Saturday, February 26, 2011

A Theory On Dead Fish & Birds, Disappearing Vessels and Airplanes.


Study finds massive flux of gas, in addition to liquid oil, at BP well blowout in Gulf

A new University of Georgia study that is the first to examine comprehensively the magnitude of hydrocarbon gases released during the Deepwater Horizon Gulf of Mexico oil discharge has found that up to 500,000 tons of gaseous hydrocarbons were emitted into the deep ocean, where it is trapped in a deep layer (1000 – 1300 m) of the water column. 

The authors conclude that such a large gas discharge (methane and pentane, known to have significant health implications for human and marine life)—which generated concentrations 75,000 times the norm—could result in small-scale zones of "extensive and persistent depletion of oxygen" as microbial processes degrade the gaseous hydrocarbons.

Now what if the gas is not trapped, as the study maintains, but bodies of gas of unknown sizes are being formed and escape to the surface at irregular intervals, floating in the air as highly toxic, invisible, odourless, super explosive, “drop-dead” bubbles?

Would this not explain the “dead fish in the ocean and birds falling from the sky” phenomenon?

And suppose this phenomenon is just a natural occurrence (except for in the Gulf, courtesy BP) in other part of the world, would it not explain midair exploding airplanes and disappearing vessels?

Agree, 99,9% of these bubbles would disappear in the air and dissolve. But 0,1% of them might not, floating in the air horizontally and, depending on size, chemical composition and weather patterns, be destructive or not.

Who would ever know?


From the study
"It's like searching for a needle in the haystack. We may never know what happened to all of that gas."
Joye said the methane and other gases likely will remain deep in the water column....
Likely? Likely is 80%? 90%. Much more than 99.9% as previously stated. Great!!

Now what if such a “drop-dead” bubble descends on a densely populated metropolitan area...........


Update: My 2nd eldest son Jeroen (12) questioned my theory. He says all the gas dissipates in the air. Great comment! But then, what if the gas comes out streaming out of the ocean and keeps on streaming for an X number of hours. Like a geyser. Again: who would ever know, see or smell, unless you cross he path with an open fire, like an airplane with jet engines or a vessel with gas ovens or people smoking?

Update2: The more I look around, the more stories about climate change, the unknown of the ocean floor but also the potential as an alternative energy source.

Sunday, February 20, 2011

A Worried Dutch Government Is Going To "Rescue" The Pension Funds


I read in below article: "Don't worry, your Government will rescue your savings"
Tut-tut-tut, what a mess! Nobody could have seen this coming. To protect the savings we will have a hearing on pension funds who made stupid and risky decisions. If necessary, we will take them over, thereby guaranteeing the entitlement of the poor pensioners.
What the article actually says is: "We're broke, we need the money!"
The government is preparing a hearing to legitimise the stealing of the savings of pensioners as they need money! They are broke. Previously private savings, these vast amounts will eventually belong to fiscally irresponsible politicians who will distribute it depending on the popular sentiment (Das Gesundes Volksempfinden).
The problem is that they really do not know how broke they are. Pension funds admitted they had a big problem with the stock exchange going down in 2008 but, they say, recovered 35% since then, so, you know, it is going much better now. Do not worry.

Fools, puppets and economists: the stock exchange has been going up thanks to the POMO (Permanent Open Market Operation) organisation, invented by the Federal reserve and part of the PPT (Plunge Protection Team) to buy anything that moves on the exchange. There is no demand, there is no economy or stock exchange anymore, only the POMO. It is all rigged, manipulated bull shit to fool everybody, especially brain dead financial journalists and with that the population at large. Nobody gives a damn anyway as longs as they keep on repeating "The Bold and The Beautiful".
And as the POMO gets their money from QE2 (printing press), we all know these debt will eventually be socialised. Why do they do this: to mask a depression bigger than 1929-1946. "Time" is what they want and need, in the hope Jezus comes back to earth with approximately 100 Trillion US$.

Don't you believe the sudden "increased life expectancy" story. They saw this coming 30 years ago. Furthermore, low interest rates have been set by Keynesian economists of the Fed and ECB. This has nothing to do with market forces but with "manipulation", market rigging and interventions. Therefore, setting interest rates so low is a political decision to intervene in and "to kick start" the market but (alas) with the "unintended" consequence that the saver will the punished in order to save the spender/speculator. Did the low interest rates help to kickstart the economy? No! Will they? No! But in the meantime, due to a wrong economic religion, savers are being brought to the slaughter house.

