Politics, the Stock Market and Debt

Since January 1, 2016, the news from Wall Street has been discouraging.  The Dow Jones Industrial Average is down by something around 7% and the other indices have not performed well either.  Nor have other markets internationally been doing well .  Additionally, Wall Street did not perform well during the last two months of 2015 either.

During the earlier few years, as the stock indices kept pushing relentlessly higher and higher, there weren't too many who were questioning what caused such an unprecedented phenomenon.  However, now, as billions and billions get burned into ashes day after day, many are asking why.

There is one factor, however, which, to some observers at least, has not escaped consideration.  For years following the financial collapse of 2008, the Fed, the Federal Reserve Bank, had been pumping something on the level of $ 70 billion into the financial markets and the stock market, each and every month.  That, under a theory which Mr. Bernanke, the former Chairman of the Fed, called „Quantitative Easing,” whatever that means and something which President George H. W. Bush, the elder President Bush, may have called Vodoo Economics.  Some say the monthly amount by the Fed into the Financial Markets for years and years on end might have been less, some, maybe even more, but all agree that the amount of money pumped into the markets was enormous, beyond anything which one could possibly comprehend.

As we observed here a good while ago, to put this into perspective, $ 70 billion pumped into the financial markets every month would be the equivalent of giving, in cash, more than $ 17,000 each month to every man, woman and child in the United States.  That, most of us agree, is a staggering sum of money for years and years on end and, indeed, $ 17,000 in the hands of every living person in the United States, month after month after month, could have probably done as much, if actually not even much, much more (and more quickly) in pulling the United States out of the financial crisis which has been generously described as the Great Recession, which, we are not sure, is better or worse than a Small Depression.

The total sum of money which the Fed pumped into the markets is technically not part of the Federal Budget and did not have to be approved by Congress.  Technically, it is backed by securities of various sorts which have been purchased by the Fed but, which, if they decrease in value or fail, would create an additional debt incurred by the Federal Government.

It is relatively easy to see that, during this period,  except for the most inept, everyone made money on the Stock Market and other Financial Markets.  Perhaps it is not that much more difficult to see that once this money source dried up, the demand to buy securities, dropped correspondingly.

We all suspect, although no one knows for sure, that this extraordinary „Financial Tool” as former Secretary of the Treasury Paulsen, ex Goldman Sachs described it, ended sometime around November 2015; around that time and shortly before, the blame for the instability in Financial Markets was thrown on the Chinese; surely the Chinese bear some of the blame for what is going on but not all of the blame.

There is, however, a footnote to this which is particularly worrysome.  Currently the United States Treasury carries a national debt of something on the order of $ 19 trillion.  That, of course, is a staggering amount of debt; representing something like 20 years of Wall Street „Quantitative Easing.”   The Fed has been extremely careful in swapping these federal debt obligations for longer and longer terms, for up to 20 years, „locking in” near zero interest rates.  However, as the Fed has been forced to start inching up the interest rates, the new debt coming in from federal deficits (along with any other debt renewals has started inching upwards; this, in effect, accelerates the rate at which the national debt would increase, since none of the debt is being retired; actually, new debt has been piling up which, accordingly, would also have to be financed at the current and coming higher rates.

Mrs. Yellen, the current Fed Chairman has been trying to navigate through these treacherous and, one can even say, with much vigor and wisdom, although, regrettably, she has few allies; the current Federal Budget, not yet even agreed upon is in danger throwing the federal deficits into an even worse quagmire.
 

Syria -- a difficult Choice

So, now, Syria has come to the Front Burner.  A Friend who wondered what would be the correct Choice on Syria also expressed the Inclination that to strike might be the preferred and logical Alternative.

It is a difficult Choice.  However, it does not appear that all of the necessary Variables of the Equation are available in order to make a correct Decision.  It might be appropriate to list just what the available Information is, at this Point in Time.  It also needs to be emphasized that the Information which is available, classified or not, is subject to re-Evaluation, literally, at a Moment's Notice as more Information becomes available.

Here is what we see so far:

The United Nations

It is clear that an International Intervention against Syria, limited or otherwise, is not possible within the Framework of the United Nations.  Russia and China are against a Security Council Resolution authorizing such Action and both have Veto Power.

