Tuesday, June 29, 2004

We Can Only Hope

The War's End


General Douglas MacArthur

Friday, June 25, 2004

Congress: Never a Place For Children, Only the Childish

Civility Drops to a Low Point in Congress

By JIM ABRAMS, Associated Press Writer

WASHINGTON - In 1856 a House member from South Carolina took his cane to an abolitionist senator from Massachusetts, bloodying the Senate floor and leaving the man near death. Capitol attacks these days are not as dramatic, but lawmakers from both parties lament what has become another low point in political civility.

In the latest episode, Vice President Dick Cheney used an obscenity beginning with "F" in an exchange with Sen. Patrick Leahy, D-Vt., on the Senate floor where members had gathered for a group photo. "I was kind of shocked to hear that kind of language on the floor," Leahy said of the incident this week.

Maybe he shouldn't have been. Just days before, Senate Judiciary Committee Orrin Hatch, R-Utah, had referred to a proposal by Leahy to subpoena Justice Department memos on prisoner interrogation as a "dumb-ass" idea.

The occasional obscenities in a body where "my good friend" is the usual form of address are indicative of what has become a poisonous atmosphere in Congress this year. Tempers have been shortened by the war in Iraq and an election campaign in which Democrats, hoping to capture the White House and Congress, are on the offensive.

"It's as bad as I've seen it in my 10 years in Congress," said Rep. Ray LaHood of Illinois, a moderate Republican who has led efforts to make the House a more civil place. LaHood has helped organize a bipartisan retreat at the start of every session so lawmakers can get to know each other better, but he has concluded that "the will of the membership is not there to do it next year."

LaHood said things started going downhill a year ago, when a slew of Democratic presidential candidates began criticizing President Bush.

House Democratic Whip Steny Hoyer of Maryland dated the lack of comity back to 1978, when Republican Newt Gingrich came to Congress with his confrontational agenda. He said things have gotten worse recently because of unfair treatment by the Republican majority.

House Democratic leader Nancy Pelosi this week sent Speaker Dennis Hastert, R-Ill., a proposal on protecting minority rights, whoever is in power. "Too often, incivility and the heavy hand of the majority have substituted for thoughtful debate," she said. There was no immediate response from the speaker.

Pelosi and Hastert rarely confer on policy matters, which is not new to the House. Gingrich, when he was speaker, went for months without speaking to Democratic leader Dick Gephardt.

In the more decorous Senate, Majority Leader Bill Frist, R-Tenn., and Democratic leader Tom Daschle of South Dakota consult daily. But Frist also recently broke tradition and put cordiality to the test by traveling to South Dakota to campaign for Daschle's rival in the fall elections.

Kathleen Hall Jamieson, director of the Annenberg Public Policy Center at the University of Pennsylvania, said civility generally tends to break down when the minority feels it is being oppressed by the majority, or in an election season when the House and Senate floors are used for campaigning.

She said this year's increase in tension hasn't matched that of 1995, after the Gingrich-led Republicans took over the House, or of 1998 when impeachment proceedings against President Clinton began.

Also in the past several weeks:

_ Rep. Chris Bell, D-Texas, who was defeated in the Texas primary, the victim of redistricting engineered by Majority Leader Tom DeLay, R-Texas, filed a complaint against DeLay with the House ethics committee, ending an unofficial truce on one member filing charges against another.

_Rep. Patrick Kennedy, D-R.I., and Rep. Duke Cunningham, R-Calif., squared off at a committee meeting after Kennedy overheard Cunningham make a remark about Chappaquiddick, the Massachusetts island where Kennedy's father Sen. Edward Kennedy, D-Mass., drove off a bridge in 1969, drowning a female aide who was in the car. They later apologized to each other.

_Showing that aggressive language isn't always across party lines, DeLay this week went after Senate Republicans who differ with the House on spending levels on a highway bill, saying they were using the bill as a "slush fund to rob other programs."

_House Ways and Means Committee Chairman Bill Thomas, R-Calif., who last year called Capitol Police over a dispute with committee Democrats, said on the floor this week that Rep. Pete Stark's 8-year-old son "has a job being a shield for his father." The comment came after Stark, D-Calif., said GOP tax breaks were an "obscenity" his son would have to pay for in the future.

Yahoo News for full coverage

Are the wheels coming off the wagon?

Shingo Shreds Coco Crisp with a 66 mph Curveball

Takatsu could be Sox' savior this season


Sooner or later, it's going to happen. Shingomania is going to kick in. Believe me. Shingo Takatsu, the Sox' closer, is a superhero back home in Japan. In Chicago? Not so much.

''The security guy at my apartment knows who I am,'' he said through an interpreter.

So there's that. And recently, he was recognized by a stranger for the first time. Takatsu and his interpreter, Hiroshi Abei, went to the driver's-license place in Schaumburg, and the woman behind the counter said, ''Shingo Takatsu. You're the guy from the White Sox.''

Yes, yes. He said.

''We're Cubs fans,'' she said.

''And then they treated me cold after that,'' he said Wednesday, telling the story.

He scored 22 points out of 100 on the test, which was written in English. Which he doesn't understand. He tried to ask Abei what the questions meant, but the Cubs fans/driver's-license people told him he couldn't talk to anyone during the test. So he guessed. Imagine how silly he must have felt just standing there with his pencil, filling in bubbles randomly not even knowing what the questions being thrown at him were.

Cleveland's Coco Crisp surely knows that feeling. He had it in the 10th inning Tuesday night against Takatsu. In typical modern-day American closer style, Takatsu throws blazing fastballs and curveballs and ...

