India's gold big move

     On September 18, the IMF announced that it was going to sell 403.3 metric tons of gold (approx. 1/8 of its holdings) to fund its operations. Now we learn that from October 19-30, the Reserve Bank of India (RBI) bought half of it, 200 metric tons, for $6.7 billion, raising its gold holdings by 55%.
     India clearly wants to diversify their reserves out of a sick-man currency (and out of paper fiat currencies generally -- but that is another discussion). The question becomes, where is China? After all, China has even worse dollar indigestion ($2.27 trillion in mostly dollar-denominated reserves) and wants to accumulate gold despite being the world’s number one producer of the yellow metal. Many traders assume that China (if it has not already) will move to take down the other half.

     A second possibility suggests itself: Maybe India simply got the jump on China and the IMF is selling the rest in smaller tranches. I would discount this because China and India have bid cooperatively to secure energy supplies for years and the idea that India would risk a relationship that has saved so many billions (by avoiding planet-spanning bidding wars as they secure energy they need to fuel their economic growth) seems unlikely.
     A third possibility is that the IMF has blocked out China, which has been buying gold and loudly calling for a new global reserve currency to replace the dollar.

     While it would not be surprising in the least to see that China negotiated to split the 400 tons with India, neither would it be stunning if it turns out the IMF boxed them out under heavy pressure to do the impossible -- protect the dollar.

It's a solvency crisis

Banking activity indicates the economy is mired in a solvency crisis, not a liquidity crisis, according to John M. Mason in a piece at Seeking Alpha. A solvency crisis, he argues, takes much longer to work through.

To me, this has been the evolving picture of the economy, both in the United States and in the world, for the past year. We had our liquidity crisis and then we moved into the solvency problems phase. The system is working things out in an orderly and controlled way.

Yet, the Federal Reserve (and the Treasury) has stayed with the interpretation that the problem continues to be a liquidity one. That is why all the innovative facilities were created by the Fed. That is why the Fed supports the mortgage-backed securities market and the federal agency market. Their “Fed speak” is couched in the terms of the “liquidity needs” of the system.

By now the public thinks the Fed operates like a squid: When danger approaches, it ejects liquidity, ends transparency, and escapes.

A purposeful and political destruction of standards

The Recovery.gov site is still reporting 30,383 “jobs created/saved as reported by federal contract recipients.” The AP finds the figure to be comical:

The AP review found some counts were more than 10 times as high as the actual number of jobs; some jobs credited to the stimulus program were counted two and sometimes more than four times; and other jobs were credited to stimulus spending when none was produced.

For example:

_ A company working with the Federal Communications Commission reported that stimulus money paid for 4,231 jobs, when about 1,000 were produced.

_ A Georgia community college reported creating 280 jobs with recovery money, but none was created from stimulus spending.

_ A Florida child care center said its stimulus money saved 129 jobs but used the money on raises for existing employees.

There's no evidence the White House sought to inflate job numbers in the report. But administration officials seized on the 30,000 figure as evidence that the stimulus program was on its way toward fulfilling the president's promise of creating or saving 3.5 million jobs by the end of next year.

Calling a giant pork barrel giveaway an “economic stimulus” in the first place was arrant blather and so now is the idea of letting eager-beaver contract recipients guesstimate “jobs saved.” We all know twisting statistics for political ends is nothing new (only the most credulous trust GDP, unemployment, and inflation numbers anymore), but this purposeful and political destruction of standards needed to measure results – and keep public trust – is long past becoming a crisis.

A chain of endless concessions

Vladimir Bukovsky tells Konstantin Preobrazhensky that Kremlin policy is to push America away from Europe. He also sees a cultural disconnect on endless concessions.

From Frontpagemag.com:

The Americans do not understand who they are dealing with when it comes to Russia. They are dealing with the KGB and for KGB people you are either an enemy or their agent. They do not acknowledge other kind of human relations. All their methods of communication are recruitment, compromising etc. They do not acknowledge mere friendship.

On the contrary, the Western people are always trying to find some compromise which is natural in Western culture. But for the KGB it is not natural at all. They understand it as weakness and a retreat and it only facilitates their requirements.

Really, is this so difficult to understand?

Mark Steyn calls your bluff

From The Corner:

I keep getting e-mails saying, “People will reach a tipping point and they’ll no longer put up with this stuff.” I doubt it. Right now the way to bet is that once free societies will retreat incrementally, one trivial step after another, into totalitarian hell.

Ouch.

