrestrial ecosystems. In fact, only about 45 percent of emitted carbon dioxide stays in the atmosphere.

However, some studies have suggested that the ability of oceans and plants to absorb carbon dioxide recently may have begun to decline and that the airborne fraction of anthropogenic carbon dioxide emissions is therefore beginning to increase.

Many climate models also assume that the airborne fraction will increase. Because understanding of the airborne fraction of carbon dioxide is important for predicting future climate change, it is essential to have accurate knowledge of whether that fraction is changing or will change as emissions increase.

To assess whether the airborne fraction is indeed increasing, Wolfgang Knorr of the Department of Earth Sciences at the University of Bristol reanalyzed available atmospheric carbon dioxide and emissions data since 1850 and considers the uncertainties in the data.

In contradiction to some recent studies, he finds that the airborne fraction of carbon dioxide has not increased either during the past 150 years or during the most recent five decades.

The research is published in Geophysical Research Letters.

Wednesday, January 6, 2010

Better Late Than Never News Flash

Our State Department  now has revoked the U.S. visa of the Nigerian Jihadist who on Christmas Day scorched his own crotch in a failed effort to blow up the Amsterdam-to-Detroit airliner on which he was traveling.

Never let it be said that our government acts precipitously. The Brits had barred the now indicted guy from their country long before he was allowed to board the U.S. bound aircraft despite numerous signs and warnings that he was a radical Muslim activist likely to resort to terrorism (a.k.a. causing what our Homeland Insecurity director refers to as man-made disasters).

Despite assurances that those responsible for the failures in our homeland security system will be held accountable, don't hold your breath until anybody at the command level is  fired in deserved disgrace.

Tuesday, January 5, 2010

Homeland Security Chief Janet Incompetilano

With no background in intelligence, defense, or law enforcement, it has been clear from the outset that Ms. Napolitano was unqualified to serve as, and had no competency to perform the tasks required of the nation's Homeland Security chief, the position to which the Chosen One appointed her. Her comments about the genitals singeing Jihadist's effort to steal Christmas by blowing up an airliner demonstrated that she also is merely a politically correct hack lacking any basic common sense, and a moron.

Wisdom Unheeded

"We must not let our rulers load us with perpetual debt."  
Thomas Jefferson
Letter to Samuel Kercheval

Friday, January 1, 2010

Dangerous Delusions

Our government has the nation wandering around in a war zone in aimless confusions, oblivious to, and refusing to recognize the fact that we're being relentlessly attacked. The perilous situation is laid out in a combination of this analysis by the estimable Charles Krauthammer together with this one by Linda Chavez.

Decline In One Short Year

Our nation's transformation in a single year -- the one just ended -- from a power that was a reliable friend and ally, feared by those hostile to it, and respected (sometimes grudgingly) by all,  to a universally mistrusted Rodney Dangerfield one is explained in this essay.

Not To Be Missed

Dave Barry's take on 2009 puts the year in perspective with this marvelous review.

Victory . . . . Credit Where Credit Is Due -- No Matter How Bad It Smells, They Passed It