ZIRP Failed in Japan, So They're Doing It Again

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


In what is being billed as a surprise move, the Bank of Japan lowered interest rates back to zero and is planning on more quantitative easing. Along with an unending number of stimulus programs in the last twenty years, Japan has done it all before. If these economic policies actually worked, it wouldn't have to be doing them again. U.S. policy makers are following Japan's lead.

On October 5th, the BOJ announced that it cut interest rates to 0.0% to 0.1%. Rates had been 0.1% since December 2008. Japan had previously maintained a zero interest rate policy (ZIRP) between 2001 and 2006. The U.S. Fed funds rate has been at 0.0% to 0.25% since December 2008. The Bank of Japan also announced a $60 billion quantitative easing program that will purchase government bonds, commercial paper and corporate bonds. Last month, the Japanese government announced a 915 billion yen stimulus package. The Japanese economy has been in the dumps for 20 years and stimulus programs, super low interest rates, and quantitative easing hasn't fixed it. Yet, despite encountering failure over and over and over and over again, the government still repeats these same actions with the belief that somehow they will work this time.

The Japanese government was the most important player in creating the country's massive stock market and real estate bubbles in the 1980s. The last twenty years has been the hangover from those bubbles. Incompetent government policy both led to the creating of the problem and then prevented it from being fixed. It took over 18 years for the stock market to hit a low (assuming it doesn't go lower in the future). Government policy delayed the inevitable, but didn't prevent it. Japan now has the highest government debt to GDP ratio (over 200%) among developed countries. Its debt is so high from its repeated stimulus programs that it makes teetering-on-default Greece look fiscally conservative. The inevitable outcome of Japan's actions will be collapse and not recovery.

In dealing with the Credit Crisis and its aftermath, the U.S. has followed Japan's lead. Just yesterday, Fed Chair Ben Bernanke said the U.S. central bank should engage in more quantitative purchases of treasury bonds because it would "ease financial conditions". Moreover, Bernanke claims the first round of quantitative easing (also known as money printing) was a major success. The figures certainly don't show that this is the case. U.S. unemployment was around 7% when quantitative easing began the first time and is now around 10%. The Fed doesn't actually claim that economic conditions became better, since the obvious facts make that impossible, but instead claims things would have been much worse without their policy actions. How do we know things wouldn't have been better?  How do we know that things didn't become better in the short-term, but will become much worse in the long-term? We do know what has happened in Japan because of the same policy actions that the Fed is following. But like the Japanese, the U.S. Fed apparently also believes in miracles.

Disclosure: No positions.

Daryl Montgomery
Organizer, New York Investing meetup

French ex-trader to pay $6.7B for fraud

Former Societe Generale SA trader Jerome Kerviel was convicted on all counts Tuesday in one of history’s biggest trading frauds. He was sentenced to three years in jail and ordered to pay the bank $6.7 billion in damages.

The ruling marked a huge victory for Societe Generale, one of France’s most blue-blooded banks, which has worked to clean up its image and put in place tougher risk controls since the scandal broke in 2008.

The 33-year-old former futures index trader was found guilty on charges of forgery, breach of trust, and unauthorized computer use for covering up bets worth nearly $69 billion between late 2007 and early 2008.

The court also ordered Kerviel to pay the bank back the $6.7 billion that it lost unwinding his complex positions in January 2008—a punishment he would almost certainly be unable to pay. That sum marked the largest-ever alleged fraud by a single trader.

Defense lawyer Olivier Metzner said Kerviel would appeal and will remain free pending that appeal.

Societe Generale spokeswoman Caroline Guillaumin called the verdict “an important ruling that acknowledges the moral and financial harm done to the bank and its staff.”

Kerviel maintained that the bank and his bosses tolerated his massive risk-taking as long as it made money, which he did at first, racking up $1.9 billion in profits for Societe Generale in 2007, the judge noted.

During the proceedings both sides admitted to mistakes, but Kerviel insisted his bank superiors knew what he was doing.

The bank says it did not know Kerviel made bets of up to $69 billion—more than the bank’s total market value—on futures contracts on three European equity indices, because his net position appeared unremarkable since he balanced his real trades with fictitious transactions.

Still, an internal report by the bank found managers failed to follow up on 74 different alarms about Kerviel’s activities.
The Associated Press contributed to this report.