Ha! I lob a Wiffle ball underhanded to my 5-year-old harder than Takatsu throws. He struck out Crisp on a 66 mph curveball. Crisp was so far ahead on the swing that he could have pulled the bat back and swung again before the ball got to the catcher. In fact, Takatsu released the ball, I got up for a Coke, got back to my seat and saw the final 10 feet of the pitch.

This is exactly what the Sox needed. Sox fans haven't noticed yet because if they don't see something to complain about then they're not breathing. But Takatsu is saving this season. We want to know when general manager Ken Williams is going to get another starting pitcher, and whether Magglio Ordonez is going to come back from knee surgery or if he's going to be traded, and whether manager Ozzie Guillen really does know what he's doing.

But you know what? The Sox are only two games behind Minnesota. What might have been the biggest issue on this team, the closer job, went from Billy Koch to Damaso Marte and back to Koch, and for some reason Guillen was awfully slow in giving Takatsu a chance.

Finally, he got it. He gave up a hit Tuesday night, breaking a string of 29 straight batters he had retired. His ERA is 1.00. Hitters are batting .133 against him.

So what took Guillen so long?

''Shingo was even having trouble throwing in the bullpen with nobody hitting during spring training,'' Guillen said. ''Right now, he can be one of the best guys we have.''

Just a theory, but maybe Guillen was afraid to give Takatsu a chance because of his 86 mph fastball. Just a theory, but when Takatsu had his big major-league tryout in front of scouts from more than 20 teams, maybe the Sox got him because a lot of teams left without making an offer. I mean, give Williams credit for taking a chance on a guy, but if he were so desired, would he have come so cheap?

We judge our pitchers today based on speed guns, and Takatsu barely registers. Football players are judged on bench press and 40-yard dash, and you really don't do those things in a football game.

Takatsu, who's 35, is the all-time saves leader in Japan with 260. And he got every last one of those by throwing lollipops.

Where do you find the best hitters? Japan or here?

''It's not about which one is better,'' he said. ''But Japanese baseball is about team play. They try to produce runs. They bunt, or hit the opposite way, moving runners along. In American baseball, the lineup from one to nine all try for home runs. They all can produce home runs.''

This is fun. Watching Takatsu, slowballing sidearmed against today's muscle-bound, maybe-steroid-induced players. He is playing right into the power mind-set of our American sports system, toying with it, laughing at it.

He floats those pitches up there, and these big guys see them, salivate and swing harder and harder and can't hit it.

Against Crisp, Takatsu's pitch speeds went like this: 89, 89, 87, 89, 88, 65 and then 66. It's a 24 mph difference, and he throws them where he wants. He hasn't given up a run in his last 22 games, covering 24 innings.

That doesn't mean he's perfect. One day he was struggling, and Guillen walked out to the mound to talk to him. A problem: Guillen doesn't speak Japanese and Takatsu doesn't speak Spanish or much English.

What could you two have been talking about?

''He doesn't care what the hell I'm saying, and I don't care what the hell he's saying,'' Guillen said. "I'm just yelling, 'Throw strikes. Throw strikes. Throw strikes.'''

And then Guillen walks back, and Takatsu throws strikes.

So we're going to learn about Takatsu, and he's going to learn about us. He eats in one of a handful of Japanese restaurants every day and has a wife back home in Japan. He doesn't know much about Sox history and can only name one player on the Cubs.

Sammy Sosa. It's going to be interesting watching Sosa's big swings against Takatsu's flutters.

Don't be surprised if Sosa swings and misses three times on the same pitch.

Catch up on White Sox Baseball with the Chicago Sun-Times

Thursday, June 24, 2004

Now You Don't Even Have To Read Books

Well, at least, books you know will be a complete waste of time.

Bryan Curtis, Chris Suellentrop, and Julia Turner of MSFT's Slate.com have picked out a selection of quotes from Bill Clinton's new bio.

- "I was so exhausted I fell asleep while the stripper was dancing and the goat head was looking up at me" (Pg. 197).

- "I remember one Easter in the 1950s, when I was fat and self-conscious" (pg. 11)

- "Hillary says the first time she ever saw me, I was in the Yale Law School lounge bragging to skeptical fellow students about the size of Hope watermelons" (pg. 14).

- As a kindergartner, Clinton broke his leg after trying—and failing—to jump over a rope tied from a tree to a swing set. From the resulting fear and feelings of clumsiness, he didn't learn to ride a bicycle without training wheels until he was 22 (pg. 19).

- "My favorite movies during [the late '50s] were the biblical epics: The Robe, Demetrius and the Gladiators, Samson and Delilah, Ben-Hur, and especially The Ten Commandments, the first movie I recall paying more than a dime to see" (pg. 36).

- While reading Eldridge Cleaver's Soul on Ice at Oxford, Clinton writes in his diary, "Soul is a word I use often enough to be Black, but of course, and I occasionally think unfortunately, I am not" (pg. 148).

- "[M]y major extracurricular interest from ninth grade on was the Order of DeMolay, a boys' organization sponsored by the Masons" (pg. 44).

- "In the ethics class [at Georgetown] I took good notes, and one day in August another student, who was smart as a whip but seldom attended class, asked me if I'd take a few hours and go over my notes with him before the final exam. ... [T]he guy got a B on the test. Twenty-five years later, when I became President, my old study partner Turki al-Faisal, son of the late Saudi king, was head of Saudi Arabia's intelligence service, a position he held for twenty-four years" (pg. 110).

- "I had fantasized from time to time about being a doorman at New York's Plaza Hotel, at the south end of Central Park. Plaza doormen had nice uniforms and met interesting people from all over the world. I imagined garnering large tips from guests who thought that, despite my strange southern accent, I made good conversation" (pg. 172).

