Gleanings II 482 Compliments of Nick Rost van Tonningen Posted by John on October 19, 2012

Gleanings II 482 Compliments of Nick Rost van Tonningen on October 19, 201

The recent pessimism about the near-term outlook for the US economy is wilting in the face of  counter-indicative economic news. Retail sales have been stronger than expected. The unemployment rate for September came in at 7.8%, down a full 50 bps MoM (causing cynics, Republicans & conspiracy afficionados to sniffle “How convenient”)  – if confirmed on November 2^nd by the October outturn, this could affect the election result four days later). In the week ended October 6^th new applications for unemployment benefits were down 30,000 WoW to 339,000, their lowest level in 4½ years,  while the Street had expected them to be flat (one state was said to have “accounted for the bulk of the drop”, so this is likely to be revised – as it turned out California, that the week before had reported a large drop in applications, in the latest week reported a large increase, driving the number up to 388,000; wonder what next week might bring?). The widely-followed ThomsonReuters/University of Michigan preliminary October Consumer Sentiment Index jumped from 78.3 in September to 83.1, its highest level in five years, i.e. since before the onset of the Recession (while a marginal decline to 78.0 had been expected). Leading indicators were up a higher than expected 0.6% (whereas they had been down 0.4% in August & economists’ forecasts had been in the 0.2% range).  Housing starts came in at 872,000 (whereas the most optimistic of forecasts thereof had been 850,000). The National  Association of Home Builders/Wells Fargo’s Housing Market Index was up 1 point in September to 41, a post-June 2006 high. Rising stock- & house prices are being given credit for much of this (smart investors in droves are abandoning bonds for dividend-paying stocks & foreclosures are down sharply thereby reducing the glut of pre-owned homes on the market). Add onto that the fact that China’s economy seems to be stabilizing & that the new leadership, that should be in place within the next month, is expected to introduce more “pump priming’. So suddenly  the talk about the economy, & about the retail sales’ outlook for the critical Thanksgiving/Christmas period, has gotten more bullish.

On Sunday October 7^th CNBC’s Stephen Liesman had a session (rather tellingly at Goldman’s headquarters!) with Goldman CEO Lloyd Blankfein, former Republican Wyoming Senator Alan Simpson & one-time Clinton Chief of Staff Erskine Bowles (the latter two having co-chaired Obama’s National Commission on Fiscal Responsibility and Reform whose report was soundly trounced in the House last March 382-38, with only 22 Democrats & 16 Republicans supporting it, & never made it into the Senate). The most remarkable thing about this 35 minutes was the degree of cautious optimism displayed by all three. And the two most interesting parts thereof were Bowles’ summary that “Senators and Congressmen in the past have always attempted to bring ‘home the bacon’ (to their constituencies), but now the pig is dead”, & Blankfein’s observation that the past four years have been like the mid-1930’s when President Roosevelt was at war with the establishment but when, once the war clouds started to gather, there was a change of heart in the nation that in no time flat made America not only self-sufficient in weapons production but a major supplier to others as well (helped along in this by Pearl Harbour?) – those wishing to see a more complete summary in two, not 35,minutes can find it after the main body of Gleanings. 

Talk of Bowles as a candidate for the Treasury Secretary’s job in any second term Obama Administration first emerged last August. He is a different kettle of fish from Geithner, who was raised in the Third World, speaks Mandarin, has an AB from Dartmouth and an MA in Economics & Asian Studies from Johns Hopkins, and who has been what the Japanese call a “salaryman” all his career at, among others, Kissinger Associates, the US Treasury & the IMF, before becoming President of the New York Fed at age 42 (where, as few people realize, his salary is paid by Wall Street, a potential conflict of interest, if ever there was one). Bowles is more of a “hands-on”, hometown, entrepreneurial & political type. He was born, raised & went to university in North Carolina (but also has an MBA from Columbia). Early in his career he worked at Morgan Stanley. Twice during his career he launched successful regional investment boutiques (the first of which after 20-odd years was bought out to eventually become part of Wachovia’s investment banking operations & the second of which, fifteen years later, is still in business). He served (briefly) as Clinton’s Deputy Chief of Staff during his first-, & as his Chief of Staff during his second-, term. In 2002 & 2004 he ran for the Senate but both times was beaten decisively, but not badly (by 10 points) by higher profile Republicans who campaigned against his having worked for Clinton. He led a North Carolina task force on rural economy prosperity in the late 90’s. In 2005 he was Deputy UN Special Envoy for Tsunami-Affected Countries (in South- & Southeast Asia) to Bill Clinton’s Special Envoy after which he was President of the University of North Carolina System for five years. He is now on the Boards of, among others, Morgan Stanley, Norfolk Southern & Facebook.