This makes problematic any Action outside of the Scope of the United Nations, because such Action would be taken precisely because Approval cannot be obtained in the Security Council.  Simply put, one cannot easily make the Argument that the United States would go to the United Nations seeking Approval of such Action and, absent such Approval, it would act outside of the Scope of the United Nations or within another Framework or Coalition.

United States Domestic Policy Considerations

President Obama has set a courageous and correct Precedent by going to Congress to ask for Approval of a contemplated Military Strike.  We discussed the Implications of the Policy in an earlier Article.

Approval in Congress may be difficult but, it may prevail.  Straws in the Wind seem to indicate, however, that there might be some tough Sailing ahead.  Senator McCain, an outspoken Hawk in favor of Intervention, confronted some tough Questions at a Couple of „Town Meetings” which he has just held.  Polls seem to indicate that the Population as a whole is opposed to Intervention, limited as the President said it would be, by something around 48 to 28%.  There is a strange Coalition, composed of Liberal Democrats and Conservative Republicans which oppose Intervention of any Kind, leaving those who are in the „Mainstream” to carry the Weight and Responsibility for giving such Approval to the President.

The Situation in Syria

No one, including the Syrian Government disputes that they posess Chemical Weapons.

Less clear it is who used these Chemical Weapons in the latest Incident in which, according to credible Reports, approximately 1.400 People were killed, many of them, Children.  Truly a horrendous Act.  Some have suggested that the Rebels may have captured some of these Chemical Weapons and used them deliberately in order to entrap the Assad Government.

The United Nations Inspectors' Report will be available shortly and will become an important Factor if it corroborates the Intelligence Reports obtained by the United States establishing that the Assad Government used these Chemical Weapons against Civilians.

Even if the Rebels are aided as a Result of these contemplated Military Strikes, it is by no means a foregone Conclusion that Rebels associated with al-Qaeda or other Fundamentalist Movements would not inordinately benefit from them.  Interesting is the Position taken by a Veteran French Diplomat in an Open Letter to the French Parliament:

31 août 2013

Non aux frappes symboliques et de bonne conscience. Oui aux frappes utiles en Syrie.

31 August 2013

No to Symbolic Strikes (and for Conscience's Sake).  Yes to useful Strikes in Syria.

(Le Monde)

http://syrie.blog.lemonde.fr/2013/08/31/non-aux-frappes-symboliques-et-de-bonne-conscience-oui-aux-frappes-utiles-en-syrie/


(in French)

The Allies

Crucially important are the Allies who would be participating and/or supporting such Strikes.

So far, they are Canada, Turkey, Saudi Arabia and France.  After Canada, however, Things get murky when analyzing these Allies.  Saudi Arabia, which has Regional Political Considerations, that is one Thing.  Turkey which has been an arch-Enemy of Syria and would like nothing more than to have Syria destroyed, is another.  France; France has just announced that they will wait for the United Nations Report which seems to be an eminently sensible Thing to do.

Notably not joining in such a Coalition are Countries which normally can be counted upon:  Germany, Japan, Italy and, most importantly, the United Kingdom, where Prime Minister Cameron's Motion to join in such a Coalition was voted down by Parliament, putting his Government on a rather shaky Footing.

The Damage in Syria has been done.  There may be more Damage done if there are no Strikes.  However, the Likelihood appears to be that there will be more Damage done even if there are such Strikes and that Prudence and Patience are the best Choices as the Order of the Day.




 

Shifting from the Snowden Affair to the Real Debate

To briefly recapitulate the Events concerning the Snowden Affair:  After Days and Weeks of Salami Tactic News Developments, Edward Snowden left Hong Kong for Moscow on Sunday, 23 June 2013, his Final Destination still unclear.  Hong Kong jumped on a Technicality to rid itself of Snowden and thusly, together with and likely in Consultation with Mainland China (Hong Kong is under the ultimate Jurisdiction of The Mainland) passed on the hot Potato (or kicked the Can, one might say) into the Hands of Russia and President Putin.  President Putin and consequently Russia have been ambivalent on the Issue; they have refused to hand Snowden over to the United States, yet, at the same Time, they have not been particularly eager, if indeed, eager at all, to offer Asylum to Snowden.  Indeed, President Putin has come down, to a Degree, on the Side of the United States, stating that as a Condition for Snowden to be offered Asylum in Russia, Snowden would have to agree not to further „damage” the United States.  As recently as today, however, President Putin indicated that Snowden should ultimately leave Russia.  Russia's Motives are unclear and perhaps intentionally murky but it is difficult to imagine that it has not had at least partial Access to the Information which Snowden has; nobody knows what Kind of Information this is, perhaps not even The (Manchester) Guardian, which broke the Story and has been continuing to develop it but all Indications are that it is considerable.

