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One day, shortly after joining the PGA tour in 1965, Lee Trevino, a professional golfer and married man, was at his home in Dallas ,Texas mowing his front lawn, as he always did. A lady driving by in a big, shiny Cadillac stopped in front of his house, lowered the window and asked, "Excuse me, do you speak English?"
Lee responded, "Yes Ma'am, I do."The lady then asked, "What do you charge to do yard work?"
Lee said, "Well, the lady in this house lets me sleep with her."
The lady hurriedly put the car into gear and sped off.
It's our government: A guy stopped at a local gas station, and after filling his tank, he paid the bill and bought a Coke. He stood by his car to drink his cola and watched a couple of men working along the roadside. One man would dig a hole two or three feet deep and then move on. The other man came along behind him and filled in the hole. While one was digging a new hole, the other was 25 feet behind filling in the hole.
The men worked right past the guy with the Coke and went on down the road. "I can't stand this," said the man tossing the can into a trash container and headed down the road toward the men. "Hold it, hold it," he said to the men. "Can you tell me what's going on here with all this digging and refilling?"
"Well, we work for the government and we're just doing our job," one of the men said.
"But one of you is digging a hole and the other fills it up. You're not accomplishing anything. Aren't you wasting the taxpayers' money?"
"You don't understand, mister," one of the men said, leaning on his shovel and wiping his brow. "Normally there's three of us: Me, Elmer and Leroy. I dig the hole, Elmer sticks in the tree, and Leroy here puts the dirt back.
You see with the government sequestering, they are not buying any more trees so Elmer's job's been cut ... so now it's just me an' Leroy.
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Walter Williams posits unasked and unanswered questions. (See 1 below.)
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The World Bank's thinking re Bernanke's moves! (See 2 below.)
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More about who is Rohani! (See 3 below.)
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A follow up from a very dear friend regarding my previous comment about the recent Jordanian military exercise. (See 4 below.)
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Obama's speech in Berlin calls for atomic weapon reductions. (See 5 below.)
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Regulate, red tape, Scotch Tape, whatever it takes to stifle business initiatives and entrepreneurship just as long as government controls (See 6 below.)
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As I have been suggesting, it is one thing to ride a bull, even create a bull, but it is another matter when you want to dismount the bull. The market today swooned over the prospect Bernanke's money flow might be curtailed.
I had a delightful lunch today with someone who is turned off by Republican ventures into his personal life but was a successful businessman and understands the financial problems we face.
He made a valid point that Obama should be given credit for the fact that we are no longer going off the cliff as we were at the end of GW's term in office but he acknowledged Congress must share blame for causing the recession because of their inane housing policies. He also was willing to acknowledge Bernanke had bought much of the economic improvement with printed dollars.
I made the point I am repeating - the consequences are ahead and though unknown could prove most unpleasant.
Once again, I acknowledge you have to save the patient to treat the patient but saving the patient to kill the patient later is not a rational solution either.(See 7 below.)
Fed to stay the 'curse.' (See 7a below.)
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When did anything the government ever do not expand? History is quite clear, government growth is amoebic.
Name a government program that is not more costly, larger than when first proposed and eventually became law. (See 8 below.)
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Dick
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1)
Unasked and Unanswered Questions
By Walter E. Williams
Grutter v. Bollinger was the landmark U.S. Supreme Court decision that upheld the University of Michigan Law School's racial admissions policy. Justice Sandra Day O'Connor, writing for the majority, said the U.S. Constitution "does not prohibit the Law School's narrowly tailored use of race in admissions decisions to further a compelling interest in obtaining the educational benefits that flow from a diverse student body." But what are the educational benefits of a diverse student body?
Intellectuals argue that diversity is necessary for academic excellence, but what's the evidence? For example, Japan is a nation bereft of diversity in any activity. Close to 99 percent of its population is of one race. Whose students do you think have higher academic achievement -- theirs or ours? According to the 2009 Program for International Student Assessment, the academic performance of U.S. high-school students in reading, math and science pales in comparison with their diversity-starved counterparts in Japan.
Should companies be treated equally? According to a Wall Street Journal op-ed (9/7/2009) by Manhattan Institute's energy expert Robert Bryce, Exxon Mobil pleaded guilty in federal court to killing 85 birds that had come into contact with its pollutants. The company paid $600,000 in fines and fees. A recent Associated Press story (5/14/2013) reported that "more than 573,000 birds are killed by the country's wind farms each year, including 83,000 hunting birds such as hawks, falcons and eagles, according to an estimate published in March in the peer-reviewed Wildlife Society Bulletin." The Obama administration has never fined or prosecuted windmill farms, sometimes called bird Cuisinarts, for killing eagles and other protected bird species. In fact, AP reports that the Obama administration has shielded the industry from liability and has helped keep the scope of the deaths secret. It's interesting that The Associated Press chose to report the story only after the news about its reporters being secretly investigated. That caused the Obama administration to fall a bit out of favor with them. But what the heck, the 14th Amendment's requirement of "equal protection" before the law for everybody can be cast aside in the name of diversity, so why can't it be cast aside in the name of saving the planet? There are politically favored industries just as there are politically favored groups.
What's the difference between a progressive, a liberal and a racist? In some cases, not much. President Woodrow Wilson was a leading progressive who believed in notions of racial superiority and inferiority. He was so enthralled with D.W. Griffith's "Birth of a Nation" movie, glorifying the Ku Klux Klan, that he invited various dignitaries to the White House to view it with him. During one private screening, President Wilson exclaimed: "It's like writing history with lightning. And my only regret is that it is all so terribly true." When President Wilson introduced racial segregation to the civil service, the NAACP and the National Independent Political League protested. Wilson vigorously defended it, arguing that segregation was in the interest of Negroes.
Dr. Thomas Sowell, in "Intellectuals and Race," documents other progressives who were advocates of theories of racial inferiority. They included former presidents of Stanford University and MIT, among others. Eventually, the views of progressives fell out of favor. They changed their name to liberals, but in the latter part of the 20th century, the name liberals fell into disrepute. Now they are back to calling themselves progressives.
