POTUS is back on the attack-the-GOP trail -- looking again for a way to rally the retreating Democratic members of Congress who flee in panic and despair from the polls and the economy.  Last week, you will recall, POTUS accused the Republicans of "making a stand on the backs of the little guy...." -- a familiar trope, something to do with spending another $33 billion on extended unemployment checks without offsetting the costs with cuts in the budget.  Now POTUS chooses to make his weekly partisan attack while standing in front of a GM car in Detroit.  This time he accuses the Republicans in the Senate again:  "I'm calling on Republican leaders in the Senate to stop holding American small business hostage to politics...We can't afford the do nothing and partisan maneuvering..."  What is choice about the POTUS rhetoric is that during his brief tenure in the Senate, he was a worthy partisan in joining slow-downs, and foot-dragging, and "partisan maneuvering."  Also, who is the audience for this palaver?  The Senate?  Nah.  The media?  Nah.  The Republican voters, the independent voters?  Nah, nah.  The audience is the Democratic Left, the part of it that listens.

The peculiar coda in the POTUS attack palaver serves as a warning to future princes when in distress.  Avoid the negative cliche.  "I know that times are tough... We'll make it through again..."  POTUS knows what?  "Times are tough?"  Does he mean the four straight quarters of growth he boasts of?  What about the soaring 2.4% annualized growth?  Or the stabilizing 9% jobless?  Who is "we?"   "Make it" where?  Is this a pep talk?  On the basis of his observations?  His experience?  His political acumen?  POTUS risks sounding bantamweight.  If this were an astrologer's lair, we could look at the stars for the moment.  Does POTUS doubt himself?  Is the prince weakened?  Why did we listen then, since we do not much listen now?  What do the stars say?  Why is POTUS without adequate weight?  The View?  Anna Wintour's home to flirt with fashionistas? Trite, fleeting, mayflies in the July wind?

The GDP report this news cycle -- plus 2.4% for the 2nd Quarter at an annualized seasonally adjusted rate -- confirms the lackluster economy and the new normal. The recession of '08-'09 (see below) is now identified as worse than we thought -- the 2nd Quarter '09 was negative 7% -- and this explains the crushing job loss. GDP for the second quarter of 2010 is subpar at 2.4% growth, which translates into weak demand, weak consumer spending and the present corporate strategy of cutting overhead (jobs) and boosting profits, and banking the profits, all reinforced by the numbers.  Paul Vigna, DowJones, speaks to a continuing drift lower of the general economy because of the weak consumer spending.  We are saving money.  The fancy way of saying this is that we are de-leveraging.  The continued joblessness is the new normal.  It is not possible at this time to see what will reengage the growth engine.  Green jobs?  Wrong answer.  The growth now consists of financial restitution and exports of the remaining manufacturing base, with the restocking of inventory shelves.  The consumer is 70% of the GDP.  But these days the consumer has backed off to as low as 67%.  Folk do not trust their job security and are cautious to spend, grow, move, change anything significant.  Also, mention that the education costs for a family are crushing and constant, and without growth, everything goes to schools and housing.  Corresponding with Paul Vigna, my measure of the markets now is that the traders can put the money back into T-Bills and go on vacation until January.  Paul Vigna recommends vacation at the Jersey shore, not Paris this year.  Even living large can be right-sized large.

Spoke Lt. Colonel Dave Oclander, Task Force Fury, 1st Battalion, 508th Parachute Regiment, 82nd Airborne, at Kandahar City, to hear his summary of the death of four of his paratroopers on July 13th. Six Taliban suicide vest bombers penetrated security at an Afghan base, and two got through the wire to the innermost compound. One enemy attacker was stopped by a paratrooper before he reached the main force. Another was stopped at the wire. First Lt. Chris Goeke (left) of the 82nd, from Minneapolis, graduate of Apple Valley High School and West Point (sixth in his class) was killed by a gunshot to the head -- as the bombers came in firing automatic weapons. Colonel Oclander estimates the firefight lasted twenty minutes. Results were four KIA paratroopers, more than one Afhan translator KIA, several wounded, and six KIA Taliban.  Dave Oclander emphasized the "heroic" conduct of his soldiers.  Mention that Dave Oclander has lost nine KIA since his unit deployed last August 2009 at Zabul Province and then moved to Kandahar.  The security situation at Kandahar is sub-standard and not helped by the civilian corruption (Karzai cartel) and the Taliban bloody-mindedness.  Dave Oclander reports that his unit is coming home in August to Bragg, and that it will be replaced by three Army brigades from Fort Carson and a Military Police unit -- a sizable increase in firepower.  However, Oclander emphasized that the solution in Kandhar is not firepower.  He pointed to the civilian government as rotten.  He also said that the Afghan police are wholly inadequate.  Oclander finds the Afghan National Army acceptable and worthy.  But the officials and the police are rotten -- and therein lies the tale of woe.  Why did Chris Goeke perish?  Doing his job: one of our best.  Like the Italians (above).  And the six KIA Taliban?  Medieval men, living in a tiny, delusional worldview of only First Cause -- no cause and effect, no freewill, just slaves in a cemetery.  They died, in their minds, because Allah willed it.  How do we defeat such an enemy? 

