Art and commentary by Kimberly Harris

Posts tagged ‘congress’

The Man in the Pickle Barrel Suit

A man wearing only a pickle barrel is supporting the US Capitol

True to President Reagan’s vision of a shining city on the hill, this new Fabergé egg commissioned by Congress celebrates the symbiotic relationship between government and the citizenry, thanks to whose selfless sacrifices this glorious institution has flourished over so many years.

The Shining City on the Hill has never looked so bright
Resplendent in magnificence, brilliance and might
A tall proud city built on rocks stronger than the ocean
Symbolic of our leaders’ noble devotion
I’ve never seen so many tourists gawk in utter awe
At this hallowed monument to our nation’s law
I never saw that wooden suit that you’re wearing
I have been blind
Citizen in the Red

After the fanfare and celebratory atmosphere wound down in the wake of the country’s landmark second inauguration, Congress saw fit to commission a piece of commemorative art that would celebrate their accomplishments and their vision for the future of America.

Although no one conceded much admiration for the Romanovs, several prominent congressional leaders were mesmerized by the elegance and detail of the famed jeweled Fabergé Eggs that were produced for Czar Alexander III and later Czar Nicholas II, as symbols of the power and wealth of imperial Russia. They decided to commission an egg for the government of the United States.

Congressional staffers were instructed to contact the US Embassy in Switzerland to find Deepak Fabergé, one the few remaining descendants of Russian Imperial Jeweler Carl Fabergé who had been rumored to still be producing jeweled eggs in his attic workshop in Lausanne. As soon as he was located, an Air Force C-32 transport plane was dispatched to Geneva in short order to pick up Fabergé and spirit him off to Washington, DC.

After a few formalities and several bottles of scotch, a select Congressional subcommittee instructed Fabergé to produce an egg for display in the Capitol rotunda that would glorify the seat of power that has made so much progress possible and also convey the nation’s appreciation for all the support and sacrifice on the part of the citizenry. They told Fabergé that money was not a concern and to produce as elegant a piece as he could conceive.

It was a tradition in the Fabergé family of jewelers that each egg would contain a surprise inside, and not even the recipient, however prominent an individual, was to know the contents of the egg in advance of its delivery.

After Fabergé returned to his atelier in Lausanne to begin work, the committee members waited in anxious anticipation of the delivery of the egg. What surprise might this new egg contain? Jobs? Health Care? A balanced budget?

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President Obama and Krampus Unwind on the Beach in Hawaii

Krampus and President Obama listen to music on the beach in Hawaii

The Krampus and President Obama are on the beach at Hanauma Bay discussing a contract to punish the members of Congress who have been so naughty in the previous year.

December 5 was Krampus Day in a number of European countries with Teutonic roots. As many of you know, the fierce horned Krampus figures prominently in the folklore of Germany and Austria, and also in the traditions of Hungary and the countries of former Yugoslavia. The role of the Krampus is complementary to that of the benevolent bearded old man who distributes presents to nice children far and wide on Christmas. The Krampus rounds up the naughty children that Santa has passed by and proceeds to whip them with a switch of birch branches. Those who have been exceptionally bad are stuffed into a sack and taken to a remote location in the woods to be devoured by the Krampus.

This year saw an unusually large contingent of naughty children who disobeyed their parents, failed to do their household chores, talked back to their elders, refused to eat their vegetables and got into fights at school. Disciplining the lot of them kept the Krampus very busy and by the time all of the punishment had been meted out, the Krampus was exhausted.

President Obama was likewise very tired from fighting with the Republicans over raising taxes for the rich, saving entitlement programs and avoiding the looming fiscal cliff. The president had just wrapped up a brief chat with the Chancellor of Germany, Andrea Merkel, regarding the debt crisis in Southern Europe when the Chancellor suggested that Mr. Obama invite Krampus to visit him in Hawaii so that they could both unwind on the beach together. Krampus immediately sparked to the idea of escaping the cold German winter and promptly booked a Lufthansa flight from Frankfurt to Honolulu.

Soon after arrival the pair proceeded to Hanauma Bay where they were served heady tropical beverages while being entertained by an exotic dance troupe recruited by the Secret Service. When the show was over, President Obama approached Krampus concerning a possible future contract with the US Department of Justice to castigate all those individuals appearing on the list of naughty legislators that the president has been compiling. Mr. Obama emphasized to Krampus that certain members of Congress had been very, very naughty.

