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Ok, I’m sorry. That was shamelessly provocative.

But the Club for Growth certainly does seem to have come out in favor of a new gold standard:

If you want to understand how concern about an unstable dollar could cause a recession, imagine if tomorrow the U.S. Bureau of Standards announced that it was “floating” the foot. Instead of being fixed at 0.3048 meters, the length of the foot would henceforth be set by “the market”. This would impact not only economic arrangements based upon length (property lines, lumber sold by the foot), but also every transaction involving area (flooring is sold by the square foot) and volume (“the gallon” is legally defined as 231 cubic inches).

Even before there was any change in the market length of the foot, there would be a massive redirection of economic energies and focus. Executives would turn their attention from production, trade, and investment to protecting their interests from possible changes in the value of the foot. Transactions would be delayed or cancelled. Just the existence of the possibility that the foot could change in length would cause economic chaos.

Just as “the foot” is our basic unit of length, “the dollar” is our fundamental unit of market value. The smooth, efficient operation of the economy depends upon stable units of measure. Unfortunately, the dollar has become highly unstable.

The underlying problem appears to be intellectual confusion between “money” and “capital”. Because the Fed is both the monetary authority and a bank (“the lender of last resort”), it deals with both. Unfortunately, right now there seems to be considerable confusion between the Fed’s two roles.

Can the dollar be saved? Of course it can.

The Fed should announce that it is abandoning the targeting of the Fed Funds rate and will henceforth express its monetary policy in the form of a target range for the COMEX price of gold. It should further announce that it will use Open Market operations to force the price of gold down until it is trading in a range of $505 maximum, $500 minimum.

While the dollar is being stabilized, the Fed can use its capabilities as a bank to relieve any strains that might appear in the banking system. It would do this by selling government bonds and buying other types of financial assets from whatever institutions needed liquidity. The Fed is already doing this to help deal with the fallout from the “sub-prime” debacle.

I humbly predict that this approach would cause gold prices to plummet, the dollar to soar, interest rates to plunge, talk of recession to vanish, the monetary base to expand, and speculators to file for bankruptcy. It would be fun to watch.

Louis R. Woodhill, an engineer and software entrepreneur, is on the Leadership Council of the Club for Growth.

The “floating the foot” analogy is great.

In any case, fortunately for gold bug investors such as yours truly, following a $500/oz gold prescription would require an acceptance of 15 years of failed inflation bookkeeping, an acknowledgment of higher prior inflation (thus wringing another round of entitlement spending hikes from the federal government), and a cast-iron stomach to ride out a 1982-style recession.

It would also require Bernanke to repudiate a professional lifetime.

Federal Reserve hawkishness is not on the horizon–yet.

The WSJ has a predictable, but nonetheless highly worthy editorial as well:

We’re All Keynesians Now
January 18, 2008; Page A12

So famously declared Richard Nixon back in 1971, in what we thought was a different economic era. But after yesterday, we’re not sure what decade we’re in. With Federal Reserve Chairman Ben Bernanke and President Bush both endorsing temporary tax cuts and more federal spending as “fiscal stimulus,” an inflation-adjusted version of Jimmy Carter’s $50 rebate can’t be far behind.

Appearing before Congress, Mr. Bernanke told Democrats what he thought they wanted to hear. The former academic economist blessed a “fiscal stimulus package,” as long as it is “explicitly temporary.” How new federal spending can be “temporary,” he didn’t say, as if a dollar collected in taxes or borrowed and then spent can be recalled.

The “temporary” line was thus a dagger aimed directly at the heart of Mr. Bush’s desire to make his tax cuts permanent. The Fed chief did aver that, “Again, I’m not taking a view one way or the other on the desirability of those long-term tax cuts being made permanent.” But of course refusing to endorse something is itself a point of view — a point Democrats were already joyfully repeating yesterday.

Instead, Mr. Bernanke embraced the explicit Keynesian notion that the government should write checks to “low and moderate income people,” who will spend it quickly and thus lift consumer demand. In the academic literature, this is called having a higher “marginal propensity to consume” than the more affluent, who tend to save more.

