Scrivener.net

Clown Show updates, East and West...

In New York, some analysis of the lunatic behavior of the divided State Senate leading to the lock-up of the state government -- how all the petty factions put protecting their turf and extracting "payback" from their enemies ahead of any kind of responsible governing.

How do they imagine that they will escape accountability for this, in some future election?

Heck, they don't have to imagine it, they know they will. Key words from the story (with my emphasis)...

Yes, all of this sounds ridiculous. But key here is that lawmakers don't see any incentive to act responsibly. They know that the public rarely holds them accountable for misbehaving. By the time they're up for re-election, they figure, voters will have forgotten that they held state government hostage... [NY Post]

Not only will most voters have forgotten, but most who haven't forgotten won't care enough to do anything about it (if you are a Democrat will you vote Republican in 2010 or 2012 because Democrats closed down the government for a month in the summer of 2009?). And as to the small number who do care enough, they won't have the chance because they won't have a choice -- the state legislature is fully gerrymandered so that over 90% of legislators are guaranteed re-election.

That's why these guys are able to close down the goverment to pursue petty personal vendattas and turf wars at the cost of the citizenry -- they aren't accountable to anyone for anything.

The only consolation is, gee whiz, at least they aren't passing laws and legislating in the same way!

Meanwhile, over on the Left Coast, the great state of California finds itself paying a good number of its obligations with IOUs, instead of money, as it enters a new fiscal year with a $26 billion deficit. This after all proposals to close the deficit have been stymied by Democrats who refuse to cut spending and Republicans who refuse to increase taxes.

However, as to those obligations being paid with IOUs and money, it's interesting to see who's getting paid with what.

[] Getting IOUs: Grants to aged, blind or disabled persons; people needing temporary assistance for basic family needs, persons with developmental disablities; people in mental health treatment, small business vendors -- the needy and/or politically weak.

[] Getting cash: Legislators, legislative employees and appointees; the public employees’ retirement system; health care service payments to institutional providers (as very much opposed to the people getting IOUs); the University of California -- the very legislators and interest groups who own them behind them who've caused the crisis.

How do these legislators imagine they can escape accountability to the public for this fiasco they have created?

Well, the California state legislature is totally gerrymandered too.

Modern American politics is dominated by the doctrine that government is the problem, not the solution ... You don't have to be a liberal to realize that this is wrong-headed.
-- Paul Krugman

Don't make your woman too happy.

Teenagers assault woman's sex partner after mistaking her screams of passion for cries

The sounds of a woman having sex drew an angry crew of teenagers to her rescue after they mistakenly thought she was being assaulted.

Once in her Connecticut bedroom, one of the teens used a baseball bat to club the woman's sex partner.

Police say the incident kicked off when a 16-year-old girl heard screams coming from her mother's bedroom on June 6, and thought she was in danger.

Instead of calling the cops, the youngster went to fetch her friends ... [NYDN]

We all know that children hate to think of their parents having, um, fun, but ... "Sweetie, you have some 'splaining to do".

The New York State Senate clown show continues...



Democrats and Republicans remain deadlocked 31-31, with each refusing to do any business with the other, leaving the government paralyzed. [How we got here.]

Yesterday's high points:

[] When a Republican seeking a Coke walked through a chamber where the Democrats were meeting to get to the senate lounge, the Democrats claimed that his minute spent walking through them gave them a quorum -- and they "passed" 121 bills.

[] The law authorizing the current management structure of the New York City public school system expired at midnight. Management of the schools serving 1.1 million students has reverted to a Board of Education and 32 community school boards that haven't existed since 2002.

Law extending the current management structure of the school system has been passed by the State Assembly (Democratic), and its passage by the Senate has been urged by the Governor (a Democrat) and even by the teachers union, and 45 of the 62 senators are on record supporting it. But the Democratic senate "leaders" (if one may call them that) are blocking it ... why?

[] As to our Accidental Governor's contribution to the show...

Just after midday, Gov. Bumble called us into a room to announce good news. Enough senators -- finally! -- had joined together, after nearly a month of this Clown College on the Hudson, to pass some bills. Hooray!

But within five minutes, the Clown-in-Chief changed his mind. Right there, I witnessed the most surreal event I've ever seen in a press conference.

Gov. Bumble received a telephone call from state Sen. Frank Padavan. "He's on the phone now?" the gov asked. "I'll take the call!"