Illustration by Kim Harris
Story by Don Rudisuhle

Who are the bubble blowers?

Three individuals are seen blowing financial bubbles

Who is responsible for blowing the bubbles that are threatening America’s economy?

It seems like every time I pick up a newspaper or read the Internet news, there is a story about a menacing bubble of one sort or another that is threatening the stability of our economy and indeed the entire world order. I decided to do a little research to see if I could characterize each of the more prominent bubbles to gain a better perspective of the dangers that they may or may not pose. In particular, I wanted to understand the processes that were producing the bubbles and explore the dynamics of these phenomena that are putting so many people in peril.

The Stock Market Bubble

The stock market has had its ups and downs over the years but it now appears that there is an evolving disconnect from reality that is preventing investors from acknowledging that things aren’t as good as they used to be. There is still a deep founded belief that somehow today’s situation is different and that stocks will succeed in navigating the stormy times ahead and continue to provide the generous returns of the past. The analysts and financial pundits have said it is so.

Individual and institutional investors have been ignoring some of the more conspicuous risks that could stifle future earnings and ultimately affect valuations. Advocates of investments in securities have been seduced by the alluring earnings records of US corporations in 2011, part of which can be attributed to the extraordinarily low interest rate environment in today’s economy. This could be seen as a repeat of the “irrational exuberance” phenomenon that Fed Chairman Alan Greenspan alluded to in a 1996 speech that caused markets to shudder from Tokyo to Frankfurt. It is hard to see how the trend can continue as deficits are increasingly funded by the prolific creation of money by the Federal Reserve, and which will at some point trigger a bear market in US Treasuries.

Prominent financial commentators suggested the prospect of a Facebook “IPO Halo” whereby a rapidly rising stock price for the social networking company would lift other technology stocks with a rising tide. Reality, however, played out differently. The company’s $100 billion valuation may not have been entirely justified by its recent financial performance. After a week of trading following the IPO, Facebook’s stock was hovering at around 85% of its IPO price of $38. At the same time the NASDAQ roller-coastered a bit but remained unremarkable with a 1.8% gain for the week.

Evidently, George Soros did not see any halo on the technology horizon as it was reported that his hedge fund, Soros Fund Management, recently liquidated its entire position in Google valued at some $168 million and also sold off half of its investment in Apple Computer.

One cannot help but wonder what will be in store for the financial markets. There would appear to be a mounting crisis of confidence on the part of investors, and particularly, the smaller players. For some time now they have been facing higher risks while experiencing meager returns. It’s as if the average person out there has come to believe that the game is rigged, and nowhere is this sentiment more in evidence than in the litigation that has been initiated against Facebook and the Wall Street firms of Goldman Sachs, Morgan Stanley and JP Morgan, the three of which reportedly shared a $100 million fee for their underwriting of the IPO. The litigants are alleging that negative information was concealed from the public prior to the IPO and that this led to losses for them. Adding to the sector’s crisis of confidence, JP Morgan announced less than two weeks ago that it had experienced a $2 billion loss as a consequence of derivative trades that went bad.

It was further reported that investors withdrew $85 billion from their mutual funds in 2011 and have pulled out $6 billion just in the first four months of this year. One cannot help but speculate that this investor retrenchment is driven at least in part by a sense that the little guy cannot win in a system that is permeated with corruption and special interests. Nowadays with Greece circling the drain and the European monetary system facing meltdown, this pessimism is understandable.

The Housing Bubble

There was a time in the not too recent past when housing valuations appreciated so consistently year after year that people began to assume that the trend would continue indefinitely. This gave rise to a subculture of “flippers” who bought houses with little or no money down and then resold them shortly thereafter earning them spectacular profits as due to the high leverage they enjoyed. The phenomenon was driven by a number of factors including low introductory interest rates and a failure on the part of lending institutions to exercise proper due diligence in the vetting of potential borrowers.

Another contributing cause was pressure exerted by Congress on banks to provide financing for affordable housing. The lending institutions were granted guarantees on the mortgages extended to individuals that lacked the financial wherewithal to make good on their commitments, especially in an environment of a declining economy with rising unemployment.