I'm not arguing that today's progressives are racists like their predecessors, but they share a contempt for liberty, just as President Wilson did. According to Hillsdale College history professor Paul A. Rahe -- author of "Soft Despotism, Democracy's Drift" -- in his National Review Online (4/11/13) article "Progressive Racism," Wilson wanted to persuade his compatriots to get "beyond the Declaration of Independence." President Wilson said the document "did not mention the questions" of his day, adding, "It is of no consequence to us." My question is: Why haven't today's progressives disavowed their racist predecessors?
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2)World Bank: Fed Won't Make 'Short and Sharp' Policy Switch
The World Bank is concerned about the spillover effects on developing countries of a slowing of U.S. money creation and will move to provide affordable capital when borrowing costs rise, its president said on Wednesday.
The U.S. Federal Reserve has sparked a bout of financial market turmoil since its chief, Ben Bernanke, announced on May 22 that the Fed could, before the year is out, begin slowing the pace at which it creates dollars.
Emerging markets, the recipients of much of that money as it has been printed, have borne the brunt of investors taking fright.
"We're constantly watching what the spillover effects are of these unconventional monetary policies on developing countries especially," Jim Yong Kim told Reuters in an interview.
"If the United States does back off ... and slows down its (asset-buying) quantitative easing, borrowing costs will go up and we think they will also go up for developing countries. And that's a real concern."
The Fed holds a policy meeting on Wednesday. Analysts expect it to keep options open about such a move later in the year following some mixed recent economic data.
Kim did not expect capital outflow from emerging markets on anything like the scale seen in the Asian financial crisis of the late 1990s. Nor did he expect the Fed's policy switch to be "short and sharp."
"Ben Bernanke ... has been a clear and steady voice on what's needed," he said.
But he conceded that a world economy awash with money created by central banks, and with Japan now embarking on an unprecedented stimulus program, was in "uncharted territory."
"If the price of capital starts going up then we are going to have to move to find ways of creating new instruments for making capital available for infrastructure," Kim said.
The bank is working on a global infrastructure facility to do that. Kim said middle income countries were prepared to invest because they knew World Bank involvement would "crowd in" private capital too.
"We think this is urgent so we are moving pretty aggressively," he said. "As interest rates go up we have to work to provide capital at rates which make sense for developing countries."
DERISKING
Kim said it was remarkable how many emerging economies recovered so quickly from the 2007-2009 world financial crisis.
"We think it's because they made a lot of tough choices early on. They went through their fiscal consolidation, they looked at their public sector expenditures and rationalized them," he said.
But equally remarkable is that in an era of ultra-low interest rates these countries could not get access to affordable long-term investment. "They're saying we did all the right things ... and yet we still don't have access to capital," Kim said.
"Just like in 2008, we have to be the countercyclical arm that is ready to move to soften the blow on the developing countries," he said.
In the longer-term, the World Bank had a pivotal role to play in "derisking" infrastructure projects, particularly in Africa, so long-term private investors come in.
"Private sector investment is going to become such a huge part of our own strategy," Kim said.
He cited the example of the Inga III dam in the Democratic Republic of Congo which he said had the potential to provide electricity for the whole of sub-Saharan Africa barring South Africa.
Yet international investors are understandably cautious about getting involved in a country which has been wracked with violence during a long insurgency.
The World Bank and United Nations were trying to create "a little cocoon around that project so that we can in fact attract institutional investors."
"We have to find some way of creating a governance structure that would weather the vicissitudes of Democratic Republic of Congo politics. We think it's possible," Kim said. "So watch that space."
2)World Bank: Fed Won't Make 'Short and Sharp' Policy Switch
The World Bank is concerned about the spillover effects on developing countries of a slowing of U.S. money creation and will move to provide affordable capital when borrowing costs rise, its president said on Wednesday.
The U.S. Federal Reserve has sparked a bout of financial market turmoil since its chief, Ben Bernanke, announced on May 22 that the Fed could, before the year is out, begin slowing the pace at which it creates dollars.
Emerging markets, the recipients of much of that money as it has been printed, have borne the brunt of investors taking fright.
"We're constantly watching what the spillover effects are of these unconventional monetary policies on developing countries especially," Jim Yong Kim told Reuters in an interview.
"If the United States does back off ... and slows down its (asset-buying) quantitative easing, borrowing costs will go up and we think they will also go up for developing countries. And that's a real concern."
The Fed holds a policy meeting on Wednesday. Analysts expect it to keep options open about such a move later in the year following some mixed recent economic data.
Kim did not expect capital outflow from emerging markets on anything like the scale seen in the Asian financial crisis of the late 1990s. Nor did he expect the Fed's policy switch to be "short and sharp."
"Ben Bernanke ... has been a clear and steady voice on what's needed," he said.
But he conceded that a world economy awash with money created by central banks, and with Japan now embarking on an unprecedented stimulus program, was in "uncharted territory."
"If the price of capital starts going up then we are going to have to move to find ways of creating new instruments for making capital available for infrastructure," Kim said.
The bank is working on a global infrastructure facility to do that. Kim said middle income countries were prepared to invest because they knew World Bank involvement would "crowd in" private capital too.
"We think this is urgent so we are moving pretty aggressively," he said. "As interest rates go up we have to work to provide capital at rates which make sense for developing countries."
DERISKING
Kim said it was remarkable how many emerging economies recovered so quickly from the 2007-2009 world financial crisis.
"We think it's because they made a lot of tough choices early on. They went through their fiscal consolidation, they looked at their public sector expenditures and rationalized them," he said.
But equally remarkable is that in an era of ultra-low interest rates these countries could not get access to affordable long-term investment. "They're saying we did all the right things ... and yet we still don't have access to capital," Kim said.
"Just like in 2008, we have to be the countercyclical arm that is ready to move to soften the blow on the developing countries," he said.