We’re all for putting more money in the hands of the poor and moderate earners, especially via stronger economic growth that will give them better paying jobs. But the $250 or $500 one-time rebate check they may now receive has to come from somewhere. The feds will pay for it either by taxing or borrowing from someone else, and those people will have that much less to spend or invest themselves. We are thus supposed to believe it is “stimulating” to take money from one pocket and hand it to another.

To put it another way, when the government calculates gross domestic product, it expressly omits transfer payments. It does so because GDP is the total of goods and services produced in the economy, and transfer payments produce no goods and services. The poor will spend those payments on something, but the amount they thus “inject” into the economy will be offset by whatever the government has to tax or borrow to fund the transfers. No wonder stocks sold off yesterday after Mr. Bernanke endorsed this 1970s’ economic show.

A fiscal stimulus that really stimulates would change incentives, and do so permanently so workers and investors can know what to expect and take risks accordingly. One problem with the increasingly “temporary” nature of the Bush tax cuts is that they are beginning to introduce new political risk into economic decisions. Though they expire in 2010, everyone understands that a new President and Congress could act to raise taxes as soon as next year. Mr. Bernanke could have educated the public about this business expectations problem, but then Democrats would have been upset.

And Mr. Bernanke has his own political problems — namely Congressional and Wall Street demands that he rescue mortgage assets by easing money even further, despite an already weak dollar and Wednesday’s December inflation report that prices rose 4.1% in 2007. Yes, “core” inflation rose only 2.4%, but don’t tell that to Americans who are paying the higher food and energy prices that the Fed excludes from “core” readings. As the nearby table with recent polling results shows, three of the four main economic issues cited by Americans are price-related. The public thinks we have an inflation problem even if the Fed doesn’t.

Mr. Bernanke can expect to get pressure no matter what he does, and perhaps he figured the way to get more monetary running room was to give Congress what it wants on spending. If so, it doesn’t inspire much trust in us that he can hold fast on monetary policy either. And speaking of the 1970s, what markets may really fear is that we are entering another period of “stagflation,” slower growth with rising prices, and without political or economic leaders who understand what to do about it.

One truth that Mr. Bernanke did speak yesterday is that it is a mistake to rely on monetary policy alone to spur economic growth. It’s a shame, then, that his testimony makes it that much less likely that we’ll get any genuine “stimulus” from fiscal policy.

Bush’s 2003 capital-gains tax cut was by far the best domestic policy initiative of his term. Almost any intellectually honest economist would agree with the principle that capital-gains taxes are extremely toxic relative to the revenue they provide. Then again, Bernanke is campaigning for re-appointment by a Democratic government.

Bush never did well with bureaucratic appointments.

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Maybe I’m a narcissist, but I have been fascinated by the past six months’ events’ influence upon my macroeconomic outlook. I migrated from a fairly “mainstream institutionalist” perspective — the first principle that national economic institutions are, in aggregate, trustworthy and beneficent influences — to the heterodoxic badlands of Ron Paul, John Williams (Shadow Stats), Barry Ritholtz, and various other current Wall Street and Chicago professionals.

The Fed’s “play it by ear” approach to the credit mess tipped me over the edge. The vindication of the anti-institutionalists has personally informed my worldview to an enormous extent, and who also taught me that feral distrust of “mainstream” “institutions” is not confined to Krugerrand-clutching goldbugs and washed-up anarcho-leftists; that anti-institutionalism is intellectually respectable.

(I am not comfortable taking cues from other people, let alone admitting that I do on a particular subject, but in the last few months I have been blessed with the acquaintances of some very smart, experienced people.)

So, you should know, if you don’t already, that my level of trust in US institutions lies somewhere between “infinitesimal” and “nonexistent.” Fasten your seat belts and prepare to be kooked.

My economic/ currency/ trading recommendations of the past several months have performed outstandingly well. Gold in particular, but also currencies. With oil, I have not been very successful. I agree with Stratfor that geopolitical volatility has been an important driver of oil prices, and until a critical mass of oil is mined in Alberta and other geopolitically tranquil areas of the globe (Colorado and Montana shale oil; Brazil; etc) oil will remain unpredictable.

