A picturization characterizing this administration's mood towards Israel and the Palestinians.
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Biden's transparent meeting to be held behind closed doors. (See 1 below.)
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Predator hunting terrorists down one at a time. We can keep them disrupted but we will never win using this approach. We need to counter the radical Islamist's appeal with our own propaganda pointing out the benefits of development through democracy and a free economy.(See 2 below.)
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Hurt lays a hurt on Obama and reminds us of GW's plain spoken attributes and decency. (See 3 below.)
Strassel interviews GW and Bret Stephens likes one of Obama's speeches calling it his best yet.
GW comes across as I would expect. A former president that informed historians will treat better than biased voters and media folks. I daresay GW is correct that a more pro-western Iraq is a large part of GW's history equation and if Obama blows it then it will taint GW's accomplishments as well.(See 3a and 3b below.)
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The Fed's move is causing angst among allies and antagonists.
The Fed is basically engaged in causing savers to seek higher risk investments in order to get a return and should the Fed be successful in inducing inflation it will also erode wealth. (See 5 and 5a below.)
Roubini still concerned. (See 5b below.)
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Seib sees a way for the Republicans to control some votes in the Senate because Democrat Senators seeking re-election in 2012 could be nervous and in need of some voting cover. (See 6 below.)
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Does anyone in DC care about saving money or are they just interested in taxing, wasting and spending. (See 7 below.)
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Dick
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1)Top of the Ticket
Political commentary from Andrew Malcolm
Joe Biden update: The VP meets on government transparency today. But that meeting is closed
With President Obama out of the country tweaking things in Asia, carefully not bowing this time, and packing away some pista murg and balak papri chat, his trusty sidekick Joe Biden is left to find things to do back home.
There's a big Diwali party tonight at the White House. The vice president will be there.
But first, JB has a breakfast meeting with Sen. Chuck Hagel and then another one of those Middle Class Task Force events to try to find some of those thousands of missing green energy jobs that have been promised so often.
Joe's had some problems with promises recently. He assured everyone that last summer would be full of economic recovery. Which it wasn't. And Joe guaranteed that his Democratic Party would maintain majorities in both houses of Congress in last week's midterm election. Which it didn't.
Possibly the most important event of the vice president's day Tuesday is to meet at 2:15 with Earl Devaney. Everyone knows him as chairman of the Recovery Accountability and Transparency Board -- the top guy monitoring the gazillion-dollar stimulus and the overdue economic recovery, and ensuring that the taxpayers financing same know all about it.
However, no one outside the room will know what goes on in that Biden-Devaney meeting. That's because the government meeting on government transparency has been closed.
-- Andrew Malcolm
In the interests of transparency we admit you can click here to receive Twitter alerts of each new Ticket item. Or follow us @latimestot. You can also go to our Facebook fan page here. And, of course, the ReTweet buttons are below to show you friends and relatives how smart you are.
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2)US Predator UAVs arrive at secret Yemen base to hunt Al Awakli down
Operations Command (JSOC) maintain units for mounting clandestine raids against Al Qaeda cells deep inside Yemen.
The new deployment of drones elevates American military intervention in Yemen by another notch.
Against Sanaa's claim that the war on Al Qaeda is carried out exclusively by the Yemeni army, credible sources reveal for some time, US warplanes and drones have been crisscrossing Yemeni skies from their bases in Djibouti and the decks of aircraft carriers offshore. Officials in Sanaa have habitually claimed those sorties were the work of the Yemeni air force, although it has neither the aircraft nor the air crews able to conduct these precision attacks.
Middle East sources note that it is the first time in seven years that US air strike forces are stationed on Arabian Peninsula soil. In 2003, the American Air force dismantled its Saudi base and withdrew to Qatar and Oman.
Monday, Nov. 8, Yemeni Foreign Minsiter Abu Bakr al-Kurbi stated: "The United States cooperates with Yemen in intelligence but the operations are conducted by the Yemeni security forces."
Nonetheless, US military sources in Washington reiterated that America had deployed Predators in Yemen. Asked to comment on these reports, Pentagon spokesman Col. Dave Lapan said: "We have any number of capabilities and we don't talk about specifics."
To pacify the Yemeni government, certain American officials claimed the drones deployed in Hodeira were not armed with missiles although they did not confirm or deny that missiles adapted to the Predators were present at the base ready for immediate action should the need or opportunity arise to strike an important al Qaeda target. Other US sources claimed the Predators were armed but had never fired missiles as yet.
Military sources explain the mixed accounts by the fact that Washington and Sanaa are still bargaining hard on terms for activating armed US drones from Yemeni soil. At the same time, should the American commanders at Hodeira see a good chance of targeting a high-profile al Qaeda operative, such as Anwar Al Awlaki, they will not think twice before doing so - even in the middle of these negotiations.
Monday night, Nov. 9, Awlaki himself aired a 25-minute videotape on extremist websites. It was devoted to an unbridled attack on America. Muslims around the world were called upon to kill Americans. "Don't consult with anybody in killing the Americans," he said. "Fighting the devil doesn't require consultation or prayers seeking divine guidance. They are the party of the devils. It is either us or them."