In the longer-term, the World Bank had a pivotal role to play in "derisking" infrastructure projects, particularly in Africa, so long-term private investors come in.
"Private sector investment is going to become such a huge part of our own strategy," Kim said.
He cited the example of the Inga III dam in the Democratic Republic of Congo which he said had the potential to provide electricity for the whole of sub-Saharan Africa barring South Africa.
Yet international investors are understandably cautious about getting involved in a country which has been wracked with violence during a long insurgency.
The World Bank and United Nations were trying to create "a little cocoon around that project so that we can in fact attract institutional investors."
"We have to find some way of creating a governance structure that would weather the vicissitudes of Democratic Republic of Congo politics. We think it's possible," Kim said. "So watch that space."
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3)Iran's new fanatic-in-chief
By Michael Freund
Eleven years ago, a middle-aged, up-and-coming Iranian cleric sat down for a rare interview with ABC News. Though largely unknown to the West at the time, the bespectacled mullah served as chairman of Iran's Supreme National Security Council and was a key adviser to the Iranian president.
Despite knowing that he was appearing before a Western audience, the turbaned official made little effort to hide his uncompromising and extremist views. When asked why then-US President George W. Bush had included Iran as part of the “axis of evil,” for example, the partisan Persian did not hesitate to invoke an anti-Semitic canard, blaming the Jews for America's policy.
“After September 11,” he said, “the hardliners, especially the Zionist lobby, became more active and, unfortunately, influenced Mr. Bush.”
A few minutes later, perhaps concerned that he had not gotten his point across, he went out of his way to reiterate that, “What we really see in the decision-making is the influence of the Zionist lobby. They are very influential in the administration as well as with members of Congress.”
The man who uttered those hateful words is none other than Hassan Rohani, the new president-elect of the Islamic Republic of Iran. Yes, that Hassan Rohani, the same one that much of the Western media is attempting to portray as a judicious and reasonable man.
“Moderate Wins Iran's Presidential Election,” crowed National Public Radio. “Rohani an Advocate of Peace,” insisted The Australian.
But don't let the screaming headlines fool you. The assertion that Rohani is a moderate is absolute hogwash, marinated in self-delusion and garnished with sheer ignorance. Sure, when compared with outgoing nutcase Mahmoud Ahmadinejad, Rohani is relatively restrained. But that's like saying Attila the Hun was a moderate when measured up against Genghis Khan.
In other words, it is a distinction without a difference.
Rohani has spent more than two decades as part of Iran's national security apparatus, which has used violence and terror at home and abroad to preserve the rule of the ayatollahs. From 2003 to 2005, as Teheran's chief nuclear negotiator, his task was to dither, delay and dissemble in talks with the West while Iran's nuclear scientists advanced toward the atomic finish line. And for the past eight years, Rohani was one of Supreme Leader Ayatollah Ali Khamenei's two personal representatives on Iran's Supreme National Security Council.
His record is one of slavish loyalty to the thuggish theocracy that was installed after the downfall of the Shah in 1979, and there is simply no reason whatsoever to think that this close confidante of Khamenei will suddenly become an Iranian F.W. De Klerk or Mikhail Gorbachev.
Indeed, if Rohani's public statements are any indication, Iran's hostile stance appears certain to continue.
In the ABC interview that he gave in September 2002, Rohani justified Palestinian suicide bombers, saying that, “Palestinians can use any means to kick out the occupier.” He defended Hezbollah as “a legitimate political group,” called Israel “a terrorist nation” and refused to condemn the March 2002 Passover Massacre, when a Hamas suicide bomber blew himself up at a Passover Seder at the Park Hotel in Netanya, murdering 30 Israelis and wounding 140 others.
More recently, in a meeting with the Turkish ambassador on January 11, 2012, Rohani came to the defense of Syrian dictator Bashar Assad, even as the latter was busy slaughtering his fellow citizens.
“Syria has constantly been on the frontline of fighting Zionism and this resistance line must not be weakened,” Rohani was quoted as saying by the Iranian and Syrian press. “Syria,” he added, “has a particular position in the region and in the past 60 years has formed the resistance line against the Zionist regime.”
And if you thought that the race for the presidency might serve to soften his views, think again. In an interview with Al-Sharq al-Awsat last week, Rohani denounced what he called Israel's “inhuman policies and practices in Palestine and the Middle East.”
To be sure, Rohani has been making noises about reforming Iran's economy and loosening the regime's stifling grip on the Iranian people. But while his election to the presidency does constitute a change of faces, it hardly signals a change in policy.
The departure of Ahmadinejad from the scene is certainly welcome news, and few will miss his rancorous and vitriolic anti-Semitic and anti-Western tirades.
But the results of Iran's presidential balloting are hardly a reason to celebrate. Iran may have a relatively more moderate fanatic-in-chief in the form of Hassan Rohani, but a fanatic he most assuredly is.
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4)Marines assigned to the 26th Marine Expeditionary Unit search for targets during a live fire exercise in Al Quweira, Jordan June 13th. 5,000 U.S. personnel participating in a 12-day annual military exercise called Eager Lion.
AL QUWEIRA, Jordan — It’s hot, barren and isolated, and the living conditions for the 2,400 Marines here assigned to the 26th Marine Expeditionary Unit, are spartan.
But the experience in Jordan ’s desert environment is worth it, say Marines participating in the multi-national Eager Lion exercise here that ends Thursday.
“The training here is a lot better than what we’re used to getting,” Staff Sgt. Josh Wartchow said. “There is only so many places in America where we go” for training.
Some Marines noted the conditions would have been ideal before a deployment to Afghanistan because of the geological and environmental similarities.
There is the heat to contend with, and the physical challenges of the rocky desert terrain, Wartchow said. “We actually get to put all of that to the test.”
The best thing for the Marines right now “is hard and interesting training in an environment that might prove challenging and might prove unusual,” said Brig. Gen. Gregg Olson, commander of Marine Corps Forces Central Command (Fwd).
