Hugh Hendry on the Economist's Buttonwood Conference

Great interview of Hugh Hendry on the Economist's Buttonwood Conference:
For a short summary, refer to Mish's.

US Government to Spent $1 Trillion on F-35 Fighters — That's More Than Australia's GDP

Nobel Piece Prize Laureate Obama, who also happens to be the US President who wages the most wars in history and attacked civil liberties the most, is now to spent $1 trillion on F-35 fighters. The Atlantic is reporting:

The Lockheed Martin F-35 Lightning II is an impressive aircraft: a fifth generation multirole fighter plane with stealth technology. It's also a symbol of everything that's wrong with defense spending in America.
[...]
The F-35 is designed to be the core tactical fighter aircraft for the U.S. military, with three versions for the Air Force, Navy, and the Marine Corps. Each plane clocks in at around $90 million.
In a decade's time, the United States plans to have 15 times as many modern fighters as China, and 20 times as many as Russia.

So, how many F-35s do we need? 100? 500?  Washington intends to buy 2,443, at a price tag of $382 billion.

Add in the $650 billion that the Government Accountability Office estimates is needed to operate and maintain the aircraft, and the total cost reaches a staggering $1 trillion.
In other words, we're spending more on this plane than Australia's entire GDP ($924 billion).

The F-35 is the most expensive defense program in history, and reveals massive cost overruns, a lack of clear strategic thought, and a culture in Washington that encourages incredible waste.

Money is pouring into the F-35 vortex. In 2010, Pentagon officials found that the cost of each plane had soared by over 50 percent above the original projections. The program has fallen years behind schedule, causing billions of dollars of additional expense, and won't be ready until 2016. An internal Pentagon report concluded that: "affordability is no longer embraced as a core pillar."

US Government Alternative Energy Bankruptcies

CNN Money reports:

a spokesman for the Energy Department said that agency has dozens of programs that funded over 1,300 companies in the renewable energy space.

Amazing number right? How much money was wasted? How many other companies went bust and other energy sources were ignored because of this unfair competition?

Surprised that the government is wasting your money and investing in the worst possible assets? You shouldn't. The aim is not to return any money on the investment, is to buy votes and enrich the select few who are close to those corrupt politicians running these programs.

Here are some of the companies that went bust or made negative headlines:

• A123: The battery maker received a $249 million Department of Energy stimulus grant to build two factories in Michigan to manufacture batteries for electric cars.
  The company drew down $132 million of that grant, and the factories are up and running, according to the DOE.
  As part of A123's bankruptcy announced earlier this week, the factories were sold to Johnson Controls, which is expected to keep them open. Since the investment was a grant, the government got no money back. It's unclear whether Johnson will be eligible to draw down the remaining grant funds. 
• Abound Solar: The manufacturer of thin-film solar panels received a $400 million DOE stimulus loan guarantee to build two factories -- one outside Kokomo, Indiana and another outside of Denver.
  Abound drew down $70 million of the grant to build the Denver factory. Abound declared bankruptcy in June amid strong competition and the collapsing price of solar panels.
  Its assets are being auctioned off, and DOE is expected to lose to $40 to $60 million on the deal. 
• Beacon Power: The company received a $43 million DOE stimulus loan guarantee to build a facility in upstate New York that uses flywheels to store extra energy from the power grid, and then release it when needed. Such technology is seen as essential to integrate wind and solar into the grid, as those sources don't produce energy 24/7.
  The company spent $39 million to build the project, which consists of wheels inside vacuum tubes that can spin at near perpetual motion. Beacon went bankrupt amid low prices for natural gas, which can be burned to produce electricity.
  The flywheel plant was sold to a competitor, and DOE is slated to receive at least $27 million in the deal. 
• Ener1: A subsidiary of the company, EnerDel, received an $118.5 million grant to build two plants outside Indianapolis to manufacture batteries for electric cars and other uses.
  Ener1 declared bankruptcy in January, and the company was bought by a Russian investor. The plants in Indianapolis continue to make batteries. 
• Solyndra: The manufacturer of advanced solar panels received a $535 million loan guarantee to build a factory outside of San Francisco.
  Solyndra went bankrupt in 2011 amid falling prices for solar panels, and has since served as the poster child for well-meaning government policy gone bad.
  Its assets are being auctioned off, and DOE is not expected to recover any meaningful amount of money.
• Fisker Automotive: The electric car maker received a $529 million DOE-backed stimulus loan to design a mid-priced model and build a factory to manufacture the vehicle in Delaware.
  In February, Fisker put the manufacture of the sedan on hold amid lower than expected demand for electric cars and announced layoffs, though still says it plans on building the car in 2014. The company has drawn down about $200 million of the loan. 
• Nevada Geothermal Power: The firm received a $98 million DOE-backed loan to build a geothermal power plant north of Reno. According to the House Committee on Energy and Commerce, an internal audit of the firm revealed $98 million in net losses and significant debt. DOE says the power plant the loan built has a long-term agreement to sell electricity, and its investment will be protected no matter what happens to the parent company. 