Austerity vaudeville

When you are on air three, four hours at a stretch, there are going to be some flat spots. Perhaps “I've counted, three minutes and I don't stink” is not a line for the ages, but no worries: Re-light the cigar, recite some poetry, or maybe belt out a folk song. An IBD editorial, Showering With Hugo, looks at austerity vaudeville, Chavez-style:

Tyranny: In his latest absurdity, Venezuela's Hugo Chavez is dictating three-minute showers and no singing. Claiming it's to save water, his act is nothing but a "green" fig leaf to cover his socialist mismanagement.

'Some people sing in the shower, in the shower half an hour," Chavez ranted on his Sunday TV show "Alo Presidente." "No, kids. Three minutes is more than enough. I've counted, three minutes and I don't stink." His words echo those of environmental extremists, blaming shopping malls, El Nino, tourists and sabotage. But the water and electricity shortages are his own doing, and the scope of the crisis signals the systemic shortages of socialism.

There shouldn't be any shortages at all. Green, jungly Venezuela, with some of the world's most spectacular waterfalls, also boasts some of the best hydroelectric capacity in all Latin America.

His subjects are glad he used Dial, but I bet they'd be real glad if he'd would get off their radio dial.

Michael Moore on healthy living

In Michael Moore's Action Plan: 15 Things Every American Can Do Right Now, the filmmaker has some recommendations for his “true and trusted fellow travelers.” It's uninspiring -- he should stick to propaganda films. But there amidst exhortations for socialized medicine, unionizing your workplace, and picketing your bank, was the following, which jumped out as, um, uncharacteristic:

Eat fruits and vegetables and cut down on anything that has sugar, high fructose corn syrup, white flour or too much sodium (salt) in it (and, as Michael Pollan says, "Eat (real) food, not too much, mostly plants"). Get seven hours of sleep each night and take the time to read a book a month. I know this sounds like I've turned into your grandma, but, dammit, take a good hard look at Granny -- she's fit, she's rested and she knows the names of both of her U.S. Senators without having to Google them. We might do well to listen to her. If we don't put our own "oxygen mask" on first (as they say on the airplane), we will be of no use to the rest of the nation in enacting any of this action plan!

Well scoff if you like – and in fairness, the man is not a recognized fitness authority – but as for me, I now assign as much weight to his views on healthy living as I do to his views on economics.

A New Low for Hollywood

I cancelled cable a year ago. Curb Your Enthusiasm Season 7 Episode 6 on HBO reminds me why that was a wise decision. In this episode Seinfeld producer and comedian Larry David, shows what he thinks about Christians by splashing his own urine on a painting on Jesus Christ. Yes, you read that correctly: In 2009 Hollywood, they're okay with this kind of sleazy anti-Christian propaganda.

If you don’t appreciate Hollywood mocking Christ, why not cancel cable and tell them why. I wish I could, but I already have.

Clear a path

You know how those drunk-on-a-motorized-La-Z-Boy stories always end. Assume that’s what happened. Except this impounded and soon to be auctioned throne is not just another motorized chair with stereo, headlights, parachute, and lawnmower engine. No, this upholstered beauty brings a nitrous oxide (N₂O) system to the battle with inertia, blasting away from any notion of restraint at 20 mph. No telling what nitrous would do to a stock mower engine (Maybe it’s for the pilot.), but there you go.

Crackberry Companion

The fastest way to get busted for a BlackBerry Crackberry is to attempt to conceal its use. Boring bosses in particular are hyper-alert and will bust you down for that first furtive glance under the conference table. Now there is a solution for all you connectivity addicts: a Crackberry companion wristwatch (not made by RIM) that lets you know when your BlackBerry has something urgent for you.

From the inPulse website:

Using your inPulse, a glance down at your wrist is all it takes to discreetly check recently received email and SMS messages. New messages are pushed directly to your inPulse. Instead of pulling out your phone to figure out who keeps texting you, just keep an eye on your inPulse.

Great concept, but the problem lies with the execution. For stealth, you would want a simple form factor, but this wrist appliance is honkin’ big, like one of those giant leather wristband seventies watches favored by ironic sideburned hipsters. Worse, it has a full-color OLED screen, so you’ll be notorious around the office as the Crackberry watch guy. Which means every time you so much as look in the general direction of your watch-side arm, you’ll be so, so busted -- even if you're just checking the time.

Brains won’t stay, drain away

The brain drain is even worse than you think.

Vivek Wadhwa writes in TechCrunch:

These were a self-selected group, people who had already left. But what about the future, the immigrants presently studying at U.S. institutions of higher learning? We surveyed 1,224 foreign students from dozens of nations who are currently studying at U.S. universities or who graduated in 2008. The majority told us that they didn’t think that the U.S. was the best place for their professional careers and they planned to return home. Only 6 percent of Indian, 10 percent of Chinese, and 15 percent of European students planned to settle in the U.S.