Officials have emphasized that the exercise, an annual event, was not related to the civil war in neighboring Syria, though the U.S. announced Saturday that it would leave behind a battery of F-16s and Patriot missiles after the exercise ends at the request of Jordan, which is concerned about possible threats from the war waging on its border.
The overwhelming consensus among the Marines participating in the 12-day exercise was that Jordan , with its vast open spaces, offers a better training ground than can be found in the U.S. , where there are restrictions on firing ranges.
“Here, this would be a natural fighting environment for us and scouts. It’s more of a real life situation versus being back stateside,” said Sgt. Robert Driver during a light armored vehicle live fire exercise.
About 5,000 U.S. troops from all branches of service were among the 8,000 personnel from 19 countries participating.
With Jordan playing host, the U.S. troops found their patience tested, as they followed the lead of the Jordanian military during various exercises. The Jordanians would frequently change scheduled events, often leaving U.S. Marines all geared up with nowhere to go.
“Any time you’re dealing with two cultures, even military cultures, you’re still going to have to account for training differences, cultural differences and difference in experience levels,” Olson said.
The difference in experience was most obvious on joint patrols where the Americans, battle hardened from more than a decade of war, often found the Jordanian army’s tactics unusual and confusing.
“They have the same formations we do... they do things a little bit differently,” said Capt. Raymond Kaster , a company commander. But, he had no quibble with the Jordanians’ abilities.
“They still talk about how they look up to us. But they are on par as far as ground tactics,” Kaster said.
The Jordanians were eager for feedback from U.S. Marines. On one patrol, this led to three impromptu classroom-like sessions in which Jordanians of various ranks gathered around a U.S. Marine drawing lines in the sand to explain tactics and maneuvers.
“We have a certain way of approaching our field training... but that doesn’t mean we don’t have some things they can learn from us; correspondingly we can learn from them,” Olson said.
The Jordanian armed forces — established by the British in the 1920s as the “Arab Legion” — traditionally have been considered among the best-trained and most capable in the Arab world. The force, numbering about 100,000 members, has fought in a series of wars against Israel and in other conflicts, and has provided military troops and advisers to several nations in the Middle East . The Jordanian military is also one of the largest contributors to U.N. peacekeeping missions worldwide.
Wartchow said he enjoyed watching how his Jordanian counterpart dealt with his troops.
“We get to learn their point of view and how they deal with certain aspects of this training,” Wartchow said.
He also encouraged his junior Marines to spend time with their counterparts.
“They see that the host nation guys are exactly the same as they are,” Wartchow said. “They’re 20-something years old, they like Facebook, they like to sit around, eat, smoke cigarettes and tell stories.”
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5)Obama in Berlin, Calls for Huge Cuts in Nuclear Arsenal
President Barack Obama used a speech in Berlin on Wednesday to call on Russia to revive the push for a world without nuclear arms by agreeing to target further reductions of up to one third of deployed nuclear weapons.
But Republicans quickly warned that the cuts Obama is contemplating would put the United States at greater risk as rogue nations like North Korea and Iran seek to build larger arsenals. Moreover, allies like Japan may move to build their own arsenals as they determine they can no longer depend on the U.S. nuclear umbrella.
"Our experience has been that nuclear arsenals — other than ours — are on the rise," said Jim Inhofe, the top Republican on the Senate's Armed Services Committee, pointing to Iran and North Korea.
"A country whose conventional military strength has been weakened due to budget cuts ought not to consider further nuclear force reductions while turmoil in the world is growing."
Sen. Bob Corker, Republican from Tennessee, the ranking member of the Foreign Relations Committee, said any additional limitations of the U.S. nuclear arsenal without first fulfilling commitments to modernization of existing forces could amount to "unilateral disarmament."
"Maintaining a strong nuclear deterrent is vital for our nation's security and that of our allies around the world. While the administration has assured me that no further reductions will occur outside of treaty negotiations and the advice and consent of the Senate, the president's announcement without first fulfilling commitments on modernization could amount to unilateral disarmament," Corker said.
"The president should follow through on full modernization of the remaining arsenal and pledges to provide extended nuclear deterrence before engaging in any additional discussions," Corker told Bloomberg News.
In April, Corker pointed out the Obama administration's unmet obligations on nuclear modernization in a joint commentary with Inhofe published by Foreign Policy. And in a previous op-ed piece in The Wall Street Journal, also with Inhofe, Corker argued unilateral disarmament by the United States could lead to the "very instability that the U.S. seeks to avoid."
Republican Rep. Chuck Fleischmann of Tennessee told Newsmax's John Gizzi that he was very disappointed by the speech.
"I'm sure you remember last year when the president discussed with [then-Russian President Dmitry] Medvedev about how he could do more after the election when he wouldn't be seeking re-election? Now you know the rest of the story," Fleischmann said.
"We live in a dangerous world and Russia has not complied with existing treaties. Russia also has an advantage in tactical nuclear weapons and [Russian President Vladimir] Putin has not exhibited any credibility, as we have seen recently regarding Syria."
Further cuts also are likely to embolden other non-nuclear states, including Japan, to consider building their own nuclear arsenals, analysts say.
Retired Air Force Lt. Gen. Thomas McInerney told Newsmax earlier this year that the administration is seeking to unilaterally disarm U.S. nuclear forces, something that is "the most dangerous thing I have ever seen an American president attempt to do."
"This is not the time to embark on such a dangerous path, with China, Russia, Iran, and North Korea increasing their nuclear forces," he said.
A U.S. official familiar with strategic nuclear policy also told Newsmax in May that the delay in signing the implementation study may be the result of concerns among military commanders in charge of nuclear deterrence that China's nuclear arsenal is expanding more rapidly than anticipated, and that Russia and other nuclear states, including Pakistan and North Korea, are modernizing their forces.
"I hear increasing concerns about China," the official said. "We really don't know what they're doing and what decisions are being made" about China's nuclear-force modernization.
The Fed said it will maintain the pace of its bond purchases for now. But it offered a more optimistic outlook for the U.S. economy and job market.