Two minutes later [after hearing about the can of Coke] Paterson came back, looking as if he'd been kicked...

"I will not sign any legislation passed," said Gov. Bumble, looking as if he desperately needed that margarita ... give this man a drink. [NY Post]

I can't wait for tomorrow's highlights!

This-'n-that


Have Obama and the Democrats finally found someone they won't bail out?


As Time, Newsweek, the New York Times, and the rest of the news-in-print industry shrivels up, The Economist thrives.


Will Governm... General Motors have more trouble in bankruptcy than Chrysler did due to its dealers?


The story of the creation of the Prius.


Papists take over the Supreme Court. If Sotomayor is confirmed, six of the nine Justices will be Catholics under the control of Rome: Sonia plus Alito, Kennedy, Scalia, Thomas, and Chief Justice Roberts. They warned us that if John Kennedy was elected President this would happen, yet hardly anybody has noticed. The Pope operates in insidious ways.

An odd thing about Keynesian deficit spending to support the economy.

Keynes did not support deficit spending to support the economy. Ever. At least if one can believe the Palgrave encyclopedia of economics [1998 edition] ...

"Despite the fact that the economics of deficit finance began with the Keynesian Revolution, it has been conclusively established by Kregel (1985) that Keynes himself did not ever directly recommend government deficits as a tool of stabilization policy. Keynes played a conservative political hand and viewed budget deficits with a 'clearly enunciated lack of enthusiasm'."

Keynes advocated government spending in some circumstances to strengthen an economy -- but not deficit spending. Noted previously here was the fact that in 1937, when the unemployment rate in Britian was 11%, he opposed a government spending stimulus program.

What happened? Some of Keynes' first-generation disciples observed that the calendar year is an arbitrary time period for judging "budget balance" and concluded, not entirely unreasonably, that using the full length of the business cycle would be better -- so a deficit during one stretch of a multi-year cycle would be offset by surpluses during others, creating balance overall.

Then Keynes's second-generation disciples came along...

How much does a "rubber room" of NYC public school teachers cost?

More than $65 million a year...

637 AT SCHOOLS GET 'IDLE'-IZED
43 SEX RAPS, 45 'INCOMPETENTS'

New York City high school teacher George Addison has pocketed almost $500,000 in taxpayer-funded paychecks over the last six years -- and hasn't taught a single class. Accused of fondling a 15-year-old special-ed pupil, the veteran computer teacher has been twiddling his thumbs in a "rubber room" since 2003 ...

Addison, who has also been investigated twice for corporal punishment during his 12-year career, collects a $79,531-per-year salary for sitting in one of the city's seven "teacher reassignment centers" -- or "rubber rooms" -- while he waits for his case to wind through the backlogged disciplinary system.

Other school employees have languished even longer in the Department of Education's purgatory, which costs taxpayers $65 million annually just for staffers' salaries ... [not including of the cost of one of the world's greatest benefit-and-retirement packages that these teachers keep "earning".]

Rubber-room denizens include 43 employees charged with sex-related offenses, including 14 for relationships with students, the data shows. Another 140 were accused of employee misconduct, 117 of corporal punishment and 45 for incompetence. More than 100 were banished after being arrested.

The DOE can suspend a teacher's pay in rare circumstances, but most continue to collect checks...

During a typical day, rubber roomies show up at their assigned center by 8:15 a.m. They come and go outside as they please, and go home at around 3 p.m ... [NY Post]

For any who may wonder how this can be, a former NYC public school teacher explained how the entire sorry system works.

As to other news of the schools and their unions this past week...

In what the Mayor and union spun as good news, the teachers union made modest pension concessions -- but took them out of the skin of the students by getting two more days added to their paid summer vacation, the days just before the opening of school when they prepared for classes.

Stunned principals reacted with horror Tuesday after the city agreed to have teachers return from summer break on the same day as students ....

"Do parents want their children coming into rooms where furniture is stacked up and materials packed away?" said Principal Elizabeth Phillips at Public School 321 in Brooklyn. ... Principals union President Ernest Logan said he was "dismayed" after fielding calls from angry principals "all day long."...