At the very end of these four minutes during the heat of the 2008 campaign, after Candidate Obama had swept the caucus states (thanks to Netroots cleverness) and won Wisconsin handily with a vast youth and progressive vote, I mention the billionaire Iraqi-born and London citizen Nadhmi Auchi and his connection to "the governor."  This was of course Rod Blagojevich, who at the time was a wiseguy bystander for the phenomenon of the Obama campaign.  Blago's crafty ways had hooked Auchi to invest in downtown Chicago, a fifty-plus acre plot of wasted building space by the Chicago RIver.  Bag man Tony Rezko, who was Blago's action figure before he was assigned to be Senate Candidate Barack Obama's fixer and fundraiser, had taken a piece of the Auchi property.  Other Blago pals had taken a piece of the action.  We can only guess how much of the plot was linked to Blago's cut-outs.  Auchi is now safely back in Europe.  The fifty acres-plus plot remains undeveloped.  Obama is POTUS.  Tony Rezko remains in jail, pending another Federal trial for corruption; and Blago is about to face the jury for hawking Obama's empty Senate seat to the highest bidder.  The Auchi connection remains unexplored.  Auchi worked for Saddam Hussein in London during the Oil for Food scandals.  Then he worked with the Assads, holding real estate in downtown Damascus, where he will profit if John Kerry and POTUS ever develop the Assads as Cook County-like sharpies of the Middle East.  The last hours of Blago.  Will Blago talk?  You bet, and talk and talk, but who will believe him?  Follow the money.  Somewhere Blago and his cronies have a hand on a piece of the $170 million-plus that Auchi has paid out for those 50 acres by the Chicago RIver.  All the time in the world.  Only needs a dame with a hankering for Arab cash, a private detective named Spade, couple of visits to the Big House, and a trail of shell companies at the Hall of Records.   Oh yes, and a body into the Chicago River, guy named Tony.  Start the saxophone music! 

Ahmnadinejad's whining remark that the US and Israel are about to attack his nuke facilities is a peculiar demonstration of the old truth that paranoids have enemies. A-N is under assault from the middle-class merchants who have supported the Islamic Revolution for thirty years -- the bazaaris, who run the credit and trade cycle in Iran, where the politicians have wrecked the economy and created shortages, hoarding and deep poverty.  A-N is also under assault from the non-Twelvers (the vast majority of the country), who do not agree that crying about imminent chaos is a good plan; and that if the Twelfth Imam is coming back any time soon (Twelver theory being that chaos invites the nine-hundred-year-old re-animated and hidden child who was supposed to be the Twelfth Imam), there won't be enough to set the table for him.  Does the US have an imminent or credible or staffed-up plan to attack Iran?  Not to my hearing.  Does Israel?  Unknown, but it would be a foolish day to go out into the wilderness of the ummah without plenty of firepower all set to go.

The EU foreign ministers's sanctions regime just endorsed added to the US Iran Sanctions Act of June added to the UNSC fourth round of sanctions regime in June all create a wall of troubles for the Tehran Twelvers?  Will the Twelvers change their behavior?  Nope.  The Twelvers must attack and threaten and seethe, must torture and maim their own people who protest (the IRGC is weakned by the virus of sadism); and there is no going back for the Twelvers.  The next step is unknown. The Twelvers are now surrounded by Netanyahu to the West, Petraeus to the East, Putin to the North, and the Arabs to the South, along with the US Fifth Fleet and an unknown number of IDF naval units with cruise missile capabilities.  And their money is no good!  Chaos, the prologue.  Has Tehran got three months of credit in Europe?  Maybe.   Watch Berlin.

 

Harvard astronomer Dimitar Sasselov, speaking in London, illustrates that the first results from the Kepler robot point to the Milky Way being filled with Earth-like planets.  Kepler is staring at just a tiny piece of the sky, about five degrees, in the Constellation Cygnus, and it is reading just the planets that pass in front of a star from just those systems that are lined up so that the plane of orbiting faces Kepler.  The preliminary results are both comforting and demanding: ". . . You can see here (below) the small planets dominate the picture . . ."  And this is just a small, small, small sample.  One hundred fifty-plus candidates for Earth-like Eden.  Now we await the chemical composition of the 150.  Dimitar Sasselov told me in June that Kepler is sensitive to the point that we can discern the chemistry down to carbon dioxide and water vapor and methane, all of which are consistent with tectonic activity, weather and even life-forms.  We cannot discern 747s in flight.

The philosophical challenge is freshest for me.  Not only are we not alone, but more likely we are inhabitants of a default rocky and wet planet in orbit of a default variable Main Sequence star. Uniqueness would come down to the hominid evolution over the last seventy thousand years since the volcano in Sumatra reduced homo sapiens to about 1000 creatures in Africa.  Following the uniqueness of the asteroid bombardments that shuffled the dinosaurs off the planet and welcomed the prosperity of the mammals.  In sum, Earth may be special because of colossal and routine physical accidents; otherwise, Earth is off the shelf of star formation and planetary geology.  Lucky so far.  And Dimitar did tell me that Kepler can study planets down to the size of an Earth-like moon around a gas giant, a planet that would most resemble the Pandora of "Avatar."  Alien kissing alert.

"What Does It Take?"  