My core recommendations of the past several months did not change until the middle of December: short the dollar, long the euro, short the sterling, long gold, long commodities in general. The sterling was the only one that went directly against me for most of that time, and it has plunged recently, finally coming in line with my prediction. For a while now, I have figured that recent sterling/ UK outperformance has been a function of Russian oligarchs’ inflows more than anything else. There’s nothing about the UK’s macroeconomic profile (colossal trade deficit, gargantuan public sector, high debt as a percentage of GDP, Gordon Brown running the Bank of England’s credibility into the ground over Northern Rock) to inspire any degree of confidence whatsoever. In fact, Northern Rock proved the turning point for the British pound.

I flip-flopped on the dollar in early December, and the dollar did rally a bit, but it’s on its way down again, significantly earlier than I initially expected.

I do not expect the balance of American trade to improve much more more than it already has. The vast majority of the US trade deficit lies with China — whose currency becomes more undervalued by the day, as the yuan’s peg to the declining dollar drags the yuan lower than its “crawling band” peg allows the yuan to appreciate — and the oil exporters. As long as China’s insane monetary policy continues, oil demand will continue to outstrip supply, regardless of the infinite abundance of $45/bbl oil in Alberta and Colorado and Montana.

If the Chinese had a remotely long-term time horizon, they would have floated the yuan years ago. Why would they change their minds now, when the alternative outcomes are exponentially more painful than they were even three years ago? I don’t see a genuine “maxi-revaluation” as likely without being forced by massive inflation-driven unrest.

The similarities between the Chinese Communist elite and the Guomindang Nationalists of 60 years ago are amazing to behold. Somehow, regardless of the original ideology of the revolutionaries, the relationship between Chinese peasant and Chinese elite always becomes more and more exploitative up to and including nationwide revolution. There is usually an external catalyst, but the trend remains the same. Whether it is the CCP of today, the CCP of 1989, the Nationalists of the 1930’s, the Boxer/ foreign/ Yuan Shikai interregnum of 1895-1911, or the Taiping Rebellion of the 1850’s, there exists an uncanny supercycle in Chinese history wherein Chinese elites intermediate ruthlessly exploitative relationships between subjects and foreigners, to the enormous profit of all connected players — except for Chinese peasants. Eventually, the Chinese peasantry tires of the exploitation, pollution, and privation throughout the country, to the benefit of provincial elites, Beijing elites, and foreigners. And then the peasants destroy, and destroy indiscriminately.

All the way across the Pacific, I remain schizophrenic with regards to Bernanke. Bernanke has left a long paper trail leading to his favorite meme, “the global savings glut.” The “savings glut” of today is overwhelmingly centered on China, Japan, and the Gulf oil sheikhs.

If you think there’s a savings glut, that means you think there’s a consumption deficit. Which means you will probably depreciate the dollar until the exporter central banks throw in the towel.

If I were confident that that were Bernanke’s strategy, I would be much less critical of him. However, the Fed has engaged in many other actions — the pathetically failed M-LEC, the “Term Auction Facility” (identical in form to the M-LEC, but operated by the Fed itself), the repo injections, the FHLB‘s $220 billion discount-note dump (which the Fed knows about, in the unlikely event that it doesn’t approve of it), the timing of the Fed discount cut mere hours before the end of August to ruin options bears, and any number of other actions which run completely contrary to market efficiency. The Fed has exuded a malevolently “get back at the bears” streak throughout its post-July behavior.

The Fed has also suffered from other ideological influences which I believe will be very harmful. One of them, supposedly, is Athanasios Orphanides, who is now the governor of the Bank of Cyprus and a dove on the ECB. His basic thesis is that central banks should wait until inflation expectations become significantly unmoored before raising interest rates, margin requirements, and associated economic brakes. I haven’t studied his research in depth, but on a gut level, his thesis strikes me as insane: it’s exactly analogous to a bank owner saying, “We’ll wait until we start to see a run on the bank before we increase our bank reserves.” It never works, and when the prescribed action is taken, it only panics outsiders more, causing the fission of market confidence to accelerate.