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3)By CHARLES HURT
WASHINGTON -- He was no rock star.
His oratory rarely left us swooning.
He never convinced us he could calm the oceans or conjure up world peace.
It is probably safe to say that former President George W. Bush would
never be confused with President Obama.
Bush was pedestrian. He mangled his words. He was capable of cringing
inappropriateness in social settings -- as he himself will flatly tell
you.
Obama is smooth. His eloquence is what entirely fuels him. His mere
presence in our political midst inspired millions of Americans to
usher him into office without really knowing what he would do.
So Bush's re-emergence onto the public stage after two years of
self-imposed exile comes at a stark moment when Americans have clearly
grown tired of their handsome and exotic plaything, Obama.
We now know how fervently and reflexively Obama believes that the
federal government is the answer to all of our problems. We have been
shocked by his refusal to listen when we beg him to stop.
So as voters delivered him and his party a historic pounding at the
polls last week, Bush's re-emergence -- though timed to the release of
his book -- could not come at a better moment to glimpse the sharp
differences between the man two years ago we could not ditch fast
enough and the man whose arms we blindly flung ourselves into.
The most outlandish promise Bush ever made while in office was the
crazy notion that a slightly peaceful, sovereign nation of Iraq,
governed by a freely elected government, would emerge from the war he
had wrought.
Yet not once since this actually came true has Bush gloated over it.
Meanwhile, you cannot turn on the television and not see Obama
absurdly gloating over his own failures.
Can you imagine Professor Obama impishly delighting in mispronouncing
the word "nuclear" as "nukular" -- just to razz the pointy-headed
nerds in the world who thought he was stupid?
No, Obama's confidence is loud and clanging -- the kind that foolish
men have when walking noisily, unarmed, through the woods, fearful of
encountering a grizzly.
Ironically, for such a swaggering Texan, Bush actually has a quieter,
deeper confidence -- like a man armed and sure that if he encountered
a bear, he would come home with a great pelt.
For all his lack of refined speech and his low hobbies such as
clearing brush with a chainsaw, Bush always knew who he was.
And, it turns out, he is a fairly gracious fellow who has striven
mightily to give his successor the benefit of his silence. His book is
devoid of cheap shots or settled scores.
Bush's popularity today remains far below the enthusiastic support
Obama enjoyed just two years ago. But it has rebounded from the
dungeon levels he saw when he left office.
At this rate, Bush may yet become a rock star -- and Obama won't see a
second term.
3a)Bush Agonistes? Not Quite
In an interview, the former president makes the case for his 'freedom agenda' and defends his record on the economy and spending
By KIMBERLEY A. STRASSEL
The former leader of the free world sits in a comfy chair wearing Crocs. As twilight sets in, George W. Bush keeps one eye on a muted World Series game. "That's what I'm talking about," he tells the TV in his home library after one impressive Rangers play.
The 43rd president of the United States looks healthy, rested and confident. That last is especially notable, considering he's not yet two years out of what can only be called a controversial presidency.
Mr. Bush ran as a uniter, but the hung 2000 election bequeathed him a divided nation. The terrorist attacks of September 11 brought brief national cohesion, but it was soon shattered by recriminations over the Iraq war. A difficult second term—overshadowed by war turmoil and capped by a financial crisis—saw him leave office with anemic approval ratings. But as readers of "Decision Points," his memoir set to hit stands today, will discover, this is not a president agonizing over the big decisions he made or wringing his hands about history's judgment.
The book is not the usual chronological fare; Mr. Bush wrote thematically, with 14 chapters chronicling decisions he made in life and office, and it is very much in his own voice. We get his insights on his decision to quit drinking, on stem cell research, Hurricane Katrina and enhanced interrogations. Six chapters deal with the momentous foreign and domestic policy decisions that followed from 9/11.
The president does write about his regrets and his desire to have done some things differently. But both in his memoir and in an interview he granted me 10 days ago, Mr. Bush sounds entirely secure about the major decisions of his presidency. The last lines of the book perhaps put it best: "Whatever the verdict on my presidency, I'm comfortable with the fact that I won't be around to hear it. That's a decision point only history will reach."
The president—thoughtful, spirited, and at times making fun of my clumsiness with a tape recorder—gamely answered everything I threw at him.
If his book has an overriding theme, it is Mr. Bush's case for his "freedom agenda." He defines it broadly: from Afghanistan and Iraq, to his African AIDS work, to tax cuts. One major criticism of his Iraq policy is that the turmoil in that country has empowered Iran, which continues to move toward a bomb.
"The notion that we went into Iraq and therefore the Iranians became emboldened—it was the opposite," Mr. Bush says. "The Iranians, it turns out, suspended their program," he continues, referring to a 2007 National Intelligence Estimate finding that Tehran had halted its weapons program in 2003. He says that it wasn't until mid-2005 that Iranian elections brought to power Mahmoud Ahmadinejad, who announced the process of nuclear enrichment would accelerate.
