Author: Matthew G. Saroff

Economics Update

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The big news, as it is on any day when the fed meets, is the decision, which was to cut the federal funds rate by 25 basis points. Of note that that they are no signaling no more cuts.

Of course, with the rate at 2%, it’s not like they can really cut much further.

Then we got the GDP numbers for the first quarter of 2008. The number is that U.S.GDP increased at an 0.6% annual pace, though this will likely drop when a final reading is released.

I will provide more detail, but the spin that this is not a contraction is false” initial reading, will fall. Also, we’ve already had 0.6% so far this year, we will likely see 3-4% inflation even with the bogus government data, it would be closer to 10% with honest data, and 0.6%-3%=-2.4% that’s a recession.

I, with the aid of the good doctor Roubini, will provide more detail in a later post.

Oil prices have dropped, which should come as no surprise. The spikes of the past few days were as the result of short term news, though the trend still seems to be up.

In real estate, we have
ortgage application volume falling 11.25% last week, and we have an analysis from Barclays Capital that upwards of half of Alt-A and subprime mortgages will be under water by year’s end, and they are predicting a fair amount of “jingle mail” as a result.

They Want to Execute Him Because it Would Be Embarrassing for Him to Die of Natural Causes in Prison

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That is really the crux of this trial, and his lawyers have been refused adequate security.

He is on trial for the execution of food merchants for price gouging in 1992, when he was foreign minister.

He turned himself into the American military in 2003, and has since been held without trial, so they want him tried before he dies in custody.

One of the lessons of all this is just how much the US government is willingly subverting the principals of Nuremberg in order to achieve politically expedient results.

Whither Us Defense Contractors?

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Dov S. Zakheim and Ronald T. Kadish, senior executives at Booz Allen Hamilton, the government and defense consulting firm, have written a blistering editorial criticizing the defense consolidation of the 1990s, and the role of the government, in particular the Clinton administration, in encouraging this.

While I agree with their assessment of the facts, that there was an extraordinary level of consolidation in the 1990s, and that no savings have yet materialized, and that defense procurement is an over budget and behind schedule mess, I disagree with their basic thesis, that somehow deconsolidating the defense industry will help.

These moves highlight an unfortunate reality: The United States is approaching an “arsenal system” for developing and producing its weapons — that is, one in which the government manufactures its own weaponry. It’s an antiquated model with modest benefits, but the way things are going even those will probably be lost.

I have worked off and on in defense since 1992, and I have not seen any significant change.

With the US government spending more than the rest of the world on defense, it means that we are merely seeing the consequences of an effective monopsony (single buyer market, the reverse of a monopoly).

We already have a market without meaningful competition, and when you have for profit institutions without competition, you do not save money.

What’s more the self-dealing, how many retired generals work for defense contractors after, and other corruption and pork barrel aspects to not bode well for the future.

I’m not sure how to fix this, but the use of private defense contractors is not working, so perhaps an arsenal model will work.

I will note that the one part of the Soviet economy that produced reasonable quality products efficiently was their defense industry, which was precisely the arsenal model that they disparage.

More A400M Delays

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It looks like the first flight of the EADS A400M airlifter will will be delayed again (paid subscription required).

Once again, it is all problems with the engine, with the C-130 testbed not ready yet to fly, and the #1 aircraft will not be flying with final the high pressure compressor, which is in redesign:

The CEO admits that a number of issues could push the flight date out further. The most critical involves the software on the full-authority digital engine control which he said is three times as complex as that on the Airbus 380. Feedback from engine ground tests and static tests, which started in March, will also be critical. ­Suarez says the engine will total 1,200 hours on the bench by the end of May.

I would assume that the FADEC also includes blade pitch.

Of course, if they had bought the AN-70, it would be already for flying for less money, and if they had gone with the US engine proposal they might be flying already.


The #1 airframe is basically complete except for the engines.

The Rule of Men, Not the Rule of Law

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We now see some letters from Bush and His Evil Minions™ to Congress saying that they could torture who they wanted whenever they wanted, because they were motivated by a noble cause, because their intent was to prevent terrorism, “rather than for the purpose of humiliation or abuse.”

I don’t think that a single nation among the torturers has ever adopted it as a technique because it gave them the jollies*, they have done for precisely the reasons that you give. They wanted information, and to prevent acts that they deemed lawless.

We need to send these folks to the Hague for a fair trial in 2009.

*Dick Cheney excepted, of course. It gives him a stiffie.†
†Apologies for that mental image.

IDF Ramps Up Ground Forces Training

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This increase in focus in training ground forces, which accompanies an increase in the status of ground forces is not surprising.

