The John Batchelor Show

Tuesday 20 August 2013

Air Date: 
August 20, 2013


Photo, above: America's Cup: Emirates Team New Zealand vs. Luna Rossa Challenge (Italy)


Co-host: Larry Kudlow, The Kudlow Report, CNBC; and Cumulus Media radio

Hour One

Tuesday  20 August 2013 / Hour 1, Block A:  David M Drucker, Washington Examiner Sr Congressional correspondent, in re: Chris Christie: GOP needs to focus on winning, governing. Christie is likely to be the single most popular Republican fundraiser. The presumed Democrat candidate for '16 is Hillary Clinton; many pols are trying to position themselves lest Clinton not run, Right now, she's popular nationwide.  Expect to see jockeying post-2014.

New Jersey Gov. Chris Christie is still technically running for re-election in the Garden State. But two new polls show him leading the pack of potential candidates for the 2016 Republican presidential nomination. 

A Rasmussen Reports poll released on Wednesday shows Christie leading the potential GOP field with 21 percent support. Florida Sen. Marco Rubio comes in a close second with 18 percent. Former Florida Gov. Jeb Bush, who has been considering a presidential run after ruling it out for a number of years, is third with 16 percent. 

Kentucky Sen. Rand Paul is behind Bush with 15 percent. 2012 Republican vice presidential nominee Paul Ryan garnered 13 percent of the vote in the poll. Christie and Rubio have taken criticism recently from within their party for taking positions out of line with the conservative base. And Paul recently had a very public feud with Christie over military spending, with each man making barbs at the other.  Potentially adding to that rivalry, a WMUR/UNH New Hampshire poll released on Tuesday also shows Christie leading the Republican field with 21 percent. However in this poll, Paul comes in second, with 16 percent. Bush places third in the poll with 10 percent, followed by Ryan at 8 percent and Rubio at 6 percent, respectively.  [more]

Tuesday  20 August 2013 / Hour 1, Block B:   Stephen Moore, WSJ, in re: The ObamaCare Slush Fund 
Health-care dollars for whatever the White House wants. Sibelius is funding three organizations (Planned Parenthood, Urban League &   ) in Iowa, Montana and New Hampshire, all affiliated with Planned Parenthood.  There's $50mil in the HHS [slush] fund; send people out to knock on doors; 90% of US abortions performed by Planned Parenthood. Slush fund will be used tactically: when women arrive in clinics, they’ll be educated in the virtues of ObamaCare. But cash is fungible.  Money is going to groups that have visibly helped Pres Obama get elected. This make many people sympathetic to de-funding ObamaCare. Looks deliberately provocative – "trying to turn over the chess board."  And now they've found anther $12 mil for ObamaCare. Odd.  The navigators are: ACORN.  A lot of young people going around the country lobbying or a govtl program Highly unusual. This all goes to the individual mandate, which is the Achilles' heel of ObamaCare.  If we had the vote in the Senate that you want to see . . . .  Harry Reid knows that he doesn’t have enough votes. Could Sibelius's distribution be clawed back?  Yes – appropriations can be reversed. 

Tuesday  20 August 2013 / Hour 1, Block C: Allan H. Meltzer, Hoover, Project Syndicate, in re:  When Inflation Doves Cry  We've had an unusual experience. For long the Fed has ignored credit and ___ in monetary policy.  They don’t allow money growth and credit to increase; lock up all reserves after the first round, now $2 trillion-plus. The problem is to get them out. Banks want these reserves for emergency situations – even if you didn’t pay them 24 bps.  The Repurchase Market is damaging emerging nations, hedge funds, corporations; people still extremely worried about whether they'll get heir money back.   Use excess reserves to . . .  If interest rate were zero ,t hat wouldn't happen.  Half of the . . .   The velocity of money is virtually zilch.  Only 27,000 new workers are full-time; all the others are part-time. ObamaCare (29 employees rule). This Administration is overtly hostile to business. Very slow investment; historically, only 1938 is similar when FDR decided to be a populist.  Yellin vs Summers: if you had over $2 trillion in excess reserves, you’d need a strategy to get rid of it over years; neither of these persons is strategic – both are spur-of-the-moment thinkers.  They make businesses quite nervous. What does Summers believe in? Summers!  He's given terrible advice in the past on tax rates, regulations, maximizing uncertainty. A hundred years of Fed: 1923-28, and 1985-2002 – gold exchange standard and small recessions when they more or less followed the Taylor rule.