As for those who feel Mr. Bush wasn't aggressive enough, the president disputes the notion that Iran can be compared to Iraq. "Diplomacy was just beginning in Iran, the world was just beginning to focus," he says. Mr. Bush takes credit for "helping focus" that attention.
One revelation in the book is the degree to which Mr. Bush's Iran strategy hinged on internal political revolt. His goal, on the one hand, was to "slow down" the Iranian "capacity to develop a weapon," which he choose to do with sanctions. On the other hand, his administration tried to "speed up" the ability of reformers to institute change. He writes of his belief that the success of the surge and a free Iraq would "help catalyze that change," and he points to last year's massive street protests following Ahmadinejad's re-election.
What about the critique that Afghanistan was left to fester while the president dealt with Iraq, setting up a return of the Taliban and the need for President Obama to send more troops? "What I say is, we had a large coalition of troops in Afghanistan and it looked like we were making progress." He notes that "when it became apparent that the NATO coalition was not able to cohesively deal with the Taliban," he ordered a 2006 "silent surge" in Afghanistan—a 50% troop increase. "We were plenty capable of doing two things at the same time."
Mr. Bush writes that one of two major "setbacks in Iraq" was not finding WMD. He writes it still gives him a "sickening feeling." I ask why, given the myriad reasons he lays out for removing Saddam. The problem, he says, was what the lack of WMD meant for the public's perception of the war.
"The world is better off and more secure without Saddam Hussein in power. But so much of the case—and so much of the focus—was on WMD, that the failure to find it made the task of convincing the American people to hang in there harder." The Bush doctrine rested on "going on offense." And in Mr. Bush's mind, this failure risked a "wave of isolationism that would effect U.S. security" by putting Americans off future pre-emptive action.
Should he have fought back harder against those who accused him of lying about WMD, as Karl Rove argued in his memoir? "His point is that I should have gotten in their face about the lying, and I chose not to do that because I thought it would diminish the presidency. . . . You start calling names, it makes it even harder to hold the support of the American people."
President Bush has studiously refrained from commenting on Mr. Obama—and doesn't here. Though when I ask him what is the most devastating thing that could happen to Iraq now, he shoots out unequivocally: "No U.S. presence. We need to work with the Iraqi government and respond to any requests they may have about a presence."
Given Mr. Bush's reputation as an international cowboy, readers will be intrigued by his descriptions of his relationships with world leaders—including frank appraisals of those he did and didn't like. The latter category would come to include Vladimir Putin, despite the president's 2001 comment that he'd seen into the Russian leader's "soul."
I ask the president when exactly he became aware of Mr. Putin's true political character. "When they started suspending rights," he responds. Mr. Bush's theory is that the mid-decade rise in oil prices emboldened Mr. Putin, giving him "an opportunity to spread economic hegemony" to a Europe reliant on Russia's natural gas. Why wasn't there more push back from the White House? Russia was a "disappointment," Mr. Bush admits, but he adds that "it's hard to know if we could have done anything differently. Russia is a sovereign nation, they elected their leaders, and they entrenched themselves."
Then there are the anecdotes about Jacques Chirac, who at several points lectures the U.S. on the folly of morality or idealism. When I ask the president if he wants to expand, he starts, stops, and gives that Bush chuckle. "Let's just say he wasn't a freedom-agenda guy."
Mr. Bush devotes his final chapter to the financial meltdown: The White House anxiety he describes nearly equals his narration of 9/11. He heaps most of the blame on Wall Street. As for too-loose Federal Reserve policy, which many see as the groundwork for the housing bubble, Mr. Bush refers to "easy money" only once among a list of contributing factors.
I ask if anybody ever specifically warned him about the Fed's feeding of the mortgage beast. "No, not really. I think that the only place, the main place, where we get credit for having seen a potential crisis is Fannie and Freddie." (The administration's proposed reforms were blocked by Congress.) "The crisis blindsided us."
While a Democratic Congress this year passed a slew of financial regulations, Mr. Bush argues this wasn't "a lack-of-regulation crisis, except for the extent to which Fannie and Freddie were allowed to run wild. . . . This was a regulated house of cards—regulators were watching it all. . . . This was a crisis that was caused in large part by bad business decisions."
If that was the case, why weren't more banks left to fail? Did the administration discuss what particular institutions were too big to fail? "No," Mr. Bush answers, adding that he believes in letting the market punish bad decisions but in this case the economy was in the balance. "We didn't want any of them to fail because we were really worried that there would be a domino effect."
Unprompted, he adds that this fear is why the administration bailed out General Motors. Did he genuinely believe that a GM bankruptcy would cause an economic free fall? "That's what I was told. I think at that point in time it would have been still pretty risky." I must still look skeptical because he adds: "I hope I conveyed in the book this sense, that we were," he throws his hands in the air, as if to summon the anxiety of those weeks. "We were pretty risk-averse at this point. We really were."
Why did the administration inject TARP money directly into banks—a move that tarred healthy banks along with sick ones—rather than proceed with the original idea to buy up toxic assets? "Because it was too cumbersome. It was an interesting idea, but it wasn't going to work quickly enough. Whose assets? How do you buy them? . . . We didn't have a lot of time." With capital injections, the money went "boom, right into the system."