In addition to these, OregonLive reports:

Another publicly subsidized green company is going under, this one -- called ReVolt Technology -- backed in Portland by city and state taxpayers.

Losses on ReVolt are tiny compared to those at Solyndra Inc., the notorious California solar company that tanked after receiving a $535 million federal loan guarantee. Portland and the state of Oregon had committed $6.8 million to ReVolt, which also landed a $5 million federal grant.

But the timing of ReVolt's demise is awkward ahead of the Nov. 6 election for Democrats, who have plugged renewable-energy companies in the face of Republican criticism.

Oregon Democrats who lavished praise on ReVolt as it acquired funds and chose a site in 2010 include U.S. Sen. Jeff Merkley, U.S. Sen. Ron Wyden, U.S. Rep. Earl Blumenauer, Rep. Tobias Read, of Beaverton, former U.S. Rep. David Wu and former  Gov. Ted Kulongoski. Portland Mayor Sam Adams was also a strong supporter.

David Stockman Campaigns Against the Fed

David Stockman, a former U.S. politician and businessman, serving as a Republican U.S. Representative from the state of Michigan and as the Director of the Office of Management and Budget, has been on many shows these last few days, is campaigning hard against the Fed. Most of his very informative ones are available on YouTube:

• Interview on Capital Account 
• Interview on CNBC (embedding not allowed)
• Interview on Bloomberg

And some older but quite interesting and long videos. I cannot recommend more the watching of these videos. They give rare views and insights in on history of the US from someone who served under Reagan, and also great Austrian Economics perspective on most of the Fed and US Gov driven economic distortions and unbalances.

• Bill Moyers Interviews David Stockman on Crony Capitalism of Washington & Wall St. (34 min)
• David Stockman on TARP, the Fed, Ron Paul and Reagan (42 min)
• The Forgotten Cause of Sound Money (67 min presentation at the Mises Institute)

And finally, here's the link to The Great Deformation: How Crony Capitalism Corrupts Free Markets and Democracy the latest book by David Stockman which I am really looking forward to reading.

All Tuna Tested In California Were Contaminated with Fukushima Radiation

Via ZeroHedge:


CNN reports today:

Low levels of radioactive cesium from Japan’s Fukushima Daiichi nuclear accident turned up in fish caught off California in 2011, researchers reported Monday.

The bluefin spawn off Japan, and many migrate across the Pacific Ocean. Tissue samples taken from 15 bluefin caught in August, five months after the meltdowns at Fukushima Daiichi, all contained reactor byproducts cesium-134 and cesium-137 at levels that produced radiation about 3% higher than natural background sources

The Wall Street Journal quotes the studies’ authors:

“The tuna packaged it up and brought it across the world’s largest ocean,” said marine ecologist Daniel Madigan at Stanford University, who led the study team. “We were definitely surprised to see it at all and even more surprised to see it in every one we measured.”

[...]

“We found that absolutely every one of them had comparable concentrations of cesium-134 and cesium-137,” said marine biologist Nicholas Fisher at Stony Brook University in New York state, who was part of the study group.

As Reuters points out:

Unlike some other compounds, radioactive cesium does not quickly sink to the sea bottom but remains dispersed in the water column, from the surface to the ocean floor.

Fish can swim right through it, ingesting it through their gills, by taking in seawater or by eating organisms that have already taken it in ….

As CNN notes:

Neither [of the scientists who tested the fish] thought they were likely to find cesium at all, they said. And since the fish tested were born about a year before the disaster, “This year’s fish are going to be really interesting,” Madigan said.

“There were fish born around the time of the accident, and those are the ones showing up in California right now,” he said. “Those have been, for the most part, swimming around in those contaminated waters their whole lives.”

One of the studies’ authors told the BBC:

The fish that will be arriving around now, and in the coming months, to California waters may be carrying considerably more radioactivity and if so they may possibly be a public health hazard.