Having Bowles as Treasury Secretary would have at least two advantages for a second term President Obama intent on building his “legacy” over the next two years. He is already up to speed on the fiscal challenges the nation & his Administration face. But what may be far more important is that he & Rep. Paul Ryan, Romney’s running mate & the driving force behind much of the mainline-, as opposed to the Tea Party-, GOP’s Budget ideas, seem to have a mutual admiration society going; for Ryan has called Bowles “his favorite Democrat” while the latter has said he “admires” Ryan who “seems smart … intellectually curious … honest, straightforward and sincere …it doesn’t mean I agree with him by any stretch of the imagination. But I am not going to act as if I don’t like him, or that I don’t have some real respect for him.” On the other hand, Bowles has been faulted by some for having “no market experience” (which is pathetically untrue &, in any case, market experience wouldn’t be why Obama would want him in the job), his ‘coziness’ with Ryan wouldn’t sit well with the leftist element in the Democratic Party, & likely has upset much of, the Democratic Part’s establishment by supporting an independent, former Governor Angus King, in a tight three-way race for the Senate seat vacated by three-term (moderate) Republican Sen. Olympia Snowe in Maine (who didn’t run again because she’d had her fill of “hyper partisanship in a dysfunctional Congress”) & that last week he & Sen. Simpson took out one page ads in three local newspapers in neighbouring New Hampshire supporting an eight-term Republican member of the House, Charlie Bass (one of just 16 Republicans – & 22 Democrats – who last March had voted in the House for their plan).

Bowles is likely serious when he said, in response to a direct question by Liesman, that he has no interest in any job outside North Carolina but seemed to leave the door open when he said something like ‘if only the Treasury were in North Carolina’). He is at an age (66) where he doesn’t need the hassle that the Treasury job would entail (why would anyone in his right mind, regardless of age, want that job at this stage?). He is doing financially quite well by his board  memberships (that last year brought him US$1.4MM, albeit only 20% thereof in cash). On the other hand Obama, if he so desired, could challenge him to put his money where his mouth is (i.e. ‘you drew up the plan, now you’d better help us implement as much of it as we can’) for at least the first two years of his second term – if Bowles  were to emerge as Treasury Secretary in any second term Obama Administration this would be a powerful signal that Obama intends to make a clean-out  of the Augean Stables on the Potomac  part of his legacy .

On October 16^th the Canadian dollar swooned in early trading because the day before, in a speech in Nanaimo, B.C., Bank of Canada Mark Carney omitted from his circulated text what has in recent months been a signature stock paragraph in his, & his Deputies’, speeches, namely that there might soon be reasons for a “propensity to reduce the level of accommodation it (i.e. the Bank of Canada) had been offering the money market.” The market interpreted this as meaning that  higher interest rates are off the table again; so a bunch of interest-sensitive money skedaddled.

In a recent Angus Reid poll 58% of those interviewed want Ottawa to reject the proposed $15.1BN CNOOC takeover of Calgary-based Nexen (vs. 12% urging the government to give it the green light). Not surprisingly, opposition to the deal was strongest in BC (69%) & Alberta (63%) where more people are directly exposed to the Asian invasion of the Canadian natural resource ‘patch’ and, rather remarkably, quite universal across the political spectrum : 57% of Conservatives  were in the Naye category, as were 65% of NDPers & 69% of Liberals. And when asked if they thought foreign governments should be allowed to gain control over natural resources on Canadian soil, the Nayes soared to 78% (as to the latter, only a small part of Nexen’s assets & operations are domiciled in Canada). This will pose a quandary for Harper who, if he were as smart as he thinks he is, should bring out the “golden share” idea to cretae at least the impression give the impression that CNOOC would be held to its commitments under the deal.

