Friday, June 29, 2012

Daily Bell Comments to Return

With a condition:

Coming Back Soon ... Daily Bell Feedback. However, both authorization to participate in the discussion and access to read the feedback will be contingent upon membership in the Internet Reformation Party's Global Movement for Real Change. Details will be forthcoming shortly as the Global Movement for Real Change launches here at the Daily Bell – Home of the Internet Reformation! (Hint: One of many exciting features to come with your membership to the Internet Reformation Party, is a FREE webmail account – That way, when we are spreading the word, we do so together and bring a wave of influence to all who offend our ability to celebrate our individual freedom – memento mori!)

On the one hand, I am pleased with this as I believe the comments were an important part of what made the Daily Bell valuable (although, as previously mentioned, my views changed on this over time).

On the other hand, what’s with the membership requirement?  I will wait for the details.  Perhaps it is a way to keep some of the riff-raff off of the comments section – as I mentioned previously:

The host had a very difficult job – to try to find a path that allowed the most free-flowing conversation while still maintaining some sense of integrity in the community.

To do so in an open-access internet forum is quite difficult.  The Daily Bell managed to do so for an exceptionally long period of time.  I can understand the desire to find a way to manage this.

Sadly, the one specific “riff-raff” that caused me to decide to stop posting will likely be a charter member of this club.

I am looking forward to the details of this membership, and will watch the postings for a time.  Perhaps I will decide to join again.  Whether I do or not is not a statement on the work Mr. Wile has done – he has created a most wonderful site that I have found to be very helpful to me in both my education and in developing my logic and writing skills. I still enjoy visiting the site, especially on Saturday when Mr. Wile writes his own commentary.

Thursday, June 28, 2012

Katy Bar the Door

Katy bar the door: take precautions; there's trouble ahead.

I will limit my comments on the Supreme Court decision regarding Obamacare to this one statement by Chief Justice Roberts, in writing the majority opinion:

In this case, however, it is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance.  Such legislation is within Congress's power to tax.

In place of the words “go without health insurance,” insert any of the following:

  • Go without public education
  • Go without joining the military, Peace Corp, or other approved community service
  • Avoid paying state income tax
  • Own a firearm
  • Buy a car delivering less than 40 miles-per-gallon / buy a car with an internal combustion engine
  • Hold assets overseas
  • Hold non-US Dollar denominated assets
  • Buy precious metals
  • Have more than two children
  • Live in more than 1500 square feet
  • Own more than one home
  • Eat red meat
  • Avoid taking statins
  • Avoid annual physical exams

I am sure there are hundreds more.  I have limited my universe to items that fall into areas that could easily be targeted as having a so-called “societal benefit,” in other words, where the dialogue already makes it easy for the government to assert a so-called "national benefit."  Even here, I am sure there are dozens more.

More on Barclays

It seems I am not alone.  Yesterday I wrote:

In a normal world, liability for committing fraud would be personal, and more than simply forgoing a bonus.

The bank committed fraud.  To be clear, human beings with two legs committed fraud, and other human beings with two legs supervised them.  This wasn’t just a poor management decision.  It was an act with the intent to deceive in order to achieve an economic gain.  According to the AP report, the bank "attempted to manipulate" and made “false reports.”  These manipulations and false reports lead to a gain for someone and a loss for someone else.

Today comes more fallout:

Barclays admitted Wednesday that the actions "fell well short of standards"

Emails and instant messages disclosed as a result of the investigation cast an unflattering light on the corporate culture on Barclays' trading floor. The back and forth over fixing rates included cringeworthy comments like "Done ... for you big boy," and "Dude, I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger."

However, the more dangerous emails and messages are those demonstrating that the senders knew that what they were doing was dubious.

"This is the way you pull off deals like this chicken, don't talk about it too much, 2 months of preparation... the trick is you do not do this alone ... this is between you and me but really don't tell ANYBODY," one Barclays trader wrote to a trader at another bank.

And at least one person willing to state the true nature of the event:

Former City minister and ex-chairman of Marks & Spencer Lord Myners told the BBC Wednesday: "This is the most corrosive failure of moral behaviour I have seen in a major UK financial institution in my career.

"I think fines and public criticism will not stop these behaviors. These behaviors will not stop until the people perpetrating it or responsible for overseeing them face the prospect of criminal charges and the prospect of going to jail."