- In 1971, Clinton hits a Volkswagen and discovers he doesn't have his driver's license. "They stripped me of my belongings and took my belt so that I couldn't strangle myself, gave me a cup of coffee, and put me in a cell with a hard metal bed, a blanket, a smelly stopped-up toilet, and a light that stayed on (pg. 175).

- Robert Bork: His constitutional law class was Yale Law School's "most interesting class by far" (pg. 176).

- While on the road campaigning for Congress against John Paul Hammerschmidt in 1974, Clinton loses five of his students' law-school exams. "I was mortified. I offered the students the option of retaking the exam or getting full credit without a specific grade. They all took the credit, but one of them was particularly upset about it, because she was a good student who probably would have made an A, and because she was a good Republican who had worked for Congressman Hammerschmidt. I don't think she ever forgave me for losing the exam or for running against her old boss. I sure thought about it when, more than twenty years later, that former student, federal judge Susan Webber Wright, became the presiding judge in the Paula Jones case" (pg. 220-221).

- "Our bond market gambit would work beyond our wildest dreams, bringing lower interest rates, a soaring stock market, and a booming economy" (pg. 537).

- Some don't like touchy-feely games. At an early administration retreat at Camp David, "we were supposed to bond by sitting in a group, taking turns telling something about ourselves others didn't know." Clinton reveals he was mocked for being chubby as a child. Lloyd Bentsen and Robert Rubin refuse to participate (pg. 449).

- Gingrich's Republican Congress opposes big government and international air travel. "A surprising number of them didn't even have passports," Clinton reports (pg. 642).

- Clinton notes, apropos of nothing, that it has recently come to light that Thomas Jefferson fathered several children with slave Sally Hemmings (pg 882).

- In the middle of tense Middle East peace negotiations, Ehud Barak nearly dies after choking on a peanut (pg. 914).

- Clinton says he issued too few pardons on his way out the door—he wishes he had given passes to Webb Hubbell and Jim Guy Tucker. Of Marc Rich, whose ex-wife was a supporter: "I may have made a mistake, at least in the way I allowed the case to come to my attention, but I made the decision based on the merits" (pg 939-41).

- Steven Spielberg and Kate Capshaw teach him the card game Oh Hell! (pg. 516).

- Chelsea's sweet 16 party in 1996: Les Misérables at the National Theater, then paintball with friends at Camp David (pg. 701).

- Strom Thurmond, 94, tells Chelsea, "If I were 70 years younger, I'd court you!" (pg. 742).

- On a visit to Italy, the actor Roberto Benigni leaps into Clinton's arms and shrieks, "I love you!" (pg. 879).

- After a White House interview with Kenneth Starr, Clinton offers him a tour of the Lincoln Bedroom (pg. 653).

More Quotes Available at The Slate Condensed Clinton Biography

The New URL Courtesy of Google Cached Links

Wednesday, June 23, 2004

How Many Genghis Khan's in a Mongolian Phone Book?

Mongolians seek to make a name for themselves

After more than 80 years without surnames, picking one is as much about personality as it is ancestry, GEOFFREY YORK writes.

ULAN BATOR -- For the first time in his life, Batbold needs a surname. And after some moments of reflection, he thinks he has found the perfect name: the tribal name of Genghis Khan.

"I'm kind of proud of Genghis Khan," the 25-year-old tailor said shyly as he lined up to register his new name. "He was a good leader, a strong warrior. I kind of feel that I'm from the same tribe."

For more than 80 years, everyone in Mongolia was on a first-name basis. After seizing power in the early 1920s, the Mongolian Communists destroyed all family names in a campaign to eliminate the clan system, the hereditary aristocracy and the class structure.

Within a few decades, most Mongolians had forgotten their ancestral names. They used only a single given name -- a system that eventually became confusing when 9,000 women ended up with the same name, Altantsetseg, meaning "golden flower."

By the mid-1990s, Mongolia had become a democracy again, and there were growing worries about the lack of surnames. One name might be enough when most people were nomadic herdsman in remote pastures, but now the country was urbanizing. The one-name system was so confusing that some people were marrying without realizing they were relatives.

In 1997, a new law required everyone to have surnames. The law was largely ignored, but then a system of citizenship cards was introduced. Slowly the country of 2.5 million began to adopt surnames.

Today, however, there are still 10,000 people without surnames. So the government is trying to solve the problem with a mixture of incentives (a discount on the registration fee) and heavy-handed pressure (a threat of financial penalties on anyone who fails to get a citizenship card before the June 27 national election).

And so Batbold joined a horde at a civil registration office in Ulan Bator this week, clutching a stack of documents to legalize his newly chosen name.

His new surname, Borjigin, the tribal name of Genghis Khan, has become the most popular name in the country. It means "master of the blue wolf," a reference to Mongolia's creation myth.

"Everyone wants the name Borjigin, as if they have some connection to Genghis Khan," said Serjee Besud, director of Mongolia's state library and a leading researcher on surnames.

"It's like a fashion. But it has no meaning if everyone has the same name. It's like having no name at all."

Mr. Besud has spent years poring over the dusty archives of the state library to compile a book of possible surnames for the nameless. He obtained access to the highly secret archives of the country's Communist Party, which included detailed lists of the names of noble families who were prohibited from party membership.

He discovered his own long-lost surname, Besud, by finding his grandfather's name on a 1925 list of conscripts in a Communist army.

His book, called Advice on Mongolian Surnames, provides maps and lists of historically used surnames in each region of the country.

The book also suggests other ways to choose a surname. Some people choose the name of a mountain or river in their ancestral region.

