Thursday, May 20, 2010

A Cork in the Butt of the World Economy

There's an old joke that goes something like:
Three agricultural scientists were determined to discover how much a pig could eat before it  had to poop. To this end they procured a sow and pushed a large cork into her ass.

After six weeks of forced feeding, the sow was the size of the Goodyear blimp and threatening to burst. Being humane types, the scientists agreed that the cork must now be removed.

No one wished to volunteer for the job, however, so in true scientific tradition, they decided to train a monkey for the task and swiftly put a small gibbon through a crash course in cork-pulling.

The day came and the pig was air-lifted out to the desert for safety's sake. Special equipment was set up to monitor the event. Picture the scene: In the middle of the desert, the pig. Behind the pig, the monkey. One mile behind him, the first scientists with a video camera. One mile behind that scientist are the other two scientists with a seismometer. Finally, the monkey reaches up and pulls out the cork.

There is a huge eruption. 

When the massive geyser subsides, the two scientists find themselves knee-deep in pigshit. Grabbing shovels they wade forward and dig out the first man who has been buried up to his neck. When they free him they find that he is laughing hysterically.

"What's so funny?" they ask.

"You should have seen the monkey trying to get that cork back in!"
That's the Federal Reserve we're talking about.  The monkey, that is.  I'll give Congress the role of those three scientists. Personally, I find the story vaguely reminiscent of the scene for "Project X", in Atlas Shrugged, when the government destroys middle America with the Sound Ray.

There still seems to be a lot of wishful thinking about the jobless rate. It's like --- every single person I've ever talked to knows the government statistics are meaningless, grossly understated, not to be trusted, and yet, every time they come out, there's a reaction if the government doesn't lie well enough about them.

It still boggles my mind a bit (not that much) that the Germans are stupid enough to believe that banning shortselling will keep their markets from going down. Where does that lead?? Limbaugh was arguing for a temporary price bubble then a collapse. I don't even see why there would be a price bubble, but it surely *is* like a penny in the fuse box, or stopping the pressure relief valve on an overheated boiler. The utter stupidity of the clowns in government.

Based on nothing more than the Germans' actions, I'd guess we can't be far from a total collapse of the markets. When governments are so openly defying reality for the sake of nothing more than a few more moments reprieve, we're surely doomed. There's a scene in Atlas that this reminds me of that, when Hank Rearden the steel industrialist asks the government's leaders what they can hope to accomplish by destroying him with all their regulations (doesn't it sound like the bankers and the finance regulations being pushed in the Senate?):
"Have you anything left to loot? If you didn't see the nature of your policy before--it's not possible that you don't see it now. Look around you. All those damned People's States all over the earth have been existing only on the handouts which you squeezed for them out of this country. But you--you have no place left to sponge on or mooch from. No country on the face of the globe. This was the greatest and last. You've drained it. You've milked it dry. Of all that irretrievable splendor, I'm only one remnant, the last, What will you do, you and your People's Globe, after you've finished me? What are you hoping for? What do you see ahead--except plain, stark, animal starvation?"
Give it time for us. The handouts of the Germans to prop up the lifestyles of the Greeks, or the coming big handouts of the Americans to prop up the lifestyles of the Europeans (if it hasn't already started in secret -- I don't think the presses have stopped running at the Fed) is surely like the relief ships sent from the U.S. to the People's States, in Atlas. As I said in a previous post, where's Ragnar when we need him?

Shortly afterward, Dagny Taggart is confronted by her brother Jim, the humanitarian railroad non-executive who runs to the government for favors, who is trying to get her to help him in some undefined way, or at least, to prevent her from abandoning him, but his motives are a broken pretzel, and even he's not sure why he wants to talk to her:
"...I wanted to have a conference, I wanted to know your view of the situation--"

"You know it."

"But you haven't said a word!"

"I said everything I had to say, three years ago. I told you where your course would take you. It has."

"Now there you go again! What's the use of theorizing? We're here, we're not back three years ago. We've got to deal with the present, not the past. Maybe things would have been different, if we had followed your opinion, maybe, but the fact is that we didn't--and we've got to deal with facts. We've got to take reality as it is now, today!"

"Well, take it."

"I beg your pardon?"

"Take your reality. I'll merely take your orders."

"That's unfair! I'm asking for your opinion-"

"You're asking for reassurance, Jim. You're not going to get it."

"I beg your pardon?"

"I'm not going to help you pretend--by arguing with you--that the reality you're talking about is not what it is, that there's still a way to make it work and to save your neck. There isn't."

"Well..." There was no explosion, no anger--only the feebly uncertain voice of a man on the verge of abdication. "Well... what would you want me to do?"