Moral of the story:
Prepare for violence in Entitlement Country. Pensioners are going to be eaten alive by the politicans. The Government is broke and desperate and pensioners are weak, vulnerable and their savings plenty. Inflation will eat away the good life. "Nobody Saw This Coming". Hah! Soon, the stock exchange will crash for a 2nd time, but now more severe, as the Keynesian lie cannot continue. "Trust", which holds everything together, will be severly tested. See the politicans and bankers running for the hills.
Hey, Got Gold?

Update: Bomb under pension scheme: The government to the rescue! Telegraaf (Google translation)
Update: How to break the bad news to the population.
Update: Do you have an additional pension scheme? No guarantees anymore..

Parliament calls for pension hearing 

THE HAGUE - In a hearing on the investment of pension funds, the House calls on citizens to maximize their questions and comments about the management of their retirement provision known. People will do so also through the website of the Chamber are invited.
 
According to the initiator of the emergence of CDA politician Pieter Omtzigt hearing his "individual opinions" such as employees and retirees important for MPs to managers, supervisors and experts in the pension world to hear.On March 31, the Court scheduled a hearing after including auditors and criticism of the show 'The Vanishing pension funds' TV program Zembla.
 
Many pension funds are working on a recovery plan for buffers in order to get declined since the credit crisis. Low coverage rates are often attributed to the low discount rate and increased life expectancy, so funds have to raise money.But there are also problems through poor management and risky investment.

Wednesday, February 16, 2011

Hi! I Am Your Banker And You Can Trust Me...Until You Are Down.





"Hi, I am your BANKER. When all goes well and you are of interest to us, I will give you money, a lot of money....and an umbrella. But, you know, we take away your umbrella when it starts raining."

Here you have a perfect example of how vulnerable you are when banking: trust, promises, wealth protection, family offices, assest management and great stories about their legacies. 


But! When you are down, they not only spit on you but kick you also in the nuts. No legal process or document needed. No rule of law or due process. A news report, a story on television will do as they will commit themselves to Das Gesundes Volksempfinden. (Eng: "popular sentiment")

Rrrrausss!





Update: Gadaffi is the next media victim - imagine it was you! International Business Times - Swiss freeze assets of Gadaffi
Update: Also the Brits follow the cry of the populus - hang'em high.  Telegraph - Gadaffi billions to be seized by Britain

Swiss start to disclose Mubarak assets

The National

Banks in Switzerland are disclosing the assets of the former Egyptian president Hosni Mubarak and his "associates", says the Swiss foreign ministry.
Last week, the government said it had frozen "any potential assets" belonging to Mr Mubarak, as well as 10 members of his family and other people. The move followed Switzerland's decision to freeze the assets of Tunisia's ex-president Zine al Abidine Ben Ali and his entourage after he was forced out of power last month.
A spokesman for the Swiss foreign ministry said yesterday Swiss banks were beginning to reveal the extent of Mr Mubarak's holdings and his entourage for the first time, although he would not give a figure.
"That's all I can say about the subject," the spokesman told Bloomberg.

Billions of dollars are believed to have been amassed by the Mubarak family and businessmen connected to them during the 30 years that Mr Mubarak ruled Egypt, although no official accounts of their wealth exist. Mr Mubarak reportedly earned just over US$800 (Dh2,938) a month as president.
EFG-Hermes, Egypt's largest investment bank, said on Monday Mr Mubarak's son, Gamal, has owned 18 per cent of EFG-Hermes Private Equity since 1997. The fund has $919 million under management. Few other assets have been publicly identified.
The aggressive measures from the Swiss government are part of a broader attempt to improve the image of the country's famously secretive banking system.
Micheline Calmy-Rey, the Swiss president, told the Swiss newspaper NZZ am Sonntag Switzerland had to ensure it was not a haven for "dirty money".

"It cannot be that right at our door some people embezzle state funds and put them into their own pocket," she said.
European powers are also weighing decisions to freeze the assets of Mr Mubarak and his family, but are waiting for an official request to be made from Egypt, the EU said.
"We are in contact with the Egyptian authorities. We will take appropriate measures if this issue comes up, when necessary," said Catherine Ashton, the vice president of the European Commission, according to reports.
Egypt had also requested the US, France, Germany and the UK to freeze the assets of several former Egyptian politicians, whose identities have not yet been revealed.
EU finance ministers were expected to discuss the requests from Egypt to freeze assets yesterday, but gave signs they were willing to co-operate.
A spokesman for David Cameron, the British prime minister, said any action should come as part of an international arrangement, according to reports.