Snowden had originally wanted to go to Iceland but he appears to have changed his Mind and now wants to go to South America.  He seems to have been influenced in this Decision by Julian Assange, of Wiki Leaks.  Julian Assange himself has received Asylum in Ecuador but cannot get there; he is confined to the Ecuadorian Embassy in London.  Venezuela, Bolivia and Nicaragua (the Latter in Central America), seem to have offered him Asylum of one Sort or another but it is not easy for him to get there because any Commercial Flight might either have to fly through United States Air Space or be within reach of United States Jets which may force the Aircraft to land on United States Territory, thus effectively foiling Snowden's Escape.  There has been much made of the Fact that Snowden cannot fly because his U. S. Passport has been revoked; this Point is of questionable Validity because any Country which offers Asylum to Snowden can also issue a Laissez Passer (a simple Travel Document, literally meaning, let this Person pass).  People have and still do travel without a Passport (willingly and sometimes unwillingly) when extraordinary Conditions exist.

However, ultimately, we believe, the Fate of Mr. Snowden is not central to the Crux of this Issue.

So, moving on to the Second Aspect, it has been revealed that considerable Eavesdropping has taken place against Friends and Foe alike; Russia, Western European and South American Countries.  Many of these Countries are furious over the Revelations and demanding Explanations, which may be slow in coming.  This Issue, we believe, is not central to the Crux of the Issue, either.  Espionage has taken place since Time immemorial, both against Friend and Foe alike.  It is often a messy Business but everyone does it and everyone uses any and all Means at its Disposal to do it as best as possible.  Nearly all Countries, if indeed, not all Countries, conduct Espionage at some Level or another and, whoever is best at it comes up with the best Scoops.  Greeks did it, Persians did it, Romans did it, the French did it, moving along to more recent History, the Germans did it, the Allies did it and most certainly, the Chinese have done it all the Time and keep on doing it in the grandest of Styles.  So, while it may sound like a dirty Business and it is, everybody does it and, thusly, nobody should be surprised by it.  In the old Days, when caught, Spies were hanged or, as Things became more modern, shot; these Days, they are usually sent to Jail or traded for other Spies.  At Times, Spy Trade become a flourishing Business, actually (Take, for Example, the Case of former Russian Spy Anna Chapman-yes, she is Russian, who supposedly even offered to marry Snowden).

 

Former Russian Spy Anna Chapman who was „traded”

To the Question, what is the central Crux of this Issue, we believe, the Answer is simple:  based on Snowden's Revelations and other Information, one Needs to ask, what are the Powers and, indeed, the Boundaries of a Country (in this Case, the United States) to gather indiscriminate Information on most if not all of its Citizens.

http://nbcpolitics.nbcnews.com/_news/2013/06/09/18863448-lawmakers-americans-dont-know-how-carefully-the-government-is-watching?lite

It is also interesting to note the evolving Role not only of the NSA but also of at least one Private Corporation, Booz Allen Hamilton, which was (perhaps it still is) a noted Accounting Firm (in plain English, Bookkeepers, Beancounters), which has gotten into a Business which does not have much (if anything at all) to do with Accounting.  Sorta like Lawyers getting into Brain Surgery, one might say.

http://usnews.nbcnews.com/_news/2013/06/15/18940842-growth-of-intel-outsourcing-no-secret-but-now-congress-taking-notice?lite

http://usnews.nbcnews.com/_news/2013/06/11/18901089-leaked-secrets-pose-a-risk-for-booz-allen-where-secrecy-means-billions?lite

President Obama correctly pointed out that one has to strike a Balance between Security and Privacy; the Question is, if this vast amount of Information which is being collected from the American Public markedly increases the Security of ordinary Americans and if so, by how much.

Recent Experiences, those in Communist Countries and other Dictatorships indicate that ultimately, total (or nearly total) gathering of Information from the Populace can be a suffocating Experience.  According to the Explanations offered by James Clapper, the Information Gathering Activites of the NSA are not only legal but have been authorized by Congress.