United Federation of Teachers President Randi Weingarten said she was not to blame ... [NYDN, more details]

Even the NY Times, which normally resides in the schools unions' pocket, stuck its head out far enough to run a story including criticism of the deal. Although that might be explained by the reaction of the principals' union, "The principals’ union protest set off a spat with the 228,000-member teachers’ union", which left the Times to cope with a conflict of unions. (Yes, the NYC public schools management is unionized, one more part of the problem.)

But the teachers union showed it can at least teach somebody...

UFT TEACHES POL A LESSON

It's payback time for the powerful UFT. The United Federation of Teachers blocked City Councilman Simcha Felder (D-Brooklyn) from receiving an "early endorsement" from the 1.3 million-member Central Labor Council to get even with him for exposing the union's arm-twisting during a City Hall hearing on charter schools, sources said.

Felder disclosed that union reps brazenly distributed cue cards with prepared questions that legislators were supposed to ask at the April hearing. Union witnesses got the softball questions. The tough queries went to administration officials ...

"To me, it's a badge of honor," Felder said. "I think a lot of the leadership in the unions are ripping off members for their own benefit, and I don't want to have anything to do with it."... [NY Post]

Seen around and about...


Pirate hunts of the rich and famous:

Wealthy punters pay £3,500 per day to patrol the most dangerous waters in the world hoping to be attacked by raiders. When attacked, they retaliate with grenade launchers, machine guns and rocket launchers... [Ananova]

Dumb criminal of the week.



Think things are tough for you? Get an $11-a-day job working in hell. [via Newmark's Door]



When they have to tell you it's not hyperbole, you know it is:

"The gravity of America's health care crisis is the moral equivalent of the 19th Century's bloody conflict over slavery. This is not hyperbole..." [Firedoglake, ht: Viking Pundit]

Such cheap rhetorical excess literally makes my blood boil.



The day comes to us all when we are meant to die:

"Man Drowns After Being Thrown From Lawnmower" [KETV, Omaha]

In light of which, while I don't run this blog to repeat the gratuitously nasty, it can be fun.

It's a terrible time to buy US Savings Bonds. Will there ever be a good time again?

I doubt it. I mean, in case you were thinking about buying some, be warned. Don't.

"Regular" Series EE bonds being issued today pay all of 0.7% interest.

Inflation-adjusted Series I bonds being issued today pay a nifty 0.0% through this coming October 31. This amount is comprised of an almost as nifty 0.1% real permanent interest rate to be paid over the life of the bond, plus an additional amount to account for inflation that is adjusted every six months. (In the case of deflation this later amount can reduce the total combined rate to, but not below, 0.0% -- thus the current rate).

The thing about Savings Bonds is that they usually are held as long-term investments -- people give them as gifts to newborns to provide a figurative start on college savings, grandma hides a shoebox full of them in a clost to feel secure. And so on.

They aren't marketable, and if redeemed within five years there's a penalty. But these rates are awful for long-term investments. They embody Warren Buffett's warning against being invested in long-term US bonds, writ small.

When the recession ends, and a normal economy resumes, it is hard to imagine that the 0.7% rate on today's Series EE bonds will come anywhwere close to even matching inflation, much less pay any real interest return. So they will be pure money losers, long-term. Possibly serious money losers: if inflation averages only 2.5% over the next 20 years, an EE bond bought today will lose 30% of its value by its maturity date.

(Even today, bank CDs guaranteed by the government with five year maturities, the shortest penalty-free holding period for a savings bond, pay a bit over 3% -- more than four times what EE bonds pay.)

Somewhat less bad are Series I bonds, if tradition or whatever demands that you make someone a gift of Savings Bonds. At least I bonds won't actually lose value, due to their inflation protection. Though with a 0.1% real interest rate, when they mature 20 year from now they will be worth only a real $1.02 for every $1.00 invested in them today, so your gift isn't going to make anyone rich.

The base interest rates paid on newly issued EE and I bonds is reset every six months and will change this coming November 1, but that won't really change anything of substance. Savings Bonds have simply become a bad deal compared to the alternatives.

There is speculation that the Treasury is moving towards eliminating Savings Bonds altogether, as it recently dropped the limit on annual purchases to $5,000 from $30,000. At the same time it has lowered the minimum purchase price for regular US bonds, notes and T-bills to only $100, and made it easy to purchase them online with no fees or commissions at Treasury Direct. (As recently as 1998 the minimum purchase of T-bills was $10,000).