Furthermore, I think the Fed has systematically underestimated CPI for years in both intentional and unintentional ways. Intentionally, there’s the whole “hedonic adjustment” con: 10% more expensive gas from a new ethanol mandate doesn’t get counted in inflation statistics, because our air is so much cleaner (yeah, right) from that new ethanol mandate. Not as intentionally, asset price inflation simply isn’t counted in inflation statistics. When houses soar in value, that’s awesome for the economy, and indicative of growth; but when housing (or any other major asset class) prices deflate, the Fed cuts interest rates massively. If inflating asset prices are not treated as inflationary, but plunging asset prices are, that adds up to a lot of systemic inflation which the ‘system’ ignores.

I recommend these two primers by John “Shadow Stats” Williams for anyone interested in vagaries of government methodology. I am not as bearish as John Williams, but I do think “real” inflation, to the extent that it can be measured, exceeds the government’s measures by 2-3 percent per year.

It’s still impossible to predicate a financial career, or financial decisions in general, on the assumption that the entire system is rotten and about to fall. However, it does make commodities, particularly gold, fantastic bets. Bernanke has at least two more years left as Fed chairman.

To be perfectly clear, I don’t think the economy is “staring over the cliff of Armageddon.” But I do think that the 1970’s will repeat their sorry selves until there is a drastic changing of the guard at the commanding heights of the US private economy. I don’t see that happening in the near future.

As for Mike’s question on my assessment of the US economy, there are basically two cogent ways to look at it. One perspective, the mainstream institutionalist perspective, is that things are pretty much fine. (Two months ago the institutionalists were saying that they needed deluges of taxpayer government dollars to survive the next 24 hours, but whatever.) In the longer run, the credibility of US judicial institutions, strength of the US military, and relatively capitalistic climate of the United States means that US debt will still trade at a premium to all other debt, and that the US will remain the leading magnet for global investment, recent dollar vicissitudes notwithstanding.

On the other side is a grab-bag of anti-institutionalist perspectives, from Ron Paul on the right (which happens to be exactly where I am) to Paul Krugman on the left. They are very diffuse, but intellectually at least somewhat cogent. They agree that inflation is chronically underestimated, employment is at least somewhat overestimated, the US government is massively overextended, and the commanding institutions of the American economy are much more parasitic than is commonly understood. They are not convinced by a statistic that says US GDP is $13.2 trillion, because that number does not reflect the plunge in the dollar’s purchasing power.

Organizations like Stratfor are in the business of geopolitical forecasting. Politics, to the extent that it leads economics and thus has monetary predictive power, is based upon relative changes in economic mass, not absolute changes.

By virtually any currency-adjusted basis, the United States’ relative economic mass has deteriorated drastically in the past three years. Its military commitments have increased dramatically.

I still don’t have an assessment of the US economy. I am very familiar with pessimistic rationales for the US economy, but I do not have the cultural awareness to know how foreign economies may be even more overextended than our own.

What I can say is that I have very little confidence in any commanding institutions of the American economy — the medical-industrial complex, the banking complex, the white-collar regulatory complex (government officials, accountants, and lawyers), the intellectual-property complex, the MSM, the Federal Reserve. All of them are fundamentally confiscatory, inefficient, government-protected bureaucratic complexes. I particularly don’t see the investment banks or pharmaceutical industries as very differentiable from a vanilla government bureaucracy in how much they “contribute” to the economy relative to what they take.

I believe the mainstream institutionalist perspective is myopically over-trusting of the United States’ commanding economic institutions.

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The following is a political rant.

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Fred Thompson’s campaign [sic] symbolizes how dysfunctional, incompetent, and willfully clueless the Republican Party’s governing institutions have become.

The Politico is a very biased politics news outlet, but even after cutting through the oozing contempt to the actual facts in the Politico’s article, the sheer laziness and incompetence of the Thompson campaign is jaw-dropping.

WAVERLY, Iowa — When is retail politics not retail politics? When candidates refuse to get off their big buses and go do it.

Fred Thompson rolled into this small town on the Cedar River in north-central Iowa on a giant brown bus Tuesday. He also had a van, an entourage of guys with earpieces and a press aide.