Some Liberal Party insiders must have a death wish for their party (or be desperate beyond belief). For they are prodding Ontario’s soon-to-be-ex Premier, Dalton McGuinty, who suddenly resigned earlier this week, to throw his hat into their party’s leadership race ring. For few, if any Provincial Premiers have ever been very successful at the federal level, & his track record as Premier has been so dismal as to make Bob Rae’s 25 years ago look good by comparison.

At last report only five of the 17 Eurozone countries, Estonia, Finland, Luxemburg, Slovakia & Slovenia were meeting the EU’s standard for current deficit & total souvereign debt levels of 3% & 60% of GDP respectively.

On October 15^th Greece’s Prime Minister Antonis Samaris reassured his compatriots struggling with a 25%, & still rising, unemployment rate (which is shortening the fuse on an incendiary social time bomb), & who three days later  were once again rioting,  that “Greece will soon get the next tranche of the bailout. Its economy needs liquidity like a desert needs rain.” – he may well be right because rumours are ‘the fix is in’ even though everyone knows Greece has fallen far short of the loan conditionalities; be that as it may, this was an unfortunate bit of imagery since deserts that green up overnight after a rain, a few weeks later back to being well ….. deserts.

In his eight months as Spain’s Prime Minister Mariano Rajoy has raised income taxes, cut spending drastically, most notably in healthcare & education, raised the VAT from 18% to 21%, watched the unemployment rate go to 25% (over twice that for young people), & presided over a nation suffering what in people would be called ‘depression’. So his party likely won’t fare well in this weekend’s election in his home province of Galicia (in Spain’s very Northwest corner, bordered to the South by Portugal, and to West & North by the Atlantic). And next month’s election in Catalonia is becoming ever more a referendum on independence, or at a very least a great deal more local autonomy. And just as at the national level Germany is loath to become the fairy godmother for the Southern European countries, at the sub-national level serious separatist movements aregaining traction all over the place, & not just in Catalonia or Basque country in Spain  (most recently so in Belgium & Venice, and for the same reasons : charity starts at home & ‘loyalty to the clan’.

A decade ago the US produced 77MM tones of soybeans, 83% more than Brazil; this year the former is also expected 77 MM tonnes, while Brazil has doubled its out put to 80MM tonnes. Since, despite some serious concerns along the way, this appears to be turning out to be a pretty decent year for US bean growers, the trend seems unmistakable. Argentina’s soybean production also went up significantly, by  40%, during the same period (despite being down 20% YoY this year due to drought). Rather interestingly, of the three Brazil is the only one to produce significant amounts of non-GM soybeans (30+% of its entire crop) for which the market for which is expanding in relative terms. Brazilian farmers say non-GM bean crops are more profitable & complain a shortage of seed is caused by Monsanto constraining the supply thereof (which seems like a bit of nonsense since nothing stops them from reverting to the age-old practice of propagating their own own seeds).

On a more general note regarding the global food situation, in the past decade global wheat stocks have declined over 30%, rice stocks over 40%, & corn stocks 50%.

The Yakusuni (Shinto) Shrine is located in Chiyoda, one of the smaller of Central Tokyo’s 23 ‘special wards’ & is also home to the Imperial Palace. It is dedicated to almost 2½ MM Japanese citizens who died in the service of their Emperor (& is the only place in the world where the Emperor will actually bow), many of them in WW II (incl. 14 convicted war criminals, one of them Gen. Tojo, Japan’s Prime Minister from before Pearl Harbour until mid-1944, who, after the war was sentenced to death, & hung, by the Allies), & it also houses one of the few musea in Japan dedicated to WW II. So it is not surprising it is a powerful, carefully nurtured emotional symbol in China & Korea of their countries’ suffering at Japanese hands during WW II, & that whenever a Japanese politician makes a pilgrimage there, the reaction in Beijing (& Seoul) is swift & Pavlovian. Last Wednesday the leader of Japan’s Official Opposition, Shinzo Abe (who has a good chance of becoming the next Prime Minister) used the occasion of the Autumn Festival to visit the Shrine, giving rise to Beijing huffing & puffing that this would ‘further poison bilateral ties” & the Xinhua News Agency proclaiming this was a “rightist show of militarism”. Then the very next day, in a show of double defiance (of both Beijing & their boss), two government ministers, one belonging to the ruling party & the other to its  junior coalition partner, did likewise, despite having been instructed earlier by Prime Minister Noda to “stay away” from Yakusuni.

