In an interview posted at Real Clear Politics, Ron Paul states what everyone knows, but won’t acknowledge:

“Default is coming. The only argument that’s going on now is how to default, not send the checks out or just print the money. In all countries our size, they always print the money,”  …  They’re going to raise the debt limit, and then they’re going to print the money, and then they’ll default by inflation, and that’s much more dangerous than facing up to the facts of what’s happening today.”

See the video here.

It’s been about 9 months since I started weightlifting again after a long, long layoff. Since I’ve started, my weights on “pull” exercises have doubled, while my weight increase on “push” exercises has been far less. This difference has nothing to do with how hard I work on each kind of exercise. It’s totally a result of my genetics. As a (relatively) skinny guy with long, skinny arms and legs, I find “pull” exercises like rows a lot easier than “push” exercises like bench presses. I’m just built better for them. Similarly, I find deadlifts a lot easier than squats. When I was in college, I had a roommate who had short, massive arms. Not surprisingly, he could bench huge amounts that I couldn’t even touch, because he was built for it. When it comes to exercise, you should always start by looking at what your body is built to do, and then working to maximize your potential. In the end, you can’t beat genetics.

I woke up this morning to hear the news that Microsoft was launching a competitor to Twitter. In my mind, I can’t help but juxtapose that story with the news from last week that Oracle is buying Sun. Now, I’m not a big fan of Larry Ellison. I still have bitter memories from the 90s when my wife’s raise was held up, because Larry had to approve it, and he was off yacht racing. But, you have to admire the way that he approaches his business. I never have any questions about what Oracle is doing. Larry knows what Oracle is about: Enterprise Software. He has a vision of where the market is going: a few big players. And, he has a strategy to make Oracle the dominant player in this new world: buy up key technologies; offer the complete Enterprise stack. Once you understand Larry’s vision, you can understand and justify every move Oracle has made.

Now, contrast that with Microsoft. Ballmer doesn’t know what the company is about. Is it focused on the desktop, games, internet, enterprise? Who knows? He doesn’t have a coherent vision of where all these markets are going. Who could? As a result, Ballmer doesn’t have a coherent strategy. He’s attempting to do everything; and he’s doing nothing well. Seriously, does anyone have a clue what Ballmer will do next, and why? If you say you do, you’re lying. You can’t know, because there is no strategy. There’s just a bunch of incoherent initiatives. It’s too bad, because if Microsoft had been as focused as Oracle, they could be hugely dominant in the enterprise space. As it is, they’ve wasted ten years.

J. G. Ballard died today aged 78. Ballard was one of the most innovative writers of the Sixties. He shared with Philip K. Dick an awareness of the fragility of normality, and expressed it powerfully in all he wrote. As a teenager, Concrete Island and Crash had a profound effect on me. Later, my favorite work of Ballard’s became the short story collection The Terminal Beach. Although Ballard’s later work became increasingly repetitive, I still consider him one of the greatest writers of the second half of the Twentieth Century. Rest in Peace, J. G. Ballard.

Here’s a good obituary.

If you want to understand why the stimulus will fail, just read Ambrose Evans-Pritchard’s article in the Telegraph entitled Bond Market Calls Fed’s Bluff As World Falls Apart. As Ambrose points out:

The yield on 10-year US Treasury bonds – the world’s benchmark cost of capital – has jumped from 2pc to 3pc since Christmas despite efforts to talk the rate down.

The Fed has stepped into the breach, up to a point. It has bought $350bn of commercial paper, and begun to buy $600bn of mortgage bonds. That helps. But still it recoils from buying Treasuries, perhaps fearing that any move to “monetise” Washington’s deficit starts a slippery slope towards an Argentine fate. Or perhaps Bernanke doesn’t believe his own assurances that the Fed can extract itself easily from emergency policies when the cycle turns.

Now, the stimulus is going to add another $800 billion to the borrowings, and who knows how much Geithner’s “Bad Bank” plan will add in addition. Borrowing of that much money is bound to increase interest rates even more. And that increase will directly counter a stimulus bill that is already badly constructed to produce immediate benefits.

Finally, somebody is going after Robert Rubin and his part in the current rapid destruction of our financial system. Surprisingly, it’s the Wall Street Journal. Less surprisingly, Rubin has a litany of excuses:

Under fire for his role in the near-collapse of Citigroup Inc., Robert Rubin said its problems were due to the buckling financial system, not its own mistakes, and that his role was peripheral to the bank’s main operations even though he was one of its highest-paid officials. “Nobody was prepared for this,” Mr. Rubin said in an interview.

Sure, nobody was prepared! Except for all those people who were warning about the coming crisis for years before it happened! Since 1999, Rubin was paid, not counting stock options, $115 million by Citi! Presumably, he was paid that much to help Citi avoid bankruptcy.

Today, the United States’ political and economic systems are stuffed to the gills with people of two types: those who immediately and effectively blame others, and the fools who let them get away with it. Rubin is a prime example of the first type, and things will not get better until we all stop being the second type. This is why I have little hope for the incoming Obama administration. So far, he is staffing his economic team with people who were complicit in the current destruction. More of the same is not going to work, and that is all that Obama’s team is offering.

For more on Rubin, see Rubin Agonistes, and Mirabile Dictu! Rubin Takedown by the Wall Street Journal.

Michael Lewis, the author of a great book about Wall Street in the 8o’s called Liar’s Poker: Rising Through the Wreckage on Wall Street, has written an article for Portfolio that everyone should read if they want to understand the roots of today’s financial crisis. As he notes in the article’s introduction:

[Since the 80's, I've been] waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility.

Until, eventually, it all fell apart. Read The End, and learn.

As I mentioned in a previous post, I saw Judas Priest on their 1986 tour. At the concert I saw, Iron Maiden opened for them. So, here’s a video from that year’s Maiden tour:

Today, the Fed announced that it was allowing American Express to restructure as a bank holding company. This gives American Express access to the Fed’s emergency credit lines. That’s a pretty good indication that American Express is in severe trouble.

In December 1930, about a year after the great crash of 1929, John Maynard Keynes wrote:

“The world has been slow to realize that we are living this year in the shadow of one of the greatest economic catastrophes of modern history. But now that the man in the street has become aware of what is happening, he, not knowing the why and wherefore, is as full today of what may prove excessive fears as, previously, when the trouble was first coming on, he was lacking in what would have been a reasonable anxiety. He beings to doubt the future. Is he now awakening from a pleasant dream to face the darkness of facts? Or dropping off into a nightmare which will pass away?”

We are in a similar situation now.