Unusually unironic remarks from the MSNBC celebrity Ed Schulz at the Netroots Nation confab at Vegas on Friday 23 -- and the suggestion that the insurgency of 2006 has moved toward Stand-Up and resume-shopping and away from VBIED planning.  Large, robust man in a blue suit wandering a stage with a corded mike does not communicate confidence and violence.  This appears to be one of the stages of grief -- the stage where you start to comfort the aggrieved and use this power to endorse yourself.  Ed Schultz comforts the wounded Netroots ops.  Wounded how?  After two years of empowerment, the young have lost the sense of mission.  Netroots is organized as an anarchist band on the web -- not as a cadre of revolutionaries.  Netroots selected Candidate Obama because he resembled None of the Above.  Now that POTUS resembles Same Ol' Same Ol', the Netroots ops are disconsolate.  They can see the GOP insurgency gathering in the valley for the assault in November.  They feel helpless.  What was the point of 2006 and 2008?  Obamacare and FinReg?  Those are patchwork documents that will be torn apart by the GOP.  What about the stimulus?  Well, it did keep the teachers employed, and the teachers do make up a third of the Democratic convention delegates.  Is that a positive?  Van Jones?  Is he a success?  Hey, he's a Yale Law grad.  In fact, POTUS likes the Harvards and Yales 'way too much?  POTUS has a weakness for the blessed establishment.  "What does it take?"  It takes more than iconoclasm and herding on the web.

The national economy is on pause.  Too much Fed play money, too many foggy regulations to be determined, too many costs of unintended consequence from the knuckleheads of the 111th Congress.  Mrs. Pelosi's wrath needs a name.  The Money Wreckers.  The Soft Money Crowd.  The Unsound Dollar Congress.  Just the Unsounders.  Trillions and trillions and right back to where we started, Fannie and Freddie and no job growth.  Now Treasury Secretary Tim Geithner tells us that the government money has done enough to rescue the economy, that it is time for private investors to begin again.  Can't make this stuff up.   We'll be there, Tim, right after we get back from Vegas, cleaned out and happy, since Vegas is a much better investment than what you've made of the unsound dollar economy.

Porkchop Question 1959.     

The stentorian and glamorously manly Gregory Peck produced and starred in the sensational and brutal 1959 "Pork Chop Hill," based upon a bestseller by S.L.A, Marshall, with a screenplay by James R. Webb.  The meaninglessness of the fight on a 237-foot-high naked rockpile is underlined by the fact that the Panmujon ceasefire talk proceeds at the same time the featured K Company and L Company are reduced to a handful of desperate, outnumbered, doomed men.  Gregory Peck is the beleaguered and noble Lt. Joe Clemons.  Fate chooses to put Clemons and 25 men on a hill that is a test between the Red Chinese bulls and the US bull.  The US will not reinforce, because it does not want to lose any more men on a "hill that we could give back tomorrow."   An American admiral who is leading the negotiations at Panmujon presents the case:  "I'm beginning to think that they picked it because it's worth nothing.  That makes it a test of strength, pure and simple ... They're willing to spend lives for nothing or what seems nothing.  That's what they want to know.  Are we as willing as they to do that?"   The tension is severe.  And then the Reds launch a massive frontal assault with flame-throwers.  At the very last moment, while our heroes are roasting, the Americans reinforce massively and drive the Reds back down the hill.  Gregory Peck's final explanation of the sacrifice of K and L Companies makes a bold assertion in 1959, just six years after the ceasefire along the DMZ: "Millions live in freedom today, because of what they did."  

2010.  

The same sort of question again obtains today on the Korean peninsula, after the years of confrontation with the Kim regime.   What are we willing to spend to remove the worthless Kim regime?  My measure of the tangle these last years is that the Kim regime is undergoing a succession struggle that will lead to the collapse of the regime entirely.  Chaos, anarchy, civil war.  What are we willing to spend to rescue the starving, abandoned, abused, doomed millions of North Koreans from the tyranny of the Kims and their Red China patrons in the PLA? Hoping to speak to Even Ramstad, WSJ, who has flown out to the visiting George Washington supercarrier, now calling at Busan in a show of force.  The giants gather.  The Kim gang threatens nukes.  Those flame-throwers again. Will the Red Chinese launch a frontal assault?  Will the US reinforce?  Hear those bugles over the loudspeakers?  Even after 57 years, the Reds remain defeatists, gangsters, posturers, bullies, rogues, losers.

Spoke Paul Vigna, WSJ, re the ECRI, a private index that is regarded privately as a careful leading indicator of economic activity. The bad news is that the ECRI has now gone negative to -10.5. What does this mean. Everytime since 1980 that the ECRI has gone beloew -10.0 there has been a recession in 13 weeks. How can this be? We are in recovery? Yes, we are in recovery, and this makes the ECRI very worrisome to the traders.  The ECRI climbed from the December 2008 lows of the last thirty years, -29 plus, to a recovery in early 2010 to positive numbers.  Then this sudden reversal of the last few months.  What now.  Joe Brusuelas, Bloomberg, points to the European bank stress test results.  The seven banks that failed, the 84 that passed wil now come under the scrutiny of the smart money traders who will do their own stress tests with the bank numbers.  The European stress test was deliberately easy to pass.  For example, the Greek banks were tested with bond losses of 23%, whereas the average losses of bonds the last part of the 20th century was 46%.  The usual turmoil and doubts starting Monday 26.  The underlying tale is the extreme caution for the remainder of the waiting time till the Election.  Joe Brusuelas asserts there will be no credible rally.  Waiting on the New Year.  And housing starts will wait until 2012.  If you can trade the downside, or the volatility, enjoy.  For now, quantitative easing is available for the Fed, not much else.