Thompson’s public schedule said: “Fred Thompson Tours Downtown Waverly and Drops by Waverly Democrat.” …

Anelia Dimitrova, the executive regional editor, greeted us in warmly and invited us to have a seat, chat and use the bathroom. She offered Mark a high-speed Internet line so he could upload some video to his website and I sat down with her for a brief interview.

She said Thompson was the first candidate to come into the paper. The paper does not endorse candidates, and maybe that is why the others have skipped it. “He’s got a lot of catching up to do,” Dimitrova said. “I think it’s a sign he is behind. I don’t think he necessarily wants to run. Bluntly, I don’t know why he is running.”

… after exchanging a few pleasantries, Thompson headed in to his meeting with Dimitrova in a conference room.

Dimitrova invited Mark and me into the interview with Thompson but the Thompson press aide refused. Dimitrova said she had no problem with us being there, but the press aide refused again.

It was no big deal. We waited for Thompson outside the conference room and after a few minutes he emerged, left the newspaper office and headed straight onto his large, brown bus.

But what happened to the “tour of downtown Waverly” that was on his schedule?

Canceled. Not going to happen. He was not going to walk the streets of Waverly in search of voters.

Instead, Thompson rode four blocks to the local fire station. Local fire stations always have captive audiences (unless there is a fire).

Inside, Thompson shook a few hands — there were only about 15 people there — and then Chief Dan McKenzie handed Thompson the chief’s fire hat so Thompson could put it on.

Thompson looked at it with a sour expression on his face.

“I’ve got a silly hat rule,” Thompson said.

In point of fact, the “silly” hat was the one Chief McKenzie wore to fires and I am guessing none of the firefighters in attendance considered it particularly silly, but Thompson was not going to put it on. He just stood there holding it and staring at it.

To save the moment, Jeri Thompson took the hat from her husband’s hands and put it on her head.

“You look cute,” Thompson said to her. She did.

Jeri took off the hat and McKenzie led the Thompsons over to a fire truck.

The chief invited Thompson to climb up behind the wheel, but Thompson said, “Naw, this is fine.” And he stood there looking at the fire truck.

Jeri once again saved the moment by engaging the chief in some actual conversation.

“How many people do you serve?” she asked.

“About 10,000,” Chief McKenzie said.

Thompson walked away from the fire truck, posed for a picture or two and the event was over. He and his entourage got on his bus and roared out of town.

Later, his press aide sent Mark and me an e-mail of explanation, though we had not asked for one.

Thompson had skipped going up and down Bremer Avenue after the newspaper meeting because, the press aide explained, “We can’t control where the newspapers are. Had it been a more ‘main-street’ type town, it would have been different.”

But Waverly is a “main-street” type town, and the newspaper office was right there on the main street of town surrounded by businesses.

The press aide also claimed that “ice and snow on the streets presented a safety issue,” but Halperin and I had no problem walking on the mostly well-shoveled avenue, both before Thompson arrived and after he left. (In fact, we went into a local store on Bremer Avenue, where there were a number of shoppers Thompson easily could have greeted.)

Later in the day, I sent an e-mail to Anelia Dimitrova, asking her about the private meeting she had with Thompson at the newspaper office.

She e-mailed me back that Thompson “was so vague that I would be hard-pressed to write a story. Simply put, there is no news peg other than he came to the newsroom with his model wife and a beehive of staffers. When I asked him specifically what he would do as prez for farmers in Bremer County, he resorted to glittering generalities.”

So the sum total of Thompson’s day in Waverly was meeting with a newspaper editor and saying nothing and then meeting about 15 people in a warm firehouse and saying nothing.

When he was supposed to go out and find voters in shops and diners, talk to them and answer their questions, he decided to skip it and get back on his luxury bus instead. …

This horse race stuff, again, is pretty much always meaningless.

However, the fact that a majority of GOP powerbrokers piled onto the Thompson bandwagon, invested their credibility in him, and apparently don’t really care that their investment has been a complete disaster/ that they look like total idiots, is all totally emblematic of the entitled laziness within the Southern echelon of the party.

At the beginning of the Thompson “surge” in, oh, April/May or so, when all the insidery types looked at each other and said “WTF?”, a favored conspiracy theory among conservative circles was that Thompson was a pure head fake to corral conservative support, before endorsing McCain at the end. Judging by Thompson’s subsequent “performance,” you can’t help but wonder. Thompson could have gotten the vast majority of Huckabee’s current (soft) support if he’d tried at all.