Its brighter view of the economy could be a signal that the Fed's bond purchases may soon be scaled back. But the statement issued after the Fed's two-day policy meeting gave no indication of when that might happen.
Investors reacted initially by selling both stocks and bonds. The Dow Jones industrial average was down 70 points shortly after the statement came out; minutes earlier, it had been down just 16. The yield on the 10-year Treasury note shot up to 2.27 percent from 2.21 percent just before the statement came out.
In the statement, the Fed says the economy is growing moderately. And for the first time it said the "downside risks to the outlook" had diminished since fall.
Timothy Duy, a University of Oregon economist who tracks the Fed, calls the statement "an open door for scaling back asset purchases as early as September."
The fact that the Fed foresees less downside risk to the job market "gives them a reason to pull back" on its bond purchases, Duy says.
The Fed says it will keep buying $85 billion a month in bonds until the outlook for the job market improves substantially. The goal is to lower long-term interest rates to encourage borrowing, spending and investing. It hasn't defined substantially.
The central bank also said that it would maintain its plan to keep short-term rates at record lows at least until unemployment reaches 6.5 percent.
The Fed also said that inflation was running below its 2 percent long-run objective, but noted that temporary factors were partly the reason.
The Fed also released its latest economic projections on Wednesday, which predicted that unemployment will fall a little faster this year, to 7.2 percent or 7.3 percent at the end of 2013 from 7.6 percent now. It thinks the rate will be between 6.5 percent and 6.8 percent by the end of 2014, better than its previous projection of 6.7 percent to 7 percent.
"The more upbeat tone and the change in the unemployment forecast will only encourage expectations for action soon," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, wrote in a research note. "We continue to believe that tapering could start at the Sept. 17-18 meeting."
The Fed said inflation could run as low as 0.8 percent this year. But the Fed predicts it will pick up next year to between 1.4 percent and 2 percent.
The statement was approved on a 10-2 vote. James Bullard, the president of the Federal Reserve Bank of St. Louis, objected for the first time this year, saying he wanted a stronger commitment from the Fed to keep inflation from falling too low.
Esther George objected for the fourth time this year, again voicing concerns about inflation rising too quickly.
The ultra-low rates engineered by the Fed have helped fuel a housing comeback, support economic growth, drive stocks to record highs and restore the wealth America lost to the recession.
Financial markets have been gyrating in the four weeks since Chairman Ben Bernanke told Congress the Fed might scale back its effort to keep long-term rates at record lows within "the next few meetings"— earlier than many had assumed.
Bernanke cautioned that the Fed would slow its support only if it felt confident the job market would show sustained improvement. And he also told lawmakers that the Fed must take care not to prematurely reduce its stimulus for the still-subpar economy.
The Fed announced after its September meeting that it would purchase $40 billion a month in mortgage bonds for as long as it deems necessary. And in December, the Fed expanded the program to $85 billion a month, adding $45 billion a month in Treasury bond purchases. The Treasury purchases replaced an expiring bond-purchase program.
Job growth picked up after the Fed announced the latest round of bond purchases. Since October, the economy has added an average of 196,500 jobs a month, up from 157,000 a month in the previous eight months.
Last month, the U.S. economy added a solid 175,000 jobs. But the unemployment rate is still high at 7.6 percent. Economists tend to regard the job market as healthy when unemployment is between 5 percent and 6 percent.
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5)Obama in Berlin, Calls for Huge Cuts in Nuclear Arsenal
President Barack Obama used a speech in Berlin on Wednesday to call on Russia to revive the push for a world without nuclear arms by agreeing to target further reductions of up to one third of deployed nuclear weapons.
Speaking in Berlin where John F. Kennedy and Ronald Reagan gave rousing Cold War speeches, Obama urged Russia to help build on the "New START" treaty that requires both countries to cut stockpiles of deployed nuclear weapons to 1,550 each by 2018.
"After a comprehensive review I have determined that we can ensure the security of America and our allies, and maintain a strong and credible strategic deterrent, while reducing our deployed strategic nuclear weapons by up to one third," he said."I intend to seek negotiated cuts with Russia to move beyond Cold War nuclear postures," Obama said at the Brandenburg Gate, which once stood alongside the Berlin Wall that divided the communist east and the capitalist west.
But Republicans quickly warned that the cuts Obama is contemplating would put the United States at greater risk as rogue nations like North Korea and Iran seek to build larger arsenals. Moreover, allies like Japan may move to build their own arsenals as they determine they can no longer depend on the U.S. nuclear umbrella.
"Our experience has been that nuclear arsenals — other than ours — are on the rise," said Jim Inhofe, the top Republican on the Senate's Armed Services Committee, pointing to Iran and North Korea.
"A country whose conventional military strength has been weakened due to budget cuts ought not to consider further nuclear force reductions while turmoil in the world is growing."
Sen. Bob Corker, Republican from Tennessee, the ranking member of the Foreign Relations Committee, said any additional limitations of the U.S. nuclear arsenal without first fulfilling commitments to modernization of existing forces could amount to "unilateral disarmament."
"Maintaining a strong nuclear deterrent is vital for our nation's security and that of our allies around the world. While the administration has assured me that no further reductions will occur outside of treaty negotiations and the advice and consent of the Senate, the president's announcement without first fulfilling commitments on modernization could amount to unilateral disarmament," Corker said.
"The president should follow through on full modernization of the remaining arsenal and pledges to provide extended nuclear deterrence before engaging in any additional discussions," Corker told Bloomberg News.
In April, Corker pointed out the Obama administration's unmet obligations on nuclear modernization in a joint commentary with Inhofe published by Foreign Policy. And in a previous op-ed piece in The Wall Street Journal, also with Inhofe, Corker argued unilateral disarmament by the United States could lead to the "very instability that the U.S. seeks to avoid."
Republican Rep. Chuck Fleischmann of Tennessee told Newsmax's John Gizzi that he was very disappointed by the speech.