Regular US bonds, notes and bills get better rates than Savings Bonds and are the most marketable of all securities at all times (with no penalty) so they dominate Savings Bonds two ways right there. Really, you should probably never buy a Savings Bond ever again.

About the only meaningful advantage Savings Bonds have left is that you can still buy them in paper form, stick them in an envelope and hand them to someone as a gift. But then that someone can lose or forget them. (As I can attest, regarding all the bonds I got handed for my kids.) While regular Treasury securities today are recorded in electronic format.

But you can easily make a gift of a regular T-bond, note or bill, write a note saying you did, stick that in an evelope, and everybody involved will be better off.

Savings Bonds had their run -- in an era when the Treasury issued regular bonds in denominations up to $500 million each (about $4 billion or more in today's money) to save itself the trouble and cost of processing interest coupons physically clipped and sent to it from half a million $1,000 bonds for every one $500 million bond issued.

But that era is over -- one more example of the Internet changing everything.

2011 model Chrysler van being road tested in Europe?



"The annual Which? Car survey is the largest survey of its kind in the U.K., and it is conducted by a publication that, like Consumer Reports, does not accept advertising and delivers the straight facts from its findings ...

"For its reliability study, Which? Car looks at models up to eight years old, thereby often reporting on years of experience with a given vehicle. Their survey tallies serious breakdowns, unscheduled repairs, and minor problems...

"Among the 38 brands featured in Which? Car, Fiat ranked 35th, followed by Renault, Land Rover, and Chrysler/Dodge ... Fiat, Chrysler, and Dodge are categorized as 'Very poor.'

"In total, Fiat, Chrysler, and Dodge provide similar reliability, and it isn’t good ..."
-- Consumer Reports.

Will having the government run health care really reduce its cost?

What does history say about the effect on cost of government control and influence over the medical system up to now?

A look at the data is instructive. The effect of tax exemption and the enactment of Medicare and Medicaid on rising medical costs from 1946 to now is clear. According to my estimates, the two together accounted for nearly 60 percent of the total increase in cost. Tax exemption alone accounted for one-third of the increase in cost; Medicare and Medicaid, one-quarter ... [Milton Friedman]

Read the whole thing.

"Poll results mean what I say they mean!"

Ezra Klein says that the latest poll results find that national health care is very popular with the public, so failing to enact it would be "resolutely, aggressively, anti-democratic" -- a denial of our responsibility in a democracy.

Paul Krugman says that the latest poll results find that the public prefers reducing the deficit over increasing government spending. But the voters "don’t know much" about policy, ”So the moral for Obama is, of course, to ignore this poll" -- anything else would be a denial of our responsibility in a democracy.

Discuss.

(H/T: John Henke)

Obama, Dems, environmentalists fold to farmers on the "cow gas" issue.

Or, another excellent Pigouvian tax bites the dust.

The politics....

Angered by White House decisions on everything from greenhouse gases to car dealerships, congressional Democrats from rural districts are threatening to revolt against parts of President Barack Obama’s ambitious first-year agenda. “They don’t get rural America,” said Rep. Dennis Cardoza, a Democrat who represents California’s agriculture-rich Central Valley. “They form their views of the world in large cities.” ...

A rural revolt could hamper the administration’s ability to pass climate change and health care legislation ... In the House, rural Democrats threaten to marshal nearly 50 votes against the climate and energy bill backed by the administration.

... much of rural Democrats’ unhappiness with the new administration has focused on the EPA ... Obama’s EPA has moved forward quickly on a host of new regulations, including limits on greenhouse gas emissions that farm lobbyists say will raise costs on farmers... [Politico]

The problem...

Agriculture interests are scrambling to cover their rears -- or more precisely, those of their cattle -- from potential new regulation, as U.S. EPA closes in on a finding that could lead to new a regime on greenhouse gas emissions under the Clean Air Act.

Some agriculture groups and farm-state lawmakers are concerned the federal government could be forced to impose fees on livestock operations for the methane emissions that result from the flatulence and burps from their cows or pigs.

If EPA took this route, more than 90 percent of dairy, beef and hog operations could face fines, according to farm groups, with potential losses totaling $175 per dairy cow, $87.50 per head of beef cattle and $20 per hog ...

"If they do regulate greenhouse gases under the Clean Air Act, then they will have to do all sources, all emitters," said Sen. John Thune (R-S.D.), co-sponsor of the Senate cow tax bill. "That will include livestock because of the methane created and the greenhouse gas and carbon dioxide emissions in the atmosphere."...