Others prefer the name of an ancestral occupation: Blacksmith, Herdsman or Writer. Some names are linked to clans: White Camel or Black-and-White Horse.

And some names have more obscure origins. One surname listed in the book, perhaps less fashionable today, is Seven Drunk Men.

As the election deadline approaches, the registration offices in Ulan Bator are surrounded by mobs, kept behind ropes as they wait their turn to enter the office to register their new surnames.

Mungunkhoyag, a 54-year-old payroll manager in an Ulan Bator factory, stood in the queue with a sheaf of documents to register his new name. He says he knows many people who have chosen the Genghis Khan tribal name as their surname, but he disapproves of the idea. "I don't like it," he said. "You should have your original name. If you use a different name, it means you have different blood."

In his own case, he knew the last name of his grandfather -- Zuutrag -- and now he is registering it as his own surname.

"I'm very proud of getting my family name on my documents," he said.

"If you have only a single name, mistakes can be made. I used to tell my children that we were from the Zuutrag clan. Now I am making it official."

Even after seven years of registering new surnames, however, most Mongolians are still in the habit of using a single name. Their business cards, for example, usually list their given name and their father's given name -- with no surname. Many people have no clue as to their friends' surnames.

Mongolia's Defence Minister, an earnest, bespectacled man with a "Hero of the Soviet Union" medal on his jacket, is the proud owner of probably the coolest name in the country.

The 58-year-old minister, Gurragchaa, is a former cosmonaut on a Soviet spaceship -- the only cosmonaut from Mongolia. And so when he was unable to discover his ancestral surname, he chose Sansar, the Mongolian word for the cosmos. His children will use the same name.

"It's actually nothing very special," he said, shrugging. "Everyone is proud now to restore their surname."

When he handed over his business card, however, his new name didn't appear. Slightly embarrassed when this was pointed out, he noted that Mongolians "don't have a tradition of using surnames," but added, "I have some newer cards and my surname is on those cards."

Read the Article at The Globe and Mail Website

Fake Notes On Top of More Fake Notes

What is a Superdollar?

The superdollar is the name given to an almost perfect forgery of an American banknote.
Millions of dollars of the fake cash have been passed into circulation since its existence was first noticed over a decade ago.

The money, officially known as Note Family - C14342, is thought to originate from communist North Korea.

Experts believe that the money is being produced and flooded into the system, mostly by North Korean diplomats as they travel abroad.

It is also circulated by criminals - with the Russian mafia and even Republican organisations in Northern Ireland involved in the distribution process.


One school of thought is that it is part of a plan to try to destabilise the American economy by putting millions and millions of dollars into the system.

However, North Korea dismisses the allegations and says that the claims being made against it are just Western propaganda.

What is known, is that in the late 1980s, US Intelligence discovered that the North Korean government had acquired a highly sophisticated printing press, known as the intaglio.

This press is similar to the one used to print money in the US and would give North Korea the ability to produce sophisticated banknotes if they wanted to.

Further evidence comes from defectors, whose stories all seem to be consistent with US claims.

Although it is impossible to corroborate their stories, they appear to be consistent.

Real expertise

One defector who spoke to Panorama on the condition of anonymity said he had spent his life making counterfeit US dollars, adding that they were such good quality that they fooled experts.

He said: "The counterfeiting was all done at government level. We had a special plant for doing it.

"When I defected I brought some of these counterfeit notes to South Korea, and I showed them to the experts in the South Korean intelligence agency. They said - these are not fake notes. They're real."

Another defector said: "We bought the best of everything - the best equipment and the best ink. But we also had the very best people, people who had real expertise and knowledge in the field.

"When government officials or diplomats travelled to south-east Asia they distributed the counterfeit notes mixed in with the real one's, at a ratio of about 50-50."

Read the Story on the BBC

Tuesday, June 22, 2004

The Browning Pistol That Sent Civilization Back to the Stone Age

Pistol found that killed 8.5 million people


BERLIN -- The Browning pistol that killed Archduke Franz Ferdinand and sparked the crisis leading to World War I has been discovered gathering dust in a Jesuit community house in Austria.

The weapon is going on display in the Vienna Museum of Military History in time for the 90th anniversary of the assassination of the heir to the Austrian empire and his wife, Sophie. Gavrilo Princip, a student from Belgrade, fired seven shots as they were driven through Sarajevo on June 28, 1914.

The shooting led to World War I, which by one estimate resulted in 8.5 million deaths.

For decades the murder weapon, serial number 19074, was in the possession of a community of Jesuits in Styria, southern Austria. They inherited it from a close friend of the archduke and his wife.

A Jesuit priest, Anton Puntigam, gave the couple the last rites and later made public his intention of opening a museum in memory of the archduke. But the chaos of the war foiled his plans.

On the priest's death in 1926, the objects were offered to the archduke's family, which declined to take them. They remained out of sight until recent publicity about the 90th anniversary.

Read the Whole Story at the Chicago Sun-Times

Monday, June 21, 2004

Financial Alchemy Underlying Risk and Uncertainty

Jim Puplava on the market from his crimson-stained tower.

Storm Watch Update

The markets don't look right to me. They appear to be out of order. Uncertainty is everywhere. Geopolitical risks abound from Central Asia and the Middle East to the American ballot box. Financial risks have never been greater with asset bubbles consistently inflating, fed by an avalanche of debt. Speculation is rampant with banks and hedge funds borrowing short and investing and lending long as well as households borrowing short and investing long in real estate. Despite record amounts of consumer, business, and government debt, financial markets remain complacent to the threat of higher interest rates.

