Prairie Weather

The dollar, American investments, and the Dubai threat

The Bank of Japan let it be known that it would support the falling dollar.  Just the news of an intervention perked our currency up a bit -- for now, along with a rush out of European markets because of the Dubai debt/default problems.

Investors' broad retreat from riskier assets pushed Treasury prices higher. The dollar gained against most other major currencies as investors sought safety following steep drops in overseas markets. Commodities prices tumbled.

Investors are worried that a default by a government investment company in Dubai over $60 billion in debt payments could have a ripple effect in world financial markets. The fear is that losses in the small emirate, which has drawn wealthy tourists from around the globe in the past decade with its Las Vegas-in-the-Middle East appeal, could imperil a nascent economic rebound.... WaPo

Meanwhile, the stock markets have been down as much as a percent and a half so far, but are meandering up slightly.  This is a day when New York closes early -- at 2 pm Eastern. 

30-36K troops plus 10K/year as needed

Those are the latest Afghanistan numbers from a source "close to the White House," writes Laura Rozen .

Put nothing on plastic today -- and leave your skates at home

Black Friday is here.  Black stands for merchants in the black on a big shopping day.  That's a nice black for WalMart and others.  But maybe not for the rest of us.  We may be witnessing a huge drop in economic optimism by the end of the day and with it a big drop in the stock markets.

U.S. stock index futures were sharply lower on Friday, a day after markets were shut for the U.S. Thanksgiving holiday, as a possible debt default at a Dubai state-owned conglomerate sparked fears of renewed global financial turmoil.

Dubai, part of the oil-exporting United Arab Emirates, said Wednesday it will ask creditors of state-owned Dubai World and builder Nakheel for a standstill agreement on billions of dollars in debt as a first step toward restructuring.

Overseas, Hong Kong shares dropped 4.8 percent while Shanghai stocks fell 2.4 percent on concerns that Dubai would spark a financial relapse.

S&P 500 futures sank 29.8 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures tumbled 222 points, while Nasdaq 100 futures slid 47.25 points. ...NYT

On the other hand, if everyone goes on a wild spending spree today and over the weekend, the market could put on its happy face next week.

This is like trying to decide whether to go skating or not -- whether the ice on the lake will hold us or whether it has big, dangerous slushy spots.

And then, dump Joe Lieberman

Steve Coll asks if it isn't time to dump Joe -- and use Olympia Snowe to get rid of him.  He bases strategy, at least in part, on an episode of "Mad Men."

Remember, in the final episode, when the English cost-cutting axe man turns against his bosses in London, “fires” the Sterling Cooper partners to release them from their contracts, then joins them in a breakaway firm? I have a suggestion for similar end-game negotiations in the Senate, in the extremely unlikely event that the Rahm Emanuel has not already thought of a much more effective and emotionally satisfying version.

Coll lays out the steps, finding a way to get Snowe to accept a public option, offering in return a list of goodies for Maine Snowe can't afford to turn down.  They're the very goodies Joe Lieberman has sought for his state over the years.

If Snowe agrees to an acceptable public-option provision, immediately stop negotiating with Lieberman and go to the Senate floor with a bill. Let him vote no. Afterward, return to him humbly, soliciting his wish list. Flatter and negotiate with him during the treacherous conference phase that follows. Take care to hold Snowe close; reach out to Collins. 

When the final bill is passed, with some public option intact, graciously invite Lieberman to the White House signing ceremony. All the while, think about when and at what restaurant, over what vintage, Harry Reid wishes to deliver the news to Lieberman that, with the challenges ahead in 2010, the Senate’s Democratic caucus has decided to move on; Lieberman’s service as a committee chairman (for which his colleagues all remain grateful and admiring, etc.) will no longer be required.

Finally, telephone Chuck Schumer, chairman of the Democratic Senate Campaign Committee. “We’re done.” Redouble search for the most attractive possible Democratic Senate candidate in Connecticut for the 2012 cycle. There will be no sixty votes possible after the mid-term elections, anyway.

Pretty good.  No good wine though.  Tar, feathers, and a plank would be more appropriate.

Congress needs a similar diet

Hundreds, if not thousands, of lobbyists are likely to be ejected from federal advisory panels as part of a little-noticed initiative by the Obama administration to curb K Street's influence in Washington, according to White House officials and lobbying experts. ...

... The initiative is aimed at a system of advisory committees so vast that federal officials don't have exact numbers for its size; the most recent estimates tally nearly 1,000 panels with total membership exceeding 60,000 people. Under the policy, which is being phased in over the coming months, none of the more than 13,000 lobbyists in Washington would be able to hold seats on the committees, which advise agencies on trade rules, troop levels, environmental regulations, consumer protections and thousands of other government policies.  ...WaPo

Ignobel Iran

Norway accused Tehran on Thursday of confiscating the Nobel Peace Prize awarded to human rights campaigner Shirin Ebadi in 2003 and said freedom of expression was under "great pressure" in Iran.

The Foreign Ministry said Ebadi's gold Nobel medal and her award diploma had been removed from her bank box together with other personal items.