Over the years I used to spill a lot of ink in support for conservative principles and Republican politics, but those who care about the future of conservatism should vote for Ron Paul until the current GOP elite is destroyed. For that to happen, a second electoral bloodletting (worse than 2006) is not a probability, but a necessity.

It’s not a Bush thing, either. Anybody who has objectively watched what is actually going on in the Mideast (i.e. reads more informed sources than the New York Times, which is literally 12-18 months behind the curve when it isn’t actively undermining the war effort) knows that Bush is playing an infinitely more sophisticated, and dare I say occasionally artful, chess game in the Mideast than the mainstream morons will ever credit him for. Unfortunately, Bush’s foreign preoccupation has prevented him from minding the domestic corruption spiral which has hijacked the Republican professional elite.

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Two weeks ago I yelled myself hoarse, temporarily, over the silent bailout of the US mortgage industry by the Federal Home Loan Banks. Then I gave up. Luckily, the FT found it later.

It is reporting like this which gives me hope for the MSM (UK MSM at least).

Bank co-ops keep US afloat

By Krishna Guha in Washington, Saskia Scholtes in New,York and Gillian Tett in London

Published: December 12 2007 02:00 | Last updated: December 12 2007 02:00

A little-known network of government-sponsored bank co-operatives founded during the Great Depression is playing a critical role keeping the private sector US mortgage industry open for business – and some mortgage lenders out of financial trouble – in spite of the brutal slump in the housing sector.

The Federal Home Loan Banks are pumping hundreds of billions of dollars into the mortgage industry in the form of loans against mortgage collateral at a time when purely private sources of finance are offered only at punitive terms for many lenders.

In doing so they have cushioned the impact of the credit squeeze and ensured that mortgage lending in the US has not come to a sudden stop.

The scale of the cash infusion by the FHLBs vastly exceeds the few billion dollars of cash lent to banks by the Federal Reserve through its direct lending facility.

Indeed some officials privately admit that the FHLBs have, in effect, replaced the US central bank as the lender of last resort for the financial system in the credit crisis.

By making vast amounts of cash available on a routine basis against a wide range of mortgage securities, with none of the stigma associated with going cap in hand to the Fed, the FHLBs have reduced the risk of a liquidity crisis at the most stressed institutions.

Analysts say this is one reason why the US has avoided a bank run of the kind that crippled Northern Rock, the crisis-hit UK mortgage lender. The FHLB move is attracting intense interest in Europe, where policymakers are waking up to the fact that the securitised market-based model of US housing finance was imported without the quasi-public safety valves of the US system.

“The Federal Home Loan Banks have been leading a minor revolution in the financing of the US commercial banking system, providing funding for mortgages when other markets have been closed,” said Steven Abrahams, head of liquid products research at Bear Stearns.

The latest Fed flow of funds data shows that FHLBs issued new loans at an unprecedented annualised rate of $746bn (€508bn, £366bn) in the third quarter, up from practically nothing in the second quarter.

FHLB loans helped depository institutions ramp up their acquisition of mortgages by almost $190bn, annualised to $312bn. This – along with record purchases of mortgages by better-known government sponsored enterprises Fannie Mae and Freddie Mac – offset a large part of the $512bn annualised decline in mortgage purchases by special investment vehicles (SIVs) conduits and other issuers of asset-backed securities at the epicentre of the crisis.

As a result, US mortgage lending continued to grow right through the credit squeeze, increasing at an annualised rate of $732bn in the third quarter.

Michael Feroli, an economist at JP Morgan, said: “It is almost like the socialisation of housing finance.

Like Fannie and Freddie, the FHLBs have no formal state guarantees but the market believes the US government would step in if the system got into trouble, allowing the FHLBs to raise funds at very low rates against an AAA credit rating, despite being very highly leveraged.

There is no statutory bar on how much money the FHLBs can raise, though there are limits on how much they can lend to any one institution. In November alone, the FHLBs (which raise funds collectively) issued $210bn in new debt.