"As I understand the situation on asset freezing, there has to be some international effort … and a request has to be made" by the Egyptian authorities, a spokesman for Mr Cameron said.
Meanwhile, Egypt's stock exchange plans to open on Sunday and may cancel the January 27 trading session, the day the benchmark index slumped 11 per cent, said Hisham Turk, a spokesman for the bourse.
* with agencies

Friday, February 11, 2011

The Financial Advisors Of The Children Of the Super Rich, Systemic Risks, Conflicts Of Interest And Precious Metals

<--- John Exter's Inverted Golden Pyramid: visualise the organization of asset classes in terms of risk and size. In Exter's scheme, gold forms the small base of most reliable value, and asset classes on progressively higher levels are more risky. The larger size of asset classes at higher levels is representative of the higher total worldwide notional value of those assets. While Exter's original pyramid placed Third World debt at the top, today derivatives hold this dubious honor. Read about it here and here.



What the Financial advisor will tell the children of the super rich is to understand where the power is: the politicians, bankers as they will protect you no matter what.

They will also advise the children to invest in the system rather than outside of the system with a preference for "risk free" (!) stocks, bonds, etc.

Financial Advisors cannot and will not see the systemic risk, the moral hazard and the boom & bust theories of their Masters, after all, we're experiencing a "return to normal"?

Unfortunately also, what the financial advisor will not tell these children that there is one asset class which will preserve their wealth, in fact, has been used for at least 3000 years by smart people to avoid the follies of out-of-control politicians and bankers, but also:


§  Doesn’t engage in accounting fraud.
§  Doesn’t miss quarterly earnings.
§  Isn’t affected by Obama’s health care.
§  Doesn’t lie about its real balance sheet problems.
§  Doesn’t lose market share due to stupid management practices.
§  Doesn’t perform stupid mergers or acquisitions.
§  Doesn’t waste money on buybacks.
§  Doesn’t lose profit margins to rising commodity costs.
§  Doesn’t go out of business.
§  Doesn’t have custodial risk (if you keep your bullion yourself).
§  Doesn’t pay itself ridiculous salaries and bonuses rather than increasing shareholder returns.
§  Doesn’t require a bailout or stimulus to stay in business.
§  Doesn’t commit insider trading or use Government policies to keep itself a billionaire.
§  Isn’t impacted by a slow down in the economy or consumer spending.

The regular reader knows the answer: physical gold and silver. Look at these words carefully and note that ETF's are paper promises and therefore not gold.

Makes one wonder about the competence of financial advisors!


The Rich Want Children Schooled In Crisis 

Private Wealth Magazine

February 10, 2011 (Dow Jones) Advisors to the very wealthy are adding a new chapter to the primer they use to teach the next generation how to handle the family's fortune. Its title: Avoiding the mistakes of 2008.

Stung by the downturn's impact on their fortunes, ultra-wealthy families—think $50 million and up—want their future leaders to have a firm grasp of governance and to fully understand investment risk.

"For the first time in my experience, prospects are coming to us and asking, unsolicited, about family governance," says asset manager Glenmede's wealth-service chief Susan Mucciarone. A family wealth manager for 30 years, she says that was a concern "we used to have bring to our clients over time."

Mucciarone sees education as core to family governance, along with other aspects of family management like mission statements, councils and regular, business-oriented get-togethers.

U.S. millionaires shed 30% of their financial wealth in 2008, according to an early-2009 study by Spectrem Group. Though the S&P 500 has nearly doubled since those dark days, advisors say families remain eager to equip younger members to withstand future downturns.

Lessons from the downturn now underpin next-generation education on wealth, and give senior family members "an easier way to talk about the future" with those younger family members, says Daisy Medici, head of family governance for GenSpring Family Offices.

Before the recession, family elders often avoided talking money to their children—even grown-up offspring—for fear of dulling their ambition. "But now they're able to say, 'We're worried the wealth may not be there,'" says Medici. This approach can draw next-generation family members into governance structures and promote thinking aimed at preserving wealth.

One important element of education for scions of the wealthy is something Medici calls "the impact of generational mathematics"—that is, the erosion of wealth as a family grows larger but no more productive over the years. "Given time, there is no amount of wealth that can't be spent through," says Medici.

