The John Batchelor Show

Tuesday 11 September 2012

Air Date: 
September 11, 2012

 

Photo above: US embassy in Cairo as the American flag is trashed.

JOHN BATCHELOR SHOW

Co-hosts:

Larry Kudlow, The Kudlow Report, CNBC;

Gordon Chang, Forbes.com

Tuesday 905P Eastern Time: Larry Kudlow, in re: News: one dead, an American consular official in the US embassy, in Benghazi under attack from citizens's claiming that a film insults Islam: a video inaccurately said to have been produced by Egyptian Copts!  Copts constitute 10% of the Egyptian population. Mob also tore down the US flag. Reminiscent of 2005-6 worldwide cartoon riots.   Why did our Cairo embassy apologize?  If I did, that would've been "the absolute wrong thing to do," according to Andy Card. See: Indonesia, Malaysia, Pakistan.  Since this is Remembrance Day of 9/11, we must never forget – 9/11 or the fact that there are terrorist nations. The US has the right to protect its most basic interests by pre-emptive action.   Esp in the Middle East, "the stronger horse" is respected. US has offered an open hand to Mohammed Morsi, Washington speaking of transferring a huge amount of money to Egypt.  Morsi speaks of a quadripartite caliphate:  Egypt, Saudia, Iran and Turkey. The American president has not at all explained how he accepts the flag being trashed and the oncoming threatening news from around the world.   This is not spontaneous rioting: it' carefully planned, phone calls are made, instructions are quite organized.  Pres Obama is still dissing PM Netanyahu.  As John Bolton says plainly: Weakness invites trouble.

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UBS is telling its investors QE3 is coming. ”More and more market prognosticators are calling for the Fed to unveil a third round of quantitative easing this week UBS is the latest to join the fray, predicting the Fed will announce something big on Thursday following its policy meeting. The QE3 parameters will likely entail a six-month program of at least $500 billion, primarily focused on buying Treasurys, UBS predicts, while also anticipating the Fed will extend its ultra-low rate guidance into 2015. UBS joins a growing chorus of investors who are anticipating less talk and more action from the Fed after its two-day meeting this week, which ends on Thursday with a statement and press conference from Fed Chairman Ben Bernanke.” Steven Russolillo in The Wall Street Journal.

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Tuesday 920P Eastern Time:   Joseph Rago, WSJ & Pulitzer Prize, in re: Romney said, "I'm replacing Obamacare with my own program" – and then never said boo about what his plan is. Campaign seems to be based on the notion that conservatives will vote Obama out, so no need to explain his policy. . . .  Pre-existing conditions plan: 75,000 people have enrolled in this showing that it's a real issue but not enormous.  In Tampa, Romney did not make the sale; had 250 words on the economy in his acceptance speech, but otherwise left out a great deal – corporate tax cut, how his plan would benefit the economy - of essential info. Romney's pre-existing politics: the GOP candidate might try explaining his policies. Just a thought.

Tuesday 935P Eastern Time:   Jon Hilsenrath, WSJ, in re: JH says it’s the job of markets to anticipate, which is what they’re doing;  LK: I think there will be a QE3. Such gloom in Jackson Hole. Fed will buy bonds by creating new cash to inject into banking system. Won’t J P Morgan take the new cash & just deposit it at the Fed, which already has $1.6 trillion?  What the Fed thinks is important is what happens when it buys the bonds: push down long-term interest rates, not he overnights – like mortgages, to give people a better chance to refinance. Also, forcing investors to replace their holdings with something else, such as stocks. Note that the S&P bottom was June 21, probably generated by to the Fed's June 20 mtg.  LK: If the economy gets better,, the long-term interest rate will rise.  I read Bernanke's speech: in a study, QE1,2 and perhaps s 3, have created 2 million jobs.  If he created 2 million jobs with 2 trillion dollars,, that's more expensive that the Chicago teachers union- a mil a job.   JH: The Fed isn’t just spending; it buys bonds expecting the to be paid back some day. LK: Strictly speaking, you're right, but the Fed is also underwriting the govt's budget deficit, already owns so many bonds, it'll be a hell of a job to unwind that if and when the time comes. Fed's policies are enabling this unbalanced federal deficit awhile claiming to create 2 mil jobs.  JH: Right. Where are they? Model of he economy called FERVIS – but the Fed's models have been consistently wrong throughout. In Jackson Hole, people asked, how'd you get this number and why shd we be confident that your plan will work?  Five hundred billion of bond-buying creates 2/10 of a percentage point GDP improvement. Faugh.  The Fed has a trillion dollars of currency, pay no interest. If you run a hedge fund -  and the Fed is like a hedge fund these days – it’s a great way to do it. Fiscal cliff?  I think no one at the Fed thinks they alone have the capacity to solve the whole situation.

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Credit demand is still weak, as consumers choose to keep the credit cards in their wallets.  ”Americans cut back on their credit card use in July for a second consecutive month, suggesting that many remain cautious in the face of high unemployment and slow growth. Total consumer borrowing dipped $3.3 billion in July from June, to a seasonally adjusted $2.705 trillion, the Federal Reserve reported Monday. . . . Consumers have been using credit cards much less since the 2008 financial crisis.” The Associated Press.

@pdacosta: Global central bankers’ band ‘Fiat Currency,’ (Bernanke, Draghi & King) has a new hit single out: “Where there’s a will.” It’s the jam.

BAUM: Why Bernanke will ease. ”Federal Reserve Chairman Ben Bernanke will be damned if he does and damned if he doesn’t on Wednesday…Bernanke is a man of his word. Agree or disagree with his policies, he is a person of character. Therefore, we should expect the Fed to announce additional stimulus at the conclusion of this week’s meeting. Bernanke has been laying the groundwork for months…So what will the Fed do? Perhaps it will announce something akin to the European Central Bank’s open-ended bond purchases without the offsetting sales. There are risks to doing more…The risks of doing nothing may be even greater. Inflation is a future risk; current unemployment is a ‘grave concern.’ With words like that, Bernanke’s choice seems pretty clear.” Caroline Baum in Bloomberg.

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Tuesday 950P Eastern Time: Jon Hilsenrath, in re: on Thursday, the way Bernanke describes what he's doing will be important in shaping people's expectations.  I think we'll hear someone who's lost a bit of patience, is changing framework a bit and prepared to change methods in view of the economy and the slow pace of job creation.  Bought more than $1 tril in bonds in 2009, seen as the most successful. We're actually getting a little good news in the housing mkts.   Might improve – or might trigger the velocity of money, cause too much lending and a real inflation problem. LK: I don’t think money creates growth – you change either the value of a dollar or the rate of inflation. If it were going to work, would have done so already.  JH: Trade forecast: 1.4%  Fed's tool kit can work on short-term swings, but in the long run a lot of other things need to happen – tax & fiscal policy, skills in labor force. They’ve been trying to manage the bz cycle for four years. When do you address structural problems?  LK: I think the whole policy mix is wrong.  Supply-side/Robert Mundell: low tax rates and a sound dollar.  The economy is in such bad shape because the policy is just totally wrong.  JB: Interfering in the election process?  JH: 1992 was a good example of that – Greenspan was under pressure from G H W Bush.

Tuesday 1005P (705P Pacific Time):  Gordon Chang, in re: In Libya in Benghazi, said to be 3 KIA at US embassy, 15 wounded; report unconfirmed that one American dip has been abducted.  Roads out are blocked by mobs and gangs air evacuation overnight. As the sun rises over Indonesia and Pakistan, might see new violence.  Egyptian Christians have been persecuted for he last year – violence by Salafists – now are accused of having produced he film. 

Also: the Chinese foreign ministry commented today about Ian Jonson's reports:  said they’ve told us everything. When asked if he was alive, "We only accept reasonable questions."  Xi Jinping hasn't been seen since 1 Sept; and He hasn’t been seen since 28 August. Communist Party overwhelmed by all the news.  It may just be a X I health problems, but there are assassination rumors, also car crash, or back injury, or paralysis that disfigures, or heart attack.  A minor official was on a plane leaving China, was turned around to return, was a Party official.  Cui bono? Hu Jintao – he either stays on or gets to pick a different successor.

Tuesday 1020P (720P Pacific Time):  Charles Burton, Brock University, in re: the mystery of the missing Xi Jinping.  "Is he alive?" "We answer  only serious question."  It’s the behavior of a punk; what's  happening?  The foreign ministry has got very impolite, now have shut themselves off from the world.   Cui bono?   Bo seems to want to change policies; Hu may be unhappy with succession; Xi's disappearance my be political.  Being gone for a week is highly unusual; glimmer of possibility that Xi will not succeed to presidency, indicative of a great deal of confusion. Tends ot result in a much stronger military component. Today announced sending two surveillance craft to Senkakus/Diaoyutai. A military op in the middle of a political crisis.  Ferrari car crash on March. Can only get worse over time. Leadership floundering: serious corruption, bad policies, can’t think how to stave off problems without damaging the privileges they're used to  How to sustain their power?   Political infighting at the senior level. Absent a swift resolution, continuing crisis, and China is facing grave problems: decelerating economy, military breaking free of civilian control, dissatisfied populace: we have to entertain the possibility of a failed state.  Wang Lejun made a dash for freedom last February; is Xi Jinping part of this? 

Bloomberg story on Xi's corruption may be a clue of why he's missing.

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Yardeni writes this morning that one reason the Chinese may not be spending more is because some of the projects commissioned in the $590 billion stimulus package after the financial crisis are already falling apart. He note reports  of road cave-ins in Beijing and bridge collapses elsewhere. And in march, the high-speed railway line due to open in May in the Yangtze river cities collapsed, with engineers working on some projects complaining of problems with use of inferior materials. In his speech, Wen defended the post-crisis stimulus, which has also come under attack for creating long-term costs like inflation and soaring property prices.

It seems as though the country, which is also about to undergo a major leadership change, is trying to take a slower and more prudent approach this time; but it also seems as though the market may force their hand to act quicker –and bigger.

Tuesday 1035P (735P Pacific Time):  Robert Zimmerman, behindtheblack, in re:

Tuesday 1050P (750P Pacific Time):  Eric Trager, Washington Institute and Foreign Policy Research Institute, in re: demonstration in Cairo vs the US embassy was scheduled days ago. Statement issued by US embassy in Cairo: 11 Sept 2012 , The embassy condemns the efforts to hurt the feelings of members of various religions, especially Islam. . . . .  " Washington said, This statement was not condoned by the White House.    Unconfirmed: perhaps three dead, and perhaps one US diplomast abducted.

In Benghazi, a large mob stormed the US consulate, with gunmen firing their weapons, said Wanis al-Sharef, an interior ministry official in Benghazi. A witness said attackers fired automatic weapons and rocket-propelled grenades at the consulate as they clashed with Libyans hired to guard the facility.

Al Gamaa Islamiya announced 2 weeks ago there'd be a demo in favor of releasing the Bind Sheikh.  News of an obscure anti-Islamic video began to circulate; Salafists used that to drum u anti-American feelings, and today were joined by soccer hoodlums known for drugs and violence. They scaled  ht wall, trashed the flag. Where was Egyptian security?  Recent announcement that the US embassy neighborhood would be opened for general traffic causing a major security issue.  A linkage between Benghazi and Cairo is not far-fetched.   In English, Muslim Brotherhood condemned the attack; in Arabic, applauded it.  Aa the al Qaeda flag was raised in place of the US flag, the Marines intervened. In war the first three reports are wrong.

Tuesday 1105P (805P Pacific Time): Fighting for MacArthur: The Navy and Marine Corps' Desperate Defense of the Philippines by John Gordon, 1 of 4

Tuesday 1120P (820P Pacific Time): Fighting for MacArthur: The Navy and Marine Corps' Desperate Defense of the Philippines by John Gordon, 2 of 4

"Dante's Inferno" - the total destruction of Cavite Navy Yard by

Japanese bombers in December 10, 1941

Tuesday 1135P (835P Pacific Time): Fighting for MacArthur: The Navy and Marine Corps' Desperate Defense of the Philippines by John Gordon, 3 of 4

Tuesday 1150P (850P Pacific Time): Fighting for MacArthur: The Navy and Marine Corps' Desperate Defense of the Philippines by John Gordon, 4 of 4

 

Tuesday/Wed 1205A (905 Pacific Time): John Bolton, AEI, in re: Chinese aggression and the US pivot failure

Tuesday/Wed  1220A (920 Pacific Time): Brendan Conway, Barron’s, in re: ETF price fee war between Vanguard and Blackrock.  PIMCO buys Italian bonds over US bonds - what does it mean?

Tuesday/Wed  1235A (935P Pacific Time): Jon Hilsenrath, WSJ, in re: JH says it’s the job of markets to anticipate, which is what they’re doing;  LK: I think there will be a QE3. Such gloom in Jackson Hole. Fed will buy bonds by creating new cash to inject into banking system. Won’t J P Morgan take the new cash & just deposit it at the Fed, which already has $1.6 trillion?  What the Fed thinks is important is what happens when it buys the bonds: push down long-term interest rates, not he overnights – like mortgages, to give people a better chance to refinance. Also, forcing investors to replace their holdings with something else, such as stocks. Note that the S&P bottom was June 21, probably generated by to the Fed's June 20 mtg.  LK: If the economy gets better,, the long-term interest rate will rise.  I read Bernanke's speech: in a study, QE1,2 and perhaps s 3, have created 2 million jobs.  If he created 2 million jobs with 2 trillion dollars,, that's more expensive that the Chicago teachers union- a mil a job.   JH: The Fed isn’t just spending; it buys bonds expecting the to be paid back some day. LK: Strictly speaking, you're right, but the Fed is also underwriting the govt's budget deficit, already owns so many bonds, it'll be a hell of a job to unwind that if and when the time comes. Fed's policies are enabling this unbalanced federal deficit awhile claiming to create 2 mil jobs.  JH: Right. Where are they? Model of he economy called FERVIS – but the Fed's models have been consistently wrong throughout. In Jackson Hole, people asked, how'd you get this number and why shd we be confident that your plan will work?  Five hundred billion of bond-buying creates 2/10 of a percentage point GDP improvement. Faugh.  The Fed has a trillion dollars of currency, pay no interest. If you run a hedge fund -  and the Fed is like a hedge fund these days – it’s a great way to do it. Fiscal cliff?  I think no one at the Fed thinks they alone have the capacity to solve the whole situation.

..  ..  ..

Credit demand is still weak, as consumers choose to keep the credit cards in their wallets.  ”Americans cut back on their credit card use in July for a second consecutive month, suggesting that many remain cautious in the face of high unemployment and slow growth. Total consumer borrowing dipped $3.3 billion in July from June, to a seasonally adjusted $2.705 trillion, the Federal Reserve reported Monday. . . . Consumers have been using credit cards much less since the 2008 financial crisis.” The Associated Press.

@pdacosta: Global central bankers’ band ‘Fiat Currency,’ (Bernanke, Draghi & King) has a new hit single out: “Where there’s a will.” It’s the jam.

BAUM: Why Bernanke will ease. ”Federal Reserve Chairman Ben Bernanke will be damned if he does and damned if he doesn’t on Wednesday…Bernanke is a man of his word. Agree or disagree with his policies, he is a person of character. Therefore, we should expect the Fed to announce additional stimulus at the conclusion of this week’s meeting. Bernanke has been laying the groundwork for months…So what will the Fed do? Perhaps it will announce something akin to the European Central Bank’s open-ended bond purchases without the offsetting sales. There are risks to doing more…The risks of doing nothing may be even greater. Inflation is a future risk; current unemployment is a ‘grave concern.’ With words like that, Bernanke’s choice seems pretty clear.” Caroline Baum in Bloomberg.

Tuesday/Wed  1250A  (950P Pacific Time): Exeunt. Sid Perkins worldwide deaths from landslides much higher than expected.

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Music (using New York City broadcast times)  

9:00 hour:    2012; Crysis.

10:00 hour:   Tomorrow Never Dies; Call of Duty: Black Ops; Crysis; Syriana.

11:00 hour:   The Good German.

midnight hour:   Crysis; Call of Duty: Black Ops.