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The parallel universe of Mitt Romney's auto industry rescue
Mitt Romney is doubling-down on his negative view of the the 2009 bailouts and bankruptcies of General Motors and Chrysler. In late 2008, he argued in the New York Times that a bailout of Detroit would mean the end of the U.S. auto industry. Today, in the Detroit News, he refuses to back off from his earlier position, says that a "managed bankruptcy" of GM and Chrysler was what was needed all along, and that the Obama administration practiced:
"...crony capitalism on a grand scale. The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better.
Before the companies were allowed to enter and exit bankruptcy, the U.S. government swept in with an $85 billion sweetheart deal disguised as a rescue plan.
By the spring of 2009, instead of the free market doing what it does best, we got a major taste of crony capitalism, Obama-style.
Thus, the outcome of the managed bankruptcy proceedings was dictated by the terms of the bailout. Chrysler's "secured creditors," who in the normal course of affairs should have been first in line for compensation, were given short shrift, while at the same time, the UAWs' union-boss-controlled trust fund received a 55 percent stake in the firm.
Is Bitcoin dead? No, but TradeHill is.
Behold, the cyber-banker. Above, Hermione Way interviews Jered Kenna, CEO of TradeHill, a Bitcoin trading site. He thinks that Bitcoin has a future, and he's probably right. The cyber-currency continues to chug along, even as it has fallen far from its speculative highs in 2011. TradeHill, on the other hand, is a goner, at least according to this post yesterday from the site's blog:
::::: Announcement :::::: TradeHill suspending trading and returning client funds.
Dear Clients, Effective immediately TradeHill will be shutting down trading / deposits and returning all client funds. Due to increasing regulation TradeHill can not operate in it's current capacity without proper money transmission licensing. Combined with multiple bank account closures and Paxum's decision to close all Bitcoin business accounts, we have deemed the best course of action is to halt trading and pursue licensing while raising funds. SEPA transfers for our Euro customers have been enabled. Everyone at TradeHill has also been working without pay for several months after one of our payment processors removed over $100,000 dollars from our account without notice. We decided to cover this loss for now instead of passing it on to our customers and are taking legal action against the processor. We would also like to make it known that our relationship with Paxum has been great and hope to work with them in the future. We will be focusing on Bitcoin.com and are preparing to release a new site before the end of the month. It has been a pleasure working with the Bitcoin community and look forward to continuing our business in the future. More details to come soon. Sincerely, Jered Kenna Chief Executive Officer TradeHill
Where's the inflation? It's Ron Paul versus Ben Bernanke PART II
Last week, I wrote about how there's no significant inflation in the U.S. economy and that critics of the Federal Reserve's policies, chiefly Ron Paul, should admit that they were wrong and find something else to complain about. Such as Fed Chairman Ben Bernanke's inability to address the central bank's other mandate, maximum employment. With an unemployment rate at 8.3 percent, we're far from it.
The response from the commenters was swift, copious — and merciless! I got 120 comments, by far the most ever for a DeBord Report post, and all the one's that I didn't write myself disagreed with everything I had to say. Well, one didn't entirely disagree. This person just said I was as off-the-mark as Kenneth Rogoff and Paul Krugman and shouldn't be blamed.
I'll hasten to say at this point that I'm really fine with with this. I actually like being vigorously attacked, and I think that a good blogger brings the comment stream into the process. And so I'm doing that now (the comments are unedited, by the way).
Obama's 2013 budget: The part rich people should read
President Obama released his 2013 budget today. Conveniently, the U.S. Treasury emailed me a summary of the so-called "Green Book," its explanation of the President's recommendations. It's fairly dense. But if you're rich, this is the part you'll want to study, because it's all about how the wealthy in America are taxed, right down to their private jets and interest on hedge-fund earnings (I've edited for length):
Allow the 2001 and 2003 income tax cuts to expire (including the low tax rate on dividends) for households making more than $250,000 per year and restore the estate tax to 2009 levels....Sustaining these unaffordable high-income tax cuts would require either borrowing more, increasing taxes on the middle-class, or deep cuts in other parts of the Budget that help seniors, the middle-class, and the most vulnerable. The President’s Budget would instead reflect shared sacrifice by allowing income tax rates that exclusively affect upper-income households to return to the levels they were at throughout most of the 1990s...
Warren Buffett on investing: It's just so simple!
Thanks to Henry Blodget at Business Insider for directing to this Fortune except from Warren Buffett's annual letter to Berkshire Hathaway shareholders. In it, Warren Buffett lays out the commonsense case for avoiding investments in currency (for example, government debt like U.S. Treasuries) and gold (driven by fear) and sticking with stocks. Here's a taste:
My own preference -- and you knew this was coming -- is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola (KO), IBM (IBM), and our own See's Candy meet that double-barreled test. Certain other companies -- think of our regulated utilities, for example -- fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.