Some families are looking to mold entrepreneurs--even if it calls for instilling skills quite different from those that make for good investors. "Building a business is about taking control, being in charge; investing in financial markets is really about letting others take control," says Jennifer Pendergast, a senior consultant with the Family Business Consulting Group.

Still, Medici says family members should be encouraged to follow, and educated to make the most of, their go-it-alone instincts, both for the sake of their personal fulfillment and because it can help keep the family coffers filled.

The financial crisis was a shock not just to family's portfolios but also to the psyches of both adults and children.

Jill Shipley, head of next-generation education at GenSpring, tells of the teenage son of super-rich parents who, unnerved by media coverage of the crisis, had a full-on anxiety attack over the expense of a vacation the family had planned for late 2008.

So some of GenSpring's next-generation education focuses on market cycles—including basics like the fact that battered markets can engender bargains—and the danger of letting emotions sway investment decisions.
Copyright (c) 2011, Dow Jones. For more information about Dow Jones' services for advisors, please click here
H/T Phoenix

Wednesday, February 2, 2011

The Economists Are The Real Sheeple.

Afraid to dissent, brain dead economists (yes, 99%, which means ALL of them) are being paid for to stay within the boundaries of what Wall street is thinking and saying. Now Wall street & the Fed created a Financial Wunderland of paper & promises which will disintergrate because nature dictates manipulative systems to crash. No doubt about it. 
You can just hear the economists saying on TV, after the crash: "Nobody Saw This Coming".

Priceless: How The Federal Reserve Bought The Economics Profession

Huffington Post

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.
This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.
"The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."
One critical way the Fed exerts control on academic economists is through its relationships with the field's gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll -- and the rest have been in the past.
The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after "flipping" had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that "a national severe price distortion [is] most unlikely." A year later, current Chairman Ben Bernanke said that the boom "largely reflect strong economic fundamentals."
The Fed also failed to sufficiently regulate major financial institutions, with Greenspan -- and the dominant economists -- believing that the banks would regulate themselves in their own self-interest.
Despite all this, Bernanke has been nominated for a second term by President Obama.