The conclusion of the Winograd report*, which reviewed the 2006 Lebanon campaign was quite clear:

The military has abandoned the doctrine that stressed precision stand-off firepower over maneuver warfare, arguably the biggest mistake Israel made in the conflict.

It should be noted that the doctrine that they are abandoning is the central doctrine of the US military, particularly the USAF, and it is why you are seeing changes as a result of the experiences in Iraq and Afghanistan.

In fact, when one looks at the failures of the US military, at their core have been a consistent over-reliance on air power, whether USAF fast jets or slower helicopters.

*Warning, the format is some sort of mutant flash called NTXbook.

McCain Knows Nothing of Foreign Policy

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And Fareed Zakaria is too much of a coward to say so

In his speech McCain proposed that the United States expel Russia from the G8, the group of advanced industrial countries. Moscow was included in this body in the 1990s to recognize and reward it for peacefully ending the cold war on Western terms, dismantling the Soviet empire and withdrawing from large chunks of the old Russian Empire as well. McCain also proposed that the United States should expand the G8 by taking in India and Brazil—but pointedly excluded China from the councils of power.

Let’s be clear on this one of the reasons that Russia is increasingly hostile to the West is that we have repeatedly lied to them.

We promised no Western expansion of NATO. We lied.

And then there was that whole privatization thing, which was sold as a way to prosperity for the whole society, as opposed to a campaign of rape and pillage that would have made Genghis Khan proud.

Now he’s talking about breaking another promise.

McCain is an idiot who has spent his life poking people in the eye, and unsuited to be president.

Russia and Ukraine Plan to Restart An-124 Production.

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I think that it is cool.

For most of the forces out there, what they need is strategic airlift capability, not tactical, and honestly, the An-124 pretty much owns the field, and will for the foreseeable future, as the only potential competitor in terms of size, the A-380 is far more restricted in terms of airports, if just because with its low wing, it will Hoover debris off an austere strip.

As the article notes, Anotov has some real problems, noting the fact that the An-70, which is a great tactical airlifter*, is languishing, and wondering if Russia’s United Aircraft Corporation might be looking at a corporate takeover.

*Once you replace the avionics with western equivalents, and allow one of the large western turbine manufacturers to license produce with higher quality materials to improve reliability.

Crossing the Olbermann Event Horizon

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I enjoy watching Olbermann, though I differ with him on one matter, I do not think that Hillary Clinton is the devil incarnate, but NPR’s reporter Ken Rudin, who compared Hillary Clinton to Ales Forrest, the deranged character played by Glenn Close in Fatal Attraction:

But after comparing Senator Clinton to the insane, murderous, kidnapping, stalking, knife-wielding, suicidal, bunny-boiling character of Alex Forrest, who has to be drowned and shot to be finally stopped in Fatal Attraction, even the harshest critic of Senator Clinton is probably beginning to think, you know, that might be a little harsh. Maybe an apology is in order.

I’m just sayin’ if you’ve lost Keith Olbermann because you are hating too much on Hillary Clinton, you have crossed some sort of metaphysical event horizon, you aren’t going to get out, and all you can look forward to is for tidal forces to rend you into subatomic particles.

I’m just sayin’.

Watch it below.
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Economics Update

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Well, the consumer confidence index fell to its lowest level in 5 years, what’s more, the Frog consumers are bumming more than they have in 20 years.

Sarkosy is not going to find a lot of support for making the French economy more “Anglo-Saxon” right now.

In real estate, foreclosures jumped 23% in 1Q of 2007, which is on a pace for a 200% increase in foreclosures in 2008, while the Case-Shiller Home Price index fell 13% year over year in February.

This is not over. It’s not close to being over.

In the ever entertaining Countrywide sage, the mortgage lender posted a $893 million first-quarter loss.

I still wonder when some Bank of America investor finally starts screaming about a proxy fight over their purchase of Nationwide. Every day, the deal looks worse and worse.

As to energy, oil is down, but gasoline is up.

Zimbabwe Update

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To my mind, the best development this far is the fact that the UN Security council is to be briefed by MDC Secretary General Tendai Biti. Thabo Mbeki has been doing his level best to keep this off the security council agenda, and for that matter for anywhere where meaningful action might useful, for reasons that continue to escape me.

Interestingly enough the UN did a bit of good here, with somewhere in excess of 200 detained MDC supporters were released once the meeting was on the agenda.

The election in parliament was not close enough to be stolen, MDC has the majority, and the two branches of MDC have, at least for now, decided to reunite.

Mugabe’s security forces appear to escalating attacks on members of the opposition, indicating that this will be a long road to hoe.

The US has come down firmly in favor of an MDC led government, but given the credibility of the US State Department, the obvious response is , “With what army?”

The recount of the votes in the presidential election has been delayed again.