Many disagree.  A Reading of Section 702 of the Foreign Intelligence Act,

http://uscode.house.gov/download/pls/50C36.txt

does not, we don't think, lead all of us to reach the same Conclusion which Mr. Clapper (and others), seem to have reached.  Many Congressmen were not familiar, if familiar at all, with everything that the NSA has been doing, even though Mr. Clapper assures us that every Member of Congress was debriefed on the Activites of the National Security Agency.

http://usnews.nbcnews.com/_news/2013/06/07/18827047-who-is-behind-the-snooping-and-how-long-has-it-been-going-on?lite

Of Concern are also the Activities of the FISA Court, the secret Federal Court to which the NSA goes for Approval, although, we assume that they did not even have to go to the FISA Court for the broad intercepting Activities which appear to involve a huge Amount (if not most) of all Telephone Conversations and eMails.

http://www.nytimes.com/2013/07/07/us/in-secret-court-vastly-broadens-powers-of-nsa.html?nl=todaysheadlines&emc=edit_th_20130707

Constitutional Concerns have been raised on the Issue of the FISA Court (which most People did not even know existed, until recently), having non adversarial Proceedings and what Appeals, if any, can be made.

Of further Concern is the broad trawling of Data (which the Government calls Meta Data) which, as the Word Trawling suggest, is essentially nothing more than a Fishing Expedition.  The Concern has been expressed that if one can use the Constitution to justify that Type of Activity (the Process has not been subject to Constitutional Review), then a Lot of other Things could conceivably be justified which otherwise, one might have been reluctant to justify.

It should further be noted, in this Context, that, according to recent Polls, most American People oppose this Kind of Wholesale Data Gathering, Meta Data, Trawling, Fishing Expedition, whatever one ultimately calls it.

The Constitution of the United States is a wonderful Document; it was written more than 200 Years ago by some brilliant People who could not have possibly imagined what the Country they were founding will some Day look like.

Many have argued that the Constitution should be treated as a dynamic Document, which is to say, a Document which should be interpreted in accordance with the changing and evolving Conditions which prevail today.  That may be true; it may also be appropriate in many Instances; however, at the End of the Day, we are still left with that relatively simple Document; the Constitution of the United States and one should be careful, we believe, not to equate Dynamism with Evisceration.

Secretary of State John Kerry - Attempting to diffuse Tensions with North Korea and Elsewhere

Former Massachusetts Senator, now Secretary of State John Kerry, was selected by President Obama at the Beginning of the Year to succeed Hillary Clinton's turbulent Reign.

John Kerry had come very close to becoming President of the United States, far closer than Hillary Clinton.  He lost the Election to George W. Bush in 2004 by only 34 or 35 Electoral Votes.  But lost he did and now, as soon as he became Secretary of State, one could sense the Difference in Tone which he established from the Onset.  He went to Afghanistan, an unsteady Ally which, in the Words of President Obama cost the United States „Blood and Treasure” in a non ostentatious Military Plane, rather than the Luxury Jetliner which Secretary Clinton relentlessly used during her Tenure.

 John Kerry arriving on a Military Plane in Kabul, Afghanistan for Talks with President Karzai

(February 2013)

Hillary Clinton arriving on the State Department's Luxurious Jetliner in Kabul, Afghanistan

for the Inauguration of President Karzai 

(Archive Photo)

Instead of „lecturing” President Karzai and letting a bad Situation becoming worse, Secretary of State Kerry showed real Diplomacy by seeking to calm down not only President Karzai but the entire Afghanistan Situation which remains extremely volatile and one in which the United States has decided, wisely, not to aimlessly throw any more „Blood and Treasure.”

But the Statemanship of Secretary of State Kerry and what distinguishes him sharply from former Secretary Clinton has become even more evident in recent Days, with the rapidly escalating Tensions with North Korea, where a Dictatorial Regime makes anything possible.

As Korean Dictator Kim Jong-Un unleashed one Verbal Escalation after another against the United States (and against South Korea as well), the Administration initially followed a Clintonesque „Tit for Tat” Series of Responses.  Then, the Secretary of State intervened.