GLEANINGS II – 482

Thursday October 18^th, 2012

HOW INFLATIONARY POLICY THREATENS SAVINGS (Der Spiegel, Ferdinand Dyck et. al)

• A September survey by Faktenkontor, a consulting-, & Toluna, a market research-, firm, found that one in four Germans are seeking ways to protect themselves from the inflation they fear is coming. They’re investing in hard assets as the realization grows governments seem increasingly willing to accept more inflation as the price of facilitating real debt reduction. They are not alone. Anshu Jahn, Deutsche Bank’s new Co-CEO, recently declared flat out that inflation will come. And Andrew Bosomworth, the head in Germany of PIMCO (the world’s largest manager of bond funds) believes a “slow & dangerous devaluation of money” is coming & refers to the Fed’s policies as a “reverse Volcker moment” (Paul Volcker, as Fed Chairman, battled inflation with high interest rates & freed the Fed from government interference while Bernanke is courting  inflation with low interest rates & “the Fed is increasingly subservient to fiscal policy.” Governments have behaved this way since the days of Dionysius of Syracuse in the 4^th Century BC who, stony broke, had all coins in circulation collected & melted down, turning one old drachma into two new ones & then using one to reimburse the rightful owners & the other to pay his creditors.

The latest bit of possible fiscal legerdemain by First World governments & their central bank satraps mooted in the Financial Times would involve central banks cancelling part of their government bond holdings. For economic theoreticians this may  make sense, but outside their ivory towers it would diminish confidence in the system & be seen as just another way of ‘rolling the problem down the road’, rather than addressing its root causes. Three or four  generations after Germany’s post-WW I hyperinflation Germans remain obsessed with it; but this may now serve them very well indeed if it were to put them in the van of a “Let’s get the hell out of Dodge while the getting is still good” movement. The Krugmans of this world pooh-pooh the risk of inflation on the grounds there is too much spare capacity & unemployment, and corporations have too little pricing power. But they are making a mistake they wouldn’t tolerate in an Economics 101 student (if they ever saw, or dealt with, one these days), failing to distinguish between “demand-pull” & “cost-push” inflation, &  ignoring the possibility of serious inflationary expectations emerging (at which point sellers gain a great deal of pricing power  – an example thereof was recently reported in the press : an Iranian was haggling with a supplier over the price of a large quantity of wheat, the phone rang & the seller answered it, and after a brief one-sided conversation he turned to the aspiring buyer & told him “My price is now 10% higher” – it’s that simple when an inflation mentality gains a foot hold, one doesn’t, &shouldn’t, haggle) Finally, it is a sign of the times that the bastion of the German corporate establishment, the Deutsche Bank, now has an Indian Co-CEO who lives in London & whose remuneration last year, as Head of it’s global corporate finance operation, was 60% greater than the measly 8.8MM Euros his then boss, Swiss-born CEO Joseph Ackerman, took home).

FOMC STRAYING OFF PRICE TARGET, FORMER FED OFFICIALS SAY (Bloomberg)

• Dino Kos, is a former Executive Vice President of the New York Fed (where he, among others, operated the ‘System Open Market Account’ that implements the FOMC’s monetary policy directives) & now a Managing Director at a New York-based macro-economic consulting firm, Hamiltonian Associates. He says “the message I took” from the Fed’s September 13^th announcement of a third round of bond buying (& that it intended to continue doing so until the labour market improved “substantially”) is that “we want the inflation rate to go higher.” And Martin Goodfriend, a former research director at the Richmond Fed who now teaches at Carnegie Mellon University in Pittsburgh, noted that in making the announcement the Fed didn’t specify a commitment to act “in a context of price stability”, that its “open-ended” bond purchase commitment risks kindling investor anxiety that inflation will accelerate (a sentiment he said can rise “all of a sudden”) & that the Fed “seems to be throwing away two decades of inflation stability.”