"I'm sure you remember last year when the president discussed with [then-Russian President Dmitry] Medvedev about how he could do more after the election when he wouldn't be seeking re-election? Now you know the rest of the story," Fleischmann said.
"We live in a dangerous world and Russia has not complied with existing treaties. Russia also has an advantage in tactical nuclear weapons and [Russian President Vladimir] Putin has not exhibited any credibility, as we have seen recently regarding Syria."
Further cuts also are likely to embolden other non-nuclear states, including Japan, to consider building their own nuclear arsenals, analysts say.
Retired Air Force Lt. Gen. Thomas McInerney told Newsmax earlier this year that the administration is seeking to unilaterally disarm U.S. nuclear forces, something that is "the most dangerous thing I have ever seen an American president attempt to do."
"This is not the time to embark on such a dangerous path, with China, Russia, Iran, and North Korea increasing their nuclear forces," he said.
A U.S. official familiar with strategic nuclear policy also told Newsmax in May that the delay in signing the implementation study may be the result of concerns among military commanders in charge of nuclear deterrence that China's nuclear arsenal is expanding more rapidly than anticipated, and that Russia and other nuclear states, including Pakistan and North Korea, are modernizing their forces.
"I hear increasing concerns about China," the official said. "We really don't know what they're doing and what decisions are being made" about China's nuclear-force modernization.
Obama's vision of a "world without nuclear weapons" set out in a speech in Prague in 2009, three months into his presidency, earned him the Nobel Peace Prize. But his mixed results so far have fueled criticism that the prize may have been premature.
Experts said reducing the nuclear arsenal makes strategic and economic sense. But Mark Fitzpatrick at the International Institute for Strategic Studies said Obama faces major obstacles "including a recalcitrant Russia and a reluctant Senate".
President Vladimir Putin, speaking in St. Petersburg minutes before Obama's speech, made no direct comment but voiced concern about U.S. missile defenses and high-precision weapons.
Moscow sees nuclear deterrents as the safeguard of national security. It is worried about the West's superior conventional weapons and NATO plans for a missile defense system in Europe.
"High-precision conventional weapons systems are being actively developed. ... States possessing such weapons strongly increase their offensive potential," said Putin.
The chief of the Russian military's general staff appears reluctant to negotiate a new nuclear deal, and Russian foreign policy expert Fyodor Lukyanov described Obama's desire to "go to zero globally" as totally unacceptable in Russia.
Obama will also target reductions in U.S. and Russian tactical nuclear weapons in Europe and host a summit in 2016 on securing nuclear materials and preventing nuclear terrorism. He hosted such a meeting in 2010, a second was held in Seoul in 2012, and Obama will attend a third in The Hague next year.
He met the Russian president this week at the G8 summit in Northern Ireland, where they signed a new agreement on securing nuclear material left over from the Cold War, replacing the 1992 Nunn-Lugar agreement that expired on Monday.
That was "the kind of constructive, cooperative relationship that moves us out of a Cold War mindset," Obama said afterward.
Early initiatives of Obama's presidency led to the New START treaty plus measures to bolster the Non-Proliferation Treaty and a new effort to secure nuclear materials worldwide, but that push has flagged in the face of political realities.
But Obama said the United States and Russia were on track to cut deployed nuclear warheads "to their lowest levels since the 1950s," and said a framework was being forged to counter what he called Iran and North Korea's "nuclear weaponisation."
Iran denies it is seeking nuclear weapons.
Obama also wants to see negotiations on a treaty to end the production of fissile materials, which are necessary for a chain reaction of nuclear fission, for weapons.
Experts and advocacy groups described Obama's initiative as "long overdue" and the reduction targets as modest.
"The one-third cuts outlined by the president are but 200 to 300 warheads fewer than the United States was prepared to agree to during the New START negotiations four years ago," said Daryl Kimball of the Arms Control Association in Washington.
"The U.S. could have gone much lower and maintained deterrence," said Jon Wolfsthal, a former special adviser to the vice president on nuclear security and nonproliferation. He saw little chance of success in the face of political opposition.
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6)The Regulated States of America
Tocqueville saw a nation of individuals who were defiant of authority. Today? Welcome to Planet Government.
By NIALL FERGUSON
In "Democracy in America," published in 1833, Alexis de Tocqueville marveled at the way Americans preferred voluntary association to government regulation. "The inhabitant of the United States," he wrote, "has only a defiant and restive regard for social authority and he appeals to it . . . only when he cannot do without it."
Unlike Frenchmen, he continued, who instinctively looked to the state to provide economic and social order, Americans relied on their own efforts. "In the United States, they associate for the goals of public security, of commerce and industry, of morality and religion. There is nothing the human will despairs of attaining by the free action of the collective power of individuals."
What especially amazed Tocqueville was the sheer range of nongovernmental organizations Americans formed: "Not only do they have commercial and industrial associations . . . but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fetes, to found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in this manner they create hospitals, prisons, schools."
Tocqueville would not recognize America today. Indeed, so completely has associational life collapsed, and so enormously has the state grown, that he would be forced to conclude that, at some point between 1833 and 2013, France must have conquered the United States.
The decline of American associational life was memorably documented in Robert Puttnam's seminal 1995 essay "Bowling Alone," which documented the exodus of Americans from bowling leagues, Rotary clubs and the like. Since then, the downward trend in "social capital" has only continued. According to the 2006 World Values Survey, active membership even of religious associations has declined from just over half the population to little more than a third (37%). The proportion of Americans who are active members of cultural associations is down to 14% from 24%; for professional associations the figure is now just 12%, compared with more than a fifth in 1995. And, no, Facebook FB +0.41% is not a substitute.
Instead of joining together to get things done, Americans have increasingly become dependent on Washington. On foreign policy, it may still be true that Americans are from Mars and Europeans from Venus. But when it comes to domestic policy, we all now come from the same place: Planet Government.