An economy and stock market that is this levered is far more vulnerable to small movements in interest rates—even if they are measured. On the economic front, America's twin deficits keep expanding as our nation goes deeper in debt. Yet, the dollar has been in a rally mode since the beginning of the year. Inflation is also on the rise and is visible everywhere you look, but gold and silver prices have been falling.

What we have here is financial alchemy and I can't help but believe this is going to end badly. There is simply too much risk and uncertainty. What astounds me is the fact that investors seem oblivious to it all.
On Monday of this week the Commerce Department reported that the April trade deficit was the worst on record coming in at $48.3 billion, an annual rate of $575 billion or nearly 5% of GDP. The decline in the dollar over the last two years has done very little to stem the U.S. trade imbalance.

According to recent figures, America is importing and paying more for its oil. The average cost of oil in April was $31 a barrel. The trade deficit figures should be even worse next month as energy prices continued to resie to record levels in May.

But the growing trade deficit wasn’t entirely due to oil prices. Imports of everything from autos and electronics to furniture were also up. Automobile and auto parts imports rose to a record $19 billion, while Americans shelled out $31.7 billion for consumer goods. How is job growth in this country supposed to improve when more of our consumption goes towards the purchase of foreign made goods?

Economists argue that our rising trade deficit is due to our extraordinary economic growth in comparison with the rest of the world. Our GDP is expected to grow by over 4% this year. In contrast to our robust economic growth, French economic growth was revised downward to 0.50% for this year. Yet, America’s trade deficit has darker side. It reflects a lack of national saving that needs to be supplemented by importing foreign capital.

The U.S. Is Not Alone With Deficits

Other nations that are running large budget and trade deficits are seeing the price of their bonds drop in value along with their currencies. For example, Brazil and Turkey are two countries that have run into difficulty recently. Both countries have suffered the sharpest increases in interest rates among emerging countries this year.

Brazil, which is running a $21 billion budget deficit, needs to come up with $33 billion to cover maturing bonds in 1004 in addition to financing this year’s deficit. Turkey’s budget deficit this year will approach $31 billion. It will also need to pay the equivalent of $110 billion to domestic bondholders in 2004. Turkey will also need to pay $2.1 billion in U.S.-denominated bonds and $500 million in yen-denominated bonds by the end of the year. Both countries are experiencing rising interest rates and a falling currency.

With a Little Help From Our Friends

By contrast, the U.S. has experienced a rising currency even as our budget and trade deficits worsen. This is due to currency intervention by Japan and China and other central banks. On Monday, June 13th, the day the April trade deficit numbers were released, the dollar rose against the Japanese yen. The Fed reports that foreign central bank holdings of Treasuries at the Fed have risen by $293 billion in the last twelve months. They are up only $7.4 billion in the latest week ending on June 9th.

Why has the dollar risen instead of falling as would be the case if the markets weren’t altered?

Plain and simple: the value of the dollar has been held up by Asian currency policy. Asian central banks, in particular Japan and China, have been willing to endlessly buy dollars. So in effect, interest rates and the value of the greenback rest on the whims of Asian central bankers.

What will happen to interest rates here in the U.S.? What will happen to mortgage rates, to the value of real estate and to our stock market, which now rest in the hands of Japan and China more than it does the U.S. Fed? If foreign central banks stop buying or—even worse—start selling, our currency falls and interest rates rise. It is now a question of not “if” but “when” the dollar nexus unravels. No nation—not even the U.S.—can run $500-$600 billion twin budget and trade deficits into perpetuity. At some point foreigners will say “No more!”

The Carry Trade - The Search for Yield

What will precipitate this unraveling is yet unknown. It could be another rogue wave in the financial markets or a geopolitical event. I suspect this time it will be financial in nature.

According to a recent BIS (Bank for International Settlements) report, derivatives traded on global exchanges rose at the fastest pace in three years during the first quarter of this year. The value of derivative contracts on stocks, interest rates, commodities, and currencies increased by 31% during Q1 of this year, rising to a record $272 trillion.[2] Not since the first quarter of 2001 when derivative contracts surged 55% have we seen this much of an increase.

According to the BIS report, a robust appetite for risk underpinned equity and credit markets. Additional revelations of corporate malfeasance failed to put a dent in investors' appetites for risk. Equity and debt prices in emerging markets outperformed most markets. Implied volatility of options on U.S. equity indexes fell to record lows, while credit spreads narrowed on emerging and high yield debt.

During this speculative quarter not only did yields fall on risky debt, but in addition troubled economies of Brazil, Turkey, Venezuela and other emerging market borrowers continued to amass large amounts of new debt—more than any other quarter since 1996. Incredibly, despite increased risks, yields fell. To a large degree, this reflected the effects of the carry trade with institutions and hedge funds moving out of cash in search for yield.

Round One

That was March. Since then, things have changed. The first round of the unraveling of the carry trade took place in April and May. As it appeared that the Fed was going to tighten, the carry trade began to unwind. Shown below are charts of emerging market debt, junk bond spreads, the treasury market and the gold market. All four markets got hit hard. Emerging market debt fell by 15%, junk bonds fell by almost 10%, 10-year Treasury yields rose more than 119 basis points, and the gold stocks (HUI) fell by 29%. The major equity indices went from gains to losses. This was only round one.

As the markets began to unravel during this first stage of the tightening process, Federal Open Market Committee (FOMC) officials—or more appropriately the Federal Open Mouth Committee—went into high gear, feeding the markets soothing words such as “measured” and “slow.”

The damage above was all done without the Fed firing a single shot. Imagine what would happen if they were to get real serious about inflation. Fed officials were able to rescue the markets by reassuring market players that they would take their time in raising interest rates. This was supposed to assuage the market participants—and especially the carry trade—that they would have plenty of time to unwind their positions. The last thing the Fed wanted was another repeat of 1994, 1997, or 1998.