The rise of black Republicans

The Pittsburgh Post-Gazette's Jack Kelly devotes his most recent weekly column to "The rise of black Republicans." It is not just because Kelly identifies two of the candidates we have highlighted in our "Strong shots and long shots" series that I love this column. Kelly makes a point I have not seen made elsewhere. Kelly remarks in connection with candidate Charles Lollar (I've added the links inside this paragraph):

He is running against the second most powerful Democrat in the House in a strongly Democratic district (political guru Charlie Cook rates it D+11), Mr. Lollar is given little chance to win in November. But he shares with Mr. [Tim] Scott, Mr. [Allen] West, Mr. [Ryan] Frazier and Bill Randall (a retired Navy master chief petty officer who is running against Rep. Brad Miller in North Carolina) the distinction of being a black candidate in a white majority district.
Of the 39 black Democrats in the House, all but two represent districts where blacks are a majority or plurality. One other black Democratic contender is running in a white majority district. So in this election, Republicans are running more blacks in white majority districts than the Democrats are. Shouldn't that be taken into consideration when accusations of racism are being hurled about?

Kelly makes a hard-hitting point not usually seen in the mainstream media: "Accusations of racism against Republicans are a staple of Democratic politics because Democrats need to keep blacks on the plantation to remain viable nationally." This also explains the prominence of such accusations against conservatives and Republicans in the media adjunct of the Democratic Party.

Kevin Williamson recently posted a reminder making a related point close to my heart. "Frederick Douglass should be as much the face of the Republican party as Reagan and Goldwater. If the GOP had any brains (I know, I know!) it would spend a fair amount of money reminding the world: This is what a radical Republican looks like" (photo above).

Posted by Scott

Real Housewives Of Atlanta Premier Part

October 5th 2010

Tonight marked the return of the Real Housewives of Atlanta with 2 new cast members Phaedra Parks and Cynthia Bailey.  This season NeNe is having marital problems, Kim’s got a new friend, Sheree’s spending money, and Kandi’s has a new album. Last night the girls came together, well kinda. My homies from the Real Atlanta Housewives TV show, came together to watch the premier last night on Bravo. NeNe and Sheree had to go to the NYC to promote the show, while Kim Kandi Phaedra Parks Derrick J and  Cynthia Bailey partied the night away with all there closest friends as they viewed the first episode of the show. Kim hosted a party at Twist in Buckhead. Her new Boo and loving Daughter were in the building. Big Shout out to Brielle and her Boy, you better listen to yo mama.

On the other side of town Kandi and all her friends came together at justin’s to view the show but they were also there celebrating one of her Kandi Koated Nights cast members birthday. My girls Rasheed and Ebony Elektra were some of the guest in the building.

Times Square bomber Faisal Shahzad sentenced to life

By Peter Stone
 

The Times Square bomber has been sentenced to life in prison without parole. Image from Wikimedia Commons.

The Times Square Bomber, Faisal Shahzad, has been sentenced to life in prison. He pled guilty and was not offered any deals by the prosecution to do so. His sentence is without the possibility of parole. Shahzad attempted to set off a crude explosive in Times Square. Pedestrians alerted police to a smoking vehicle, which resulted in a Times Square evacuation. The device was defused and Shahzad was quickly arrested. He was affiliated with a Pakistan based Taliban organization.

Times Square bomber gets life

Faisal Shahzad attempted to leave an explosive-laden SUV at Times Square. The Times Square car bomb didn’t work, and he was soon arrested. He entered a plea of guilty for the crime in June, according to CNN. He was found guilty of 10 different crimes. The judge sentenced him to life in prison without the possibility of parole. The Times Square bomber, as he has been dubbed, was defiant in the face of incarceration for the rest of his life. He pledged that a defeat of America was imminent. He was adamant that adherents of Islam would soon sweep Americans from their lands.

Shahzad communicated with Taliban in Pakistan

Shahzad was in regular communication with a Taliban group in Pakistan. The jihadist group, called Tehrik-e-Taliban, also funded his bomb operation, according to Reuters. He has a wife and two children, whom he moved from Connecticut to Pakistan. Shahzad intended to carry out another attack if the first had been successful. He said that his intention was to kill up to 40 people or more. He would have carried a second plot several weeks after the first. After his New York terror plot failed, he attempted to flee to Dubai, but was caught at LuGuardia airport.