In the field of economics, the chairman remains a much-heralded figure, lauded for reaction to a crisis generated, in the first place, by the Fed itself. Congress is even considering legislation to greatly expand the powers of the Fed to systemically regulate the financial industry.
Paul Krugman, in Sunday's New York Times magazine, did his own autopsy of economics, asking "How Did Economists Get It So Wrong?" Krugman concludes that "[e]conomics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system."
So who seduced them?
The Fed did it.
Three Decades of Domination
The Fed has been dominating the profession for about three decades. "For the economics profession that came out of the [second world] war, the Federal Reserve was not a very important place as far as they were concerned, and their views on monetary policy were not framed by a working relationship with the Federal Reserve. So I would date it to maybe the mid-1970s," says University of Texas economics professor -- and Fed critic -- James Galbraith. "The generation that I grew up under, which included both Milton Friedman on the right and Jim Tobin on the left, were independent of the Fed. They sent students to the Fed and they influenced the Fed, but there wasn't a culture of consulting, and it wasn't the same vast network of professional economists working there."
But by 1993, when former Fed Chairman Greenspan provided the House banking committee with a breakdown of the number of economists on contract or employed by the Fed, he reported that 189 worked for the board itself and another 171 for the various regional banks. Adding in statisticians, support staff and "officers" -- who are generally also economists -- the total number came to 730. And then there were the contracts. Over a three-year period ending in October 1994, the Fed awarded 305 contracts to 209 professors worth a total of $3 million.
Just how dominant is the Fed today?
The Federal Reserve's Board of Governors employs 220 PhD economists and a host of researchers and support staff, according to a Fed spokeswoman. The 12 regional banks employ scores more. (HuffPost placed calls to them but was unable to get exact numbers.) The Fed also doles out millions of dollars in contracts to economists for consulting assignments, papers, presentations, workshops, and that plum gig known as a "visiting scholarship." A Fed spokeswoman says that exact figures for the number of economists contracted with weren't available. But, she says, the Federal Reserve spent $389.2 million in 2008 on "monetary and economic policy," money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009.
That's a lot of money for a relatively small number of economists. According to the American Economic Association, a total of only 487 economists list "monetary policy, central banking, and the supply of money and credit," as either their primary or secondary specialty; 310 list "money and interest rates"; and 244 list "macroeconomic policy formation [and] aspects of public finance and general policy." The National Association of Business Economists tells HuffPost that 611 of its roughly 2,400 members are part of their "Financial Roundtable," the closest way they can approximate a focus on monetary policy and central banking.
Robert Auerbach, a former investigator with the House banking committee, spent years looking into the workings of the Fed and published much of what he found in the 2008 book, "Deception
and Abuse at the Fed
". A chapter in that book, excerpted here, provided the impetus for this investigation.
Auerbach found that in 1992, roughly 968 members of the AEA designated "domestic monetary and financial theory and institutions" as their primary field, and 717 designated it as their secondary field. Combining his numbers with the current ones from the AEA and NABE, it's fair to conclude that there are something like 1,000 to 1,500 monetary economists working across the country. Add up the 220 economist jobs at the Board of Governors along with regional bank hires and contracted economists, and the Fed employs or contracts with easily 500 economists at any given time. Add in those who have previously worked for the Fed -- or who hope to one day soon -- and you've accounted for a very significant majority of the field.
Auerbach concludes that the "problems associated with the Fed's employing or contracting with large numbers of economists" arise "when these economists testify as witnesses at legislative hearings or as experts at judicial proceedings, and when they publish their research and views on Fed policies, including in Fed publications."
Gatekeepers On The Payroll
The Fed keeps many of the influential editors of prominent academic journals on its payroll. It is common for a journal editor to review submissions dealing with Fed policy while also taking the bank's money. A HuffPost review of seven top journals found that 84 of the 190 editorial board members were affiliated with the Federal Reserve in one way or another.
"Try to publish an article critical of the Fed with an editor who works for the Fed," says Galbraith. And the journals, in turn, determine which economists get tenure and what ideas are considered respectable.
The pharmaceutical industry has similarly worked to control key medical journals, but that involves several companies. In the field of economics, it's just the Fed.
Being on the Fed payroll isn't just about the money, either. A relationship with the Fed carries prestige; invitations to Fed conferences and offers of visiting scholarships with the bank signal a rising star or an economist who has arrived.
Affiliations with the Fed have become the oxygen of academic life for monetary economists. "It's very important, if you are tenure track and don't have tenure, to show that you are valued by the Federal Reserve," says Jane D'Arista, a Fed critic and an economist with the Political Economy Research Institute at the University of Massachusetts, Amherst.
Robert King, editor in chief of the Journal of Monetary Economics and a visiting scholar at the Richmond Federal Reserve Bank, dismisses the notion that his journal was influenced by its Fed connections. "I think that the suggestion is a silly one, based on my own experience at least," he wrote in an e-mail. (His full response is at the bottom.)
Galbraith, a Fed critic, has seen the Fed's influence on academia first hand. He and co-authors Olivier Giovannoni and Ann Russo found that in the year before a presidential election, there is a significantly tighter monetary policy coming from the Fed if a Democrat is in office and a significantly looser policy if a Republican is in office. The effects are both statistically significant, allowing for controls, and economically important.