In related news, the head of the electoral commission has renamed himself Godot. (Humor. If you don’t get it, read a bloody book)

Thoughts on Obama and Wright

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Let’s be clear, there are any number of Rabbis whose services I attend, but I’ve yet to see a problem that I really needed to go to them for, because I think that Rabbi Hillel’s distillation of Torah while standing on one foot * pretty much covers the situations that I’ve encountered.

I like most of the Rabbis I’ve met. But I disagree with some of the things that they believe†.

In terms of what Wright’s opinions mean about Barack Obama, the answer is that it means very little. It is only among the Christofascists who expect parishioners to act in lock step with their pastor.

That being said, the assault by the right wing on this is not swift boating. It’s Willie Horton.

Truth be told, swift boating was far more benign than Willie Horton.

The purpose of swift boating was to attack Kerry on his (only) strength as a candidate. The purpose of Willie Horton was to create an association Michael Dukkakis and a violent black criminal. It’s goal was to make him a black rapist.

Obama’s problem as a candidate, largely as a result of his skin color, is that he cannot be an angry candidate, because America fears the “Angry Black Man”, and Wright is an explicit attempt to make him into such.

It’s unfair. It has very little to do with the facts. The only thing that is important is if/how Obama puts this issue to bed.

*You can see the story here. The end state is that Hillel said, “”You want to learn a great deal quickly, don’t you? Very well, I shall teach you the Torah while you stand on one foot. This is our Holy Torah: ‘What is hateful to you, do not do unto others.'”
†They have almost all been way too hawkish on Israel, even though I consider myself an Israel hawk.

And the Morons Win the Pennant

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It looks like Congress, knuckling under to knuckle heads, will continue to fund the fraud that is abstinence only education.

The reputable studies all show no effect on teen sex or pregnancy, and there are indications that it may increase the incidence of STDs, but the anti-sex right won’t let facts get in their way on their jihad against common sense.

The problem is that there is no political upside to being honest with our children.

More Signs (and Pictures) that Official Government Inflation Stats are BS

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We are starting to see more articles, like this at San Diego Union Tribune, noting that official government inflation statistics are a crock.

I will note that the changes in 1983 to a large degree took housing out of the picture, which is why Alan “Bubbles” Greenspan was so bullish on real estate*, and those in 1998 used hedonic mumbo-jumbo to create the illusion of low inflation.

If you assume that inflation is 2% more than official numbers over the past 35 years, prices have doubled relative to official inflation at 3¼% more, it’s triples, and at 4%, it quadruples.

We may be seeing a tremendous drop in the standard of living of the average American over that time that has been deliberately masked by our government.

*It allowed him to call inflation in a necessity, housing, an increase in wealth. If memory serves, Greenspan was at the center of both adjustments

City’s plan to relocate residents meets resistance – Apr. 24, 2008

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It appears that the 50 or so remaining residents in Youngstown’s abandoned neighborhoods are refusing to move, even with the offer of $50,000 payments.

I think that the obvious thing to do here is eminent domain. These green spaces are to be created for the benefit of the city, so as not to have to pay for utility service and police patrols to these areas.

Declare the green spaces a park, and take them to court. This is a legitimate public need.

Obviously, the use of eminent domain could be a political problem, so as an alternative, you could set up a special utility district in the neighborhoods intended for demolition.

When these folks get their bills to account for the real costs of their water, sewer, street lights, etc., they would likely leave.

Bush Court Confirms: Voting While Black is a Offense

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They voted 6-3 to uphold Indiana’s voter discrimination identification law.

It was actually 3 opinions each supported by 3 justices, and some legal analysts claim that there is hope, since one of the concurring opinions asked for evidence of voter disenfranchisement, but I see that as a vain hope.

While I see Stephens ruling against the law if there is evidence, it is telling that there is no evidence of the sort of vote fraud that the law was intended to prevent having ever occurred in Indiana, and I see Roberts and Kennedy simply moving a bit to the right each time that such a challenge occurs.

Gripen Sales Pitch to Norway

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Now that Sweden has rolled out the advanced Gripen demonstrator, they are aggressively marketing it to Norway.

Among other things, Sweden is offering co-development on some of the technologies, and a promise to upgrade their Gripens to this standard should Norway buy them.

My money is still on the steamroller that is the JSF, at least until deliveries start showing late and more expensive than previously anticipated, my guess is a price tag 2/3 that of the F-22 ($120 million a pop) as versus the $50-60 million for the Gripen.

At that point, the Gripen will look very attractive to countries that are taking a wait and see approach.

Yep, the Gripen is my fighter obsession right now. In an age of ever spiralling costs, it’s half a generation ahead of the F-16 at around the same prime price, though even with the additional fuel and thrust, it will be smaller and lighter.