stimulus in a backpack

A friend, who was in a military unit in central Iraq some years ago, sends this photo.

Those are $100s.  Approximately $1 million US.  Actual real American simolions. 

My friend took this pic just before they stuffed this into a backpack, and went to go give it away in a village.  This was supposed to buy loyalty.

I submit that the military enlisted personnel are not well suited to carry out this task.  And that the task itself is asinine, because one-time "payments" like this are no more likely to cause growth, or loyalty, then the idiot Keynesian "stimulus" policies in the US.  Both of these policies are just political payoffs to friends, with no prospect of benefit to the nation, or to the taxpayers who are footing the bill.

Still, it had to be fun to have a thousand large in a backpack, walking on the streets of [city in central Iraq].  They should have invested in brown paper bags, to make the Mafia comparison even more realistic.

Euro woes

Some European financial news for you this Monday.

A Euro-wide stock index is down around 2%, The Greek stock index is down around 5%, Spain's down around 2.5%.

Spanish 10 year bonds are up to yielding 6.22%, Italy's now yield 5.75%.

German 10 year bonds are paying 1.45%, but the German and French stock indices are both down around 2%.

The big, big question is, can the Euro-zone limit contagion from a Greek exit and keep Spain and Italy in?

Entre la espada y la pared?

As I've been droning on about, the Fed has promised to (a) keep rates near zero until at least the second half of 2014, and (b) keep inflation at or below an upper limit of 2%.

The latest report on the CPI came out today.

Behold (clic the pic for a more glorious image):

CPI inflation (blue line) is currently 2.9%. CPI less food and energy inflation (red line) has now climbed over 2% and is trending upward.

Something has got to give. Either the recovery falters or the Fed has to take a pass on one of its promises

Yes, I know that the Fed target is probably some genetically modified version of the GDP deflator.

Here's a slightly less updated inflation graph using the deflator for personal consumption expenditures (from Tim Duy at Mark Thoma):

Even this cherry picked series is over 2% and the series less food and energy is trending up and poised to hit 2%.

Please understand that I am not advocating that the Fed tighten policy right now. I think 3 or 4 percent inflation for a while would not be a disaster.

I am saying that the Fed has made some very strange promises of late that don't bode well for its vaunted "credibility".

The Fed is a bear

I read the Fed's latest announcements as a sign that they are very bearish on the US economy. They are saying two things. (1) The Fed funds rate will stay near zero at least through most of 2014, and (2) their inflation target is 2%.

The only ways I can see those two points being consistent with each other is if we have another recession or a sustained but pitiful "expansion" for the next 10-12 quarters.

I wouldn't want to be an incumbent from the President's party running for re-election in the 2014 midterms if the Fed "achieves" both of their announced objectives.

Two songs about my favorite Hindu God

People, you KNOW it's Hanuman.

First up Mexican guitar heros Rodrigo & Gabriela:

Now for something completely different, Krisha Das:



just beautiful.