To Save the Euro, Leave It

I found Ken Griffin & Anil Kashyap's  editorial of today in the New York Times to be an elegant solution to the Euro mess.  Germany should re-instate the Mark and leave the Euro much like the British pound is out yet Britain itself is a part of the Eurozone.
http://www.nytimes.com/2012/06/27/opinion/to-save-the-euro-germany-must-leave-it.html

What comes around goes around

I am reading Henry Adams History of the United States, the Administration of Thomas Jefferson.  It is as if the North and South Poles are switched around since the Revolutionary war.  The way I read the Federalist Papers by Alexander Hamilton, I see a force for federal control in finance, commerce and defense.  In Republican South and Democrat North of the era, I see the anti-federalist, those for states rights and local governance.  In my youth I thought highly of the Federalist and now less so.  On the other hand I thought Andrew Jackson was a crazy man in dismantling the Bank of the United States and now I think he was brilliant in doing so.  The tide has turned so that Democrats descended from Thomas Jefferson act like Federalists. For example Obama care is a Federalist over reach of States Rights. On the other hand modern Republicans who appear more ideologically in tune today with Hamilton's Federalism argue States Rights.

What Republicans Think. Do they?

Today was a good breakfast watching Lou Gerstner, former CEO of IBM, on Squawk Box and reading David Brooks' editorial in the Times, “What Republicans Think.” I bring this up because Lou has got to be the sort of constructive businessman that the GOP would bow and salute to. Yet he appeared non-plussed by the partisan politics practiced in Washington. “Look I am just a computer salesman from the past, so who cares what I think about Washington” he said more or less. Which got me to thinking when reading Brooks. Is there any thinking going on over there at the GOP?

What I detest about Romney in particular and Republicans in general is that they insult my intelligence. If Romney is anything like Gerstner then he will take a meat cleaver to the budget. He will cut and re-organize government and generally try to eliminate some of the strange life forms that develop in the petrie dishes of bureaucrats talking to each other in their own little world. But Romney explains nothing and with a vagueness directed by poll watching doesn't inspire confidence that he knows what he is about. Obama will probably be reelected by Romney's timidity.

Romney's present course is to be elected without a mandate.  Reagan, on the other hand,  talked radical and was not fearful of scaring some people away.  Never the less, he get's elected with a clear mandate to veer away from big government and toward individual initiative.  I don't see Mitt leveling with the people so that when elected he can convince them to do the heavy lifting required of all of us if we are to turn this global economic malaise around.

Thomas Hoenig now with the FDIC

I thought so much of Thomas Hoenig's criticism of the FED when he was president of the Federal Reserve Bank of Kansas City that I blogged about his resignation last year.  Saw him on Squawk  Box this morning and understand why I think he is great.  Good to see him at the FDIC where Sheila Baird, another who I think very highly of, use to rule.  If only we could get Hoenig, Baird and & Born, Brooksley - Former head of of the CTFC, to run the Fed, Treasury and Chair of Economic adviser's, in no particular order,  then I could sleep at night.

Freedom means Licentious?

On reading the Moral Sense I see that the Chinese understand freedom as licentious or allowing licentiousness.  I wonder how many American's feel the same way about Libertarians  because we want to decriminalize dope.  I understand human behavior has a guiding hand much like Adam Smith's economic model that works in the following sense: Those that practice risky behavior tend to die off and the more prudent among us thrive and propagate.  Society and it's mores are a result of this natural pruning which leaves a Conservative garden of church goers.  If only Evangelicals understood how truly conservative Libertarians really are.

Germany Resists Stimulus because of Costly Re-Unification

Today's article in the New York Times brings up Germany's lessons learned with their 2 trillion dollar re-unification effort.  Huge money was thrown at East Germany yet parts are sill depressed. Paul Krugman aside, throwing money at the problem is not a guaranteed fix. An entrenched Greek bureaucracy hampering private initiative is the most damaging factor to it's economy. It was reported in the Times how a Greek olive oil venture selling on the internet to others in the EU  took months with various agencies to get the required permits, one which required the owner's stool sample before getting approval.  Another report about a Greek American trying to start a beer company battling bureaucrats intent on keeping Heineken's, a Dutch company, dominance in the Greek beer market.  Finally the report on the $100,000 a year train conductors and a economist's conclusion that using taxis would be cheaper than transporting passengers on the government run train system are examples of money thrown at such an  inefficient and corrupt government would only add fuel to the fire of it's economic destruction.
Free markets are efficient at correctly directing capital.  Promoting an entrepreneurial economy is the best stimulus a government can provide.  Germany found out it takes time to change old East German attitudes that were such a dead hand on the economy when it was on the other side of the iron curtain. Until the austerity plan in Greece dismantles offices that keep a dead hand on the tiller, then I agree with Germany's reluctance to maintain the status quo.  

J P Morgan Chase's Loss

It means a lot to me that Jamie Dimon thinks this loss is stupid, avoidable and while no Volker rule had been broken, it broke the Jamie Dimon rule. There is a lot of talk that more regulation is needed. If Wall Street had understood their operations and shown the discipline described by Gillian Tett in her book Fools Gold about the J P Morgan group that initially developed many of the financial exotica out there,     then there would not have been a 2008 financial crisis.  What Jamie has to ask is what caused that discipline to falter recently?
Wall Street currently lobbies Washington against regulation making derivatives more transparent as if the obscure system in place is a sure money maker when actually it's a loser. Any bank that thinks its trading desk is adding value for its shareholders is deluding itself and does not deserve consideration as an investment.  The juice has been worked out of the system.  Today's bank proprietary desks are practicing financial masturbation. Making some heat but no issue. I think the Jeremy Irons character in the movie Margin Call had it right when he said, "I don't hear the music."
TEPCO the Japanese utility with the disastrous failure of its nuclear reactors is an example of a private entity currying favors from regulators in the name of  increasing shareholder value. The result is a total wipeout for shareholders and a staggering burden for Japan. The investment community ought to consider  bank's who want to do proprietary trading as entities destined for a total wipe out, just like TEPCO.  Regulation is sure to come, but investors should leave the TBTF banks to benign neglect because they are losers, with a capital L on their foreheads.