"This is the first time a Nobel Peace Prize has been confiscated by national authorities," Foreign Minister Jonas Gahr Stoere said in a statement. ...Reuters

Investment tax -- and putting some distance between Obama and Wall Street

The Brits -- and Paul Krugman -- are recommending a financial speculation tax.  Tim Geithner and other "US officials" are opposed.  Probably some are opposed because it sounds threateningly unfamiliar and uncapitalist, others because they're tied by increasingly visible lines to the banking and investment industry.

The dispute began back in August, when Adair Turner, Britain’s top financial regulator, called for a tax on financial transactions as a way to discourage “socially useless” activities. Gordon Brown, the British prime minister, picked up on his proposal, which he presented at the Group of 20 meeting of leading economies this month.

Why is this a good idea? The Turner-Brown proposal is a modern version of an idea originally floated in 1972 by the late James Tobin, the Nobel-winning Yale economist. Tobin argued that currency speculation — money moving internationally to bet on fluctuations in exchange rates — was having a disruptive effect on the world economy. To reduce these disruptions, he called for a small tax on every exchange of currencies.

Such a tax would be a trivial expense for people engaged in foreign trade or long-term investment; but it would be a major disincentive for people trying to make a fast buck (or euro, or yen) by outguessing the markets over the course of a few days or weeks. It would, as Tobin said, “throw some sand in the well-greased wheels” of speculation.

Many opposed to the tax say it's unworkable.  Krugman counters that no, things have changed.  The business of financial transactions has become increasingly centralized. 

... While traders are all over the place, a majority of their transactions are settled — i.e., payment is made — at a single London-based institution. This centralization keeps the cost of transactions low, which is what makes the huge volume of wheeling and dealing possible. It also, however, makes these transactions relatively easy to identify and tax. ...

...Would a Tobin tax solve all our problems? Of course not. But it could be part of the process of shrinking our bloated financial sector. On this, as on other issues, the Obama administration needs to free its mind from Wall Street’s thrall.

Amen.

"Security has broken down even in unexpected parts of Afghanistan"

A northern province of Afghanistan, long considered to be under control, is back in the fray.  The Taliban are back in Kunduz province in force and are fighting with greater sophistication.  They have cut off a vital supply line, according to the New York Times.

Over the last two years the Taliban have steadily staged a resurgence in Kunduz, where they now threaten a vital NATO supply line and employ more sophisticated tactics. In November, residents listened to air raids by NATO forces for five consecutive nights, the first heavy fighting since the Taliban were overthrown eight years ago.

The turnabout vividly demonstrates how security has broken down even in unexpected parts of Afghanistan. It also points to the hard choices facing American, NATO and Afghan officials even if President Obama decides to send more soldiers to Afghanistan, as he is expected to announce next week.

Sporadic appearances of truth (for good or ill)

"The debate is over. The economy is obviously still struggling, but the stimulus did what it was supposed to do, and has made a real, positive difference.  Conservatives were wrong about Reagan's tax increases. They were wrong about Clinton's tax increases. They were wrong about Bush's tax cuts. And now, they're wrong again now."  Steve Benen has the goods.

"Thanks to the lobby, the simplest, most robust ways of reforming Wall Street were never even on the table in the first place, and the reform bills now grinding their way through Congress are already complex enough that most bankers will have little trouble eventually figuring out a way to worm their way around them."  Kevin Drum

"Obama’s China Trip Failed Everywhere But China."  Mahablog

"A Republican operative tells us that if the Republican National Committee ends up passing the so-called 'purity' resolution - which would cut off party support for candidates that violate three or or more out of ten key conservative policy positions -- it's unlikely that party campaign committees will actually abide by it."  Talking Points Memo

"So I think it is entirely possible that Obama will be 0 for 2 if he escalates in Afghanistan. And it is extremely dangerous for him to go on alienating his base, which wants peace and prosperity, with policies that make rightwing Republicans happy-- coddling bankers in a jobless recovery and an escalation of an eight-year-old, increasingly unpopular war."  Juan Cole

War tax: Who pays. How much.

Several top Democratic lawmakers, including David Obey, chairman of the House Appropriations Committee, and Carl Levin, chairman of the Senate Armed Services Committee, have called for imposing a “war tax” to pay for a troop increase. According to Politico, the tax they are considering to help pay for the war would mean that families earning under $150,000 a year would be taxed at 1 percent of their tax rates. The tax would be higher for those in the $150,000-to-$250,000 range and those making $250,000 or more. ... The Caucus

Some highlights of the Prairie Weather War Tax include:  95% on the gross income of George W. Bush and Dick Cheney for the years 2001-2008.  95% on the gross income of lobbyists for the defense industry during the same period. 50% on the same as it applies to members of Congress who voted for the war during that period.  50% on the gross profits from defense industry for the same period.  (Should be 95%, but we don't want to give them an excuse to cut jobs.)  A sliding scale of taxes on 2009 income for all Americans, excluding those individuals and families with a family member who has served in the war(s).