They submitted a paper with their findings to the Review of Economics and Statistics in 2008, but the paper was rejected. "The editor assigned to it turned out to be a fellow at the Fed and that was after I requested that it not be assigned to someone affiliated with the Fed," Galbraith says.
Publishing in top journals is, like in any discipline, the key to getting tenure. Indeed, pursuing tenure ironically requires a kind of fealty to the dominant economic ideology that is the precise opposite of the purpose of tenure, which is to protect academics who present oppositional perspectives.
And while most academic disciplines and top-tier journals are controlled by some defining paradigm, in an academic field like poetry, that situation can do no harm other than to, perhaps, a forest of trees. Economics, unfortunately, collides with reality -- as it did with the Fed's incorrect reading of the housing bubble and failure to regulate financial institutions. Neither was a matter of incompetence, but both resulted from the Fed's unchallenged assumptions about the way the market worked.
Even the late Milton Friedman, whose monetary economic theories heavily influenced Greenspan, was concerned about the stifled nature of the debate. Friedman, in a 1993 letter to Auerbach that the author quotes in his book, argued that the Fed practice was harming objectivity: "I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results," Friedman wrote.
Greenspan told Congress in October 2008 that he was in a state of "shocked disbelief" and that the "whole intellectual edifice" had "collapsed." House Committee on Oversight and Government Reform Chairman Henry Waxman (D-Calif.) followed up: "In other words, you found that your view of the world, your ideology, was not right, it was not working."
"Absolutely, precisely," Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."
But, if the intellectual edifice has collapsed, the intellectual infrastructure remains in place. The same economists who provided Greenspan his "very considerable evidence" are still running the journals and still analyzing the world using the same models that were incapable of seeing the credit boom and the coming collapse.
Rosner, the Wall Street analyst who foresaw the crash, says that the Fed's ideological dominance of the journals hampered his attempt to warn his colleagues about what was to come. Rosner wrote a strikingly prescient paper in 2001 arguing that relaxed lending standards and other factors would lead to a boom in housing prices over the next several years, but that the growth would be highly susceptible to an economic disruption because it was fundamentally unsound.
He expanded on those ideas over the next few years, connecting the dots and concluding that the coming housing collapse would wreak havoc on the collateralized debt obligation (CDO) and mortgage backed securities (MBS) markets, which would have a ripple effect on the rest of the economy. That, of course, is exactly what happened and it took the Fed and the economics field completely by surprise.
"What you're doing is, actually, in order to get published, having to whittle down or narrow what might otherwise be oppositional or expansionary views," says Rosner. "The only way you can actually get in a journal is by subscribing to the views of one of the journals."
When Rosner was casting his paper on CDOs and MBSs about, he knew he needed an academic economist to co-author the paper for a journal to consider it. Seven economists turned him down.
"You don't believe that markets are efficient?" he says they asked, telling him the paper was "outside the bounds" of what could be published. "I would say 'Markets are efficient when there's equal access to information, but that doesn't exist,'" he recalls.
The CDO and MBS markets froze because, as the housing market crashed, buyers didn't trust that they had reliable information about them -- precisely the case Rosner had been making.
He eventually found a co-author, Joseph Mason, an associate Professor of Finance at Drexel University LeBow College of Business, a senior fellow at the Wharton School, and a visiting scholar at the Federal Deposit Insurance Corporation. But the pair could only land their papers with the conservative Hudson Institute. In February 2007, they published a paper called "How Resilient Are Mortgage Backed Securities to Collateralized Debt Obligation Market Disruptions?" and in May posted another, "How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt Obligation Market Disruptions."
Together, the two papers offer a better analysis of what led to the crash than the economic journals have managed to put together - and they were published by a non-PhD before the crisis.
Not As Simple As A Pay-Off
Economist Rob Johnson serves on the UN Commission of Experts on Finance and International Monetary Reform and was a top economist on the Senate banking committee under both a Democratic and Republican chairman. He says that the consulting gigs shouldn't be looked at "like it's a payoff, like money. I think it's more being one of, part of, a club -- being respected, invited to the conferences, have a hearing with the chairman, having all the prestige dimensions, as much as a paycheck."
The Fed's hiring of so many economists can be looked at in several ways, Johnson says, because the institution does, of course, need talented analysts. "You can look at it from a telescope, either direction. One, you can say well they're reaching out, they've got a big budget and what they're doing, I'd say, is canvassing as broad a range of talent," he says. "You might call that the 'healthy hypothesis.'"
The other hypothesis, he says, "is that they're essentially using taxpayer money to wrap their arms around everybody that's a critic and therefore muffle or silence the debate. And I would say that probably both dimensions are operative, in reality."
To get a mainstream take, HuffPost called monetary economists at random from the list as members of the AEA. "I think there is a pretty good number of professors of economics who want a very limited use of monetary policy and I don't think that that necessarily has a negative impact on their careers," said Ahmed Ehsan, reached at the economics department at James Madison University. "It's quite possible that if they have some new ideas, that might be attractive to the Federal Reserve."
Ehsan, reflecting on his own career and those of his students, allowed that there is, in fact, something to what the Fed critics are saying. "I don't think [the Fed has too much influence], but then my area is monetary economics and I know my own professors, who were really well known when I was at Michigan State, my adviser, he ended up at the St. Louis Fed," he recalls. "He did lots of work. He was a product of the time...so there is some evidence, but it's not an overwhelming thing."
There's definitely prestige in spending a few years at the Fed that can give a boost to an academic career, he added. "It's one of the better career moves for lots of undergraduate students. It's very competitive."