Methane is a potent greenhouse gas, 20 times more effective at trapping heat than carbon dioxide, and a natural byproduct of the digestive process for cows and other livestock... [emphasis added] [E&E News]
~~~~

... the nation's 170 million cattle, sheep and pigs produces about one-quarter of the methane released in the U.S. each year, according to the Environmental Protection Agency. That makes the hoofed critters the largest source of the heat-trapping gas.... [a] contributor to global warming bigger than coal mines, landfills and sewage treatment plants ..

Research has shown that changing cattle diet and boosting efficiency — such as producing the same amount of milk and beef from a smaller herd — can result in less gas, according Frank M. Mitloehner, an associate professor at the University of California at Davis, who has studied livestock gas for 15 years.

"I don't think livestock should be ignored. Every industry has to play their role," Mitloehner said. [ AP ]

But that's the difficult solution, here's the easy one...

House appropriators approved a $10.6 billion spending bill for U.S. EPA last night, tucking in several amendments aimed at insulating agricultural interests from the reach of federal climate regulations ... [including] provisions to block EPA regulations requiring factory farms to report their greenhouse gas emissions and exempt livestock operations from possible carbon regulations.

... agriculture groups and farm-state lawmakers are concerned that if EPA moves to regulate greenhouse gases under the Clean Air Act, EPA could impose fees on livestock operations for the methane emissions that result from the flatulence and burps from their cows or pigs..

... the amendment would prohibit EPA from requiring Clean Air Act permits for carbon dioxide, methane and other greenhouse gases emitted by livestock... [ NY Times ]

So as city people get hit with global warming taxes farmers get off free -- and cow gas remains a threat to burn the world ...

Obama reconsiders his plans for America after meeting Americans at Denny's.

Fathers of the day

George Stephanopoulos, just named Father of the Year by the National Father's Day Committee, said he was certain the title would be revoked due to a recent radio broadcast from his home in which one of his daughters could be heard screaming at him, "I hate you!" ... [P.6]

From a poll, top responses....

Creepiest celebrity dad? ... Michael Jackson, 52%.

Worst famous father? ... Michael Lohan, 36%.

How much do you plan to spend on your dad's Father's Day gift? ... Nothing, 36%.

Fathers, what is the best Father's Day gift you could receive? ... Time alone, 43%.

Oh, the joy of being a dad.

The strange case of the dog that isn't barking over the $134 billion of bearer bonds.

~~
Revised: I've added a couple more possibilities to cover all the bases, and a few more thoughts, after a fun discussion with some associates.
~~

Three days ago we told the story of the detention in Italy of two Japanese nationals crossing the border into Switzerland who were found by border authorities to be carrying $134 billion in purported US bearer bonds in the false bottom of a suitcase.

Since then a very strange thing has happened: Nothing.

This story has gotten a lot of play in Europe, but US media coverage has been virtually zilch (as of when I checked Google News a couple hours ago). Even at Bloomberg, the only US news agency to file original reports in the subject, however brief, the longest piece has been an opinion column wondering how strange it is that nobody has been reporting the story.

And it is indeed strange because either...

A) The bonds are counterfeit, and this is one of the largest counterfeiting frauds in history; or

B) The bonds are real, and represent a potential earthquake-blow to the world financial system in the midst of the ongoing financial crisis, as some major government has tried to get out of US bonds and dollars in a big way, on the sly.

Isn't either of these a real story?

Moreover, on its surface this appears a case worthy of Sherlock himself, because each of the two major obvious possibilities seems, well, incredible to the point of being impossible.

[] Scamming someone into buying $134 billion of fake bearer bonds would be considerably more difficult than scamming them into buying a fake Mona Lisa. If Mona wasn't missing from the Louvre, any buyer would immediately know any copy being offered is a fake. If Mona was reported missing from the Louvre, well, it's possible a fanatic art lover might pay to buy a copy passed off as the real thing to hang in his den and admire until he dies, I guess.

But people buy US bonds for the dividends they pay and to cash them in. These bonds were issued in denominations of $500 million each. Nobody is paying for those without calling up the Fed to verify that they are real. Which is easy -- call, give the Fed the serial numbers and other descriptive information, and it replies, "No, fakes" or "Yes, real, and owned by the Chinese government to whom we are paying interest", and if you aren't buying from the central bank of China you know the bonds are either fake or hot, and you aren't going to get your money back from them. End of scam.