Take your pick as to whom to believe, Bernanke, who hopes it will work & Krugman who knows how it should work, or these two fellows who know firsthand how it will work (and at least one of whom is well-positioned to imbue a broad spectrum of decision makers with his concerns).

WHY BUSINESS WANTS OBAMA TO BE RE-ELECTED (BBCNews)

• On October 16^th, PIMCO CEO Mohamed El-Erian told the BBC’s Kathy Kay that whatever the two (US Presidential) candidates may try & make listeners believe “The reality is that whoever wins in November is going to have a very small set of policies he can pursue if he wants to get this economy back on track”, incl. reforms of both spending  & revenues. When asked about a recent Financial Times poll finding CEOs abroad wanting to see Obama re-elected & US CEO’s favouring Romney,  his explanation was that the latter are focused on domestic issues, while the former see Obama as more willing to engage, & cooperate with others, in finding solutions (while Romney has made no bones about believing that, as Mao Tse-tung put it seventy-five years ago, “Power grows out of the Barrel of a Gun.”

In El-Erian’s eyes, the economy is “healing” & the priority is to keep the healing process “on track”. And that, while Democrats believe Americans are in the throes of a paradigm change such as their economy hasn’t seen in a century & need the social safety net to help them through it, the GOP  holds  that, if government just got out of their way, individuals would adjust on their own (which seems like little more than the largely discredited concept of “trickle-down economics’ in drag).

OBAMA READY TO VETO A BILL BLOCKING ‘FISCAL CLIFF’ WITHOUT A TAX HIKE FOR THE RICH (WP, Lori Montgomery)

• He is said to be ready to play a (dangerous) game of chicken with the Republicans who have so far resisted any deal to tame the debt that included higher taxes (why is it that even supposedly educated, well-informed people seem unable to tell the difference between ‘debt’ & ‘deficit’ – the former is a ‘stock’ & the latter a ‘flow’ – and that dealing with the debt is an important long-term problem while the deficit is a critical short-term, if not immediate, one). And if re-elected, he is seen as being in a better position to dictate the terms of a bipartisan debt-reduction deal while, if he loses, he can make sure the fiscal cliff will materialize before he hands over the keys to the White House on Inauguration Day.

This doesn’t have much credibility with many Republicans who believe that, having blinked twice, he will do so again. And those around House Speaker John Boehner (R.-Ohio) refer to this as a “Thelma and Louise” strategy (after the 1991 movie of that name in which the two main characters drive their 1966 T-bird convertible over a cliff rather than surrender to the cops).

WHY NETANYAHU BACKED DOWN (NYT, Graham T. Allison Jr.)

• Netanyahu & his Defence Minister Ehud Barak (the former head of the Labor Party) long were joined at the hip in urging an early military attack on Iran’s nuclear facilities. But in the week ended October 5^th Netanyahu accused him of conspiring with the Obama Administration behind his back. While this came as a surprise to many Israelis, he had signaled something like this in his UN General Assembly speech; for, while the media focused on his cartoonish graphic (bomb) chart with its ‘red line’, they ignored that in it he also conceded that Israel wouldn’t be able to do anything about an attack on Iran until next spring or summer (until it develops its own bunker-busting bombs, with the possible connivance of someone inside the US military-industrial complex?) 
• But Barak is just a convenient scape goat to vent his frustration on about the growing revolt in Israel’s security establishment against an early attack, especially if the US weren’t on board (due to which he has been unable to gain majority support for the idea in his informal nine-member ‘inner cabinet’, nor in the much larger ‘security cabinet’ whose approval is needed for an attack). And this was due to the Obama Administration ‘‘back channelling’ its message that an early attack on Iran wasn’t in Israel’s best interest & would damage its relationship with the US, and then reinforcing this message by hiking US security assistance to unprecedented levels (incl. joint cyber attacks on Iran’s nuclear program), thereby creating a “United States lobby” among Israeli security officials.