However, experts worry about “moral hazard” – the FHLBs’ ability to issue vast amounts of debt to aid member banks with an implicit taxpayer subsidy.

The FHLBs are traditionally regarded as bearing little credit risk because their loans are overcollateralised, borrowers post de facto margin deposits, and it has priority claim in bankruptcy.

The Office of Finance says they accept as collateral only securities that have an ascertainable market value.

However, in normal times the 12 FHLBs have roughly 40 per cent of their assets in direct mortgage holdings and investments.

The mortgage holdings are in high-credit-score, low loan-to-value programmes, and virtually the entire investment portfolio is AAA rated. However, the FHLBs have made losses on investments in the past. In 2003, the New York HLB lost $183m on a bond that was originally AAA-rated but was heavily downgraded.

As their role in the financial system balloons, the FHLBs can expect to face greater scrutiny.

You know where you read it first …

P.S. For you Ron Paulites out there, this is the real scam of the US Fed/ banking/ regulating complex.

The Fed is too handcuffed by transparency rules to be truly stupid and get away with it. The real money printing has been happening at the FHLB’s.

Dolts like Feldstein have been looking solely at the ABCP market and expecting a deflation tsunami to hit any day now. Feldstein didn’t notice that the FHLB system pumped a quarter trillion dollars into the most stressed markets even as the “Siv Citi” ABCP market cratered.

As the JPMC guy said, the mortgage industry has been effectively nationalized. Of course, that’s not how it will turn out: the taxpayers will probably get stuck with 90 percent of the bill, while Countrywide et al. get spun off for some piddling amount of money, and Angelo Mozilo retires a centimillionaire.

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I have been hearing and reading buzz about how Mike Huckabee, the simpleton Arkansas governor who probably still doesn’t know what the NIE is, is the biggest threat to the GOP power-broking elite since Pat Buchanan.

That’s bogus. Huckabee just represents all the votes Fred Thompson could have gotten, had Thompson ever learned how to work at anything in his life. Huckabee still has zero money. After he said that he stood by a 1992 comment to “quarantine” AIDS carriers from the general population, the press has begun slicing him apart, calorie for calorie.

(Remember Drudge’s headline attacking Huckabee for that comment, saying that it could be a “game changer in the GOP race?” Drudge, of all people, knows what the sexual orientation and priorities of the Beltway press corps is. What matters to them are not what Huckabee knows about foreign policy, whether he’d consult the Bible every day before making choices, how thoroughly he’s thought the issues through, or what kind of a president he’d make — but rather, something Huckabee said about AIDS fifteen years ago.

A crafty one, Drudge.)

No, Huckabee has peaked. He will be a horribly disfiguring addition to a Giuliani ticket, is my guess.

Ron Paul, however, hasn’t peaked. He’s on track to raise about $20 million for the quarter, which is probably going to be at least 40 percent more than what anybody else in the GOP field will raise, and possibly up to twice as much. That’s simply stupefying when you think about it. A, what, 78-year-old “kook” who wants to bring back the gold standard, abolish the Federal Reserve and the IRS, legalize drugs, close the border and get out of Iraq — he is beating the living hell out of Giuliani and Romney in the paper chase.

That is profound.

Most of this horse-race stuff is utterly irrelevant, as far as the markets are concerned. But Ron Paul might be indicative of something which could, just maybe, disturb the toxic media/bureaucratic duopoly over American policy.

And guess what? Ron Paul is most definitely going to be running a third party ticket once he racks up a jarring total for the nomination.

Meanwhile, the NRCC is bankrupt. On the rare occasion that a reporter will give John Boehner a gasp of air, Boehner crybabies about how nobody wants to give him money.

Bush’s approval ratings have actually rebounded, and the latest polls put Bush in the 37 percent range. Republican apparatchiks talk as if Bush is some kind of GOP albatross. I think it’s the opposite. Bush has credibility insofar as his actions are concerned. He will say he will do something, and he will probably definitely sound like an idiot explaining why, but he will do it, and there’s usually some vague principle buried under the ####pile of mangled syntax.

With the congressional Republicans, though, the odds are they’ll just steal your money. Their credibility is just that abysmal.

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