Moreover, who could buy $134 billion of US bonds? -- $134 billion is more than the GDP of New Zealand. Only the Chinese, Japanese and Russian governments own that much. Major governments like them are the only buyers, they all have hotlines to the Fed, and they aren't going to be scammed.

A counterfeiter would be better off producing mere millions of dollars of fake currency or of, say, $10,000 bonds that could be peddled to many buyers. How a $134 billion scam could even be conceived is ... hard to conceive.

So, Sherlock might say, eliminating that as impossible we have these possibilities ...

[] The bonds are real and were being moved by the Japanese (or Chinese) government to get out of the bubble in US bonds before it bursts, via an "under the table" trade in Switzerland for something else of value -- instead of by making market sales that would themselves bust the bond bubble in ways that could rebound against the seller (grievously!). That's an idea that in fact may make sense on its face.

But why would the Japanese government move $134 billion into Switzerland by taking the crazy risk of having a couple guys try smuggling it in a suitcase on a train reportedly full of itinerant workers, through a border crossing known for smuggling, and so subject to scrutiny by customs authorities? Wouldn't it instead use the near absolutely safe option of sending the bonds by diplomatic pouch?

Which makes us look at parties who can't use a diplomatic pouch. Maybe...

[] The bonds are fake and were sent by a "rogue" nation. It would take a government to work a deal on the order of $134 billion. And maybe, say, the North Koreans would try to pull something like this off with a third party. Yeah, they'd have to be nuts, and ignorant of how western finance works -- but they are. And the North Koreans are well known for mass counterfeiting of dollars, either to pay their own bills or as an act of economic warfare (or both) -- perhaps they decided to "go nuclear" with the option? Or maybe...

[] The bonds are real and were sent by a "non-official" person from a foreign nation. The few news stories published on all this typically say that the US stopped issuing bearer bonds in 1982. But, as I noted in my prior post, the law that ended the issuance of bearer bonds in the US contains exceptions that enables the Treasury to still issue them to foreigners.

Now imagine, hypothetically, that the Chinese government, for reasons of its own, asked that, in exchange for its continued support in financing the US deficit, the Treasury issue some of the bonds it was buying in "bearer" form, and that the Treasury did. The Chinese government still has roots in communism, is trying to make the jump from third-world to first-world in one generation, and is rife with factionalism. Suppose next that the bearer bonds wound up in the hands of an individual government functionary, and he decided to keep them under his personal control to secure his position and "influence" over the government, not to mention a well-funded retirement. Might those bonds then find themselves on their way to an anonymous safe deposit box in Switzerland?

This idea eliminates the awkward requirement of a buyer for the bonds, and offers entertaining James Bond-type story possibilities. But why would the government of nation like China ever open itself to such a risk by demanding bearer bonds, rather than registered bonds, in the first place?

Well then possibly the bonds are fake and not from a government ...

[] The bonds are fake and part of a small-money "Nigeria"-type scam. In this the scammer claims to hold some huge asset, but for some strange reason needs your help to cash it in, in the form of an advance payment of money from you, in exchange for which he promises you a share of the asset after he cashes it in. (Nigeria scams require seemingly unbelievable stupidity on the part of their victims -- but experience shows human stupidity is something one can always safely believe in.)

I guessed before that "Probably this was all some lunatic scam gone bad, a 'Nigerian' scam of insane proportions" -- primarily because it gets the dollar amount involved down to plausible levels. Making it even more likely, it turns out that this scam has been pulled with bearer bonds before. (ht: Newmark's Door)

But the idea of a Nigeria-scam still leaves plenty of questions: This scam has to be pulled on rubes, real dummies. You need a big market of people in which to find them -- the big old USA, as in the linked example, is fine! But if you were going to pull this scam using fake bearer bonds, why would you smuggle them into Switzerland, which has probably the smallest and most financially astute population outside of Liechtenstein?

It doesn't seem like anyone would take these bonds into little Switzerland unless there was someone there already committed to wanting them. Who? Moreover, with a Nigeria scam the victim wouldn't be buying the bonds, acquiring them, but would be paying money to help the scammer dispose of them. So why would the bonds be going into the country at all, instead of the victim's money going out?