The NSA is Building The US's Biggest Spy Center

Here are some quotes from a long an interesting report on Wired:

[...]
Under construction by contractors with top-secret clearances, the blandly named Utah Data Center is being built for the National Security Agency. A project of immense secrecy, it is the final piece in a complex puzzle assembled over the past decade. Its purpose: to intercept, decipher, analyze, and store vast swaths of the world’s communications as they zap down from satellites and zip through the underground and undersea cables of international, foreign, and domestic networks. The heavily fortified $2 billion center should be up and running in September 2013. Flowing through its servers and routers and stored in near-bottomless databases will be all forms of communication, including the complete contents of private emails, cell phone calls, and Google searches, as well as all sorts of personal data trails—parking receipts, travel itineraries, bookstore purchases, and other digital “pocket litter.” It is, in some measure, the realization of the “total information awareness” program created during the first term of the Bush administration—an effort that was killed by Congress in 2003 after it caused an outcry over its potential for invading Americans’ privacy.

But “this is more than just a data center,” says one senior intelligence official who until recently was involved with the program. The mammoth Bluffdale center will have another important and far more secret role that until now has gone unrevealed. It is also critical, he says, for breaking codes. And code-breaking is crucial, because much of the data that the center will handle—financial information, stock transactions, business deals, foreign military and diplomatic secrets, legal documents, confidential personal communications—will be heavily encrypted. According to another top official also involved with the program, the NSA made an enormous breakthrough several years ago in its ability to cryptanalyze, or break, unfathomably complex encryption systems employed by not only governments around the world but also many average computer users in the US. The upshot, according to this official: “Everybody’s a target; everybody with communication is a target.”

Nice! Let's hope that like most government funding effort, it will be a disastrous failure, and such a monstrosity will never see the light of the day.

[...]
For the NSA, overflowing with tens of billions of dollars in post-9/11 budget awards, the cryptanalysis breakthrough came at a time of explosive growth, in size as well as in power. Established as an arm of the Department of Defense following Pearl Harbor, with the primary purpose of preventing another surprise assault, the NSA suffered a series of humiliations in the post-Cold War years. Caught offguard by an escalating series of terrorist attacks—the first World Trade Center bombing, the blowing up of US embassies in East Africa, the attack on theUSS Cole in Yemen, and finally the devastation of 9/11—some began questioning the agency’s very reason for being. In response, the NSA has quietly been reborn. And while there is little indication that its actual effectiveness has improved—after all, despite numerous pieces of evidence and intelligence-gathering opportunities, it missed the near-disastrous attempted attacks by the underwear bomber on a flight to Detroit in 2009 and by the car bomber in Times Square in 2010—there is no doubt that it has transformed itself into the largest, most covert, and potentially most intrusive intelligence agency ever created.

As you can see, only the in government entities, funded by the taxman ability to coerce almost an unlimited amount of money from the citizen, can a failing institution, grow, not only thanks to its successes, but actually, quite the opposite, thanks to its failures.

In the process—and for the first time since Watergate and the other scandals of the Nixon administration—the NSA has turned its surveillance apparatus on the US and its citizens. It has established listening posts throughout the nation to collect and sift through billions of email messages and phone calls, whether they originate within the country or overseas. It has created a supercomputer of almost unimaginable speed to look for patterns and unscramble codes. Finally, the agency has begun building a place to store all the trillions of words and thoughts and whispers captured in its electronic net. And, of course, it’s all being done in secret. To those on the inside, the old adage that NSA stands for Never Say Anything applies more than ever.

Now, it sounds very much like 1984 or the worst nightmare sci-fi novels. But the use of superlatives makes be believe it's mostly non-sense.

The report continues:

[...]
the Pentagon is attempting to expand its worldwide communications network, known as the Global Information Grid, to handle yottabytes (1024 bytes) of data.
[...]
The eavesdropping on Americans doesn’t stop at the telecom switches. To capture satellite communications in and out of the US, the agency also monitors AT&T’s powerful earth stations, satellite receivers in locations that include Roaring Creek and Salt Creek.
[...]
Binney left the NSA in late 2001, shortly after the agency launched its warrantless-wiretapping program. “They violated the Constitution setting it up,” he says bluntly. “But they didn’t care. They were going to do it anyway, and they were going to crucify anyone who stood in the way. When they started violating the Constitution, I couldn’t stay.” Binney says Stellar Wind was far larger than has been publicly disclosed and included not just eavesdropping on domestic phone calls but the inspection of domestic email.
[...]
According to Binney, one of the deepest secrets of the Stellar Wind program—again, never confirmed until now—was that the NSA gained warrantless access to AT&T’s vast trove of domestic and international billing records, detailed information about who called whom in the US and around the world. As of 2007, AT&T had more than 2.8 trillion records housed in a database at its Florham Park, New Jersey, complex.

Verizon was also part of the program, Binney says, and that greatly expanded the volume of calls subject to the agency’s domestic eavesdropping. “That multiplies the call rate by at least a factor of five,” he says. “So you’re over a billion and a half calls a day.” (Spokespeople for Verizon and AT&T said their companies would not comment on matters of national security.)

