Ted Cruz is Awesome! IX

Look Up, America

Think the above meme is over-the-top?  Think again.

Remember the IRS scandal?  The one where the Obama IRS was (and still is) targeting conservative groups and persecuting them with exemption delays, audits, and ridiculous document requests?  Well, one of the things they required of a particular Christian group was that they reveal the content of their prayers.
  
Meanwhile, just this week in the wake of the San Bernardino terrorist attack we learned that Tashfeen Malik, the terrorist immigrant wife, had been posting jihadist material on social media but DHS had a policy that protected her privacy.  She was not an American.  She wanted to kill Americans.  Yet according to the Obama-ocracy, her imaginary right to privacy trumped the right of American citizens to continue living.

The average American knows nothing of this but can easily name every single member of the Kardashian family, and thinks it would be really neat to have a female president replace the first black president.

Maybe this is why the level of divisiveness and passion is so high for this election cycle.  Some see the headlights of a train coming, while others are mesmerized by the light gleaming off the shiny tracks.  

The Fed Finally Moves

Now that Janet Yellen and the Fed have finally gotten off the floor, it's time to review a brief history of Fed tinkering and its consequences.

Below is the Fed Funds Target Rates for the last 15 years.  (2010 -2015 = 0.0%)

During the period 2001 - 2004 the Fed lowered rates eventually down to 1% to boost a sagging economy and in response to 9/11.  This had an important side effect.  The already emerging housing bubble got a massive new injection of easy money.  The housing bubble was originated by alternative government mortgage policies dating back to the 1990s which upended thousands of years of sound lending practices.  This included mandates for Fannie and Freddie to buy the bulk of the new alternative mortgages.  Then came the Fed.  By lowering rates to historically low levels, the housing bubble was put on steroids.  Along with all the new easy Fed money came the mortgage derivative monster that Hollywood loves to focus on.  This was how the bubble got so big and so dangerous. Fed tinkering, no matter how well-meaning, played a big role.  But the real damage came when the Fed violently burst the bubble it helped create.        

Ben Bernanke became Fed Chairman February 1, 2006 when the Fed Target rate had already been raised by Alan Greenspan to 4.25% from 1%. The day Bernanke became Chairman, he raised the Target Rate to 4.5%, but he didn’t stop there. He kept raising until July 1, 2006 when the Fed Funds Target hit 5.25%. So from July 1, 2004 to July 1, 2006 the Fed raised it’s Target Rate from 1.00% to 5.25%, an increase of 425% in 24 months.

Imagine if food or gasoline went up by 425.00%! Can you picture the carnage?

What effect did all those rate increases have on the yield curve and why would that matter? Well, as most economists will tell you, nothing screams recession quite like an inverted yield curve (when long term rates are lower than short term rates).  Forcing a negative yield curve is economic poison.

In January, just before Bernanke became Chairman, the yield curve was essentially flat with a slightly positive bias, but that quickly changed. Bernanke’s first raise to 4.5%, resulted in a slightly negative yield curve and again, he kept raising the Fed Target all the way to 5.25% by July 1, 2006. By November 2006, there was a clear downward trend in yields. (see chart below).

Why did Bernanke's Fed keep raising interest rates in the midst of a housing bubble with a midterm election coming up in November 2006 and a yield curve already threatening negative by late 2005? Why did they persist and force the yield curve decidedly negative by mid 2006 thus throwing us into recession and crashing the housing market?  Only they know, but their tinkering turned a bubble into a financial crisis.  

The collapse of the housing market quickly inspired the Fed to lower once again - all the way down to zero this time.  That's where it's been for about seven years.  No President in Fed history has enjoyed an economy for his entire term boosted by 0.0% Fed funds rates as has Barack Obama.  So what side effects are we experiencing this time?

That's the funny thing about interest rates; the side effects of Fed tinkering only reveal themselves over time.  Consider this:  During the Obama presidency we have been able to borrow and print over $12 trillion including QEI, II, and III - more than every other U.S. president - combined!  We have financed that spending spree with cheap money that will not last.  When rates normalize, it will consume the federal budget in a way we have never seen before.  This government borrowing bubble will make the housing bubble seem like small potatoes in comparison.

Janet Yellen and Barack Obama hope they will be long gone when that happens.    

    

 


 

Is Islam just a Religion?

I do not take Donald Trump seriously, and have not since he entered the race.  Despite his consistent lead in the polls, I stand by what I wrote months ago :

Donald Trump is the Howard Stern of politics.  He’s a shock jock in a field of politicians who sound like boring newsreaders in comparison.  He opens his mouth and out comes ego, shameless self-promotion, outrageousness, braggadocio, and downright meanness towards his detractors.  But there are other things too which endear him to his audience.   He’s fearless, confident, unapologetic, and says things no one else has the cojones to say.   And he's entertaining.  In other words, he’s exactly like Howard Stern.  His fans are the same too.  Listen to them talk and you'll find yourself expecting them to blurt out “Baba Booey!” any second.  

Donald Trump is a serious candidate for President the same way Howard Stern was a serious candidate when he ran for Governor of New York in 1994.  Stern didn’t win.  Neither will Trump. 

      

That said, Trump does create opportunities for serious discussion as he has most recently with his seemingly extreme position on a pause in Muslims being allowed into the country.  The reason this is so controversial is that we have two definitions for Islam in the West.

If you deplore Trump's proposal, chances are you think of Islam as just another religion.  Every other religion in the world has its fanatics and orthodox observants.  Islam is no different.  Singling out a religion on any level seemingly violates the principles on which we were founded.

However, if you believe Trump's proposal deserves a fair hearing, chances are you think of Islam, particularly the Salafist variety, as a treasonous and murderous political movement inseparable from a religion.   Our constitution specifically defines treason as a crime and grants the legislature the power to deal with it accordingly.

In other words, everything hinges on one's knowledge of Islam and whether it is seen as just a religion, or as a treasonous political movement.  Neither side is crazy.  Neither side is being un-American. Neither side is morally inferior.  It is a disconnect based on different understandings of Islam.  A majority, including many Republicans from Dick Cheney to Paul Ryan, apparently define Islam as just a religion.  A minority believe that's naive.

I wonder how those whacky nut-jobs Thomas Jefferson and John Adams would see it given the recent power of Islam to project its power within our borders?

(Hat tip to The Wall Street Journal for today's "Notable & Quotable" column which featured the above Adams and Jefferson quote.)



   

Obama, Guns, Islam, and San Bernardino

In a case of galloping irony, I picked-up my newspaper today and saw two stories on page one :  The massacre by Muslims in San Bernardino, CA, and the U.S. is set to lift sanctions on Iran.

Meanwhile, Obama's message after the massacre in CA was, of course, about...gun control.

So, over a hundred billion dollars goes to the people who desire nuclear weapons, ICBMs, and chant "Death to America", and law abiding Americans have their constitutional right to self defense taken from them.

Is it any wonder some people think Donald Trump would be an improvement?  I believe my labradoodle would be an improvement!

ICYMI, this one says it all: