S9 Greetings from Earth-orbit micro-gravity, humans and fellow travelers -- this is your afternoon energy systems analysis report from your friendly and independent neighborhood engineering syndicate, S9 Station. Today's analysis will focus on the causes of uncertainty in the economy. It's going to be a twisted journey to get there, though, so grab a pencil and start taking notes.
Okay class -- if you will all turn to page 305 in your copy of Ron Susskind's ''The Price Of Loyalty.'' You remember this book, right? It's the one about Paul O'Neill, the useless former Secretary of the Treasury who held the office just prior to the currently useless Secretary John Snow. On page 305, we pick up the story where Paul is talking about a meeting with the President on the subject of the 2001 round of tax cuts:
[Karen] Hughes... stopped the proceedings. ''But there is uncertainty in this economy,'' she said...''Real uncertainty that this won't solve.'' ...Bush stopped in midstride and looked hard at Hughes. He was silent fora moment. ''The economic uncertainty is because of SEC overreach,'' he said pointedly... O'Neill couldn't beleive what he was hearing -- SEC overreach? No wonder the White House had backed off from... medicine for crooked executives... ceded the corporate governance debate to Congress. How, though, could the President believe the largely overwhelmed SEC had any significant effect on the vast U.S. economy?
How? Indeed, this is a mystery that has made a lot of smart people scratch their heads in wonder. Here on S9 Station, we've been seized with a burning need to get to the bottom of it, and we think we have it sussed out.
Consider the story of Sir Phillip Watts, the recently sacked Chairman of the joint boards of the British and Dutch Shell Oil holding companies. Shell Oil has been making big news on the business pages for almost three months now, mainly because it admitted January 7 to having overstated its holdings of proven oil and gas reserves by the equivalent of 3.9 billion barrels. Last week, it revealed that even this revision may need some careful reappraisal— they upped the ante to 4.15 billion barrels.
For those of you without calculators handy, that comes out to about 20% of Shell's reported oil and gas reserves. At today's prices for crude oil (around $35 per barrel), the restatement adds up to over US$140 billion of capital assets that have just evaporated into thin air. Industry experts are quietly hinting that other petroleum companies are likely to make similar restatements, though none have done so yet.
You want to read the trade press, though, if you want to see the whole story. Check out this quote from industry journalists David Ivanovich and Nelson Antosh that we lifted out of the Alaska Oil and Gas News from January 27:
While the restatement was made after an internal review, Shell officials acknowledge the restatement decision was prompted by an effort to stay current with what they describe as ''evolving'' standards at the U.S. Securities and Exchange Commission.
Evolving standards? Yes, evolving. The problem is: what standard do you use for deciding which oil and gas reserves are "proven" reserves that a sane and honest accountant would have no problem regarding as virtually money in the bank? The Ivanovich and Antosh story goes on at length to talk about how oil reserves booked years ago are no longer kosher under the new accounting standards and rules adopted by the SEC in the wake of Sarbanes-Oxley accounting reform law and the crash of Enron, Worldcom, Tyco and others.
The SEC has decided that it wants to see the results of an expensive, traditional test called a "flow test" before it will believe reports about "proven" reserves. The industry has lately been using new
high-tech methods for estimating the size of reserves -- methods the SEC says are insufficiently accurate, and prone to result in restatements later.
And well -- now, it looks like the SEC may be on to something, since it turns out that Shell Oil has been caught restating its reserves. And, of course, there are the de rigeur internal memos and emails that purport to show that Shell executives knew the reserves were overstated and they were deliberately keeping the market in the dark about it to keep the shareholders from having to take deep losses.
Pretty juicy gossip, don't you think?
This story starts to shed some light on the President's remark about "SEC overreach" causing uncertainty in the economy, doesn't it? It's all that evil SEC's fault -- changing the rules for how we measure the size of the stack of gold in the dragon's hoard.
Americans want stability in the price of gasoline, dammit. It's obvious, the President is compelled to do something about these unwelcome disruptions in the long-term supply outlook for petroleum products.
Clearly, the SEC is overreaching, and it's causing uncertainty in the economy.
CRIMINALIZING POLITICAL OPPOSITION
J. Let's ratchet the horror up a notch here shall we... With the Mighty Wurlitzer chugging away across the landscape, the Republicans could not just sit back and let the lies wash over them. No, no...that would be too cheap...too easy...even for them
No, they have decided to mount a negative defense against those pesky democrats and their footsoldiers taking the field by simply turning them all into criminals. That's right...criminals.