Will the fact that the worst financial crisis since the Great Depression happened on his watch overshadow his accomplishments on the war on terror? Again, that confidence. "Naaaaah. I think history will eventually say that the Bush administration dealt with this in a way that saved the economy. . . We didn't have a depression—and I thought one was coming. I did."
One perception the president is determined to shift is that of his spending record. "Decision Points" contains one graphic: a table comparing, among other things, President Bush's average spending-to-GDP (19.6%) to that of Bill Clinton (19.8%), Bush 41 (21.9%), and Reagan (22.4%). It also shows that his deficit-to-GDP was 2%—half that of Bush 41 and Reagan.
I come armed with a slew of spending questions. Why didn't he veto more GOP spending bills? Why he didn't use the war as a reason to cut back on domestic spending? But he shuts me down by referring to the chart. I point out that, chart or no, there is a perception he oversaw fiscal profligacy.
"Yes, there is," he concedes. "I think the Medicare reform caused certain conservative writers to say 'Bush has been fiscally irresponsible.' And they did not look at the facts. And the facts are that we have a very solid fiscal record"—despite spending "a lot of money" on war, homeland security, and Hurricane Katrina.
But what about 2003 Medicare reform, which saw Republicans add a major new prescription drug entitlement? He rejects the premise of the question. "The entitlement already existed, and the entitlement was Medicare. And that's the threshold question—should we have Medicare? If the answer is no, my attitude is fine, go debate it. If the answer is yes, then let's modernize it." The prescription-drug program is about allowing Medicare to give seniors a "$15 drug in order to prevent a $30,000 operation that your taxpayer money would be committed to paying."
Congress will soon be debating the fate of the Bush tax cuts. They were the centerpiece of his 2000 campaign and have been an unadulterated supply-side victory. As the memoir notes, what followed the 2003 legislation—which included important cuts in top marginal rates, capital gains and dividend taxes—was 46 consecutive months of growth.
Isn't the point here that not all tax cuts are created equal, and that there's more value in the 2003 supply-side winners, than in, say, Mr. Bush's 2008 one-time tax "rebates" that caused only a temporary GDP blip? "I don't want to differentiate," he responds, though he does a bit. "I do know this, 70% of new jobs in America are created by small businesses . . . and the rates matter to small business. And capital gains matter to investment." His bigger point is that all the cuts come down to a "philosophy" that's pretty simple to follow: "We'd rather you spend your money than the government spend your money."
There's a lot of emotion in Mr. Bush's memoir—much of it for the families of troops who died protecting the country. But when it comes to the policy decisions we discuss during the interview, this does not seem like a man going to bed tortured by what-ifs or what-will-comes.
What will future historians say? "I'd hope they'd say he had certain principles that were the foundation of his presidency, and on which he was unwilling to compromise."
And what about those who believe he wasn't really a conservative—that he's to blame for setting the stage for the Obama ascendancy? He smiles. "I say read the book."
3b)Obama's Best Speech In India, the president defended free markets, free trade and free societies.
By BRET STEPHENS
Every now and then a columnist ought to shock and dismay his most faithful readers. So here goes: Barack Obama gave a terrific speech yesterday to India's parliament, perhaps the best one of his presidency and potentially a true compass for the rest of it.
No, I don't mean the president's feckless lament about trade and currency imbalances. I don't mean his equally feckless defense of the Fed's latest liquidity injection, which is the currency manipulation that dare not speak its name.
I don't mean his support—justified but meaningless—of India's bid to gain a permanent seat on the U.N. Security Council. (Who would want it, anyway?) I don't mean his bizarre plea for a nuclear-free world, "a vision," he says, "that Indian leaders have espoused since independence." If that's so, why did those same Indian leaders acquire a nuclear arsenal in the first place?
Above all, I don't mean Mr. Obama's reverential bows to the memory of Mahatma Gandhi, whose "message of love and peace," as the president put it, is just a little marred by the details of his biography. Among them, his support for the caste system; his refusal to allow his wife to get a penicillin shot that might have saved her life; the "Dear Friend" letter he addressed to Adolf Hitler, whom he also described as "not a bad man"; and his belief that the British—and the Czechs, and the Jews—should have offered no more than nonviolent resistance to the Nazis.
So where was I?
At last: Barack Obama bows to a democracy, not a monarch.
Right: The president gave a terrific speech. Not that it was particularly eloquent. But for all my cavilling, he stood up for free trade, free markets and free societies. He also finally beat an honorable and unequivocal retreat from his July 2011 withdrawal deadline from Afghanistan. Here's a sampler from the speech, since the best of it seems to have escaped notice in most press accounts:
Afghanistan: "While I have made it clear that American forces will begin the transition to Afghan responsibility next summer, I have also made it clear that America's commitment to the Afghan people will endure. The United States will not abandon the people of Afghanistan—or the region—to the violent extremists who threaten us all." (My emphasis.)
Pakistan: "We will continue to insist to Pakistan's leaders that terrorist safe havens within their border are unacceptable, and that the terrorists behind the Mumbai attacks be brought to justice. We must also recognize that all of us have an interest in both an Afghanistan and a Pakistan that is stable, prosperous and democratic—and none more so than India."