Press officers for the Federal Reserve's board of governors provided some background information for this article, but declined to make anyone available to comment on its substance.
The Fed's Intolerance For Dissent
When dissent has arisen, the Fed has dealt with it like any other institution that cherishes homogeneity.
Take the case of Alan Blinder. Though he's squarely within the mainstream and considered one of the great economic minds of his generation, he lasted a mere year and a half as vice chairman of the Fed, leaving in January 1996.
Rob Johnson, who watched the Blinder ordeal, says Blinder made the mistake of behaving as if the Fed was a place where competing ideas and assumptions were debated. "Sociologically, what was happening was the Fed staff was really afraid of Blinder. At some level, as an applied empirical economist, Alan Blinder is really brilliant," says Johnson.
In closed-door meetings, Blinder did what so few do: challenged assumptions. "The Fed staff would come out and their ritual is: Greenspan has kind of told them what to conclude and they produce studies in which they conclude this. And Blinder treated it more like an open academic debate when he first got there and he'd come out and say, 'Well, that's not true. If you change this assumption and change this assumption and use this kind of assumption you get a completely different result.' And it just created a stir inside--it was sort of like the whole pipeline of Greenspan-arriving-at-decisions was
disrupted."
It didn't sit well with Greenspan or his staff. "A lot of senior staff...were pissed off about Blinder -- how should we say? -- not playing by the customs that they were accustomed to," Johnson says.
And celebrity is no shield against Fed excommunication. Paul Krugman, in fact, has gotten rough treatment. "I've been blackballed from the Fed summer conference at Jackson Hole, which I used to be a regular at, ever since I criticized him," Krugman said of Greenspan in a 2007 interview with Pacifica Radio's Democracy Now! "Nobody really wants to cross him."
An invitation to the annual conference, or some other blessing from the Fed, is a signal to the economic profession that you're a certified member of the club. Even Krugman seems a bit burned by the slight. "And two years ago," he said in 2007, "the conference was devoted to a field, new economic geography, that I invented, and I wasn't invited."
Three years after the conference, Krugman won a Nobel Prize in 2008 for his work in economic geography.
One Journal, In Detail
The Huffington Post reviewed the mastheads of the American Journal of Economics, the Journal of Economic Perspectives, Journal of Economic Literature, the American Economic Journal: Applied Economics, American Economic Journal: Economic Policy, the Journal of Political Economy and the Journal of Monetary Economics.
HuffPost interns Googled around looking for resumes and otherwise searched for Fed connections for the 190 people on those mastheads. Of the 84 that were affiliated with the Federal Reserve at one point in their careers, 21 were on the Fed payroll even as they served as gatekeepers at prominent journals.
At the Journal of Monetary Economics, every single member of the editorial board is or has been affiliated with the Fed and 14 of the 26 board members are presently on the Fed payroll.
After the top editor, King, comes senior associate editor Marianne Baxter, who has written papers for the Chicago and Minneapolis banks and was a visiting scholar at the Minneapolis bank in '84, '85, at the Richmond bank in '97, and at the board itself in '87. She was an advisor to the president of the New York bank from '02-'05. Tim Geithner, now the Treasury Secretary, became president of the New York bank in '03.
The senior associate editors: Janice C Eberly was a Fed visiting-scholar at Philadelphia ('94), Minneapolis ('97) and the board ('97). Martin Eichenbaum has written several papers for the Fed and is a consultant to the Chicago and Atlanta banks. Sergio Rebelo has written for and was previously a consultant to the board. Stephen Williamson has written for the Cleveland, Minneapolis and Richmond banks, he worked in the Minneapolis bank's research department from '85-'87, he's on the editorial board of the Federal Reserve Bank of St. Louis Review, is the co-organizer of the '09 St. Louis Federal Reserve Bank annual economic policy conference and the co-organizer of the same bank's '08 conference on Money, Credit, and Policy, and has been a visiting scholar at the Richmond bank ever since '98.
And then there are the associate editors. Klaus Adam is a visiting scholar at the San Francisco bank. Yongsung Chang is a research associate at the Cleveland bank and has been working with the Fed in one position or another since '01. Mario Crucini was a visiting scholar at the Federal Reserve Bank of New York in '08 and has been a senior fellow at the Dallas bank since that year. Huberto Ennis is a senior economist at the Federal Reserve Bank of Richmond, a position he's held since '00. Jonathan Heathcote is a senior economist at the Minneapolis bank and has been a visiting scholar three times dating back to '01.
Ricardo Lagos is a visiting scholar at the New York bank, a former senior economist for the Minneapolis bank and a visiting scholar at that bank and Cleveland's. In fact, he was a visiting scholar at both the Cleveland and New York banks in '07 and '08. Edward Nelson was the assistant vice president of the St Louis bank from '03-'09.
Esteban Rossi-Hansberg was a visiting scholar at the Philadelphia bank from '05-'09 and similarly served at the Richmond, Minneapolis and New York banks.
Pierre-Daniel Sarte is a senior economist at the Richmond bank, a position he's held since '96. Frank Schorfheide has been a visiting scholar at the Philadelphia bank since '03 and at the New York bank since '07. He's done four such stints at the Atlanta bank and scholared for the board in '03. Alexander Wolman has been a senior economist at the Richmond bank since 1989.
Here is the complete response from King, the journal's editor in chief: "I think that the suggestion is a silly one, based on my own experience at least. In a 1988 article for AEI later republished in the Federal Reserve Bank of Richmond Review, Marvin Goodfriend (then at FRB Richmond and now at Carnegie Mellon) and I argued that it was very important for the Fed to separate monetary policy decisions (setting of interest rates) and banking policy decisions (loans to banks, via the discount window and otherwise). We argued further that there was little positive case for the Fed to be involved in the latter: broadbased liquidity could always be provided by the former. We also argued that moral hazard was a cost of banking intervention.