"Give up." He looked at her blankly. "Give up--all of you, you and your Washington friends and your looting planners and the whole of your cannibal philosophy. Give up and get out of the way and let those of us who can, start from scratch out of the ruins."

"No!" The explosion came, oddly, now; it was the scream of a man who would die rather than betray his idea, and it came from a man who had spent his life evading the existence of ideas, acting with the expediency of a criminal....
My emphasis. Doesn't that exactly describe the operation of all these kinds of people today? They will never give up or change course, even if it kills them, and us, and destroys the world.
"No!" he cried, his voice lower, hoarser and more normal, sinking from the tone of a zealot to the tone of an overbearing executive.

"That's impossible! That's out of the question!"

"Who said so?"

"Never mind! It's so! Why do you always think of the impractical? Why don't you accept reality as it is and do something about it? You're the realist, you're the doer, the mover, the producer, the Nat Taggart, you're the person who's able to achieve any goal she chooses! You could save us now, you could find a way to make things work--if you wanted to!"

She burst out laughing.

There, she thought, was the ultimate goal of all that loose academic prattle which businessmen had ignored for years, the goal of all the slipshod definitions, the sloppy generalities, the soupy abstractions, all claiming that obedience to objective reality is the same as obedience to the State, that there is no difference between a law of nature and a bureaucrat's directive, that a hungry man is not free, that man must be released from the tyranny of food, shelter and clothing--all of it, for years, that the day might come when Nat Taggart, the realist, would be asked to consider the will of Cuffy Meigs [a thuggish government bureaucrat not unlike Obama's "Czars"] as a fact of nature, irrevocable and absolute like steel, rails and gravitation, to accept the Meigs-made world as an objective, unchangeable reality--then to continue producing abundance in that world. There was the goal of all those con-men of library and classroom, who sold their revelations as reason, their "instincts" as science, their cravings as knowledge, the goal of all the savages of the non-objective, the non-absolute, the relative, the tentative, the probable--the savages who, seeing a farmer gather a harvest, can consider it only as a mystic phenomenon unbound by the law of causality and created by the farmer's omnipotent whim, who then proceed to seize the farmer, to chain him, to deprive him of tools, of seeds, of water, of soil, to push him out on a barren rock and to command: "Now grow a harvest and feed us!"

...she saw him slumping and heard him say--terrifyingly, because his words were so irrelevant, if he did not understand, and so monstrous, if he did, "Dagny, I'm your brother..."
Isn't that how you beg for alms? The big guilt trip:
"Dagny"--his voice was the soft, nasal, monotonous whine of a beggar--"I want to be president of a railroad. I want it. ...It's your sin if I suffer! It's your moral failure! I'm your brother, therefore I'm your responsibility, but you've failed to supply my wants, therefore you're guilty!
 Isn't that what we're hearing on the news every day now?
"...All of mankind's moral leaders have said so for centuries--who are you to say otherwise? You're so proud of yourself, you think that you're pure and good--but you can't be good, so long as I'm wretched. My misery is the measure of your sin..."
 Sounds like the Greeks, to me.
"...My contentment is the measure of your virtue. I want this kind of world, today's world, it gives me my share of authority, it allows me to feel important--make it work for me!--do something!--how do I know what?--it's your problem and your duty! You have the privilege of strength, but I--I have the right of weakness! That's a moral absolute! Don't you know it? Don't you? Don't you? ..."

"You bastard," she said evenly, without emotion, since the words were not addressed to anything human... She turned to leave.

"No! No! Wait!" he cried, leaping to his feet, with a glance at his wrist watch. "It's time now! There's a particular news broadcast that I want you to hear!"

She stopped, held by curiosity.

He pressed the switch of the radio, watching her face openly, intently, almost insolently. His eyes had a look of fear and of oddly lecherous anticipation.

"Ladies and gentlemen!" the voice of the radio speaker leaped forth abruptly; it had a tone of panic. "News of a shocking development has just reached us from Santiago, Chile!"

I like that part about fear and "oddly lecherous anticipation". Exactly like the government right now in its attempts to strangle the finance industry with new regulations. What would the reaction be to what they were trying to get away with? Jim was gloating at the thought that Dagny would have to endure hearing how the world's greatest copper company had been nationalized by the People's State of Chile, and instead he is shocked to hear that it has been utterly destroyed by it's owner, everywhere, rather than turned over to the looters.