Many students wanted to stay for a few years after graduation if given a choice—58% of Indians, 54% of Chinese, and 40% of Europeans. But they see the future being brighter back home. Only 7% of Chinese students, 9% of European students, and 25% of Indian students believe that the best days of the U.S. economy lie ahead. Conversely, 74% of Chinese students and 86% of Indian students believe that the best days for their home country’s economy lie ahead. National Science Foundation studies have shown that the “5 year stay rates” for Chinese and Indians science and engineering PhD’s have historically been around 92 % and 85% respectively (NSF tracks these 5 years at a time, and the vast majority stay permanently). So something has clearly changed.

The plunging dollar won’t help this either, near-term. Hat tip: Glenn Reynolds.

Now hand me that 3 iron

Obama had harsh words for the worst suicide bombings in Iraq in two years: "I strongly condemn these outrageous attacks on the Iraqi people, and send my deepest condolences to those who have lost loved ones." 

In other news, President Obama has played 24 rounds of golf since inauguration, which matches his predecessor’s totals for two terms in office.

Default is yours

People bought South Florida real estate thinking it could only go up. Now, after months of watching the value of their condominiums and houses slide, buyers who can afford to make payments are making the decision to walk away from underwater mortgages. The “strategic default” has risen from single-digits a couple of years ago to 28 percent of all defaults in certain counties.

The stigma of foreclosure clearly isn't what it once was, and you have to believe the bad PR banks have gotten recently makes people more willing to stick it to them.

From the Palm Beach Post (Oct. 25).

****

Andres Duque thought he got a real steal when he paid $125,000 for his Little Haiti condo. But four years later, similar units are selling for $35,000 and even less.

And so, faced with the prospect of being underwater on his mortgage — owing more than the unit is worth — for the next 20 years, Duque, 33, made what seemed to him like a rational choice: to cut and run.

He stopped paying the mortgage, basically forcing the lender to take the condo off his hands through foreclosure.

``I was able to pay off all my credit cards,'' said Duque, who is biding his time in the condo, waiting until they come and evict him. ``In a way, it was the best thing that happened to me because all my income is not being consumed by this freaking monster of a debt.''

Link: http://www.palmbeachpost.com/business/content/state/epaper/2009/10/25/1025default.html

Off-again, on-again bank failures

Time ran out for seven banks on Friday, bringing the number of bank failures to 106 for 2009.  This is the highest since the 122 recorded in 1992, but still deceptively low.  A lack of funding and difficulty finding willing buyers has dictated a go-slow approach at the FDIC, and led to confusing signals from to the off-again, on-again nature of the bank closures.  The FDIC also hopes its pool of problem banks will dwindle if a recovery can take hold.

Of course, there is no economic recovery, and the next wave of crises from commercial loan losses will make clear that the subprime fiasco was just the beginning of a much broader and deeper banking problem.

This is from MARKETWATCH (Oct. 23).

****

NEW YORK (MarketWatch) -- Seven more banks failed Friday, pushing the 2009 total to 106 and marking the first year since 1992 that at least 100 have gone under.

Experts suggest we could be no more than 10% of the way through this cycle of bank collapses, which is sure to be the worst run of closures since the Great Depression.

LINK: http://www.marketwatch.com/story/bank-failures-hit-100-for-year-2009-10-23

Is this the droid you seek?

If having a decent network matters more than cool factor, it probably doesn't get any better than the new Motorola phone running Android 2.0 OS. The Boy Genius Report has a first look.

The key question is not whether the device will prove better than the iPhone (don't hold your breath), but whether iPhone + AT&T + many apps is better than Droid + Verizon + fewer apps. The definitive iPhone killer may appear one day, but it's looking more like competitors will close on and then bypass Apple in 100 small increments.

The evil maid attack

Globetrotters take note: That whole-disk encryption may provide peace of mind about theft of your laptop, but think twice about leaving it lying around your hotel room. Bruce Schneier explains the "Evil Maid" attack:

Step 1: Attacker gains access to your shut-down computer and boots it from a separate volume. The attacker writes a hacked bootloader onto your system, then shuts it down.

Step 2: You boot your computer using the attacker's hacked bootloader, entering your encryption key. Once the disk is unlocked, the hacked bootloader does its mischief. It might install malware to capture the key and send it over the Internet somewhere, or store it in some location on the disk to be retrieved later, or whatever.

You can see why it's called the "evil maid" attack; a likely scenario is that you leave your encrypted computer in your hotel room when you go out to dinner, and the maid sneaks in and installs the hacked bootloader. The same maid could even sneak back the next night and erase any traces of her actions.

Read the whole article, especially if you travel.