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Spoke David Drucker, Roll Call, to learn that Harry Reid has had a come to Jesus meeting with John Kerry, and they will shelve the cap and trade bill that has been hanging around like an unloved child since the New Year. The House cap and trade bill last year was a rough vote that left many Democrats broken armed and hapless, especially those in the energy states such as the Appalachia Trail. Kerry bragged and boasted and schemed, but he could not find the votes on his own side of the aisle for global wamring control. There is a slight chance there will be a modest energy bill next week. The warning is that a slight energy bill could be put together in Conference with the massive cap and trade bill from the House and then, by main force, turned into a green hybrid of hybrids in a Lame Duck. Maybe.

Spoke to Joe Carroll, Bloomberg, re the joint Coast Guard and Interior Department investigation, who reports there is a surprise for Transocean.  Heretofore, the two BP site managers were under review and refusing to testify.  One invoked his Fifth Amendment rights, the other twice has called in sick.  Now, five Transocean employees who were on the rig the day of the explosion and fire have been told that they are "parties of interest."  This makes the five employees most unhappy, because they have already testified.  It also makes their lawyers unhappy and edgy.  One lawyer told Joe Carroll that if he had know his client would come under the shadows of a criminal inquiry, he would have not permitted him to testify.  The Coast Guard thinking is that the Law of the Sea applies to Deepwater Horizon as if it were a ship.  The captain and crew of the ship, the Transocean, cannot transfer responsibility for the vessel or its passengers to a client, such as BP.  Therefore, it could be that BP's hasty pushing of Transocean to close down the well site and move the rig (it was expensive by the hour) is not evidence that BP is at fault.  Transocean possessed the power to say no.   Everyone is getting more lawyers, from BP to Anadarko, from Mitsui to the rig owner Transocean, and now to the service companies Halliburton, Weatherford, M-I Swaco, Dril-Quip, -- and to the BOP manufacturer, Cameron International.  A big dragnet. Numerous fall guys other than the under-the-weather BP wellsite leader  Donald Vidrine.

Weather Coming. 

Two possible tropical cyclone developments in the region, bookends of the rig, both requiring attention to the weekend. 

Cameron International Corp.; Weatherford International Ltd.; M-I Swaco; and Dril-Quip Inc.  

Spoke to John Burns, NYT, re the meeting of David Cameron and POTUS and learned that the Cameron government  is most concerned with the worst-case scenario of the al-Magrahi release story.  Burns was direct that the Brown government was pushed by BP.  Burns was clear that the US knew that Britain was being pushed.  John Kerry's Senate Foreign Relations begins investigating momentarily.  Not a good story; not going to improve. Big headlines.  Schumer, Gillibrand, Lautenberg and Menendez all have much to gain.  Cameron's hesitation is not determinative.  This is about Gordon Brown and Tony Blair and Jack Straw.  There will be blood.

POTUS Blinks. 

"...Times are hard right now; I know it's getting close to an Election, but there are times when you..."  Unusually anxious language from the suddenly focused and scornful POTUS, who wants the GOP Senate to rollover once more so then POTUS can blame the GOP and its freinds the rich for driving the car into the ditch.  Spoke David Drucker, Rool Call, re the unemployment check vote in the Senate.  Learned that the 60 votes for cloture are not assured.   Ben Nelson of Nebraska will vote with the GOP.  Scott Brown will vote with the GOP.  That means that the Democrats need both Susan Collins and Olympia Snowe to vote with the Democrats.  David Drucker indicates that there are no clues as to which was the "ladies form Maine" will go.  I asked if the POTUS trip to Downeast the last weekend was to spill good ink in Maine.  David Drucker laughed.  The haughtiness of POTUS today suggests the White House does not know.  But what did Snowe, Collins and Brown get from POTUS for voting yes on FinReg?  More class warfare shots.

Spoke to Pete Hoekstra, MI-2 (R), who is campaigning for the Republican nomintionf or governor in Michigan.  Learned that even though POTUS took the cheap shot against Hoekstra last Thursday 15 in Hoekstra's own home town, Holland, Michigan, the fanfare that has followed for Hoekstra has boosted his chances immensely to win the nomintion.  FNC featured remarks that the one candidate POTUS fears in Michigan is Hoekstra.  Peter Hoekstra told me the White House fears that a governor who cuts taxes and grows the state economy will be a demonstration that the stimulus spending and higher taxes of the Obama administration is the wrong direction for 2012.  POTUS did panic by singling out Hoestra to trash talk in the man's own home town.  What could the benefit to the Democrats be?  Is POTUS a novice at campaigning?

Also spoke to 

The noisy suspicion is that BP greased palms to get the mass-murderer Al-Magrahi released from life in prison in Scotland in order to win Qadahfi's favor and secure rights to the Gulf of Sidra. Now the suspicion reaches CNN, where the play acquires a face and memory in a family member. The suspicion suddenly includes a TV denial by the Libyan ambassador to the UK. This story will grow like a monster until the Senate Foreign Relations hearings organize a full team of investigators with subpoena power and headlines.  The Lockerbie families will drive this, and so will the political parties in England and Scotland.  What did (then- Cabinet Secretary) Jack Straw know, and when did he know it?  Exhibit A is the healthy and cunning mass-murderer Al-Magrahi.  The chorus is made up of the dead (see below).  What would you do if one of those names was your pal or son or mom or family?  BP begins the inquiry with a reputation on par with venality itself.  And the Obama administration managed to get itself involved in the Al-Magrahi release without an inquiry: likely the genius counterterror czar John Brennan had a hand in the chain of decision.