"Ben Bernanke understands this distinction well: he and other members of the FOMC have read my perspective and sometimes use exactly this distinction between monetary and banking policies. In difficult times, Bernanke and his fellow FOMC members have chosen to involve the Fed in major financial market interventions, well beyond the traditional banking area, a position that attracts plenty of criticism and support. JME and other economics major journals would certainly publish exciting articles that fell between these two distinct perspectives: no intervention and extensive intervention. An upcoming Carnegie-Rochester conference, with its proceeding published in JME, will host a debate on 'The Future of Central Banking'.

"You may use only the entire quotation above or no quotation at all."
Auerbach, shown King's e-mail, says it's just this simple: "If you're on the Fed payroll there's a conflict of interest."
UPDATE: Economists have written in weighing in on both sides of the debate. Here are two of them.
Stephen Williamson, the Robert S. Brookings Distinguished Professor in Arts and Sciences at Washington University in St. Louis:
Since you mentioned me in your piece on the Federal Reserve System, I thought I would drop you a note, as you clearly don't understand the relationship between the Fed and some of the economists on its payroll. I have had a long relationship with the Fed, and with other central banks in the world, including the Bank of Canada. Currently I have an academic position at Washington University in St. Louis, but I am also paid as a consultant to the Federal Reserve Banks of Richmond and St. Louis. In the past, I was a full-time economist at the Bank of Canada and at the Federal Reserve Bank of Minneapolis. As has perhaps become clearer in the last year, economics and the science of monetary policy is a complicated business, and the Fed needs all the help it can get. The Fed is perhaps surprisingly open to new ideas, and ideas that are sometimes in conflict with the views of its top people. One of the strengths of the Federal Reserve System is that the regional Federal Reserve Banks have a good deal of independence from the Board of Governors in Washington, and this creates a healthy competition in economic ideas within the system. Indeed, some very revolutionary ideas in macroeconomics came out of the intellectual environment at the Federal
Reserve Bank of Minneapolis in the 1970s and 1980s. That intellectual environment included economists who worked full-time for the Fed, and others who were paid consultants to the Fed, but with full-time academic positions. Those economists were often sharply critical of accepted Fed policy, and they certainly never seemed to suffer for it; indeed they were
rewarded.
I have never felt constrained in my interactions with Fed economists (including some Presidents of Federal Reserve Banks). They are curious, and willing to think about new ideas. I am quite willing to bite the hand that feeds me, and have often chewed away quite happily. They keep paying me, so they must be happy about the interaction too.
A former Fed economist disagreed. "I was an economist at the Fed for more than ten years and kept getting in trouble for things I'm proud of. I hear you, loud and clear," he said, asking not to be quoted by name for, well, the reasons laid out above.
Elyse Siegel, Julian Hattem, Jeff Muskus and Jenna Staul contributed to this report

Ryan Grim is the author of This Is Your Country On Drugs: The Secret History of Getting High in America

Until the Music Stops - Awaiting Reality to Kick In.

Fed's Hoenig says QE3 "may get discussed"

Reuters - The Federal Reserve could debate extending its bond-buying program beyond June if U.S. economic data prove weaker than policymakers expect, Kansas City Fed President Thomas Hoenig said.
Another round of bond buying "may get discussed" if the numbers look "disappointing," Hoenig told Market News International in an interview published on Tuesday. 


Update: Hoenig know what is happening and covering his ass. Bloomberg - Hoenig says US should break up TBTF banks