The Wall Street Journal recently ran a front-page article reporting that the monetary-policy “doves,” who had forecast low inflation in the United States, have gotten the better of the “hawks,” who argued that the Fed’s monthly purchases of long-term securities, or so-called quantitative easing (QE), would unleash faster price growth. The report was correct but misleading, for it failed to mention why there is so little inflation in the US today. Were the doves right, or just lucky? The US Federal Reserve Board has pumped out trillions of dollars of reserves, but never have so many reserves produced so little monetary growth. Neither the hawks nor the doves (nor anyone else) expected that.

Monetarists insist that economies experience inflation when money-supply growth persistently exceeds output growth. That has not happened yet, so inflation has been postponed.

Instead of rejecting monetary theory and history, the army of Wall Street soothsayers should look beyond the Fed’s press releases and ask themselves: Does it make sense to throw out centuries of experience? Are we really so confident that the Fed has found a new way?  The Fed has printed new bank reserves with reckless abandon. But almost all of the reserves sit idle on commercial banks’ balance sheets. For the 12 months ending in July, the St. Louis Fed reports that bank reserves rose 31%. During the same period, a commonly used measure of monetary growth, M2, increased by only 6.8%. No sound monetarist thinks those numbers predict current inflation.  Indeed, almost all the reserves added in the second and third rounds of QE, more than 95%, are sitting in excess reserves, neither lent nor borrowed and never used to increase money in circulation. The Fed pays the banks 0.25% to keep them idle.

With $2 trillion in excess reserves, and the prospect of as much as $85 billion added each month, banks receive $5 billion a year, and rising, without taking any risk. For the bankers, that’s a bonanza, paid from monies that the Fed would normally pay to the US Treasury. And, adding insult to injury, about half the payment goes to branches of foreign banks. In normal times, there are valid reasons for paying interest on excess reserves. Currently, however, it is downright counter-productive. Bank loans have started to increase, but small borrowers, new borrowers, and start-up companies are regularly refused. Current low interest rates do not cover the risk that banks would take. To be sure, they could raise the rate for new and small borrowers; but, in the current political climate, they would stand accused of stifling economic recovery if they did. The new Consumer Financial Protection Board is also a deterrent, as banks consider it safer to lend to the government, large corporations, and giant real-estate speculators. The banks can report record profits without much risk, rebuild capital, and pay dividends and bonuses. And the Fed can congratulate itself on the mostly unobserved way that the large banks have used taxpayers’ money.

Instead of continuing along this futile path, the Fed should end its open-ended QE3 now. It should stop paying interest on excess reserves until the US economy returns to a more normal footing. Most important, it should announce a strategy for eliminating the massive volume of such reserves. I am puzzled, and frankly appalled, by the Fed’s failure to explain how it will restore its balance sheet to a non-inflationary level. The announcements to date simply increase uncertainty without telling the public anything useful. Selling $2 trillion of reserves will take years. It must do more than repeat that the Fed can raise interest rates paid on reserves to encourage banks to hold them. It will take a clearly stated, widely understood strategy – the kind that Paul Volcker introduced in 1979-1982 – to complete the job. Should the end of QE come in September, December, or later? Does it matter? Historically, the Fed has typically been slow to . . . [more]

Tuesday  20 August 2013 / Hour 1, Block D:  Gregory Zuckerman, WSJ, in re: Morgan Whale and Paulson gold.  

Volume of overnights is slipping from $2.3 to 1.0 trillion. Liquidity has significantly declined since May.   . . .  Traders getting used to not getting so much help from the Fed.  Emerging mkt bonds.  Treasure Borrowing Advisory Committees: liquidity squeeze in the overnight lending mkt.  There are healthy and unhealthy ways to remove the punch bowl; hedge funds hurting isn’t a problem, but the larger mkts  . . .

'Whale' Case Rests on Trade Valuation   Trader racked up $6bil in losses, now says that its his superior who's at fault.  "Who knows the valuations of derivative?"  - it's not that illiquid! Need to be consistent between ask and sell price.  Julien Grout was a sort of junior trader; argue that he did something improper at the behest of his superior. 

     The fate of a criminal case against two former J.P. Morgan Chase traders accused of hiding losses rests on what the "London whale" trades were actually worth. A key defense for Javier Martin-Artajo and Julien Grout, the two traders targeted in charges announced Wednesday by U.S. prosecutors, is expected to be that the high-stakes derivatives bets their unit made were difficult to value, according to people close to the two. 
The situation presents tricky questions for prosecutors who must decide . . . [more]

Paulson Halves Exposure to Gold  John Paulson cut his hedge-fund firm's exposure to gold by more than half in the second quarter. He's still a fan of gold; still a long position, has lightened up a little. Right now, gold is bouncing around - $1900/oz to $1200/oz, now in the low $1300s. Waiting for the next major move in gold. If the Fed tapers, see if there's a liquidity effect that pushes gold down. Silver has done well. 