 

POTUS unleaches his whining class war rap as he accuses the GOP of giving tax breaks to the rich "who didn't ask for them" while ignoring help to the jobless laid off by the GOP's reckless management. And so forth. The Democrats see the polls. The Democrats run from the polls. The Democrats cry class war! Will it work? No. The Democratic voters are not motivated to go to the polls just because POTUS claims the bad guys (GOP) are a cloud of villainy. Democratic voters will not go to the polls for anything until they see a recovery. POTUS proposed to dig the deficit deeper in order to make people who are not working more money from the empty Treasury. It is shabby logic. I am told the GOP will not wobble on the unemployment extension. By the ened of July, there will be 3.3 million people who will have exhausted their 99-week unemployment checks. What will happen? They will go looking for work, or start up consultancies, or work part-time. The unemployment number will gyrate. Some may even drop out of the market. 

Class war works in a presidential election year, because the Democrats can rally around their class war-chief candidate. But in a midterm election year, when deficits and large, expensive, unknown bills are the issue, the class war case gets foggy.  Blame the GOP because we aren't willing to spend more of my tax money on the deserving poor who already get a chunk of my tax money and have stopped paying their share of taxes because they are jobless?  A difficult case.  It goes well with university elites and guys with Wall Street jobs, but it doesn't travel well into the Heartland and the South.  And the Californians are out of patience with guilt-tripping.  Also, POTUS is not much of a class warfare fighter.  He does do negative -- but in a brutish, unconvincing, rude way, just the sort of game face that makes the opposition geefully put its weight into negative push-back.  Bunker time.  When they unleash the dogs of class warfare, answer with nuke artillery!  Small irony: Bar Harbor is where class warriors hang out in July?  Maine?  Really? Cadillac Mountain?  (Where I used to pedal up when I was a younger man.) What about the Gulf?  What about helping the Gulf with cleanup?  What about no vacation?  Like the rest of us?

John Fund, WSJ, and Mary Anastasia O'Grady, WSJ, speak to James Freeman with two beautifully ironic examples of the nototious Law of Unintended Consequences. Mr. Fund reveals that the authors and financiers of an attack ad in Iowa against a Republican gubernatorial candidate, Terry Branstad, smearing him as a tool of messy and gargantuan Obamacare, is no other than the Democratic Governors' Association. In sum, the Democratic governors are using POTUS as what John Fund calls a "football" to kick around usefully. POTUS just can't get no respect. Mary O'Grady identified a detail of the FinReg bill's 2,300 pages that mandates all entities created by FinReg have an office that assures women and minorities be correctly represented in the outcomes of FinReg. The twist is that there already is a Civil Rights Commission, and that this commission is aware that when outcome-based quotas are put in the hands of "bureaucrats" (that is, civil servants who are uaccountable), that the quotas are so ambitious they result in discrimination to reach the quotas. Hilarious. FinReg has created its own laughingstock machine. Expect to see the New New Board of the bank too big to fail near you and its derivatives trading floor of random worthies. Hilarious.

BP announces that the combination of the collar and the cap have sealed the Macondo well. More testing is required because of the possible build-up of pressure in the well; however, the early indications are positive. Three months into the crisis, it may be time to turn to the clean-up and the sorting out of the regulation. 

The spill in the Gulf may be solved; however, the spilling of the goods on BP and its lobbying for the release of the Lockerbie bomber in 2007 are just starting.  Senators Feinstein and Boxer now call for John Kerry's Senate Foreign Relations Committee to open an investigation.  The British ambassador in Washington passes on the remarks of the new UK government that David Cameron believes the 2009 release of al-Magrahi was "a mistake."  Will Cameron cooperate with the search for documents and email among Libya and Britain and Scotland in the period 2007-2009?  There will be blood.

Impossible to be frightened of a character as fatuous and aimless as the Times Square bomber Faisal Shahzad. The jihadists are ill-educated, rootless, confirmed, cruel and generally a washed-out Oedipal fairy tale. Shahzad moves now from unwanted son of Pakistan to devout punk in the Federal prison system, a passive loser. There is a cynical advantage to makeing a video of Shazad's day in the life to show to young jihadis. Trade your flimsy imagination for the airless boredom of lockup. Inshallah.  He makes the dead Abdul Zarqawi look like a scholar.

Spoke Larry Kudlow, CNB; Amity Shlaes, Bloomberg; Joe Brusuelas, Bloomberg, re the slowdown in the US economy for the second half of 2010. The Fed notes, reported by Jon Hilsenrath, WSJ, speak of a dispute in the Fed Board between those who argue there is deflation and those who worry there will be inflation -- at the same time, both sides worrying what can be done by the monetary policy to offset the slowdown.  Joe Brusuelas points to corporate bond spreads, a leading indicator, pointing to the slowdown at least into the first quarter of 2011.  The concern is that the S&P 1000 lack confidence in the Obama administration.  Amity Schlaes says there is a capital strike until and if the Obama team stops spending money and aiming at tax increases.  Kudlow and Brusuelas call for tax cuts.  Larry Kudlow wants a corporate tax cut; Joe Brusuelas wants a payroll tax cut.  Amity Schlaes reminds there was a capital strike 1937-38 under FDR because of the anti-business whimsy of the Roosevelt administration.  The capital strike will continue into 2011.  Companeis making money and banking it.  No spending.  No hiring.  Cut some more jobs.  Wait.