The markets have become even more geared since those turbulent days. In addition the Fed had plenty of bullets to fight a crisis with the federal funds rate at much higher levels than where it stands today. At the end of 1994, the federal funds rate stood at 5.50%. It was 5.50% at the end of 1997 and 4.75% at the end of 1998. All three years were crisis years. When the Fed raised interest rates in 1994, it nearly collapsed the financial markets creating the peso crisis and a crisis in derivatives with Orange County, Gibson Greeting Cards and other derivative players. Institutions simply didn’t understand the risks they were taking. I am not sure they understand those risks today.

The point that needs to be understood is that the U.S. economy and the financial system is far more leveraged than where it was nearly a decade ago. Globally, derivatives have grown to a mammoth $272 trillion. In the U.S. the notional value of derivatives in insured commercial bank portfolios grew to $71.1 trillion. Of this amount, $61.9 trillion was interest rate related. Bank derivative portfolios have grown exponentially since 1994. We've seen derivatives grow from less than $17 trillion in 1994 to today’s $71.1 trillion. Incredibly, bank derivatives have grown at a compound rate of over 17% over the last 9 years.

Unlike previous years, today’s players are more interconnected. Most trades are placed with a handful of banks and brokerage firms. Everyone believes that they have hedged their risks. In actuality, the risk has just been passed around from bank to bank and brokerage firm to brokerage firm. Everything works out as long as no major player goes under. If that happens, the whole system implodes like dominoes stacked up one against the other. You may think that you are hedged, but your hedge is only as good as the financial solvency of your counterparty.

So far during the first phase of the unraveling, there have been no real casualties. Markets have adjusted to future rate expectations with the bond market doing most of the Fed’s job. As shown in the 10-Year T-Note and 30-Year Bond charts, interest rates have risen significantly.

Massaging The Numbers Won't Make It Better

However, as much as rates have risen, they have much further to go. Inflation indexes indicate that the true rate of inflation is probably approaching 8-10%. The CPI and PPI numbers are statistically massaged to remove the major impact of inflationary increases. Instead of measuring the cost of housing, the CPI Index uses a rent equivalent number which is much lower than the true inflationary costs of housing. Other statistical measures, such as quality adjustments, temper or remove price increases so that inflation rates seem reasonable. Even with these adjustments, there is no hiding the fact that inflation is on the rise. May import prices for the United States were up 1.6% in May. While a good majority of this increase was due to a spike in oil prices, other commodity prices rose as well. Wage costs are rising, health care benefits are moving up at high single-digit rates and food costs have nearly doubled.

The May CPI index jumped 0.6%, which was the largest increase since January 2001. Higher food and energy costs accounted for the bulk of the increase. Year-over-year core CPI is up 1.7% and rising quickly this year. Including food and energy, which everyone needs, the CPI index is now rising at an annual rate between 7 to 8% a year. In the meantime, for the second time this year, the Bureau of Labor Statistics has delayed the release of the PPI, the second measure of inflation. The Bureau is having "technical difficulties" coming up with a number. One can only guess by the jump in raw material prices that the PPI number has risen considerably. The new improvement measures the Bureau is considering can suspiciously be seen as an attempt to suppress a sudden surge in the index. Given the fact that commodity prices are up this year, one would expect the PPI numbers to also be up. There is tremendous pressure to keep the numbers suppressed. Higher inflation numbers mean higher interest rates, higher COLA adjustments on pensions, and a major adjustment of market multiples. Higher inflation rates and higher interest rates pose a major risk not only to the financial markets, but also to the economy. It is important to maintain the illusion that inflation rates are low, especially for the bond markets, which are the traditional vigilantes of inflation. Regardless of what is said by Wall Street and Washington officials, inflation is on the rise and has worked its way down Wall Street to Main Street.

Remember When...?

During the 80’s inflation was transferred from the economy to the financial sector. Inflation accelerated during the 90’s as the money supply ballooned. Debt levels went through the roof. However, the bulk of this money and credit went into our financial markets giving us double-digit growth in the major indexes year after year. Inflation never showed up on Main Street because excess demand was made up by cheap Asian imports.

The burgeoning trade deficit, a Nasdaq at 5048, and P/E multiples of 100 to 1,000 on tech and Internet stocks was a reflection of this inflation. Consider the fact that since January 1995 M3 money supply has grown by $4.8 trillion, a growth rate of over 8 percent per annum.

What has changed in this new millennium is that money growth has accelerated as a result of the bursting of a stock market bubble, a recession, and the attacks of 9-11.

In addition to the growth of money and credit, U.S. companies and consumers now compete with Asian companies and consumers for raw materials and consumer goods. Asian economic growth now competes with U.S. economic growth. The result is that inflation has made its way over on to Main Street.

Stagflation Rears Its Ugly Head

We are now in a new environment somewhat similar to the 1970s when the money supply soared as central banks expanded money and credit to accommodate the impact of higher energy prices. The result was stagflation. Isn’t that where we are today? Rising energy prices, higher rates of inflation, anemic job growth, and stagnating wages all point to a stagflation environment.

Given the current budget and trade deficits of the U.S., inflation is likely to accelerate in the months and years ahead. The reason is simple: money and credit growth.

Watch What I Say... Not What I do

Forget what the Fed says and watch what it does. As shown below, the money supply is growing rapidly again. In addition the Fed has begun to monetize U.S. Treasury debt as shown in the table below.