If events were as reported, this was fraud.  It should be handled as such.

Wednesday, June 27, 2012

Bank Fined for Market Manipulation

Barclays Bank is fined for manipulating LIBOR.

NEW YORK (AP) -- Barclays  PLC and its subsidiaries have agreed to pay more than $400 million to settle charges that it attempted to manipulate and made false reports related to setting key global interest rates.

Isn't manipulation in preparing false reports for a profit considered fraud?  

           A deception deliberately practiced in order to secure unfair or unlawful gain.

The truth of this settlement will never be known.  Who was defrauded and for how much?  Who were the individuals who acted to commit the fraud?  Who supervised these individuals and otherwise approved the actions?

We know two things for certain:

1)      The amount of the fine is only a fraction of the gain realized by Barclays
2)      Those who were defrauded will not see a penny of this money.

Rest assured, management is holding itself accountable:

Barclays President Bob Diamond also announced he and three senior bank executives were waiving any bonus for the year as a result of the case.

In a normal world, liability for committing fraud would be personal, and more than simply forgoing a bonus.

The bank committed fraud.  To be clear, human beings with two legs committed fraud, and other human beings with two legs supervised them.  This wasn’t just a poor management decision.  It was an act with the intent to deceive in order to achieve an economic gain.  According to the AP report, the bank "attempted to manipulate" and made “false reports.”  These manipulations and false reports lead to a gain for someone and a loss for someone else.

Tuesday, June 26, 2012

McKinley Asks Congress for War

Article 1, Section 8 grants to Congress the power to declare war.  A formal declaration, as such, has not been made since the declaration that involved the United States in the Second World War – first against Japan, then shortly thereafter against Germany and Italy.  Subsequent wars involving the United States have been “authorized” in other manners, most notably relying on United Nations resolutions or Congressional resolutions authorizing the President to decide if and when the U.S. should enter a conflict. 

Even regarding World War Two, the formal declaration came after many months of Roosevelt pursuing military actions against both the Germans and Japanese – in other words, even though war was formally declared by Congress, it was declared well after the United States was involved in hostilities initiated by the President.

The Constitution sets out the minimum requirement for the United States to enter into hostilities – the Congress, best representing the people, will decide if entering the fight is worth the cost.

But just because Congress declares war does not make the fight worth the cost – not to the people.  It is in this light that I would like to examine McKinley’s speech to Congress where he asks Congress for a declaration of war against Spain.

McKinley made this request on April 11, 1898.  A little over one week later, Congress returned with an affirmative reply.  On what basis did McKinley justify this request, and therefore on what basis did Congress approve?

McKinley spent a good amount of time in his speech recounting the events of the ongoing war in Cuba, between revolutionaries and the Spanish government.  He recounted efforts by his predecessor to intercede by means of negotiations and truce.  After this, he summarized the grounds for United States intervention:

First.  In the cause of humanity and to put an end to the barbarities, bloodshed, starvation, and horrible miseries now existing there, and which the parties to the conflict are either unable or unwilling to stop or mitigate.  It is no answer to say this is all in another country, belonging to another nation, and is therefore none of our business.  It is specially our duty, for it is right at our door.

Why is it “no answer to say this is all in another country”?  McKinley suggests that because Cuba is “right at our door,” that this is reason enough.  Fortunately, it seems, McKinley would not feel the same if the fight was further away.

Second.  We owe it to our citizens in Cuba to afford them that protection and indemnity for life and property which no government there can or will afford, and to that end to terminate the conditions that deprive them of legal protection.

Is this security for U.S. citizens living overseas only to extend to countries “right at our door”?

Third.  The right to intervene may be justified by the very serious injury to the commerce, trade, and business of our people, and by the wanton destruction of property and devastation to the island.

Certainly if individuals living overseas have a right to be protected by their government via military force, then commercial interests of citizens living overseas (and domestically) also would fall under the same umbrella.

Fourth, and which is of the utmost importance.  The present condition of affairs in Cuba is a constant menace to our peace, and entails on this government an enormous expense.  With such a conflict waged for years in an island so near us and with which our people have such trade and business relations; when the lives and liberty of our citizens are in constant danger and their property being destroyed and themselves ruined; where our trading vessels are liable to seizure and are seized at our very door by warships of a foreign nation….

This is more or less a restatement of McKinley’s second and third point.