Speaking San Francisco Public Defender Jeff Adachi with Congressman Devin Nunes, CA-21 (R), re the conflict of the city's pensions and the needs of the public.  Jeff Adachi is a most progressive member of the Newsom team, and yet he says bluntly that the municipal union contracts are draining the public treasury.  Jeff Adachi tells that the city of San Francisco, with a $6 billion budget, cannot pay for summer school this year, and yet it is mandated to pay $700 million to retiree pensions.  Jeff Adachi recommends the heresy that city workers be required to contribute 10% of their own pensions annually - a modest goal.  Yet even this small proposal is opposed by Gavin Newsom, the mayor now running lt. governor.  Jerry Brown has not commented, nor has Meg Whitman.  We spoke generally of how this same issue, of pensions draining the budgets of states and cities, weighs down every decision in Washington and in state capitals.  No disagreement.  All common sense.  Is there the likelihood of a sense of proportion under Democratic majorities?  Negative.

The engineering heroics at the Macondo well are to remove the temporary cap and in the next week to fit on a much better cap that will catch most of the spill.  In the meantime, 60K barrels of crude per day pour into the Gulf while a fleet of 46 skimmers work to capture what they can.  The weather is cooperating.  The relief well is on target for an intervention at the end of the month, perhaps as soon as July 27.  The long nightmare of the spill could be close to ending.  But afterward come the courts and the finger-pointing.  Spoke Jeremy Polofsky, Reuters, re the court battle between the Obama team and the drillers.  The moratorium on deepwater drilling (below 500 feet) has been challenged and set aside with a temporary injunction, and the 5th Appeals Court at New Orleans has approved the temporary stay, pending a hearing at the end of August.  However, the effect of the court fight is that no one is much working in the US waters of the Gulf, and all those rigs are languishing with their crews -- an expensive dispute that costs jobs and growth in the region.  BP remains at risk at the well, but the entire region now descends into the fog of Obama.

 

China is growth. China is mystery. China is a non-transparent kleptocracy. China is eager to shed its stale leadership. Without the democratic enterprises of city, states and national legislatures, without union organizing, without a transparent court system, China is stuck in an antique, inadequate, draining and aimless cycle of graft, false starts, mass violence and disappointment. Spoke to David Barboza, NYT, re the Foxconn story, and by chance he was attending the media opening of the new Apple store in Shanghai. We could hear the enthusiasm in the background. This is the paradox of China. The young citizens are capable of the the same mastery of the virtual world as America's and Europe's youth. What is the probability that these excited young people (above) will continue to accept a sloppy, secretive, frightened, ill-educated lot of middle-aged apparatchiks as the lone leadership of the state?  Zero to zero plus N. Therefore, over the next decade, as these Macbook and iPod enthusiasts (and soon the iPad) come of age, and move to the wider world of commerce and information, there will be swift, sophisticated, dynamic conflict in civil society. My colleague Gordon Chang holds that the Central Committee has already lost control of the provincial chiefs who maintain family enterprises based upon graft and nepotism. The two richest cities, Shanghai and Beijing, are pools of falsehood and grotesque property manipulation. The Sun King center, built upon mass murder and an ignorance of human history, may have gone with the 20th century. Hu and Wen and the new gang cannot hold back the tide of data that will overwhelm the CP with these perfect virtual search and destroy machines in the hands of the ambitious and the curious. The forces of transparency are centripetal, and they will create many planets and their moons, all of them in magnificent rebellion. There will be blood.

 

The so-called swap of the ten Russian deep-cover ops for four genuine Russian security officials who are charged with and/or convicted of betraying Russian national security has now moved into the motive stage of the caper.  A Russian voice opines that "hawks" in the U.S. government concocted the spy ring brouhaha in order to sabotage POTUS's elaborate peace plans.  The Pixar movie of this "hawk" scenario uses the deeply sympathetic, orphaned, 35-year-old son of Boris and Natasha in search of an explanation for his parents' disappearance in the 1980s.  Our hero is named Greg "Red" Gregory (voiced by Jon Stewart) , and he has long hidden the secret of his parenting from his employers, the University of Chicago, where he works as a Classics library archivist and translator of Greek and Latin poetry.  As our story opens, our hero is lunching with his pal Goodluck Colorado, a law school lecturer who is thinking of running for public office ...

  

What drives the post-op brief is that everyone cogent is searching for a motive for the episode.  The story so far has all the elements of a thriller except the plot.  What was at risk?   Pixar has an advantage over reality.  At least we accept a make-believe story that is all about being okay and a team player.  But the spy ring is a farce or it is a sham.  No better choice exists.  POTUS has not commented on the fact that the arrests came within hours of his burgers with Medvedev.  In truth, POTUS is well removed from the events of his own administration -- as if POTUS is a tourist at the White House.  The postmodern version of the Obama administration would be that the White House is as blank a screen as POTUS and we can project whatever we fancy upon it.  Dots do not truly connect in this White House.  It is our weakness as philosophers and observers that we insist upon cause and effect.   The Obama team is not about anything.  It just wants to "be."  Just "be."  With this POV, what the spy caper becomes is a game of pretending to "be."  Here are the elements, pretend anything you want.  "Be" suspicious?  "Be" comforted?  "Be" 007?