Life imitates art: Hugo Chavez just got through nationalizing the Venezuelan metals industries. If you want to see the full scope of this imitation, google "chavez nationalizes", and you'll get a frightening crystal ball into the course of the United States under Comrade Barack. Here is how it looks:
Chavez nationalizes French-owned retailer
Chavez seizes U.S. food giant unit
Chavez Nationalizes University
Chavez nationalizes Venezuela's iron-makers
Chavez nationalizes Bauxite producers
Chávez Nationalizes Oil Service Companies
Chavez Nationalizes Bank of Venezuela
Chavez nationalizes two more private banks
Chavez Nationalizes Cement Industry
Chavez may nationalize gold mines
Chavez Nationalizes Last Venezuelan Oil Fields
Chavez seizes Hilton resort
Chavez nationalizes coffee
Chavez nationalizes French Supermarket Chain
Chavez nationalizes ports, airports
Chavez nationalizes steel sector
Chavez nationalizes small shops...

Etcetera. This is the guy that Obama admires most next to Castro. Whether the destruction is done intentionally or not, it's irrelevant. It's coming. I'll repeat my previous post: Quo vadis, America?

(P.S.: Coincidentally, I found recently that my boiler has been overheating rather badly and the pressure expansion tank was wiped out -- it corrects for normal pressure fluctuations--but the secondary pressure relief valve on the boiler was purging water to prevent the boiler from blowing up... the plumber is in this morning to fix it. He's really quite a competent guy. Known him for years. He'll know what to do: get to the root cause. A bad thermostat, scale in the boiler, a bad zone pump, whatever. Somehow I don't think that Uncle Sam under Comrade Barack will be repairing the boiler of the world economy. It would be like Bozo the Clown performing open heart surgery with a butter knife and party balloons.)

Dow Drops Nearly 300 as Jobless Claims Jump
Published: Thursday, 20 May 2010 | 10:30 AM ET
Stocks fell sharply Thursday after an unexpected spike in jobless claims and as global jitters pushed the dollar higher.

The Dow Jones Industrial Average was down nearly 300 points, or almost 3 percent, and the CBOE volatility index, widely considered the best gauge of fear in the market, spiked more than 20 percent to above 43.

All 30 Dow components were lower, led by Caterpillar [CAT 58.496 -2.944 (-4.79%) ], Alcoa [AA 11.19 -0.59 (-5.01%) ] and Boeing [BA 63.5474 -2.6626 (-4.02%) ]

The Dow and S&P 500 are nearing correction territory and are on track to have their worst month since February 2008.

The market was already pointing lower today as volatility surged in global markets amid worries about financial reform and the sovereign debt crisis, when the jobless claims report came out and further rattled the market.

Initial claims for unemployment benefits shot up by 25,000 to 471,000 last week. Economists had expected claims to drop to 440,000.

Meanwhile, the Philadelphia Fed reported its gauge of regional manufacturing activity dropped to 21.4 in April, slightly more than expected, from 20.2 in March. And leading indicators fell 0.1 percent in April, the first decline in a year.

European stocks lost more than 2 percent amid worries that Germany's ban on naked short selling of some stocks and bonds will be extended to the entire euro zone.

The dollar surged against the euro. Commodity prices fell, with crude oil dropping below $68 a barrel and gold falling to near $1,180 an ounce.

Treasurys, particularly longer-dated securities, jumped on the stock market turmoil. The 30-year bond gained more than one point in price, sending its yield to 4.16 percent, its lowest since Oct. 20, 2009. Prices and yields move in opposite directions.

Uncertainty grew on the back of concerns about the euro zone's economic health, and whether Germany’s financial reforms will backfire on stocks.

Other European nations, including France, the Netherlands and Finland, announced they have no plans to follow Germany’s ban on naked short selling of specific instruments, to control what Chancellor Angela Merkel called "destructive" markets.

Also in Europe, more protests are scheduled to take place in Greece today against the new austerity measures.

Asian markets were lower, with Tokyo, Seoul and Sydney down more than 1.5 percent each, as political divisions in Europe, again, and fears of more market regulation pressured stocks.

In earnings, office retailer Staples [SPLS 21.585 0.045 (+0.21%) ] reported a 32 percent rise in profit to 26 cents a share.

After the closing bell, earnings are due from Dell [DELL 14.38 -0.60 (-4.01%) ], Gap [GAP 5.72 -0.21 (-3.54%) ], and Intuit [INTU 34.57 -1.00 (-2.81%) ].

In deals, Symantec [SYMC 15.1625 -0.4675 (-2.99%) ] is paying $1.28 billion for VeriSign's[VRSN 27.34 -0.65 (-2.32%) ] security business, which specializes in Web site identity and authentication.

And on the political scene, the financial regulatory reform bill failed to pass in the Senate on Wednesday amid resistance from both parties, but Democrats will attempt to seal the deal on Thursday with a fresh vote at 2:30 pm Washington time. SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler will testify about new regulations to prevent May 6th’s "flash crash” from happening again.

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