As the Competitive Enterprise Institute's Clyde Wayne Crews shows in his invaluable annual survey of the federal regulatory state, we have become the regulation nation almost imperceptibly. Excluding blank pages, the 2012 Federal Register—the official directory of regulation—today runs to 78,961 pages. Back in 1986 it was 44,812 pages. In 1936 it was just 2,620.
True, our economy today is much larger than it was in 1936—around 12 times larger, allowing for inflation. But the Federal Register has grown by a factor of 30 in the same period.
The last time regulation was cut was under Ronald Reagan, when the number of pages in the Federal Register fell by 31%. Surprise: Real GDP grew by 30% in that same period. But Leviathan's diet lasted just eight years. Since 1993, 81,883 new rules have been issued. In the past 10 years, the "final rules" issued by our 63 federal departments, agencies and commissions have outnumbered laws passed by Congress 223 to 1.
Right now there are 4,062 new regulations at various stages of implementation, of which 224 are deemed "economically significant," i.e., their economic impact will exceed $100 million.
The cost of all this, Mr. Crews estimates, is $1.8 trillion annually—that's on top of the federal government's $3.5 trillion in outlays, so it is equivalent to an invisible 65% surcharge on your federal taxes, or nearly 12% of GDP. Especially invidious is the fact that the costs of regulation for small businesses (those with fewer than 20 employees) are 36% higher per employee than they are for bigger firms.
Next year's big treat will be the implementation of the Affordable Care Act, something every small business in the country must be looking forward to with eager anticipation. Then, as Sen. Rob Portman (R., Ohio) warned readers on this page 10 months ago, there's also the Labor Department's new fiduciary rule, which will increase the cost of retirement planning for middle-class workers; the EPA's new Ozone Rule, which will impose up to $90 billion in yearly costs on American manufacturers; and the Department of Transportation's Rear-View Camera Rule. That's so you never have to turn your head around when backing up.
President Obama occasionally pays lip service to the idea of tax reform. But nothing actually gets done and the Internal Revenue Service code (plus associated regulations) just keeps growing—it passed the nine-million-word mark back in 2005, according to the Tax Foundation, meaning nearly 19% more verbiage than 10 years before. While some taxes may have been cut in the intervening years, the tax code just kept growing.
I wonder if all this could have anything to do with the fact that we still have nearly 12 million people out of work, plus eight million working part-time jobs, five long years after the financial crisis began.
Genius that he was, Tocqueville saw this transformation of America coming. Toward the end of "Democracy in America" he warned against the government becoming "an immense tutelary power . . . absolute, detailed, regular . . . cover[ing] [society's] surface with a network of small, complicated, painstaking, uniform rules through which the most original minds and the most vigorous souls cannot clear a way."
Tocqueville also foresaw exactly how this regulatory state would suffocate the spirit of free enterprise: "It rarely forces one to act, but it constantly opposes itself to one's acting; it does not destroy, it prevents things from being born; it does not tyrannize, it hinders, compromises, enervates, extinguishes, dazes, and finally reduces [the] nation to being nothing more than a herd of timid and industrious animals of which the government is the shepherd."
If that makes you bleat with frustration, there's still hope.
Mr. Ferguson's new book "The Great Degeneration: How Institutions Decay and Economies Die" has just been published by Penguin Press.
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7)Bernanke Rides the Bull
It's easy to get on but harder to get off, as markets are showing.
It's Ben Bernanke's economy, and everyone else is along for the ride. That reality has been clearer than ever in recent days, as financial markets lurch while awaiting the Federal Reserve Chairman's next monetary intimation, and now with President Obama's Monday hint that he may not reappoint Mr. Bernanke to another four-year term.
The recent market turmoil follows Mr. Bernanke's suggestion to Congress last month that the Fed could start reducing its $85 billion in monthly bond purchases later this year if growth is strong enough. There's a lot of wiggle room in "could," but the market reaction has nonetheless been sharp. The 2013 rally in stocks took a pause, bond yields have climbed, and capital has flowed out of emerging markets. All of this reverses what happened when Mr. Bernanke announced his open-ended bond buying last year.
This is a portent of what is likely to be continuing ferment when the Fed finally unwinds its extraordinary monetary interventions. The biggest question about the Fed's policy of near-zero interest rates and unlimited quantitative easing has always been: What happens when the music stops?
Mr. Bernanke's answer is that the Fed has the "tools" to unwind, and it will use them when the economy is healthy enough. The Fed says this means a jobless rate of 6.5% or lower (from 7.6% today) and presumably a durable housing recovery. With some "open-mouth operations" to signal its intentions, the Fed thinks it can manage a gradual adjustment that avoids inflation or bursting asset bubbles. We all wish it will be so.
But as the central-banking proverb holds, it is easier to get on the bull than to get off. The eternal problems are timing and political will. Knowing when to get off is hard enough when the only major variable is the traditional fed funds rate. It is harder still when the variables include a promise of near-zero rates into mid-2015 and a Fed balance sheet that has nearly quadrupled in five and a half years to $3.4 trillion.
A crowd will always form in Washington and on Wall Street to say it's too soon to stop, and those voices are already urging the Fed not to signal any reduction in bond buying at this week's Open Market Committee meeting. They say there may be a housing recovery, but it isn't solid enough. The jobless rate is falling, but not fast enough. And with little sign of inflation (0.1% in May, 1.4% over the past year), we're told that any reduction in purchases runs the risk of falling prices.
The deflation fear can be especially beguiling, as Mr. Bernanke knows. In 2003 Fed Chairman Alan Greenspan and a certain new Fed Governor named Ben Bernanke cited deflation risks to justify holding the fed funds rate at 1% for an entire year even as the economy was accelerating to a nearly 4% growth rate. This was the original sin that did so much to produce the housing bubble and financial panic.
Our view is that the sooner the Fed begins to unwind, the better. Its interventions were necessary amid panic and recession in 2008-2009. But the recovery reached its fourth anniversary this month. And while growth remains subpar, it isn't clear that monetary policy can do more to increase it.