  

Most Thursday evenings, Malcolm Hoenlein and I spend a few hours chatting about foreign policy as it relates especially to Israeli and Middle Eastern risks and threats.  Here, we discuss the peculiar facts around the CNN firing of the long-time senior editor of Mideast Affairs, Octavia Nasr, who posted a Tweet message in praise of the dead Shiite spiritual leader of the Hezbollah, Fadlallah.  It was too much even for CNN, since Fadlallah is long associated with the Hezbollah ("Party of God") and the demon Mugniyeh ("Fine time in Hell").  We also touch upon the United Nations Security Council, the UN peacekeepers in Bekaa since the 2006 war, and the unacceptably silly remarks of UN General Secretary Ban-Ki Moon (more secretary and less general).   We also mention that H. Mubarak, president of Egypt, is undergoing serious medical treatment in France and that the regime in Cairo is wobbly with an uncertain succession.    

  

It is apparently a fresh revelation to Wall Street that POTUS comes from the academic and political class that regards major corporations as untrustworthy and always suspect as larcenous.  The profit motive is not an obvious fact to POTUS or the academic creatures who surround him, such as Larry Summers and Ben Bernanke.  Worse, POTUS regards good grades in college as the chief credential of wise leadership in middle age.  It is only slightly exaggerated that POTUS thinks of the private economy as insufficiently appreciative of all that the Federal and state governments do to provide safety, comfort and the DMV.  This was all obvious when POTUS was a candidate.  It was even obvious when he started talking in February 2007 about "change."  POTUS is not a man who has ever worked for a profit-making organization -- unless this or that law firm bills nonprofits and governments.  POTUS is a product of foundations, executive budgets, state benefits and an academy built on government subsidies.  POTUS does not know about capitalism; he does not know about creative destruction; he does not know that recession is restorative; he does not value anything that is not government-subsidized. Shrug.  GE, Morgan, GM, all the little animals of coporate America, have now come awake with the same idea:  POTUS hates us.  It is very hard for a grown man to avoid the enjoyment that comes from "I told you so."  Regime uncertainty is what ails corporate America.  First, the corporations had to admit that they have a problem.  Now they must deal with the problem.  Meanwhile, Tim Geithner tells the corporate bosses http://www.foxbusiness.com/story/markets/industries/government/geithner-business-dont-hate/, "Obama doesn't hate you."  Smile.

 

Barbara Boxer of California is the Cemetery Ridge of the Democrats in the Senate.  You recall, the highwater mark of Lee and the Army of Northern Virginia on July 1, 2, 3 1863.  The GOP long-shot odds to take control of the U.S. Senate in November hang on the long-shot odds of Carly Fiorina's defeating Boxer in a deeply blue and anti-Republican state.  If Boxer falls, then anything is possible.  If Boxer holds, then the Democrats rule the slow-down Senate another two years and maintain leverage in legislation and theme-setting.  Spoke Jeff Bliss, BlissIndex.com, and learned that the Sacramento legislators have no intention of cooperating in any fashion with the $20 billion stage budget gap.  A Los Angeles assemblywoman proposes to eliminate serpentine as the state rock because it contains asbestos.  The state is unable to act on Schwarzenegger's mandate to reduce 200,000 state workers under his budget to minimum wage because the state possesses neither an up-to-date database nor a way to calculate the reduction, as the database has not been cleaned since the 1970s.  I watch San Diego real estate sales, Jim the Realtor, especially the north county stuff, and find that many sales are just investor flippers, moving in on the courthouse steps or on the MLS; and the sales are often to other flippers.  Investors with cash are looking to buy an REO for $3-5K, then flip it in 60 days for 10%, that's all.  A safer, surer bet than the markets or T-Bills.  The dead eating the undead eating the dead.  The housing overhang in San Diego includes new McMansions still going up as the old McMansions drift in short sales, or REOs, or cramdowns, or bankruptcy, or other games to be played with Fannie Mae/Freddie Mac housing.

It will come soon enough to the hardy and the stubborn in the Golden State that secession from the Feds is a credible way forward.  Then the Fed taxes (such as gasoline) can be jettisoned, and the taxpayers can keep their cash for municipalities where they live, not for subsidizing the undead bankers and their Fannie/Freddie cemeteries.  The true Cemetery Ridge in California is the shadow inventory of housing that is protected by the Fed like treasured zombie children.  Secession allows California to print its own money, and to borrow from China -- at a much better rate than Beijing gives the gargantuan Fed cookie monster called Bernanke.  Shrug.  Secede!

Charles Bolden Loses Credibility.   

Al Jazeera lite sits down with NASA administrator Charles Bolden, who spends most of his twenty minutes speaking vaguely and politely about NASA "outreach" to Muslims and other world powers. On the face of it, Bolden is simple and condescending. Bolden pushes the ISS as some sort of UN enterprise with "15 countries" participating. Bolden speaks of NASA as a "gift" to Planet Earth. Bolden says that no one nation has the technology to go to Mars. Nor the money. Strange remarks. Bolden is not a super-sharp blade, and this performance may be a low point. Still, some of these remarks are too strange to ignore.  Bolden does not believe that China can go to the moon without us and others?  Bolden thinks NASA's job includes making Muslim states "feel good" about the contributions of Muslims to science and engineering?  This is balderdash of an imperial kind.  Bolden has these sorts of conversations with POTUS?  How can NASA review this performance and keep a straight face?  Bolden is reading a science fiction novel?  Bolden represents what exactly?  The authority of the POTUS?  Bolden does not speak for Congress -- for any member of Congress I can think of.  Bolden either is out of the picture, or else he has suffered a momentary memory loss form a car accident or something.  This is the Obama administration's NASA boss?  Unacceptable.  Laughable.  Uninformed.  Unread.  Bizarre.  A bridge too far.  A foolish day.  Bolden is a veteran of nearly 50 hours in space on three different STST missions.  Bolden is not ignorant.  There is no good explanation for his conduct.  Even in the history of NASA's blithering, nothing compares to this folly. The Obama administration is lost in space -- and that's the best that can be said.  Even the Al Jazeera lite chat room cannot figure this rubbish.  Lost.