And why all the secrecy after a routine Nigeria scam was busted? Shouldn't they be publicizing it as a public service, a lesson on consumer safety?

I think the five general scenarios above cover all the logical possibilities (real/fake bonds, govt/non-govt actors, etc.).

But there are two more peculiarities about this case that are odd in any scenario...

[] Nobody's been arrested(!) Multiple reports say this -- and even that the two men carrying the bonds have been released.

Yesterday the mystery deepened as an Italian blog quoted Colonel Rodolfo Mecarelli of the Como provincial finance police as saying the two men had been released. The colonel and police headquarters in Rome both declined to respond to questions from the Financial Times.

These two guys either were part of the one of the biggest counterfeiting scams in history or owe 40% of $134 billion -- that's $53.6 billion -- as the penalty under Italian law for smuggling undeclared real securities over the border ... and they've been released? (Does this suggest they have the protection of a legitimate government??)

Even if this was "merely" a Nigeria-type scam involving $134 billion of forged securities being smuggled over the border, would you expect the perps to be released and allowed to walk away?

[] The news blackout. After the initial reports from Italy, there's been virtually nothing of substance reported of any kind. Why? If the bonds are fake and this was a routine scam of some sort, why not say so and give the details? Why were the smugglers released? Who where the smugglers? The most simple fact of whether or not they were really even Japanese hasn't been confirmed.

The initial multiple reports from Italy said that the bonds if counterfeit are excellent counterfeits (although how many $500 million US bonds do local Italian police see? so how would they know?) and that US authorities have been asked to examine them and are expected to do so next week.

But today a brief statement from the Fed declared the bonds to be fake even without examining them. "Based on the photos we've seen on the Web, they're not even close to looking like a Treasury security." [WSJ] They are judging by photos on the Web? Like this?

All of this has me putting on my Holmesian deerstalker cap, and for the first time in my life seriously considering ... maybe ... conspiracy theory.

If the bonds were real and you were the US government, what would you do? I'd think...

1) Declare definitively that the bonds are "fake" (no need to even look at them) to protect the world financial order in general and the value of the US dollar and US debt in particular, then...

2) Suppress all media investigation into the genuineness of the bonds, for obvious reasons, and then, just maybe...

3) Burn the bonds! Subtract that $134 billion from the national debt. Why not? The bonds are fake, right? Is the government of Japan (or China) belatedly going to say: "No, no, the bonds are real! Hey, give them back to us! We were just trying to smuggle them onto the world's financial black markets ..."? I doubt it. Why not teach 'em a lesson and save the taxpayers some real money at the same time?

Well, I'm not quite a conspiracy theorist yet. If I was forced to wager, I'd still put my money on "Nigeria scam" as least implausible.

I don't know what the truth is -- but shouldn't any of these possibilities be a real story for the press?

Whatever went down, something happened on an historic scale: attempted fraud, smuggling, forgery, act of economic warfare, James Bond-like intrigue, Nigeria scam, something. The news blackout itself would seem to be a story.

Yet not one hound in the entire pack of the press is barking. Which seems very strange, considering all the endless inanities that the entire pack goes yap! yap! yap! yap! yapping about all the time.

It's a mystery to me.

How free is your state?

Freedom in the 50 States: An Index of Personal and Economic Freedom
-- from the Mercatus Center, George Mason University

My state ranks dead last. Some commentary on the fact.

A star to generations

A recent e-mail exchange:

"My spellchecker keeps changing Krugman to Kurgan. What's a Kurgan?"

"The Kurgan? From the Highlander films?"

Aye! Of course! Clancy Brown, best known to my generation as Kurgan, the most vile, would-be immortal villain, murderer of Sean Connery's Juan Sánchez Villa-Lobos Ramírez, mortal foe of Christopher Lambert's Highlander.



video: "Most badass scene ever"

Best known to my kids as Mr. Krabs, eccentric money-obsessed proprietor of the ocean floor's favorite burger stand!



video: It's never closing time at the Krusty Krab!

Now there's an actor with range. (Gene Hackman, eat your heart out.)

Seen around and about...


A message from GM back when it was an innovator that knew how to sell cars [at 6:15]...

"on what other car will you find the combination of all these luxury features, such as this year's front vent pane control crank, ordinarily found in only the highest priced cars"

...today how many people are old enough to even remember seeing a front vent pane window on a car?