Free trade: "Together we can resist the protectionism that stifles growth and innovation. The United States remains—and will continue to remain—one of the most open economies in the world. By opening markets and reducing barriers to foreign investment, India can realize its full economic potential as well."
The sources of India's success: "Instead of resisting the global economy, you became one of its engines—reforming the licensing raj and unleashing an economic marvel." The "licensing raj" refers to the regulatory state that used to dictate all "private" economic decision-making in the country and still dominates the country's educational establishment.
Terrorist attacks on India: "Here in this Parliament, which was itself targeted because of the democracy it represents, we honor the memory of all those who have been taken from us." Mr. Obama is referring to the December 2001 terrorist attack on India's parliament, in which six policemen and one civilian were murdered. But he is also taking aim at the idea, common among his progressive friends, that terrorists object to what free societies do—whether in Gaza, Iraq or Kashmir—rather than to what they are. To take the opposite view, as Mr. Obama now seems to have done, is to recognize that terrorists can never be mollified by political concessions, and that democracies live under a common threat. If that's true of the U.S. and India, why not of the U.S. and Israel as well?
That's something to ponder. Also worth pondering is how a president who used to routinely inveigh against Bangalore for stealing jobs from Buffalo, who defended the "buy American" clause in the stimulus bill, and whose health-care legislation comes with its own de facto licensing raj, can suddenly talk so much sense. Maybe it's pure double-speak, or maybe the president has emerged from his midterm shellacking with a new religion. India tends to have that effect on strangers: The sensible among them have been known to lose their minds, but the senseless often find their grip.
Mr. Obama, plainly, is a leader who needs to find his grip. In describing the domestic achievements of India, he has at last alighted on a formula that can work for the U.S. while saving his presidency in the bargain. A man who has so often promised to listen to the world rather than preach to it might do well, this time, to listen to
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4)Fed Global Backlash Grows
China and Russia Join Germany in Scolding; Obama Defends Move as Pro-Growth.
By JONATHAN WEISMAN
NEW DELHI—Global controversy mounted over the Federal Reserve's decision to pump billions of dollars into the U.S. economy, with President Barack Obama defending the move as China, Russia and the euro zone added to a chorus of criticism.
Mr. Obama returned fire in the growing confrontation over trade and currencies Monday in a joint news conference with Indian Prime Minister Manmohan Singh, taking the unusual step of publicly backing the Fed's decision to buy $600 billion in U.S. Treasury bonds—a move that has come under withering international criticism for weakening the U.S. dollar.
The Fed is independent, and the White House by longstanding tradition has strained to avoid any appearance of collusion or conflict. Mr. Obama said the administration doesn't comment on particular actions of the U.S. central bank, before adding: "I will say that the Fed's mandate, my mandate, is to grow our economy. And that's not just good for the United States, that's good for the world as a whole."
The prospects of the Fed flooding the financial system with money helped drive gold above $1,400 an ounce on Monday. The precious metal, which investors often buy as protection against inflation, settled at a record $1,402.80 per troy ounce. Other assets, such as U.S. stocks and oil, drifted back slightly on Monday after getting a big boost from the Fed's announcement last week. The dollar fell against the yen, while rising against the euro as worries about Europe's debt problems returned.
The G-20 summit that begins Wednesday night in Seoul is shaping up as a showdown between exporting powers, such as Germany and China, and nations such as the U.S. that are struggling to emerge from recession and high unemployment.
Ahead of the meeting, tensions have flared in particular between German and U.S. officials. U.S. Treasury Secretary Timothy Geithner has been pressing member nations to sign up for a framework that would set limits on countries' trade balances. Germany, which relies heavily on exports, has lectured Washington about its economic policies, which Berlin sees as profligate and damaging.
Already, expectations are low for the meeting. The G-20 is struggling to agree on specific targets for Mr. Geithner's trade regime. It's also likely to leave unresolved other big questions, such as how to unwind failing international financial institutions, a task made urgent by the recent financial crisis.
Mr. Geithner said he is "very confident" world leaders, including those from China, will agree on a new framework that could instead include warning indicators for when a country's trade balance is out of line.
Germany's criticism echoes that from other countries, including Brazil and Japan, which have complained about potential spillover from the Fed's action. Printing more dollars, or cutting U.S. interest rates, tends to weaken the dollar and makes U.S. exports more attractive. The accompanying rise in the value of other countries' currencies tends to damp their exports and can fuel inflation or asset bubbles, as emerging-market officials note. U.S. officials maintain the Fed's action is about stimulating domestic demand, and that a weaker dollar is a consequence, not an objective.
On Monday, China's Vice Finance Minister Zhu Guangyao said the U.S. isn't living up to its responsibility as an issuer of a global reserve currency. The Fed's move doesn't "take into account the effect of this excessive liquidity on emerging-market economies," he said.
The top economic aide to Russian President Dmitry Medvedev said Russia will insist at the G-20 summit that the Fed consult with other countries ahead of major policy decisions.