Prosecution asked for life

The prosecution in the case asked for life. The prosecution felt that life in prison would perhaps deter anyone else from thinking about similar acts.

Sources

CNN
Reuters

T.I.’s BACK IN FEDERAL COURT + Probation Hearing Set For October 15!

Tuesday, October 5th 2010

October 15th marks the day rapper T.I. will go before a federal judge to plead to not have his probation revoked.

On Monday, District Judge Charles Pannell Jr. summoned rapper T.I. for a 2 PM hearing on allegations that he violated the terms of his probation when he was pulled over and arrested with wife Tameka “Tiny” Cottle for possession of ecstasy in Los Angeles in the beginning of September 2010. The same judge sentenced the rapper to one year and one day behind bars for firearms violations in 2009.

If you were the judge, what would you do?

A 'Spiritual Son' Supports Bishop Eddie Long

 

 

TALLADEGA, AL -- Even on the quiet, ancient campus of Talladega College in Alabama, news of the salacious accusations about Bishop Eddie Long are the buzz among students here.

None more so than 20 year-old Marcus Culliver, who was one of the Bishop's co-called spiritual sons.

"At Longfellow we all called him our pops," Culliver said. "We all called him Dad because that's what he was to us. He took me to my first NFL game, he put me through my first NFL camp when I was in high school playing football. Anything we needed, if we were going through something and our parents couldn't help us or we couldn't get something, he was there for us to help us out. So to a certain extent, we were all his sons."

Culliver says he went to church and to school with Long's four accusers, as well as the Longfellow Academy at New Birth Missionary Baptist Church, but says he saw nothing that would shake his faith in his pastor.

"Pops is a really giving person," Culliver said. "There were times in church where he'd give out cars to people who didn't have a car, big Christmas events, feed the needy, give clothes to people who didn't have clothes, whatever the case may be. His being a giving person is not really news to me because he's helped a lot of people in the community and across the world."

But Culliver echoes the words of Bishop Long himself when he adds that nobody's perfect.

"It's God's son, and you never know when God's working through someone," said Culliver. "So for everybody out there who's saying 'Bishop's doing this, Bishop's doing that and I know he was doing this', you don't know that. It's an assumption. You don't know that. So my advice for everybody out there is to pray for the church and pray for the prophets. Just pray for the whole church."

source

CA AMBER Alert: Elisa Cardenas

The California Highway Patrol issued an AMBER Alert this evening at the request of the Fresno Police Department. The subject of the AMBER Alert is 8-year-old Elisa Cardenas of Fresno, California. Some outlets are citing her last name as Cardena and Cardenaz.

According to media outlets, Cardenas was snatched off the street in the 2700 block of Hammond Avenue at about 8 p.m. Monday evening. The AMBER Alert was activated at about 10 p.m. The unknown male suspect drove off with the girl in a late-70′s model, red or reddish brown in color pickup truck.

Elisa Cardenas

Elisa is an 8-year-old Hispanic female with brown hair and brown eyes. She is 4’0 tall and weighs 60 lbs. When last seen Elisa was wearing a light purple sweater with Winnie the Pooh on the front and light blue colored jeans.

Suspect

The unknown suspect is a Hispanic or white male, in his 20′s, about 6″ 1′, with either a bald head or slick-backed hair. The suspect was wearing a white tank top and jean shorts.

Suspect Vehicle

The suspect vehicle description is a late-70′s model pickup truck, red or reddish brown in color.

Anyone who sees the suspect or the vehicle is asked to call 9-1-1.

Sources

Fresno Police Search for Abducted 8-Year-Old Girl, KSEE24.com, 10.05.10.
AMBER ALERT: Elisa Cardena, National Center for Missing & Exploited Children, 10.05.10.

Parker/Spitzer can lose

The Parker/Spitzer show debuted on CNN last night. It might as well have been called Geithner/Palin. Eliot Spitzer began the show by calling for the president to fire his treasury secretary. Then in the next two segments, Spitzer went off on Geithner. I don’t like Geithner, but sheesh. Give it a rest.