How to read the Wall Street Journal online for free. You can't have your stuff indexed by Google and keep it locked behind a pay wall too, Rupert. (via Newmark's Door)


Dedicated professionalism quote of the day:

"I was still at the stage in my career when I was trying to work really hard and do a good job."
-- Sigourney Weaver on filming Ghostbusters.

The next financial crisis: "A major credit rating agency yesterday released a report reinforcing a negative outlook on the financial stability of the toll road industry" predicting "massive toll increases coming".


OK, now Krugman has to stop complaining about people mispronouncing his name. [.pdf]


Milton Friedman is gone, but his co-author Anna Schwartz is still with us.


Discrimination against white customers in the prices charged at the Fulton Fish Market? (via Carpe Diem)


For those who like to imagine they are racing down the slopes while sitting on the pot, from Japan of course.


An Internet classic: Blond with gasoline can.

What would one be doing with $134 billion of US bearer bonds in a suitcase (be they real or counterfeit)?

That's a question being asked in several countries today...

Japan is investigating reports two of its citizens were detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland...

The Asahi newspaper reported today Italian police found bond certificates concealed in the bottom of luggage the two individuals were carrying on a train that stopped in Chiasso, near the Swiss border, on June 3.

The undeclared bonds included 249 certificates worth $500 million each, the Asahi said, citing Italian authorities. The case was reported earlier in Italian newspapers Il Giornale and La Repubblica and by the Ansa news agency... [Bloomberg]

A story that raises interesting questions!

Multiple reports (do you read Italian?) describe these as "bearer bonds", as they pretty much would have to be. Regular US bonds have registered owners, so they can't be traded surreptitiously, and today don't even exist on paper but only as electronic bookkeeping entries, so they can't be packed in the false bottom of anything.

Bearer bonds date back to the 1800s, as a type of bond for which possession is 100% of the law. The person who possesses a bearer bond owns it, and title to it passes upon delivery to the next person. There is no registered bond owner of record. Bearer bonds are the bond world's equivalent of "cash", with the advantage that they can be issued in massive denominations -- US government bearer bonds have been issued in amounts up to $500 million. (Not exactly Montgomery Burns' trillion dollar bill, but the real world's closest thing to it.)

As such in the 20th Century bearer bonds found great use in tax evasion and money laundering. In the U.S. that largely ended in 1982 when Congress enacted the Tax Equity and Fiscal Responsibility Act, which in addition to repealing a good portion of Ronald Reagan's famous tax cuts of the previous year, also stopped federal issuance of bearer bonds and taxed new issues of corporate, state and municipal bearer bonds out of existence.

But previously issued bearer bonds are still out there, and "traditionalist" bond investors still head to their safe deposit boxes every six months to clip the coupons off them to collect their interest. The US issued bearer bonds with 30-year and 50-year maturities, so some are still around.

But $134 billion is a heck of a lot of bearer bonds to be found in one false bottom of a suitcase! The only nations that own more US debt than that are Japan, China and Russia, so if those bonds are real the guy who was carrying that suitcase is/was the United States' fourth largest creditor.

It's hard to believe such a load of bonds can be real -- but it's also hard to imagine any kind of scam involving so many fake bonds.

While the owners of US bearer bonds are unregistered, the bonds themselves are easy to check out by calling the US Treasury with their serial numbers and asking about them. Is anybody buying $134 billion of bonds not going to do that? Even if getting a big discount on the purchase price? I mean, this is not unloading a suitcase of freshly printed $20s. It seems unimaginable that anyone would take them without verifying them. (Yes, "there's a sucker born every minute", but that would be one special kind of $134 billion sucker!)

On the other hand, could the bonds possibly be real? In that case there's no problem verifing them, they have the value of real money. But where could that much money possibly have come from?

There was a loophole in that law of 1982, TEFRA's anti-bearer bond provisions were aimed at bonds issued domestically -- there were exceptions that enabled bearer bonds to still be issued to foreigners.

Has the Treasury quitely been issuing bearer bonds to the Japanese, in response to some "special request", to fund the US deficit? And if the Japanese Ministry of Finance one day found $134 billion of bonds missing, would it let anybody know? "Oooops! Hey, has anybody out there seen...?"

I have no idea. What would you be doing with $134 billion of bearer bonds (real or fake) in a suitcase?

Suicides



by Alan Cedeno