Colleague Bob Zimmernan, behindtheblack.com, writes trenchantly of the NASA breakdown.  There will be blood.

"Keep in mind again," commented Republican National Committee Chairman Michael Steele to a swishy Connecticut fundraising audience last week, "this was a war of Obama's choosing. " Is he talking about Afghanistan? Really? Michael Steele is a political actor whose job is to raise money for Republican party candidates - and occasionally to comment on the give and take of partisan happenstance. Even still. Michael Steele's puzzling and profoundly ill-informed remarks about the war in Afghanistan and the war in Iraq require a complete rethinking by the Republican Party as to what is to be done with a leader who does not seem to keep up on the news. "Keep in mind again ... this was a war of Obama's choosing. This was not something the United States had actively prosecuted or wanted to engage in."  Michael Steele's ignorance is breathtaking. Dumbfounding. Inexcusable. It takes a strong mind not to break out laughing.

John McCain, Lindsay Graham, Joe Lieberman all comment with alarm at Michel Steele's remarks.  The land war in the GOP is between those who believe the midterm success will determine the 2012 contest, and those who believe that 2012 will again turn entrely on the success in the war against Al Q and its gangs.  The GOP remains a war-fighting party.  The Democrats remain an appeasing-negotiating party.  Joe Biden and John McCain exchange the glances of old men in Iraq.  Spoke Sunday 4 with Liz Alvarette, NYT, re her profile of a heroic Staten Island family, the Marroccos, who are working together to reorganize the life of their youngest son, Brendan Marrocco, 23, who lost all four limbs (and 80% of his blood) from a satanic IED on Easter Sunday, 2009, and is at Walter Reed awaiting two arm transplants.  The Michael Steele remarks are just ignorant.  The remarks by those who argue for abandoning Iraq and Afghanistan to the monsters are at best ignorant.

Bob Zimmerman has documented over many weeks the drama of the Obama administration's abandonment of the manned space program at NASA. John Glenn made the sharp observation that the Obama plan to end the Space Shuttle leaves NASA with no way to connect to the ISS except with the Cosmodrome launches. The failure of the Progress robot cargo vehicle is an example of how we are stripped of options except with the Russian program. The Obama administration war on manned space just suffered a severe blow. The NASA team and its supporters in Congress wil illustrate the grim future by pointing to the Progress abort.  What POTUS intends with manned space is shut down.  Ares quit.  Orion quit.  The moon abandoned.  China given the first shot at the the moon colony.  And a peculiar construction of a space policy that presumes other states will share and trade and cooperate in orbit and on the surface of the moon and Mars.  POTUS has made an enemy of all manned space veterans, especially the Astronaut corps.  The Progress failure will reawaken the Astronaut corps.  Major members of Congress will insist upon extending the Space Shuttle program indefinitely.  Manned space will be a part of the victory of the Republicans in the House and Senate in the midterms.

Hanging out at the Volvo dealer recently, looking at the 2011 sedans and sports coupes and crossovers as they come in from the Swedish elf factories, it occurred to me that the reason I have come to doubt the recovery is because General Motors died and yet here it is, GM with a new Cadillac.  Something is dreadful.  GM is a zombie, same as Citi and Bank of America, Goldman, Wells, and all the other failed banks of 2008; and yet they continue as if they are deserving of a place on this troubled planet.  Dreadful.

Spoke Joe Brusuelas, Bloomberg, re the dreadful jobs report Friday 2 July.  The expectation is that the jobless rolls will expand the rest of the year as the folk who have been on unemployment checks run out of weeks and re-enter the job search.  Also, the fall-off of US consumer demand means that the export-based economies of Europe (Germany) and Asia (China) will struggle and stagger and shrink.  A non-virtuous spiral.  There is random violence in China: wildcat strikes at auto factories, villagers' confronting officials over confiscated land, protesters' setting themselves on fire.  The reports tumble to a river of chaos.  Spoke Gordon Chang, Forbes.com, who indicates that the Beijing authority can no longer contain the turmoil, which will deepen as the slowdown cuts orders and jobs in China, too.  The earnings estimates for '11 will be reduced soon enough.  Major market players like Barton Biggs are halving their portfolios and building cash to ride out the second-half recession.  Storm warning.  

The midterms have the potential of turning from a game-changer to a panic.  There is no answer.  There are rage and challenge.  Interesting times.  Dreadful.

 

   

Speaking Dan Drezner, Foreign Policy and author, re the flapdoodle of the Russian spy ring, and we cannot find a successful explanation for the FBI decision to move the same weekend of the two presidents' meeting. Putin is not content.  Medvedev is enraged.  The Kremlin never did trust POTUS, and now there is evidence that POTUS is a cunning Chicago pol.  Little more to be said.  The fugitive Christopher Metsos guarantees another long weekend of the story.