Luxembourg Prime Minister Jean-Claude Juncker, who is chairman of the euro-zone finance ministers, also weighed in on the Fed move, saying: "I don't think it's a good decision. You're fighting debt with more debt."
Dissenting voices emerged in the U.S., too. Federal Reserve governor Ken Warsh, a top lieutenant of Federal Reserve Chairman Ben Bernanke, expressed deep skepticism about the Fed's action in an opinion piece in this newspaper. On Monday, Sarah Palin took aim at the Fed, calling on Mr. Bernanke to "cease and desist" on the bond-buying program. Ms. Palin said, "It's far from certain this will even work" and suggested the move would create an inflation problem.
How to Stop a Currency War. Access thousands of business sources not available on the free web. Learn More .Over the weekend, Mr. Bernanke said, "We see an economy which has a very high level of underutilization of resources and a relatively slow growth rate. The standard considerations suggest we should be using expansionary monetary policy, and that was the purpose of the action" taken last week.
Underpinning the debate is a growing sense that the international currency system, which has been based on floating exchange rates for most players for more than 30 years, is wearing out. China's policy of keeping its currency artificially low has long caused tensions that have increased of late, as other countries try to export their economies back to health. Now critics are lumping the Fed's policy, known as quantitative easing, into the same category.
German Finance Minister Wolfgang Schäuble lashed out at U.S. pressure on Berlin to rein in the country's surging exports, telling Der Spiegel magazine, "The American growth model...is stuck in a deep crisis."
He said, "It doesn't add up when the Americans accuse the Chinese of currency manipulation and then, with the help of their central bank's printing presses, artificially lower the value of the dollar."
Observers said the blunt criticism of U.S. policy is in large part payback for a longstanding stance by Washington policy makers that the American economy should serve as a model for others. The heated rhetoric also stems from fears that the U.S. may be looking for a back-door way to set exchange-rate policy in a way that favors the U.S.
In his first public comments since Mr. Schäuble's outburst, Mr. Obama seemed set to keep the heat on both Germany and China. "We can't continue to sustain a situation in which some countries are maintaining massive [trade] surpluses, others massive deficits, and there never is the kind of adjustments with respect to currency that would lead to a more balanced growth pattern."
Germany's trade surplus shot up to €16.8 billion ($23.37 billion) in September from €9 billion in August, Germany's federal statistics office reported Monday—larger than the €12 billion economists had expected.
Mr. Obama enlisted an ally in Mr. Singh, an economist whose country is wielding increasing influence at the G-20. Responding to Mr. Schäuble's criticism of the Fed, the prime minister said, "Anything that stimulates the underlying growth impulses of entrepreneurship in the United States would help the cause of global prosperity."
European Central Bank President Jean-Claude Trichet, after a regular meeting with other central-bank heads Monday, said: "Absolutely no participants mentioned that they were pursuing any kind of weak-currency policies." He said the Fed gave the committee a "very precise exposition" of its new policy, but said there was no judgment of, or vote on, its action.
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—Deborah Solomon, Geoffrey T. Smith and Ian Talley contributed to this article
5a)Ben Bernanke's Impossible Dream
The Fed's reckless notion that it can simultaneously raise inflation and lower interest rates presumes bond buyers are fools. They aren't
By ALAN REYNOLDS
Federal Reserve Chairman Ben Bernanke may be an excellent economist, but he is not a very good bond salesman. Since his Aug. 27 speech at an annual Fed symposium in Jackson Hole, Wyo., he's been telling us that he thinks inflation is too low and long-term interest rates are too high. In a quixotic effort to "maximize employment," he's begun purchasing up to $600 billion worth of long-term Treasury obligations to push inflation up and bond yields down.
If it worked as planned, this would flatten the yield curve, meaning it would narrow the spread between short-term and long-term interest rates. Since banks make money by borrowing short and lending long, the effect would be to discourage bank lending. That seems an unpromising way to stimulate the economy. But the whole notion of simultaneously raising inflation and lowering bond yields presumes bond buyers are docile fools.
The University of Michigan survey of expected inflation has hovered around 2.7%-3.2% since the recovery began last July, aside from two low readings of 2.2% in September 2009 and September 2010. That measure of inflation expectations has been higher than it was in November 2002, when then-Fed Governor Bernanke first began fretting about "deflation." But inflation expectations are still not high enough to please the Fed chairman.
Domestic and foreign investors have reacted to the Fed's plans by driving the dollar way down and commodity prices way up, which is consistent with higher expected inflation. So too is the gap between yields on regular Treasury bonds and the inflation-protected variety (TIPS), which has widened by more than 60 basis points since late August.
At Jackson Hole, Mr. Bernanke explained that "if inflation expectations were too low . . . an increase in inflation expectations could become a benefit."
Well, he's certainly succeeded in raising inflationary expectations. But rising commodity prices and a debased dollar have proved harmful to many businesses because inflated costs mean deflated profit margins. The headlines on two recent news reports in this paper tell the tale: "Prices Squeeze Main Street: Some Retailers Are Trapped between Rising Commodity Costs and Low Inflation" (Oct. 19) and "Dilemma over Pricing: From Cereal to Helicopters, Commodity Costs Exert Pressure" (Oct. 21).