With Asian central banks pulling back on their purchases, the Fed may have no choice but to start monetizing our debt. The government deficit will be over $500 billion this year and the trade deficit is tracking at an annual rate of $575 billion. Where will all of this money come from? If the government tries to get it from taxes, there will be a tax revolt in this country the likes we have not seen since the founding of this country. Taxes are going to go up no matter who is elected president. Kerry will raise tax rates the most, which will be the final death knell on the economy. Regardless of what tax rates our leaders impose, they won’t be high enough to cover the government’s voracious appetite for spending. (Each candidate is proposing massive new spending programs.) Taxes will not be able to cover the government’s bill. Government simply spends more than it takes in. So what they don’t take in taxes will be made up by printing more money. This will further accelerate inflation.

Some question whether the money supply numbers are real, since the Fed seasonally adjusts these figures. Recently the Fed adjusted the money supply data all the way back to 1998. As with all U.S. economic statistics, one never knows what one is getting. All of our economic numbers are seasonally adjusted. The GDP numbers are artificially inflated through hedonic indexing and adjusted inflation numbers. The unemployment and jobs report is inflated by the “net birth/death model" and the inflation indexes are manipulated through quality adjustments and exclusions of items that are rising in cost. If there are any doubters as to the degree of money growth, all one has to do is view the debt graphs below of total debt outstanding, bank credit, corporate debt, and mortgage debt.

If the money supply hasn’t been growing as fast as the figures indicate, then where did all of this credit come from? Or consider these facts: financial sector debt more than doubled since 1997 from $5,532 billion to $11,402 billion, total indebtedness grew by $15 trillion to $35 trillion from 1997 to 2003, and it is now $37 trillion. As for that pillar of the global economy—the American consumer—he is up to his eyeballs in debt having borrowed $775.7 billion in 2002 and $879.9 billion in 2003 by way of mortgages, home equity loans and credit cards. Consumer debt is now estimated at over $2 trillion dollars.

Unraveling: Then and Now

What you have today is an economy that is entirely run on credit. Even a small rise in interest rates can do irreparable harm. Think back to 1999-2000. The Fed began raising interest rates at its June 30th meeting in 1999. It raised the federal funds rate from 4.75% to 5%. Thereafter, it continued to raise rates in quarter point increments, taking the federal funds rate up to 6.5% by May 16, 2001. It raised rates gradually and in small increments. But it was able to raise interest rates by only 1.75%. The rise in interest rates gave us a 75% decline in the Nasdaq, a recession, the worst job growth and the largest pullback in business investment in nearly half a century.

Companies, consumers, the government at all levels, the financial markets, and our entire economy are far more leveraged today than we were in 1991 or even 2000. A rise in interest rates of as much as 1, 2, 3 or 4% (as many analysts and economists are indicating) would collapse our economy and financial markets. What is sustaining the U.S. economy, our financial markets, and the American consumer is ever increasing amounts of debt and the asset bubbles that underpin that debt. Homeowner equity has fallen steadily from 85% in 1945 to 55% in 2003. Even that figure is distorted by the amount of homes that are free and clear held by an older generation. Corporate debt remains high at close to 75% of GDP and the government's own debt is now over $7 trillion.

The Consequence of Rising Interest Rates

If the Fed raises interest rates as high as many in the financial community suggest, they will lead us into the next Great Depression. I doubt whether the next president—whoever that turns out to be—or an American Congress would look favorably at collapsing real estate prices, a collapsing stock market, another banking crisis, a sinking economy, and unemployment rates of over 10%. There would be a voter backlash of biblical proportions. The economy is simply too weak and dependent on easy and cheap credit. Deprive that economy of credit and the whole financial edifice collapses. Unlike 2000, the financial system—in particular the banking system—is dependent on inflated real estate prices as collateral for all of those mortgage loans made to consumers. (Mortgage assets represent almost 60% of banks' earning assets.) The financial sector appears healthy only as long as real estate prices hold up. Household balance sheets are stretched to the limit with less disposal income and debt levels at record highs.

Hedge Funds & The Risk of Derivatives

Besides a crisis in the economy that will come about through rising interest rates, there is also the looming crisis in the financial markets. The meltdown in emerging debt is now spreading to the junk bond market. Interest rates on high-yield bonds are rising as the hot money bails out. There are now more than 7,000 hedge funds that play a major role in terms of global capital flows. These funds tend to follow the leader as they move into the same sectors. There is very little diversity in hedge fund strategies. Most funds follow the same strategy in the same way that mutual fund managers do. Everyone is doing the same thing. These funds manage about $860 billion in investor capital. That figure is considerably larger when you consider that many funds are leveraged 20:1. When rates are low, hedge funds can make a lot of money by borrowing short-term and investing long. However when rates rise, regulators start saying their prayers. No one wants to see another LTCM. And yet just as most funds employ the same investment strategies, they also use the same risk models. These models are supposded to minimize the risk according to Nassim Taleb, author of Fooled by Randomness. Taleb points out that the trouble with these models is that they are all backward looking. Since most funds use the same models, they move money in and out of sectors at the same time. They may be hedged, but who are they hedged with? Banks used to hedge their loan books with derivatives. Now they sell that insurance to hedge funds and other market players. The fallacy of banks selling insurance to others as Taleb points out is akin to “… buying insurance on the Titanic from someone on the Titanic.”[4]

The growing use of derivatives is one major factor that hovers over the financial markets. It is capable of accelerating any downward move in asset prices. When everyone is on the same side of the boat and they bought their life insurance from a group sitting on the other side of the boat, I’m not sure who survives when the boat capsizes...

See the Complete Article, Charts, and Graphical Analysis at Financial Sense Online

Saturday, June 19, 2004

Hello Kitty Invades Japan's Gold and Silver Markets

Hello Kitty Lends A Paw...