We'll let this week's edition of The Hill make the point for us:
"Republicans are contemplating initiating criminal referrals against pro-Democratic 527 groups that are shadowing Sen. John Kerry’s (D-Mass.) campaign against President Bush...in recent days, some Republican operatives, including a senior Bush adviser, have said they expect complaints to be filed directly with the Department of Justice (DoJ). Such referrals would call for a criminal investigation of political activity that the Republican camp believes is illegal under last year’s tightened campaign finance laws."
The great part is that with the new campaign finance laws, the penalties are stiffer, including mandatory jail time and it makes the Department of Justice look at complaints filed under its auspisces a better use of their time and resources.
And in case the thought waveform was congealing in your forelobe, no, the John Ashcroft and the untouchables are not going to prosecute the Club for Growth or the NRA...they are going after MoveOn.org and Voices for Working Families and the rest of those hippies.
Remember, this is the same Justice Department that is currently pursuing charges of ''Sailor Mongering'' against those radical cud-chewing terroists in Greenpeace. That being the case, what do you think they are capable of doing to the people who are seriously greasing the wheels of the opposition party.
In fact, the horror runs so deep that it is another Republican 527 that is carrying the water for the Committee to Reelect the Prez. The so-called Americans for a Better Country -- or ABC, since asking Republicans to remember more than the first three or four letters of the alphabet is a strain, and as we all know reading is for terrorists and hippies.
This is the Republican party doing what we all knew they were going to; attempting to criminalize political dissent in America. And that starts by getting around the FEC and keeping the legal issue in the family as it were, turning the Ashcroft justice department loose.
And just for the record, these groups are not breaking campaign finance laws. McCain-Feingold does not mention 527s, does not contemplate their existence or prohibit their activities in any ways, as long as they are not openly advocating for a particular candidate.
They are running issue ads about the pressing problems of our nation today, and that is giving the RNC and it's cannibal thalmaturgist Ed Gillesipie fits.
S. Another thing giving Gilliespie and his coven fits is the fact that just one month after setting a new fund raising record in February, JK shattered it by raking in more than $20 million for March, with a few days yet to go.
According to Bloomberg, no other Democratic presidential candidate has ever raised more than Kerry has. And remember that after the party conventions, both parties' candidates will receive about $75 million in federal funds for the general campaign that begins after the conventions and ends with the Nov. 2 election.
Moreover, in the overall money race the Republicans and their footsoldiers are only leading the Democrats roughly $319 million to $306 million. Not by a lot, in the grand scheme of things with less than seven months left to V-E Day.
Progressives in this country have finally started to get their fund raising act together and get their organization on and are fielding effective and highly regimented voter awareness and registration drives in several battleground states.
America Comes Together, apparently has battallions of people wandering throughout neighborhoods in the midwest registering voters and getting their attitudes on political issues one on one and that takes money and organization.
So while the Republicans might have a nominal lead in the money race, the more important race, namely the contest on who spends it better and first, is currently being won by the Democrats and their allies in these progressive 527s.
For instance, can anyone tell us here, why there are endless Bush commercials running here in California, which is all but assured to run the Maximum Leader -- again -- while the various 527s are beating the President like a gong across the midwest and in other battleground states.
So the Republicans, naturally devoid of a record to run on, a reasonable platform of ideas, or anything that could be seen as a believable promise has simply decided that they will simply make it against the law for the opposition to raise and spend money informing voters that George Bush is a criminally incompetent boob surrounded by pimps and thugs.
One of the really funny asides in this, is that every time the Republicans make a public noise about the horror of the revitalized progressive movement in this country, the Progressives have been hitting back even harder, raising more money, airing more commercials.
So it would appear that their ability to just initimidate us into silence is a non-starter, which only leaves them with the nuclear-facist option.
There are not a lot different ways to parse this. The Republicans are going to use their power over the judiciary to persecute their political opponents. How many freekin' ways do we have to say this?! They are coming for your Republic...it is time to get out there and start throwing elbows and make it clear to them that we are not going to just sit there and watch them.