Producer prices rose at an annual rate of 5.5% in September and 4.8% in August. The broad price index for GDP rose at an annual rate of 2.3% in the third quarter, up from 1.9% in the second quarter and 1% in the first.
Mr. Bernanke is unconcerned, however, because he believes (contrary to our past experience with stagflation) that inflation is no danger thanks to economic slack (high unemployment). He reasons that if people can nonetheless be persuaded to expect higher inflation, regardless of the slack, that means interest rates will appear even lower in real terms. If that worked as planned, lower real interest rates would supposedly fix our hangover from the last Fed-financed borrowing binge by encouraging more borrowing.
This whole scheme raises nagging questions. Why would domestic investors accept a lower yield on bonds if they expect higher inflation? And why would foreign investors accept a lower yield on U.S. bonds if they expect exchange rate losses on dollar-denominated securities? Why wouldn't intelligent people shift their investments toward commodities or related stocks (such as mining and related machinery) and either shun, or sell short, long-term Treasurys? And if they did that, how could it possibly help the economy?
One heavily traded exchange-traded fund (ETF) provides a sensitive market forecast of how effective this quantitative easing is expected to be in reducing long-term interest rates. Trading under the ticker symbol TBT, this ProShares ETF goes ultra-short Treasury bonds with maturities of 20 years or more, making it a highly leveraged bet on the direction of long-term interest rates. If bond yields were expected to fall because of quantitative easing, then the price of TBT should fall sharply. But that is not what has been happening.
On the day Mr. Bernanke spoke in Jackson Hole, TBT closed at 31.95, up from 30.24 on Aug. 16. The Federal Open Market Committee minutes from September became public on Oct. 12, revealing that the FOMC thought "Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment." TBT rose to 32.32 on the news, up from 31.64 the day before.
On Oct. 15, Mr. Bernanke gave another speech, at the Boston Fed, saying, "Inflation is running at rates that are too low . . . and the risk of deflation is higher than desirable." TBT rose again to 34.17, up from 33.34. On Nov. 3, when the scope of the Fed's long-term Treasury purchase plan was revealed, TBT jumped from 32.69 at 2:12 p.m. (EST), just before the news was released, to 34.99 by 3:34 p.m. (TBT closed Monday at 34.99.) If the Fed's plan really portends a sustainable reduction in long-term rates ahead, TBT should have moved in the opposite direction. When technocrats and markets disagree, it is rarely wise to bet against the markets.
There is ample evidence from commodity and foreign-exchange markets that world investors are indeed confident the Fed will raise inflation. However, the growing interest in shorting long-term Treasury bonds shows that the market does not believe higher inflation is consistent with lower long-term interest rates.
In other words, Mr. Bernanke and his FOMC allies are risking higher interest rates and inflated commodity costs in the pursuit of the contradictory objectives of higher inflation and lower bond yields, seemingly oblivious to all the evidence that they are pursuing an impossible dream.
Mr. Reynolds, a senior fellow with the Cato Institute, is the author of "Income and Wealth" (Greenwood Press 2006).
5b)Roubini Tweets: US Banks at Risk of Insolvency
Nouriel Roubini, the star economist whose gloomy forecasts have earned him the nickname of Dr. Doom, is at it again.
This time he has taken to Twitter to predict pain. The New York University professor was reacting to a report by Laurie Goodman, senior managing director at Amherst Securities, who says one in five distressed homeowners in the U.S. faces, or may face, foreclosure, Housing Wire reports.
She says 11.5 million home loans are non-performing or highly distressed at present.
And Roubini says that spells trouble. “Amherst Securities Goodman estimates that 11.5million households could default on their mortgages, not the 4 million priced in by markets,” he tweets.
“If 11.5 million more households default on their mortgages, most U.S. banks would be insolvent again. That's why Goodman's estimates are scary.”
Last week, Roubini used Twitter to forecast failure for the Federal Reserve’s latest easing effort. “QE2 will be followed by QE3 and QE4, as QE2 will fail to revive the real economy and to prevent deflationary pressures,” he tweeted.
Roubini isn’t the only one worried about the home market. “We face a huge problem in housing,” Mortimer Zuckerman, chief executive officer of Boston Properties, tells Bloomberg. Prices are still going down, and about 11 million mortgages under water, he points out.
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6)Republicans May Yet Have Upper Hand in Senate
By GERALD F. SEIB
On paper, the numbers tell you the Democrats held on to a majority in the Senate last week.
In reality, things won't be quite that neat. In fact, on some issues the Republicans actually may have a functional majority, given the sentiments likely to prevail among certain Democrats who face the voters in two years.
On paper, Democrats kept control of the Senate after the elections. But in reality, Republican leader Mitch McConnell actually may have the functional majority on some issues.