He wisely saw that nothing good can come out of this, with Kim Jong-Un possibly willing to risk it all, including Nuclear Weapons, for a Conflict which the United States does not want and does not need.  Following a Series of uninterrupted Escalations and Threats, which still continue, North Korea has closed the Rajin-Sonbong Special Economic Zone to South Korea and, on Friday 5 April recommended that Germany and Russia, among other Countries, evacuate their Embassies in Pyonyang, the Capital of North Korea (Interestingly, we do not know if North Korea has asked China to evacuate its Embassy).

The Tone was neutralized; the United States Response was that Dialogue is still possible and that North Korea should consider taking down the Tone of its Escalations an Octave or two.  Secretary of State Kerry's thinking, we believe, is clear; obviously, North Korea could be defeated, „Bombed into the Stone Age” as the Late Senator B. Morris Goldwater may have put it some Decades ago but the Question is, does the United States need another Mess on its Hands.  We think Secretary Kerry may have quickly looked over the Situation (or perhaps he had done so long before he became Secretary of State); with the unfinished Business left in Afghanistan, a Mess in Iraq which President George W. Bush generously dumped on the Lap of his Successor and diplomatic Blunders by his Predecessor, Secretary Clinton in Egypt and elsewhere, he chose, wisely, to walk the higher Moral Ground, save Money and act with Deliberation.

One more Thing...Secretary of State Kerry, following the Example set by his Boss, President Obama, has decided to donate 5% of his Salary to Charitable Causes.

This stands in glaring Contrast with Secretary Clinton's Husband, former President Clinton, who, it is thought, amassed Millions (some say Billions) through lucrative Dealmaking with Foreign Leaders whom he had met, yeah...when he was President of the United States. 

Help APPLE Stock recover! Help China! Help Retail Sales by buying an iPad at Walmart! and GOOD LUCK!!!

http://www.nbcnews.com/technology/technolog/walmart-ipad-throwing-employee-video-it-made-us-wince-1C6979906

 

Correction: $ 4 Billion, not $ 1 Billion

In our last Writing, we reported that Cost of the Presidential Election (counting Money spent by both Parties), exceeded $ 1 Billion, an Amount most People would simply find as staggering.  However, as more Figures keep pouring they are suggesting that the Amount spent most certainly was closer to $ 2 Billion.  Some Estimates put the Amount spent (including the Money spent by Political Action Committees, which are not directly tied to the Campaigns) to $ 4 Billion.

Still other Reports suggest that, on the Average, approximately $ 20,00 was spent for each Vote Cast.

Some of us may remember Senator Everett McKinley Dirksen, who hailed from a Town with the improbable Name of Pekin, Illinois and who was also a Playwright (notably, ,,Chinese Love'') who said, ,,A Billion Dollars here, a Billion Dollars there, pretty soon you are talking abour real Money!''

These Kinds of Sums of Money, wantonly spent, some might say, by both Candidates and those who supported them, sometimes call into Question the Resolution and Determination which will be required by the winning Candidate, Mr. Obama, to deal with the Challenges ahead.

The immediate Issue facing the Nation at this Time (and we are not dismissing further ones down the Horizon) is the so called ,,Fiscal Cliff'' which must be dealt, rather than ,,kicking the Can forward'' which is what most likely will happen.

Mr. Romney, despite his Rhetoric, did not really have a Plan for dealing with the financial Challenges which face this Country.  However, Mr. Obama does not have one either.  And, neither does the Republican House of Representatives which is determined to fight him Tooth and Nail on allowing the 10% Cut for High Income Tax  Brackets to expire.

In recent Years, ,,Borrow from China'' has been the Solution.  In a very real Sense, China has even financed the ill fated and poorly thought out Wars that Mr. Bush initiated in Afghanistan and Iraq and which, although being wound down, still represent an enormous Drain on the Economy.  When it comes to certain Things, Costs are not really so easy to cut, even when the Project is brought to an End (Take, for Example, in Iraq, an Embassy employing 15.000 People, the largest Embassy in the World for any Country).

But the Strategy ,,Borrow from China'' may be fraught with Peril.  The Chinese have been willing to lend and they may still be willing to lend, even at ,,Basement'' Interest Rates.  However, it may well be that the Chinese may soon come to the Point where they cannot lend anymore in order to feed such a voracious Apetite for Deficits, simply because, they won't have any more Money to lend, no matter which Way they ,,manipulate'' their Currency.