This analysis ignores the fact Netanyahu is positioning himself for an election (which has now been set for January 22^nd – earlier than anyone had expected) in which he hopes to be able to shift Israeli public opinion slightly rightward (in part by undermining Barak’s credibility). His UN speech was made when it increasingly looked Romney was a dead duck (i.e. before the first debate blew some life back into his campaign) & when it had looked wise to quit antagonizing Obama. Recently, there were cyber attacks on large US banks, for which Washington now blames Iran; if so, the Iranians might just deem them tit-for-tat since in recent  years there have been cyber attacks on Iran’s pride & joy, its nuclear program, so sophisticated as to have been deemed to have required souvereign government involvement (incl., this article suggests, that of the US). If so, no one should have been surprised by Tehran launching retaliatory attacks on what it deems the core of the “Great Satan” empire, Wall street, especially since it plays a key part in the sanctions regime

HEZBOLLAH MILITARY BUILDUP COULD DEVASTATE REGION (JP, Herb Keinon)

• On October 15^th, days after Hezbollah had taken responsibility for earlier sending a drone over Israel, Israel’s Envoy to the UN told the Security Council Southern Lebanon had become a storage facility for 50,000 missiles, “many more than many NATO members”, that its “continued provocative and military buildup could have devastating consequences for the region” & that “some countries around this table (i.e. the EU) continue to define Hezbollah as a charitable and political group, not a terrorist organization. This is no less ridiculous than describing the Mafia as a ‘gentlemen’s social club.”

The dog that bites the hand that feeds it tends to come to an evil end : this came the day after his Prime Minister had  praised the EU for increasing its sanctions that target Iran’s  banking-, shipping- & industrial sectors, a move Tehran called “an error in calculation” & Beijing denounced.

HEZBOLLAH ALLEGEDLY FIRING ON SYRIAN REBELS (DT)

• Driving fifteen miles from the Lebanon-Syria border across the Hermel plains of the Northern Bekaa Valley, Hezbollah’s most loyal heartland replete with Shiite villages, we could hear the sound of rocket fire until the early morning hours. Residents of the Syrian border town of Al-Qusair say the attacks began six weeks ago & recur almost every night. This follows earlier claims that Hezbollah had sent fighters to support the al-Assad forces  in its fight against the, mostly Sunni, rebel forces, and earlier this month over 1,000 people attended the funeral of Ali Nassif who, according to Hezbollah leader Hassan Nasrallah, had died performing “jihadi duties.” And Lebanon’s National News Agency reported on October 14^th that two Lebanese nationals had been killed in an attack on the predominantly Christian town of Rableh on the Syrian side of the Lebanon-Syria border.

The best thing to be said about this is that every missile fired is one less in Hezbollah’s hands.   

ONLY ONE MAN CAN BEAT NETANYAHU (Haaretz, Bradley Burston)

• Netanyahu himself. This election is supposed to be a cake walk but he may end up running for his political life, as he has had to do before & may have to do again. The longer he has been in office, the more arrogant he has become. His support is a mile wide & a drop deep. The right doesn’t trust him, in part because he earlier agreed to a 10-months’ partial settlement freeze, the left because of his slavish subservience to the right, & the middle class because he hasn’t delivered on his pledges for lower taxes (they’re up), more competition-driven prices (they are up & rising), more, & more reasonable, housing (only very partially fulfilled), and an end to a few powerful families enriching themselves from the public trough at everyone else’s expense. His ticket was weakened by the sudden departure this week of his Communications Minister, Moshe Kahlon, a charismatic & popular politician in a Cabinet lacking them whom Netanyahu in the past held out as someone his other ministers should emulate, after he was told he wouldn’t be in the running for the Treasury job after the election. And the support of his current coalition partners is iffy; Avigdor Lieberman is believed to be scheming behind the scenes to try & cut a deal with Netanyahu’s arch enemy, former Prime Minister & Kadima Party Leader Ehud Olmert, and the Shas Party looks like it might split in two. And most recently an attorney, who once was a top aide to Ehud Barak when he was Prime Minster, has come forward saying he has material in his possession damaging to Netanyahu (with the latter promptly threatening to sue him for libel – possibly the dumbest thing he could have done). 

