Posted on 09-01-2010
Filed Under (Politics) by Rashtrakut

John McCain’s campaign manager comes out swinging on Sarah Palin’s issues with the truth.  This Sunday’s 60 Minutes could be entertaining.  Also read about previously disclosed emails regarding the Alaska Independence Party.  Alaska blog Mudflats has a great read of just how Palin could make stuff up with a straight face.  See link.

For the last 15 years or so the mainstream media has generally been awful in calling out politicians on their bullshit, acting as stenographers reporting stuff verbatim.  Fox News (when they are not making stuff up) is an extreme example of this when it comes to the Republican Party.

With the media not doing their job emboldened politicians up the ante. This was evident the last couple of weeks when Republicans (including Mr. 9/11 himself) started peddling the fiction that no domestic terror attacks occurred George Bush.  At least this time the media did step up.  See link.

Andrew Sullivan has compiled a fairly thorough list of Palin’s odd and often easily disprovable lies since she hit the national stage.  It is hard not to lose respect for John McCain for trying to position a truth averse clueless neophyte a 71 year old cancer survivor’s heartbeat away from the presidency.

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Posted on 09-01-2010
Filed Under (Numismatics) by Rashtrakut

If you are one of the 5 known 1913 Liberty Head nickels in existence (two in museums and three in private collections), the answer is $3,737,500.  That is the price the coin previously owned by Egypt’s former King Farouk and Lakers owner Jerry Buss was sold for at an auction this Thursday.  See link with picture of the Liberty Head.

Buss paid $200,000 for the coin in 1978.  It will be interesting see if the value of the coin continues to appreciate at its approximate 9.58% annualized rate of return the next time it hits the auction block.

Here is an explanation by the Antique Trader Blog as to why collectors value the coin other than the pedigreed ownership of the coin:

“The U.S. Mint struck tens of millions of Liberty Head nickels from 1883 through 1912, but switched designs in 1913 to depict a Native American on the “head’s” side and a bison on the “tail’s” side. However, five nickels with the new date, 1913, but the old design of the symbolic Miss Liberty secretly were made at the Philadelphia Mint and eventually sold to collectors.”

And through such shenanigans at the US Mint is a nickel worth more than five cents minted.

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Posted on 09-01-2010
Filed Under (Economics, Foreign Policy) by Rashtrakut

Tiny Iceland drew unflattering world attention last year when its overheated real estate bubble burst sending the nation perilously close to bankruptcy.  It was back in the news this week for a presidential veto that infuriated the United Kingdom and the Netherlands which is reflected in the pious declarations by the British papers.

The brouhaha started with the collapse of a subsidiary of an Iceland bank Landsbanki called Icesave that offered deposits in the Netherlands and the United Kingdom.  The key question is whether the government of Iceland was supposed to back all depositor funds beyond the amounts covered by the Icelandic Depositors’ and Investors’ Guarantee Fund set up under European Economic Area rules.  The legal case on whether Iceland’s tax payers are required to back up the deposit fund is shaky as well and not expressly required by the EU.  Even the Dutch have acknowledged that the deposit fund was not intended to cover a systemic collapse as happened with Iceland’s financial system.  Even in the United States where the FDIC covers only up to $100,000 of deposits, the deposit insurance fund simply does not have the wherewithal to bail out an entire banking system.

Then came the British overreaction that still has Iceland’s citizens seething.  When Iceland agreed to cover domestic depositors, it did not cover foreign deposits (it had not agreed to do so before the crisis in any case).  The British and Dutch stepped in to cover the deposits of their nationals.  Next Gordon Brown’s government misused anti-terrorism statutes to freeze all Iceland assets in the United Kingdom, probably the first time such action has been taken against a NATO ally, sending Iceland’s reeling economy into a tailspin and even bringing down another totally unrelated Iceland bank.  Next the IMF was used to bully Iceland to pay up.  British and Dutch grandstanding on the subject is weakened by the fact that their banks benefited from the same loose passporting rules to establish foreign subsidiaries that Icesave employed.  It is hard to imagine that they would have done what they are asking Iceland to do with respect to foreign accounts in the event of a systemic collapse.

The repayment plan forced down by the IMF is  about 5 billion dollars, chump change for Britain and the Netherlands but 40% of Iceland’s GDP and about $18,000 per citizen.  Iceland’s ability to pay is doubtful as well.  Seething from Gordon Brown’s use of terrorism statutes, the Icelandic public overwhelmingly oppose the plan and deluged the President with requests to veto it.  The President obliged and the veto now sends the plan to a public referendum where it is almost certain to fail.

As a matter of policy, it is not really clear why a government should back all deposit accounts.  It seems an invitation to moral hazard and can cripple an economy in a financial crisis like Iceland’s, particularly when (as noted in the article linked earlier) the legal arguments are shaky.  Gordon Brown’s overreaction made it harder for Iceland to pay back this debt and it is not clear why the United Kingdom should not be penalized for its disgraceful misuse of anti-terrorism statutes and the collateral harm they caused to Iceland’s economy.  Given the small size of the loan by British standards and the financial stress a long term ally was under, Gordon Brown should have resisted the temptation to flex his muscles for domestic opinion and tried to work out a deal.  Instead he made a bad situation worse and now threatens Iceland with financial isolation.

The legal principle employed by the British and the Dutch is a dangerous one too.  Evidently now the taxpayers of the country of formation have to bear the burden of the obligations of a corporation abroad.  Its time for cooler heads to prevail and pull the British and Dutch back from their overreaction and threats to financially ruin a NATO ally.

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