After he left the NSA, Binney suggested a system for monitoring people’s communications according to how closely they are connected to an initial target. The further away from the target—say you’re just an acquaintance of a friend of the target—the less the surveillance. But the agency rejected the idea, and, given the massive new storage facility in Utah, Binney suspects that it now simply collects everything. “The whole idea was, how do you manage 20 terabytes of intercept a minute?” he says. “The way we proposed was to distinguish between things you want and things you don’t want.” Instead, he adds, “they’re storing everything they gather.” And the agency is gathering as much as it can.
[...]
According to Adrienne J. Kinne, who worked both before and after 9/11 as a voice interceptor at the NSA facility in Georgia, in the wake of the World Trade Center attacks “basically all rules were thrown out the window, and they would use any excuse to justify a waiver to spy on Americans.” Even journalists calling home from overseas were included. “A lot of time you could tell they were calling their families,” she says, “incredibly intimate, personal conversations.” Kinne found the act of eavesdropping on innocent fellow citizens personally distressing.
[...]
When Barack Obama took office, Binney hoped the new administration might be open to reforming the program to address his constitutional concerns.
[...]
Binney held his thumb and forefinger close together. “We are, like, that far from a turnkey totalitarian state,” he says.
[...]
There is still one technology preventing untrammeled government access to private digital data: strong encryption.
[...]
the government was working in utmost secrecy on the other vital element: the most powerful computer the world has ever known.
The plan was launched in 2004 as a modern-day Manhattan Project. Dubbed the High Productivity Computing Systems program, its goal was to advance computer speed a thousandfold, creating a machine that could execute a quadrillion (1015) operations a second, known as a petaflop—the computer equivalent of breaking the land speed record.
[...]
the unclassified team had its Cray XT4 supercomputer upgraded to a warehouse-sized XT5. Named Jaguar for its speed, it clocked in at 1.75 petaflops, officially becoming the world’s fastest computer in 2009.
Meanwhile, over in Building 5300, the NSA succeeded in building an even faster supercomputer. “They made a big breakthrough,” says another former senior intelligence official, who helped oversee the program. The NSA’s machine was likely similar to the unclassified Jaguar, but it was much faster out of the gate, modified specifically for cryptanalysis and targeted against one or more specific algorithms, like the AES. In other words, they were moving from the research and development phase to actually attacking extremely difficult encryption systems. The code-breaking effort was up and running.
[...] 

In addition to giving the NSA access to a tremendous amount of Americans’ personal data, such an advance would also open a window on a trove of foreign secrets.
[...]
“Remember,” says the former intelligence official, “a lot of foreign government stuff we’ve never been able to break is 128 or less. Break all that and you’ll find out a lot more of what you didn’t know—stuff we’ve already stored—so there’s an enormous amount of information still in there.”
[...]
But despite its progress, the agency has not finished building at Oak Ridge, nor is it satisfied with breaking the petaflop barrier.
[...]
These goals have considerable support in Congress. Last November a bipartisan group of 24 senators sent a letter to President Obama urging him to approve continued funding through 2013 for the Department of Energy’s exascale computing initiative (the NSA’s budget requests are classified). They cited the necessity to keep up with and surpass China and Japan.
[...]
In the meantime Cray is working on the next step for the NSA, funded in part by a $250 million contract with the Defense Advanced Research Projects Agency. It’s a massively parallel supercomputer called Cascade, a prototype of which is due at the end of 2012. Its development will run largely in parallel with the unclassified effort for the DOE and other partner agencies. That project, due in 2013, will upgrade the Jaguar XT5 into an XK6, codenamed Titan, upping its speed to 10 to 20 petaflops.

While the US is not a 100% fascist country, although, in many aspects, it is a fascist country. But should the government one day decide to ban free speech, and go after all dissidents and free thinkers, they would just have all the tools at their disposal, and the records made over the past many years.

Now, who should fear most? Iran and their Mollahs? or the US and their white collar fascists?

Massive Treasury Rise — Is Jim Rogers Still Short the Long Bond?

A couple of days ago, I posted about Jim Rogers shorting the US Treasuries, I hope he had stops and that they were tight, otherwise, he's sitting on massive losses. According to the interview on the WSJ (see previous link), he opened his position on the 10th of June, almost at a short term top in yields...

Even after the downgrade, the bonds rallied massively. Although I think that we have probably reached now the shorting zone as a short term trade :-)

I mentioned many times that Treasury bonds were a buy during the current deflationary period, and hyper-inflationists won't understand. It's not the first time he's burning himself on this trade, and I hope he will open his mind to the deflation we're facing during the Greater Depression