Hour Two

Photo below: Hamad al-Mazroui, on the right, the journalist who offered a $143,000 reward for three top members of the Egyptian Muslim Brothrhood.

Tuesday  20 August 2013 / Hour 2, Block A:  Eric Trager, Washington Institute, in re: Egypt: a manhunt spurred by a reward for the whereabouts and capture of three major MB leaders.  The reward of $143,000 (a million pounds) comes from a UAE journalist.  Two are most prominent leaders in MB; one is a radical Islamist preacher closely affiliated with the MB for years.   Al Arabiya? has deposited $3 bill in Egypt's central bank. Gulf States pushing cash to al Sisi. The MB is Islamist, but above all is a hierarchical vanguard with Islamic flavor. All members have taken and oath or obey the leadership – 18 members of an executive board plus a Shura council. If you take out the top provincial leaders, the MB cannot function [as its old self].

Al Arabiya  An Emirati journalist offered to give one million Egyptian pounds ($143,000) for anyone who leads Egyptian security forces to arrest three senior Muslim Brotherhood leaders. Hamad al-Mazroui made his offer in a Twitter post, saying he would offer the money to whoever discloses the whereabouts of fugitive Brotherhood leaders Mohammad el-Beltagy, Essam el-Erian and Safwat Hegazy.  He said the prize is available to all Egyptians “regardless of their religion or race.”  Mazroui previously made a phone call to an Egyptian television talk shwo and announced granting the Egyptian people a similar amount to congratulate them for ousting Mohammad Mursi from power. During the phone call he also unveiled other grants made by several UAE journalists and writers. The UAE government has recently deposited $3 billion in Egypt’s Central Bank. Saudi Arabia, Kuwait and the UAE together pledged $12 billion to help the Arab world’s biggest country overcome its economic crisis following the Mursi’s ouster.

Authorities Stand By as Egypt’s Christians Are Under Attack In a wave of attacks last week, Islamists set upon homes and churches, shops and schools as Christians were scapegoated for backing Mohamed Morsi’s ouster as president.

Egypt Arrests Spiritual Guide of Islamist Party The arrest of Mohamed Badie, of the Muslim Brotherhood, appeared to represent a red line the police had never crossed in earlier crackdowns on the group.

Egypt Arrests Spiritual Guide of Morsi’s Islamist Party  Mohamed Badie, the spiritual leader of the Muslim Brotherhood, was arrested hours after a court ordered the release of former President Hosni Mubarak, offering a measure of Egypt’s redrawn political landscape. State security forces arrested 42 Muslim Brotherhood leaders -- 34 in Alexandria and 8 in the Gharbiya governorate -- on Aug. 18, Brotherhood sources said, Ahram Online reported. The arrests came as part of the Egyptian military's larger crackdown on Muslim Brotherhood protests. The Brotherhood has demonstrated an ability to weather suppression in the past, but this time it is facing a different sort of crisis -- one that could strip its status as Egypt's largest political movement.

Authorities Stand By as Egypt’s Christians Are Under Attack In a wave of attacks last week, Islamists set upon homes and churches, shops and schools as Christians were scapegoated for backing Mohamed Morsi’s ouster as president.

Egypt Arrests Spiritual Guide of Islamist Party  The arrest of Mohamed Badie, of the Muslim Brotherhood, appeared to represent a red line the police had never crossed in earlier crackdowns on the group.

Military Dominates Airwaves

Tuesday  20 August 2013 / Hour 2, Block B: John Fund, National Review Online, in re: It’s time to ask tough questions about the National Security Agency’s surveillance activities — even for conservatives who have given the NSA the benefit of every doubt up until now. The Washington Post opened a can of worms last Friday when it reported that, in 2012, an internal NSA audit found that the agency had violated privacy rules 2,776 times within just one year. The audit counted only violations at NSA’s Washington facilities — nearly 20 other NSA facilities were not included. In the wake of the Post’s report, the NSA insisted that the violations were “inadvertent,” but it failed to explain why it had not shared the report with Senate Intelligence Committee chair Dianne Feinstein or other congressional oversight authorities. Yet some NSA defenders continue to insist that nothing is wrong. Back in July, [more]  . . . In 1999, then-senator Daniel Patrick Moynihan wrote Secrecy: The American Experience, in which he analyzed the parallel growth of secrecy and bureaucracy in the U.S. “Secrecy is a form of regulation,” he warned. “At times, in the name of national security, secrecy has put that very security in harm’s way.” He observed that although secrecy is absolutely necessary for our protection, it all too often serves as the first refuge of incompetents or those drunk with arrogance. We should not give these groups the ability to cloak their operations — no matter how virtuous the goal. 