Kathleen Parker went on and on about Sarah Palin. So did every one else. Aaron Sorkin, praised by Spitzer and Parker for his fine writing, said: “Sarah Palin is an idiot.” If that passes for political discourse, include me out.

Palin was discussed in all four segments of the show, perhaps in an effort to gin up controversy in the cable news version of Google bombing. Odd that Barack Obama was barely mentioned.

Isn’t he, like, the president or something?

The show is an attempt to re-brand CNN as a middle-of-the-road network that shows both sides of the political spectrum.

The problem is neither Parker nor Spitzer is a very good representative of their side. Parker’s Oogedy Boogedy column after the 2008 election was a body blow to me and perhaps other fans of her. Many conservatives likely will not forget her mocking their religion.

As for Spitzer, he’s an ego-driven prosecutor who climbed on the backs of many people who really did not deserve to be prosecuted.

Also his call right off the bat — out of the blue — to fire a man seemed intemperate.

The inner prosecutor in Spitzer showed when he took a cheap shot at Andrew Breitbart by giving him 30 seconds to explain the Shirley Sherrod case at the end of a segment that had nothing to do with Mrs. Sherrod.

While there is a chemistry between them, neither one seemed to take charge and conversations became a bunch of chattering over one another. It seems unfair to put two people who have no broadcast experience into the fray against the real professionals on Fox News and MSNBC. You don’t have to like them to appreciate that Bill O’Reilly and Keith Olbermann put in their time to learn their craft.

I wish Parker/Spitzer luck. But the show gave me a headache. Too much talking over one another and too little focus on something other than Sarah Palin. Maybe it will improve later when I give it a second look in a few weeks.

Here Comes The Sun: White House To Go Solar

October 5th, 2010 Posted By Pat Dollard.

WASHINGTON (AP) - Solar power is coming to President Barack Obama’s house.

The most famous residence in America, which has already boosted its green credentials by planting a garden, plans to install solar panels atop the White House’s living quarters. The solar panels are to be installed by spring 2011, and will heat water for the first family and supply some electricity.

The plans will be formally announced later Tuesday by White House Council on Environmental Quality Chairwoman Nancy Sutley and Energy Secretary Steven Chu.

Former Presidents Jimmy Carter and George W. Bush both tapped the sun during their days in the White House. Carter in the late 1970s spent $30,000 on a solar water-heating system for West Wing offices. Bush’s solar systems powered a maintenance building and some of the mansion, and heated water for the pool.

Obama, who has championed renewable energy, has been under increasing pressure to lead by example by installing solar at 1600 Pennsylvania Avenue, something White House officials said has been under consideration since he first took office.

The decision perhaps has more import now after legislation to reduce global warming pollution died in the Senate, despite the White House’s support. Obama has vowed to try again on a smaller scale.

Last month, global warming activists with 350.org carried one of Carter’s solar panels - which were removed in 1986 - from Unity College in Maine to Washington to urge Obama to put solar panels on his roof. It was part of a global campaign to persuade world leaders to install solar on their homes. After a meeting with White House officials, they left Washington without a commitment.

That campaign followed calls by the solar industry for the White House to become a national billboard for solar power.

“Putting solar on the roof of the nation’s most important real estate is a powerful symbol calling on all Americans to rethink how we generate electricity,” Solar Energy Industries Association President Rhone Resch said.

Video: Glenn Beck Compares One Nation Rally To Restoring Honor Rally

 BY nicedeb

On his radio show this morning, Beck said he hired his own video crews to cover the One Nation rally and interview participants.
Transcript at TV Newser:

Beck:

We sent photographers down and reporters down. We hired independent crews because I didn’t want to, quite honestly, put a FOX crew into that lion’s den and have anybody have to answer that they were from FOX. So, we hired — I personally hired — independent crews to go down and take photos and do interviews with people in the crowd. You’ll see them tonight.
And does it matter?

You know, this is what I told you about a year ago. I said, right now they’re all saying that they’re not communists, they’re not socialists, they’re not revolutionaries but mark my words, I said, there will come a team when they’ll just come out and say, it doesn’t matter anyway. We’re there, gang, we’re there, and the American people have to decide.

He compared footage of his 8/28 rally and the 10/2 rally on his television show on Fox, this afternoon.