AT NO TIME DO MY FINGERS EVER LEAVE MY HANDS
J. Well...this certain seems to explain a lot. The Bush Administration, in the abscence of a real economic recovery, has apparently decided to simply make one up out of whole cloth. Unfortuantely for them and their reelection chances, the cheap veneer is starting to wear thin a few months early.
This from the Miami Herald last week: A growing number of discrepancies are emerging in America's economic numbers, including a dramatic over-estimation of manufacturing output. The latest analysis from Goldman Sachs suggests that the US economy may have grown by only about 2.2 percent in the year to the fourth quarter of 2003, considerably less than the official 4.3 percent.
Jan Hatzius, a senior economist at Goldman Sachs, has added his voice to a growing band who believe that the growth figures are overstating the true recovery of the US economy. Errors in calculating manufacturing output and income growth explain why unemployment, on all measures, has consistently disappointed the markets in recent months, the research claims.
Hatzius said: "Over the last year, the official data show real gross domestic product (GDP) growing a sturdy 4.3 percent. Yet, non-farm payrolls are up only 0.1 percent. It is hard to overemphasise how unusual this combination is."
So for those of you without formal education in the Dismal Science, or just with hangovers this morning, let us digest this for you... They were lying about the economic recovery, and we all knew it because there were no jobs being created.
It is difficult to underestimate the political dimensions here. If this trend holds, and there are some technical signs on the horizon that it might not, but if it does, it will be nigh on impossible a few months from now to disguise that horrible stench of death on the national economy with any amount of cheap perfume spewed out of West Wing.
One example of this is the notion of Hedonic pricing; that is pricing that accounts for quality in inflation figures. This could be seen as the difference in how much computing power $5,000 could buy today as opposed to 20 years ago. The greater the assumed quality difference, the lower the rate of inflation. Which in this case seems to be artificially lowering inflation figures.
Kurt Richbacher, editor of an eponymous investment letter, said: "These particular dollars are fictitious dollars that nobody has paid and nobody received. Obviously, such dollars inherently add nothing to profits. The US economy's superior growth had its source largely, though not solely, in the application of lower inflation rates."
Once again, the Bush people have decided to pee on our collective leg and tell us that it's raining, but as previously noted, it is really unclear on how long they are going to be able to get away with this.
S. It is starting to bubble up through the blogosphere and into the mainstream political punditry that the economy is going to be the main message, regardless of how profane Ken Mehlman gets in defiling the memories of American war dead.
At the end of the day, the economic machine that the Bush team is counting on, and the protocol that has produced their only decent numbers to date, has all been vaporware. They were making it up as they went along.
What else would we expect from the same people who ordered the Medicare actuary to go to Congress and lie about how much the administration's Medicare bill was going to cost the taxpayers.
But this sort of mendacity is critical for the administration right now. It is the only way they can sell their lemon of a fiscal plan to the American people. The President's budget priorities are closely tied to this idea that the economy is booming and that the new jobs are not far behind.
Now that we know that those Gross Domestic Product numbers are the harvest of fevered imaginations of West Wing speech writers, the new revisions from the Congressional Budget Office, should come as no surprise to anyone.
The CBO is now estimating a $2 trillion budget deficit for at least the next ten years with revenues declining and spending increasing, and they note that none of the President's budget figures account for spending for Iraqi or Afghani occupation and also count on the tax cuts actually being allowed to expire. (Thanks to MaxSpeak for that last part!)
So it's like this, it's easier for them to bankrupt our nation with lies and insane fiscal policy, because at the end of the day, they think it's an easier sell for the unwashed masses. Who knows, maybe they are right, but we don't think so. Remember, they didn't win the election the first time, and if anything, they have done worse than many of us thought them capable of in the last four years, and on every front.
And now, the coup-de-grace... aside from all the shenanigans overseas, the environmental regulation roll back, the giveaways to corporations and the death of civil liberties, the one thing these freekin' people thought they could do, make the basic industrial engine of the economy move forward, it turns out they couldn't do, so they made all that up as well...
Is it time to vote yet?
J. So our patriotic thought for the day: Opposition parties means the terrorists win, or as John Ashcroft says... “Hands up, hippie, you can't talk about W like that...”
S. And that’s all for this week, tune in again soon for another exciting installment, until, of course, we are declared enemies of the state.
And remember, you can now email the Mojowire at Mojohaus@hotmail.com, that’s M-O-J-O-H-A-U-S@hotmail.com. Email, us hippies!
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