Tuesday  20 August 2013 / Hour 2, Block C: Henry I Miller, M.D., Hoover &, in re: "Genetic Engineering Produces a Genuine Monstrosity"

Tuesday  20 August 2013 / Hour 2, Block D:  Robert Zimmerman,, in re: A draft of the next IPCC climate report has arrived, and it is more of the same: We're all gonna die!

An international panel of scientists has found with near certainty that human activity is the cause of most of the temperature increases of recent decades, and warns that sea levels could conceivably rise by more than three feet by the end of the century if emissions continue at a runaway pace. The scientists, whose findings are reported in a draft summary of the next big United Nations climate report, largely dismiss a recent slowdown in the pace of warming, which is often cited by climate change doubters, attributing it most likely to short-term factors. The report emphasizes that the basic facts about future climate change are more established than ever, justifying the rise in global concern. It also reiterates that the consequences of escalating emissions are likely to be profound.  I love the way the journalist here uses the term “climate change doubters.” Throughout the story it is applied to skeptical scientists in such a way as to imply that any doubt about these conclusions is obviously something to snicker at and to ignore.  As for the claim that the seas will rise three feet in the next 90 years, note that the level of sea rise has been consistently between 2 and 3 millimeters per year for the past half century, even as we have been pumping carbon dioxide into the atmosphere and the climate has supposedly warmed. At 3mm per year, the seas will only rise 270 millimeters by the end of the century, or just under 11 inches, not three feet as claimed by this new IPCC report.

Hour Three

Tuesday  20 August 2013 / Hour 3, Block A:   Jeff Bliss, The Bliss Index, in re: Luna Rossa sailors huddle after their boat broke down again, resulting in a loss.

Journalist had drugs in system: Autopsy report on Michael Hastings' death shows traces of amphetamine, marijuana in his system.  In an apparent about-face, San Francisco Fire Department officials said Monday they will revisit restrictions on firefighters' use of helmet-mounted cameras after concluding that footage from the Asiana Airlines crash showed the value of the devices. SF Chronicle

"Psychopolitical commitment" to the high-speed train.

Tesla: Top Model S safety rating: Electric-car maker says flagship model gets best mark ever.

SF Chronicle Texas Gov. Rick Perry will address hundreds of activists in the nation’s biggest state GOP in October as the headliner at the California Republican Party convention in Anaheim. [more]

U-T San DiegoLAT San Diego Mayor Bob Filner and his legal opponents held all-day settlement talks Monday involving the top officials in San Diego, while a recall effort remained in full swing and a group of supporters rallied outside City Hall to urge Filner to stay in office. The talks center on the harassment lawsuit filed by attorney Gloria Allred on behalf of former mayoral aide Irene McCormack Jackson. 

Wired  5 Cities Buy More than Half of All Electric Vehicles in the U.S.  

Tuesday  20 August 2013 / Hour 3, Block B:  LouAnn Hammond,, in re: Is Tesla the new Volvo? Safety abounds. Tesla: Top Model S safety rating: Electric-car maker says flagship model gets best mark ever.

Tuesday  20 August 2013 / Hour 3, Block C:  Arif Rafiq, Middle East Institute, in re: Pakistan looking to be transforming into a state of city states unable to protect themselves from the Jihadists.  The nukes are the vulnerability; the Pakistani army must spend a lot or resources to protect them.  Making a grand bargain with the Afridi didn't work for the British Empire with Churchill in the 4th Hussars in 1894, and it won't work today. It's said that Pakistan is an army with a state. Now the same thing is said of Egypt.  A trend?

Yes.  The government has reinstated its moratorium on the death penalty. It's unclear as to whether this is the result of threats from terrorists or pressure from international organizations like Amnesty and Human Rights Watch. The pressure from the human rights community seems to be misguided. The men who were to be executed were terrorists tried and convicted by Pakistan's courts.  Without the option of a death penalty, we could see more extrajudicial killings by the Pakistani state (military, intelligence, and police). Each year, the various security organizations in the Pakistani state conduct dozens of extrajudicial killings. While some victims are political dissidents, others are known gangsters and terrorists who'd likely be freed from jail as a result of weak courts/prisons. For example, Pakistan's anti-terrorism courts have an acquittal rate of about 75%.