He then references the incident of the U.S.S. Maine, stating that the naval court of inquiry determined it was caused by an external explosion, without placing the responsibility.  Regarding this incident, McKinley reports that Spain has already agreed to have an impartial board of inquiry investigate this matter, “whose decision Spain accepts in advance.”  It would seem Spain was desirous to avoid this incident escalating into hostilities with the U.S.

To summarize, McKinley is asking for authorization to go to war because the Cuban people are suffering, Americans in Cuba are suffering, and American business interests in Cuba are suffering.  If this is sufficient cause to go to war, it would seem that there are every year a dozen places or more where the United States would be justified to intervene.

Non-U.S. citizens living overseas do not fall under the jurisdiction of the Constitution and the government empowered by it, as sad as their plight might be.  As to U.S. citizens and businesses overseas, these made decisions to live under the risks of a jurisdiction that is not the United States.  The United States government certainly could employ persuasion and other non-military means to secure safe passage for such individuals – as Ron Paul has said, we have thousands of diplomats – put them to work on diplomacy; it is difficult to identify a Constitutional justification for using the military to protect individuals living overseas, or business interests in foreign jurisdictions.

What does all this have to do with today?  The President quit going through this formality seven decades ago, and even then he already began hostile action before the declaration.

I have a couple of reasons to explore this: 1) I am curious.  As I am reviewing history, I find even the declared wars were not properly declared, or were declared after certain provocative actions were taken by the U.S. (even in the case of the U.S.S. Maine, believing the official story at the time, leads me to ask: Why was it there?), and 2) whether declared by Congress or the President, the justifications should be examined.

Again, the reasons cited by McKinley can be used to justify a dozen wars per year, if the President so chose and the Congress declared.  It would seem a very low hurdle for these reasons to have persuaded Congress.

Some might look and this and suggest that the fact that the United States has not entered a dozen conflicts per year demonstrates the deliberation and discernment of those in power – they can split hairs too fine for my judgment and not fall into the cause of my concern: that such criteria is an open door to multiple wars.

I think history demonstrates the opposite to be true.  The criteria McKinley used and Congress accepted are so broad as to allow any intervention wherever those in power wish to intervene.  That they do not chase every perceived demon is not proof of discernment – splitting hairs.  That they left the door so wide open is proof of a desire of carte blanche – maximum flexibility to become involved if desired.  McKinley and this Congress set a solid precedent for future political leaders to intervene overseas whenever and wherever they might choose.

War is the health of the state.  Therefore it is also the health of Congress.  Just because Congress declares war does not justify it.  War is certainly not justified based on the criteria used by McKinley in this case.

Monday, June 25, 2012

Simon Black Banks in Georgia

Not the state, but the country that has made an enemy of its large neighbor to the north.

I’ve spent the last several days re-examining the local banking sector and diving into the numbers, and my analysis has led me to the conclusion that it’s one of the best capitalized banking systems in the world.

To give you an example, it’s common for banks here to hold in excess of 30% of their deposits in CASH. They don’t loan it out, they don’t invest in stupid government bonds or CDOs… they actually hang on to their customers’ funds.

I don’t know Simon Black.  I have never met him.  I wouldn’t know him if I sat next to him at an airport.

However, I don’t believe any outsider can examine a single bank, let alone a banking system, and conclude from a look at the numbers that it is safe.  I don’t believe anyone with significant experience in banking can go to another bank and make such a determination.  I don’t believe a highly accomplished bank auditor can do this.  But Simon Black has.

Just this morning, in fact, I negotiated a 1-year fixed deposit rate with a local banker on behalf of SMC subscribers for 10%… in US dollars.

This has flashing red lights written all over it.

1)      How will the bank earn enough on deposits to sustain such a payment? 
2)      How can the bank earn this amount while supposedly holding 30% of its customer deposits in reserve? This is over 14% on invested capital.

We have seen this story before: banks paying the highest rates for CDs are often the ones having the biggest liquidity crunch; banks offering deposits in an outside currency get squeezed when the exchange rate turns against it; the nation behind the bank backstops local currency deposits but not deposits made in other currencies.

As I said, I don’t know Simon Black.  I have enjoyed reading his free daily email, but this one causes me to consider that his recommendations should be taken with a grain – or more – of salt. 

Ten percent interest income on US Dollars in Georgia.  This won't end well for those who take Mr. Black's advice.