Arkady's Thoughts

Ireland released a 140 page document outlining their plan for bringing their financial house in order. I do not claim to be an expert on Irish matters what so ever, but I do fancy their most unparliamentary procedures .  So why mention or write about it?  Because!  Ireland was one of the first countries in Europe to go down the path of austerity and as I wrote about last time, it did not work.  Of course the failures of Irish austerity have much more to do with the global increase in debt than anything else, but Ireland is also suffering from a very similar malaise affecting all civilized nations:  a giant federal government and the painfully flawed concept known as the welfare state.  Observe the highlights of the Irish plan, courtesy of RTE : * Public expenditure down €10bn, tax up €5bn * Irish bank shares see big falls * Corporation tax will remain at 12.5% (maintain the visible tax, raise the less obvious ones) * Social Welfare to b...

Hardly worth reiterating the obvious, but worth mentioning the subtle " Irish bailout " just because of the parties involved.  These parties I speak of, are of course the very same banks sitting on top of a massive central bank system that have been dispensing loans at a rate that nobody could have considered sustainable.  Yet beyond dealing with the problem of our banking system in America, Americans are now bailing out Irish banks.  Because a lot of the money is coming from an EU-IMF pool containing American tax dollars, it would be a crime not to mention the story . Irish Finance Minister Brian Lenihan needs to inject at least 5 billion euros ($6.8 billion) more cash into the country’s two biggest lenders immediately as part of Ireland’s international rescue, analysts said. Indeed.  Between the nationalization of Irish banks by the government and future potential IMF contributions to the ailing country, one has to wonder when any of this will end.  Of c...

TARP WORKED!!!  Thank the lord.  Some of the headlines do a good job of capturing the level of ignorance that persists in the world of punditry. " TARP: A success none dare mention " one writes while " TARP's Success Proves Washington's Talent " writes another  Oh brother, TARP is continuing to bamboozle people to this day, perhaps we can clear it up once and for all.  By continuing to promote these falsities the writers are also promoting the savior Big Government and instilling within the American populace an idea that any crisis regardless of size can be defeated by the wisdom of our politicians.  These propagandists fail on both accounts, first out of common sense and second for economic reasons. First reason - the common sense. Just because *some* banks have been paying TARP back with interest never made it a good idea.  My analogy is the following:  Imagine if Congress offered each unemployed American an opportunity to play for...

Yeah, we just had a tax hike and it was pretty damn big.  You must be confused, what tax hike, nothing happened in Congress.  Well in case the picture does not give it away, this tax increase was not done by Congress, it was done by the Federal Reserve chairman Ben Bernanke.  He announced it yesterday and here is the relevant information: The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.  This will be done because our economy is struggling and housing is depressed, a rather bleak economic assessment, but one that is strangely similar to that of 2008.  After all the spending and all the Fed's machinations we are still struggling and still searching for a recovery, yet instead of reversing course and explor...

Purpose The 2010 midterm elections are just around the corner and the energy in the air is frenetic.  People of all ages and experience regard these elections as potentially more important and crucial than the historic 1994 elections and for good reason.  In the past eight years our government has taken a dramatic turn for the worse and exacerbated a direction that has been unfavorable for individual liberty, freedom, choice, expression, opportunity and all the wonderful things that made America the greatest country in the world.  A debate over the beginnings of this sad direction is a tricky one, but looking at the future with some renewed optimism is worth the time and effort. After the 2008 election and the inevitable assumption of power by the most liberal president since FDR along with the likes of Pelosi and Reid, America has entered a new age.  Not the lurch towards European style socialism, but a renewed activism by citizens and a dramatic up-tick i...

Paying attention to the employment condition of America is critical in understanding the direction of recovery.  Today's report leaves a very bitter taste in one's mouth and confirms the notion that America is actually within a depression and/or heading towards one.  Our path is only slowed down by an over zealous federal government and a central bank that is determined in repeating the follies and errors of the FDR administration. The full report can be found here , but for brevity there is just one piece of data that you should care about.  The main headline will probably read that the unemployment rate remained steady at 9.6%, which is the U-3 number and regrettably the number used by the main stream media. The U-6 is a much more accurate representation of where people find themselves in terms of employment.  A quick glance here and you quickly realize that we are probably at our worst as the greatest number of people have lost their jobs and given up looki...

One of Peter Orszag's first messages after leaving the public sector was to advise his former boss to extend the Bush cuts for two more years.  Ideally he would prefer to extend the cuts only for the middle class, but despite his liberal desires has come to a sober realization. Why does this combination make sense? The answer is that over the medium term, the tax cuts are simply not affordable. Yet no one wants to make an already stagnating jobs market worse over the next year or two, which is exactly what would happen if the cuts expire as planned. Talk about a rock and a hard place. So despite his Keynesian ways, Orszag admits that a tax increase (essentially what the expiration would amount to) would damage jobs.  His populist desires compel him to suggest we keep these cuts for the middle class only, yet he realizes  the wealthy keep this economy moving.  This is essentially a microcosm of the age-old debate between conservative and liberal thin...