Burston is an LA-born Jew who emigrated to Israel in the mid-70’s after graduating of UC (Berkely). He is a columnist for, & Senior Editor at, Haaretz, and his Leit Motive is “it is important to criticize Israel when it deserves criticism … and to strongly defend it when it deserves to be defended.” Last August 13^th his column was entitled Mr. Netanyahu, before you bomb Iran, say goodbye to all you know (for “you won’t be able to protect all of them from the retaliation that will surely come”). The attorney making the claims against Netanyahu once was Barak’s closest associate until fired  in late 2007 with Barak claiming “he abused my trust” after he had  changed the Labor Party’s constitution but not in the way Barak had told him to. Be that as it may, he now charges that once he was at a meeting at Netanyahu’s father’s house before tha last election when Netanyahu pulled a wad of cash from his sock & handed it to his Chief of Staff, & that Netanyahu frequently met with people at his father’s house that “he didn’t want his (third) wife to know about” (who, not long after her husband had become Prime Minister, made the headlines for being sued by a former housekeeper for humiliating her, paying her less than the minimum wage & making her work on the Sabbath (to which Netanyahu responded by suing the paper that printed the story for defamation) & a little while later for firing an elderly gardener (whom she had also being paying less than the minimum wage) whose son had died in the service of his country – which is a big issue in Israel . She has also been accused of meddling in affairs of state to the point where one of Israel’s most prominent journalists once alleged that “He – i.e. Bibi- is there to satisfy her, not to work for us.”    

-o-o-o-o-o-o-o-o-o-

• on the subject of why there had been no mention of the fiscal cliff at the Debate –
  • “they are intentionally avoiding it” (Blankfein);
  • “they worship on the altar of re-election” (Simpson);
  • on the fiscal cliff itself –
    •             there is a 30% chance something will be done about it before the end of the year,  30% something will be done immediately after the end of the year, & a 30% …… eh, 35% chance of no action at all (Bowles);
    •             “investors believe Congress couldn’t possibly be so stupid (as to fail to avoid the fiscal cliff) … but believe me it can” (Simpson);
    •             even if only we were to get a serious indication of at least agreement about a general approach to a solution, all the money fearful corporations are now sitting on will start being freed up for constructive purposes (Blankfein);
    •             we must spread the necessary adjustments over a period of time, and not try to do too much too quickly (all) – the market, however, may not agree with the lawmakers’ timing & schedule; in business that leads to ‘forced bankruptcies’;
    •             ‘we are lucky; our problems are self-inflicted while others’ elsewhere (China & Europe) are structural (Blankfein);
    •             “the axe is going to swing” (Simpson);
    • on taxes – I wouldn’t object to paying 5% more taxes (& am sure most Americans wouldn’t unduly object to it either) if only I could be sure that my money would be put to good use & not wasted … not paying more taxes won’t get us to the promised land (Blankfein, in response to a direct question by Leisman).
    • on the debt –
      • when lenders starts saying ‘you are debt-addicted”, interest rates will rise (Simpson);
  •             would you lend money to someone with the credit profile of the US? (Blankfein);
  • on compromise – “if you are not able to compromise, you should not get married … and not run for Congress” (Simpson);
  • on leadership –
    • Obama cannot govern whereas Gov. Romney has proven he can; look at what he managed to achieve, incl. a medicare program, in a difficult state like Massachusetts even with a state legislature that was 82% Democrat (Simpson);
  •             the next President must lead from the front in reforming the tax code, wiping out tax expenditures (long a pet peeve of yours truly) & reducing defense spending in order to free up the money we need to invest (Bowles, with Simpson in agreement);
  • on popular attitudes –
    • people are tired of being fed lies & mush (Simpson);
  •             in our travels across the country for the Commission Senator Simpson & I found that the American people are way ahead of the politicians (Simpson) (because they don’t benefit from the ‘game’ & have no vested interest in keeping it going?);
  • in response to a direct Leisman question about rumours he would be Treasury Secretary in any second term Obama Administration – “I expect to spend the rest of my life in North Carolina” (but then he seemed to be the door open by musing aloud ‘now if they moved the Treasury to North Carolina?’)
  • “there are 82 guys in the House who did not come there to limit government but to shut it down” (Simpson)
  • ‘we cannot solely spend our way out of it, nor tax our way out of it, nor solely cut government spending our way out of it’ (Bowles, with the others in agreement);
  • the stock market is so strong because, with 10-years USTs at 1.60%, equities are now a “high yield asset class” (Blankfein);