There have been two major jailbreaks this past year, most recent one in Dera Ismail Khan that freed hundreds. The system is broken. Terrorists have access to cell phones in prison and even get married and procreate.

Concerning PM Nawaz Sharif: Political analysts noted a strain of self-contradiction in his stance on dealing with the Taliban. Arif Rafiq, an adjunct scholar with the Middle East Institute, said: “It was a tale of two speeches. Sharif gave a coherent, honest diagnosis of the country’s energy and economic challenges and a relatively clear road map for resolving them. But on national security, he was quite confused. He said that terrorists are an existential threat to Pakistan, but then called for talks with them. He hinted at trying to radically revise Pakistan’s foreign policy, making it a force for regional peace,” Mr. Rafiq added. “But his government currently lacks the machinery to devise and implement a full-fledged national security strategy.”

Former Pakistani army chief Musharraf charged in 2007 Bhutto assassination

Pakistani al Qaeda commander threatens government over execution of jihadists  Asmatullah Muawiya said the PML-N "will have to pay a price" if it carries out the executions of jihadists. Pakistan's interior minister said the government will carry out death penalties starting next week.  . . . Top News: This morning, a Pakistani court indicted seven people for their role in the 2007 assassination of former Prime Minister Benazir Bhutto. Among those accused is Pakistan's former army chief and president, Pervez Musharraf, who was in power at the time of Bhutto's death.

Musharraf's lawyer, Afsha Adil, was defiant as she responded to the charges. "The important thing is this: You will have to prove the allegations with evidence," she told reporters Tuesday. "And still there is no evidence on record.... These are all fabricated cases." The indictment comes in advance of the publication of a book by Heraldo Muñoz, the Chilean diplomat who led the U.N.   investigation of Bhutto's death, which casts serious doubts on the previous narrative that Bhutto was killed by the Pakistani Taliban. Muñoz suspects Pakistan's Inter-Services Intelligence played a role and then may have covered up evidence after, though he notes in an excerpt published yesterday that "We will probably never know with full certainty who killed Bhutto. The list of people and groups that considered Bhutto a hated enemy is long."  No ISI officials were indicted today. Others facing charges include previously accused Taliban militant Husnain Gul and several police officials. The next court date is scheduled for Aug. 27. 

Tuesday  20 August 2013 / Hour 3, Block D:  Bret Stephens, WSJ GLOBAL VIEW, in re: A Policy on Egypt--Support Al Sisi  Where is the president during this chaotic, important period in Egypt? In Martha's Vineyard, not only physically but metaphorically. Many American public figures prefer to condemn the violence rather than address the reality of what the Ikhwan is doing, Kerensky arrested leading Bolsheviks, incl Lenin, during an uprising in Petersburg. To his eternal shame, Kerensky later released Lenin.  We should be looking to achieve the least-bad outcome. Egypt will not become a model of parliamentary democracy, military restraint and [ ] wisdom. We need to convey that we want al Sisi's crew to win, and in winning be magnanimous. The Gulf states are lending a hand to al Sisi; has Congress noticed?  Saudis, Qataris, others, can easily pick up the bill where the US left off.  When al Sisi goes to buy some Sukhois in Moscow, will we cheer then?  This posture is all about American moral rectitude, not about clear strategic thinking.

Hour Four

Tuesday  20 August 2013 / Hour 4, Block A: Shadow Warrior: William Egan Colby and the CIA by Randall B. Woods (1 of 4) 

Tuesday  20 August 2013 / Hour 4, Block B: Shadow Warrior: William Egan Colby and the CIA by Randall B. Woods (2 of 4)

Tuesday  20 August 2013 / Hour 4, Block C: Shadow Warrior: William Egan Colby and the CIA by Randall B. Woods (3 of 4)

Tuesday  20 August 2013 / Hour 4, Block D: Shadow Warrior: William Egan Colby and the CIA by Randall B. Woods (4 of 4)

..  ..  ..



Hour 1:  Inside Man. The Expendibles.

Hour 2:  Bourne Identity.  Painted Veil. Alien vs Predator.

Hour 3:  Hotel California (Eagles).  V for Vendetta. There Will Be Blood.

Hour 4: Green Zone.