The left's favorite Nobel prize winning liberal economist is busy on the propaganda trail in a vain attempt to bolster his own image.   Where shall we start?  It is no secret that Krugman is one of the most prominent and well known economists pushing for the Stimulus back in 2008.   With the architect of the Stimulus, Christina Romer, now admitting defeat - the left is mobilizing marketing forces to explain the failure. In Krugman's recent diatribe, our hero explains the failure and like a 5 year old school boy proudly announces " I told you !".  This little ego stroke points to a previous article where Krugman warns America that the Stimulus appears to be small and therefore could fail.   This is of course fascinating because central planning always fails, so Krugman positions himself in a very fortunate situation, he can always say "I told you" as a stimulus of any size will fail.  Yet, just two months before, he wrote on November 10, 2008 . So we...

This weekend I saw a commercial celebrating our independence day, it got me thinking.  This commercial played out by portraying red coats at the time of the revolutionary war ready for combat.  The situation turns grim when they discover that our founding fathers are charging directly at them at about 55 miles per hour...in a few American made cars and as the Brits run off in disgrace, a triumphant George Washington emerges and we are greeted with a slogan:  America got two things right:   Cars and Freedom .  My impulsive reaction was to blurt out that we have neither and in 2010 to invoke the memory of American automobiles in the face of unprecedented bailouts is just silly.  Later that day we watched the fireworks and I was swept up in thoughts that many would consider pessimistic and against the spirit of the holidays.  Unfortunately, we as Americans must be more cognizant than ever of what 4th of July means and what it once represented....

On the heels of another Euro destruction, where the Euro has made new fresh lows against both the US Dollar and the Swiss Franc one has to wonder where this roller coaster plans to stop.  As mentioned here previously, no sustainable rally can occurring American stocks until the situation in Europe resolves itself. That is, at least temporarily because your host fails to understand just how exactly Europe can pull itself out of their predicament.  What is their predicament?  A gigantic circle jerk of debt.   For your viewing pleasure, enjoy this video. My position remains the same, Germany which is currently Europe's strongest Economy needs to leave the Euro and return to it's own currency.  This will then expose the Euro's actual value which is NOT 1.19 against the Dollar, but something substantially lower.   Similarly and much more importantly countries like Greece and Spain need to have their currencies and debt recognized at a...

Right now the focus is on the turbulent financial markets and for good reason.  Volatility has increased drastically and after almost one year of steady gains, such volatility should be a concern.  Previously I discussed the movement in the currency market as a potential catalyst for a move in American costs. Specifically the move in the Euro, or rather it's ultimate demise.  Ever since Europeans decided that they would rather keep Greece in the union and willingly print Euros to cover the rapidly deteriorating debt of the Greeks it signaled the beginning of the end.  Reason is rather simple actually, when a central bank is willing to print more money just to keep an artificial coalition together outside forces will grow skeptical of the value of this currency.  Furthermore it exposes other weak links within that coalition, namely Spain, Portugal and Italy.  There was only one correct move in the case of Greece fire and that was to snuff it out, instead t...

It has been a very busy week with some good news and bad news.  Good news include Rand Paul winning the Kentucky primary and ousting the GOP establishment candidate.  Bad news include Peter Schiff getting completely shut out in CT, stock market sending dangerous signals of an incoming sell off in the next few months and Scott Brown showing his true colors and breaking the filibuster enabling the passage of the so-called Financial Reform (59-39) . But there is nothing to celebrate.  In this liberal soup only the big corporations and power hungry Statists benefit while the average man suffers under the growing weight of a growing Government bureaucracy and an ever increasing financial oligarchy.  Gone are the audits of Ron Paul/Alan Grayson, gone are the restrictions on derivative trading and restricting access to taxpayer money via the Federal Reserve, rejected were the plans to remove Fannie and Freddie out of Government ownership  (along party lines), ...

As the smoke settles after last week's fiasco and the stock market attempts to climb out of a historic point drop we are left to ponder what awaits us.  Little know fact about last week's one day swoon, currencies were selling off hard.  Looks like someone realized that the inflationary pyramid being constructed by our central banks will collapse sooner or later.  In fact the Euro was flirting with multi-month lows before the famous "fat finger" that sent the Dow Jones Industrial into a virtual melt down.  Why was the Euro selling off?  Well that is rather straight forward and I am glad you asked.  You see, shortly before this swoon the Greek situation was "resolved'.  I use the term loosely of course, because essentially the European Central Bank pledged to buy debt even if the world agreed that the debt's quality was deteriorating.  A quality of debt is measured by the ability of the debtor in paying back what he borrows.  This move was c...

There are just a handful of people who will tell it is like it is.  Most of these folks can be found on the Internet because they are not obligated by contracts or have to pretend to adhere to some corporate standard, these people simply speak from the heart without attempting to gain anything in return.  One such person, Karl Denninger is worthy of this mention.  While I do not always agree with his views regarding how to solve our problems, we seem to be completely in tune with recognizing some of the core failures.  As Europe slowly enters self-destruct mode and the ECB has finally humiliated itself by generously accepting downgraded Greek debt, it is important consider one very crucial aspect.  America is standing on the precipice of the exact same problem.  Failure to understand this will come as a rude awakening as within a relatively short time our financial, economic and civil health suffer another tremendous blow.  For those still long in th...