The Fed can't repeal ObamaCare, which is a deadweight burden on job creation. It can't repeal the tax increases that hit in January, notably on small businesses. And it can't repeal the waves of new regulation that the Obama Administration continues to impose across the economy. The miracle is that growth is as strong as it is, which speaks to the private innovation that continues to take place in energy, biotech, digital devices, big data and more.
Meanwhile, the longer QE and near-zero rates continue, the more risks accumulate. The longer investors scramble for yield, the greater the risks of misallocated capital and bubbles we may not see until it is too late. Savers have been punished for a half decade already, while low-interest rates have made it easier for politicians to spend with too little consequence.
Which brings us to Mr. Bernanke's future when his second term expires in 2014. Mr. Obama told Charlie Rose of PBS on Monday that the Fed chief "has already stayed a lot longer than he wanted or he was supposed to." This suggests that Mr. Obama may prefer to name a new Chairman, and the pressure within his party is great to choose Fed Governor and economist Janet Yellen. She would be the first woman Fed chief and is known to favor even more expansionary monetary policy than Mr. Bernanke does.
The political virtue of choosing Ms. Yellen is that Mr. Obama would have a loyalist in the job and thus no ability to dodge responsibility if the Fed gets it wrong. On the other hand, Mr. Bernanke made the decision to hop on this bull and ride it for more than four years. There would be rough justice in seeing if he really can manage a smooth dismount.
7a) Fed Stays the Course, Gives No Indication When It Will Begin Scaling Back QE
The Federal Reserve offered a hint Wednesday that it's moving closer to slowing its bond-buying program, which is intended to keep long-term interest rates at record lows.
The Fed said it will maintain the pace of its bond purchases for now. But it offered a more optimistic outlook for the U.S. economy and job market.
Its brighter view of the economy could be a signal that the Fed's bond purchases may soon be scaled back. But the statement issued after the Fed's two-day policy meeting gave no indication of when that might happen.
Investors reacted initially by selling both stocks and bonds. The Dow Jones industrial average was down 70 points shortly after the statement came out; minutes earlier, it had been down just 16. The yield on the 10-year Treasury note shot up to 2.27 percent from 2.21 percent just before the statement came out.
In the statement, the Fed says the economy is growing moderately. And for the first time it said the "downside risks to the outlook" had diminished since fall.
Timothy Duy, a University of Oregon economist who tracks the Fed, calls the statement "an open door for scaling back asset purchases as early as September."
The fact that the Fed foresees less downside risk to the job market "gives them a reason to pull back" on its bond purchases, Duy says.
The Fed says it will keep buying $85 billion a month in bonds until the outlook for the job market improves substantially. The goal is to lower long-term interest rates to encourage borrowing, spending and investing. It hasn't defined substantially.
The central bank also said that it would maintain its plan to keep short-term rates at record lows at least until unemployment reaches 6.5 percent.
The Fed also said that inflation was running below its 2 percent long-run objective, but noted that temporary factors were partly the reason.
The Fed also released its latest economic projections on Wednesday, which predicted that unemployment will fall a little faster this year, to 7.2 percent or 7.3 percent at the end of 2013 from 7.6 percent now. It thinks the rate will be between 6.5 percent and 6.8 percent by the end of 2014, better than its previous projection of 6.7 percent to 7 percent.
"The more upbeat tone and the change in the unemployment forecast will only encourage expectations for action soon," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, wrote in a research note. "We continue to believe that tapering could start at the Sept. 17-18 meeting."
The Fed said inflation could run as low as 0.8 percent this year. But the Fed predicts it will pick up next year to between 1.4 percent and 2 percent.
The statement was approved on a 10-2 vote. James Bullard, the president of the Federal Reserve Bank of St. Louis, objected for the first time this year, saying he wanted a stronger commitment from the Fed to keep inflation from falling too low.
Esther George objected for the fourth time this year, again voicing concerns about inflation rising too quickly.
The ultra-low rates engineered by the Fed have helped fuel a housing comeback, support economic growth, drive stocks to record highs and restore the wealth America lost to the recession.
Financial markets have been gyrating in the four weeks since Chairman Ben Bernanke told Congress the Fed might scale back its effort to keep long-term rates at record lows within "the next few meetings"— earlier than many had assumed.
Bernanke cautioned that the Fed would slow its support only if it felt confident the job market would show sustained improvement. And he also told lawmakers that the Fed must take care not to prematurely reduce its stimulus for the still-subpar economy.
The Fed announced after its September meeting that it would purchase $40 billion a month in mortgage bonds for as long as it deems necessary. And in December, the Fed expanded the program to $85 billion a month, adding $45 billion a month in Treasury bond purchases. The Treasury purchases replaced an expiring bond-purchase program.
Job growth picked up after the Fed announced the latest round of bond purchases. Since October, the economy has added an average of 196,500 jobs a month, up from 157,000 a month in the previous eight months.
Last month, the U.S. economy added a solid 175,000 jobs. But the unemployment rate is still high at 7.6 percent. Economists tend to regard the job market as healthy when unemployment is between 5 percent and 6 percent.
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8) Mueller Admits FBI Uses Drones in Domestic Surveillance
The FBI uses drones in domestic surveillance operations in a “very, very minimal way,” Director Robert Mueller said.
Mueller, in Senate testimony today, acknowledged for the first time that the Federal Bureau of Investigation uses “very few” drones in a limited capacity during its investigations.
“It’s very seldom used and generally used in a particular incident when you need the capability,” Mueller said when asked about the bureau’s use of pilotless aircraft with surveillance capabilities. “It is very narrowly focused on particularized cases and particularized needs.”
Lawmakers, including Senate Judiciary Committee Chairman Patrick Leahy, and civil liberties groups have raised concerns about the impact on privacy of drones used by federal law enforcement agencies. The Homeland Security Department regularly deploys drones to oversee the southern border.
Mueller said the FBI is in “the initial stages” of formulating privacy guidelines related to its use of drones.
“There are a number of issues related to drones that will need to be debated in the future,” Mueller said. “It’s still in its nascent stages, this debate.”
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