Here's the situation. After last week's midterm election, the Senate next year will have 51 Democrats, two independents who caucus with the Democrats, and 47 Republicans. (The Republican from Alaska could be either Joe Miller, the tea-party candidate who was the official GOP nominee, or write-in incumbent Republican Sen. Lisa Murkowski. It appears Ms. Murkowski got enough votes to stick around, but all her write-in votes haven't been counted yet.)
So, in theory, that means Democratic Majority Leader Harry Reid, having survived his own election-day near-death experience, should be able to muster 53 votes if he keeps his troops in line.
But life is never that simple in the Senate and certainly won't be now. Among the Senate Democrats, 23 will face re-election in just two years, and, having just witnessed the drubbing some in their party took at the polls, they likely will be even less willing now to toe the party line. Independent Joe Lieberman of Connecticut, who caucuses with Democrats, often leans rightward, anyway.
More important, among those 23 Democrats who face voters in 2012 are a handful of incumbents from the kind of moderate to conservative states where Democrats took a beating last week: Ben Nelson of Nebraska, Jon Tester of Montana, Jim Webb of Virginia and Claire McCaskill of Missouri. Joe Manchin, who just won a Senate race in West Virginia by separating himself from President Barack Obama and his party's congressional leaders, also faces voters again in two years because he was elected only to fill out an unexpired term.
Sen. Mitch McConnell, the Republican leader, looks at this field and thinks he may see some votes for his side. He points in particular to his desire to roll back parts of this year's big health bill.
"There are 23 Democrats up in 2012 and only nine Republicans," he said in an interview. "I think there is a widespread belief on the other side of the aisle that [the health bill] was a huge mistake. There could be, who knows, a growing number of Democrats who think that was the wrong thing to do."
Mr. McConnell won't engage when asked whether Republicans will take the next step and try to persuade any moderate Democrats to switch parties, which has happened in the past when the winds shift. But he adds: "It doesn't require changing parties to change your mind."
So maybe there also are Democrats prepared to drift to the Republican side on issues beyond health—say, on spending cuts, tax levels and a new energy program built around such items as electric cars and clean-coal technology. On selected issues, that means Mr. McConnell actually might find it at least as easy as the Democrats' Mr. Reid to assemble a working majority.
Of course, there are distinct limits to how much that means in the ever-messy Senate. In a body where any 41 members can mount and sustain a filibuster to stop action, having a bare majority, real or functional, has limited impact.
Moreover, lest Mr. McConnell be tempted to feel cocky about his position, he has internal problems of his own. Though tea-party favorites Christine O'Donnell in Delaware and Sharron Angle in Nevada lost their Senate bids, Rand Paul from Sen. McConnell's own Kentucky won his race, and there's still a chance that tea partier Joe Miller of Alaska may prevail. Meanwhile, Republican Sen. Jim DeMint of South Carolina has become a kind of spiritual godfather to the tea-party movement.
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Associated Press
Senate Minority Leader Mitch McConnell (R., Ky.) says some Democrats may vote with Republicans, citing misgivings over the health-care legislation.
.And anyone who operates under the tea-party banner isn't likely to feel he is in Congress to compromise on principles to get things done but is highly likely to feel he has a mandate to defy the established leaders in both parties. So the Republican conference could be as unruly and unreliable as the Democratic one.
Asked about that prospect, Mr. McConnell notes that among the 13 new Republicans about to take Senate seats, there are several experienced politicians who know how to get things done in a legislative chamber: Former Indiana Sen. Dan Coats is returning, for example, and seats are being taken by North Dakota Gov. John Hoeven and former House Republican whip Roy Blunt.
The real upshot may be that, in a Senate where neither party really has a clear majority on every issue, party discipline means less and the opportunity for free-lancing and interparty mash-ups grows.
Nobody will really be in charge. Let the fun begin.
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7)Medical fraud.
What can be the explanation for this refusal to use IBM's Medicare Fraud system to save 900 Billion in tax payer funds??? This is the President who designed our health care system, and is leading our nation into the ditch...
According to Fox News, IBM’s CEO, Sam Palmisano met with Obama at the WH and offered to help the Federal Government find $900B in Medical fraud within the federal budget outlays for free. Since the details of the offer have not yet been released by either the WH or IBM, one is left to assume that IBM offered its Fraud software and some consulting/IT services free. It's known that IBM has developed software to expose medical fraud at the state level, which has been used very successfully in several states. Most recently in NC, IBM installed and operated a comprehensive medical fraud detection system with NC paying nothing but a 10% commission on all cases of proven medical fraud, so it must work.
However, apparently Obama turned down the offer. See Video http://www.foxnews.com/on-air/your-world-cavuto/transcript/ibm-ceo-administration-turned-down-free-offer-hunt-out-health-care-abuseIt's also interesting that even though this occurred last week Fox News seems to be the only news outlet that's yet begun talking about the offer and the Presidents rejection of it.
I did an internet search today on the subject and the only hits were Fox News, blogs and these two outlets http://www.examiner.com/political-transcripts-in-national/health-care-fraud-ibm-made-900b-offer-to-obama-white-house-define-free?render=print
http://politifi.com/news/IBM-CEO-WH-turned-down-free-offer-to-fight-fraud-1230779.htmlWhere is the media on such an important topical story?
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