By Jim Hawe


TOKYO (Dow Jones)--Hello Kitty has returned to Japan's precious metals market to again share her marketing magic and hopefully scratch up some interest among first-time investors.

Monday Japan's Taisei Coins Corp., along with Hello Kitty owner Sanrio Co. (8136.TO), began marketing gold and silver coins featuring the likeness of Japan's most recognizable feline.

The coins, which are being issued to commemorate the 30th anniversary of Hello Kitty's debut in 1974, vary in price from Y7,350 for one-ounce silver coins, to Y126,000 for one-ounce gold coins.

The run will be limited to 1,000 one-ounce gold coins, 2,000 one-quarter-ounce gold coins and 5,000 one-ounce silver coins.

On one side of the coin is Hello Kitty adorned in one of six different kimonos, each representing a heroine in a classic kabuki play. The flip-side features Queen Elizabeth II, as the coins were minted on the Cook Islands in the South Pacific.

This isn't the first time Hello Kitty has popped up on Japan's precious metals market.

In February, Tanaka Kikinzoku Kogyo KK, Japan's largest retailer of precious metals, began offering a 30-millimeter-tall platinum Hello Kitty doll sporting a diamond-encrusted dress and a hefty price tag of Y3 million. Then in March, Sanrio offered 50 sets of gold Hello Kitty medallions that sold out almost instantly.

However, this week's release marks the first time the popular cat will appear on a coin.

Toshiharu Kato, a spokesman for Taisei Coins, said sales in just the first few days have been brisk.

Kato didn't have exact figures as the coins are being sold through both Taisei Coins and Sanrio, but he estimates sales have already topped Y100 million.

Read the Whole Story on Yahoo Finance - Singapore

"Grassroots Bottom-Up Wireless Infrastructure"

Wireless web gets a set of wheels

Wireless hotspots are springing up in buildings and homes all over the world but one New York artist has literally taken the idea onto the streets, turning his bicycle into a wi-fi hub.

Yury Gitman describes himself as a wireless and emerging-media artist and for his latest project has turned to cycle power to create the wireless bike.

It has been capturing the imagination of New York's trendiest urbanites and has been described by one New York paper as one of the hippest hotspots in the city.

"As well as being cool and stylish, it is also mobile," said Mr Gitman.


The wireless bike, or Magicbike as Mr Gitman prefers to call it, is not just a trendy alternative to the wi-fi cafe or office.

It can fulfil an important function in bringing internet connectivity to areas ignored by the traditional telecommunications industry.

"A grassroots bottom-up wireless infrastructure can be formed and pedalled to any place accessible by bicycle," said Mr Gitman.

In a wired city such as New York, he envisages it being used at art and cultural events, public demonstrations and for emergency access.

In communities at the fringe of internet connectivity it could become a more permanent lifeline.

Read the whole article on BBC Online

Friday, June 18, 2004

Gottfried Haberler Never Looked So Good

More stores at Cafe Press for every demographic:

Banquet of Sages


Live Free or Die

and last, but, certainly not least...

Hail Holy Queen

Forget Paris, Milan, New York, and London

All of your Summer 2004 fashion needs can be acquired at Cafe Press:



Aubrey Herbert



Thursday, June 17, 2004

First Mobile Phone Virus Disclosed

Agence France-Presse Reports on Infection in the Mobile Environment.

The first ever computer virus that can infect mobile phones has been discovered, anti-virus software developers said today, adding that up until now it has had no harmful effect.

The French unit of the Russian security software developer Kaspersky Labs said that that virus - called Cabir - appears to have been developed by an international group specialising in creating viruses which try to show "that no technology is reliable and safe from their attacks".

Cabir infects the Symbian operating system that is used in several makes of mobiles, notably the Nokia brand, and propagates through the new bluetooth wireless technology that is in several new mobile phones.

If the virus succeeds in penetrating the phone, it writes the inscription 'Caribe' on the screen and is then activated every time that the phone is turned on.

It is able to scan for phones that are also using the Bluetooth technology and is able to send a copy of itself to the first handset that it finds.

Read the Story at news.com.au

A Few Of The Real Experts...

For those hungry for market insight and analysis:

Financial Sense Online

Marc Faber Limited


Gold-Eagle: Where The Sun Never Sets

Any other suggestions would be greatly appreciated and perhaps even worthy of a free lunch paid for by the beloved Dr. Krassimir Petrov.

The Solution Lies in Sequestration

Shell Chairman Warns of Increasing Carbon Dioxide Emissions

LONDON (AP) - A chairman of the Royal Dutch/Shell Group of Cos. said in comments published Thursday that he sees "very little hope for the world" unless there is a reduction in global carbon dioxide emissions.

Lord Oxburgh, chairman of Shell Transport and Trading Co. PLC, the Anglo-Dutch oil giant's British wing, told The Guardian newspaper that he was worried by the threat of climate change.

"No one can be comfortable at the prospect of continuing to pump out the amounts of carbon dioxide that we are at present," Oxburgh was quoted as saying. "People are going to go on allowing this atmospheric carbon dioxide to build up, with consequences that we really can't predict, but are probably not good."

Oxburgh, a geologist, said the solution lay in sequestration - capturing carbon dioxide gas so it can be stored rather than escaping into the atmosphere. But the technique is expensive and unwieldy.

"Sequestration is difficult," Oxburgh acknowledged. "But if we don't have sequestration I see very little hope for the world."

Read the Full Article at Tampa Bay Online

Sunday, June 06, 2004

The Birds Win Again!

...Birdstone Turns Smarty Pants Into Dog Food.

Triple Crown Upset

Better "Luck" Next Time.