All good things must end sometime and that day occurred in December 2008 following several years of slow decline in the housing market. The subprime loan catastrophe that ensued left a trail of foreclosed and abandoned homes in its wake, bankrupting builders, ruining lives and compromising the solvency of some of the nation’s largest financial institutions. The impact was so great that the federal government was forced to step in with a series of rescue measures to assist foreclosed homeowners and banks that had become insolvent as a result of the large volume of delinquent loans.

The Student Loan Bubble

Earlier this year the rating agency, Standard & Poor’s, warned of the mounting danger posed by a growing student loan bubble. The situation was created by a convergence of factors which include tuition costs rising at twice the rate of inflation, a lack of proper underwriting that allowed young people to assume levels of debt inconsistent with their future earning power, and disregarding a weak job market that has left more than half of this year’s graduates under- or unemployed.

The New York Federal Reserve estimates that as of the third quarter of last year, 27% of all student loans have become delinquent. Incredibly, this level of unsustainable debt now exceeds $1 trillion and has eclipsed the nation’s aggregate credit card debt.

As more student loan defaults occur, there will be far-reaching consequences that will impact the entire market as asset-backed securities are inevitably downgraded by the rating agencies.

In 2005, Congress passed the Bankruptcy Abuse and Consumer Protection Act of 2005 that makes it impossible to discharge student loan debt in bankruptcy. However, this is of little comfort to the creditors who are finding it difficult if not impossible to collect from insolvent students who are living in their parents’ basements with scant prospects of employment.

Since universities depend heavily upon the income derived from repayment of government guaranteed student loans, it is not inconceivable that some ivory towers of knowledge will follow Greece in its death spiral into the abyss of debt.

The Unfunded Liabilities Bubble

There has been much fretting and arguing amongst the presidential candidates regarding the snowballing annual deficits that have spawned the nearly $16 trillion public debt now burdening the United States. However, there has been less attention focused on the much greater danger residing at federal, state and local governments attributable to unfunded and contingent liabilities. At the federal level, these additional obligations of about $46 trillion are largely composed of mandatory payments for entitlement programs such as Social Security, Medicare and Medicaid. Originally conceived as pay-as-you-go programs, evolving demographics and changing economic conditions have resulted in a situation where tax revenues and other sources of government income are going to be woefully inadequate to meet projected cash flow requirements for the future.

Nowhere is this looming crisis more evident than in Berkeley, California where the city has accumulated nearly $330 million in unfunded liabilities of which nearly 2/3 represent defined benefit pension obligations for city workers. Articles in the press have reported that Berkeley’s recently retired city manager will be entitled to an annual pension benefit of some $280,000. Assuming an annual cost-of-living increase of 2% and the current 2% yield on five-year certificates of deposit, the city would have to set aside a fund of approximately $15 million just to provide the cash flow necessary to support this one individual. When one considers that the city of Berkeley has in excess of 100 pensioners receiving at least $100,000 per annum, the unsustainability of the system becomes glaringly evident.

Estimates regarding the total figure of the unfunded liabilities of the United States range from $62 trillion to $144 trillion, a staggering amount in either instance. Depending on which estimate is selected, the amount of unfunded liabilities could exceed $1 million per US citizen, and it is hard to envision how this debt will ever be satisfied.

Am I on target here? Does anyone have any other bubbles you’d like to discuss? Suggest solutions? Please leave a comment.

Illustration by Kim Harris
Story by Don Rudisuhle

Green Hole Devours the Earth

President Obama, Ben Bernanke and Timothy Geithner flee Earth in a UFO

An artist’s rendering of the harrowing escape by President Obama and his trusted advisers just as the Earth is assimilated into the green hole of debt

NASA scientists recently announced that they have been watching a high-energy radiation beam emanating from a remote galaxy 3.9 billion light years away. Their findings were published last week and revealed that the beam, which astronomers have named Swift J 1644+57, was likely a black hole that was in the process of capturing and absorbing a hapless star that innocently wandered into its neighborhood.

Just a few days later, NASA scientists informed the White House that they had observed the possible formation of a similar black hole in close proximity to the Earth. Closer examination of the phenomenon revealed that it was actually a green hole that appeared to consist of a nebula of worthless US currency. Unprecedented government spending over the last several decades congealed into a critical mass of depreciated dollars circulating around the Earth and ultimately collapsed into a voracious vortex from which nothing could escape. The gravitational effects of this phenomenon were believed to be provoking earthquakes and spawning extreme weather around the globe and the anomaly was now beginning to digest the moon.

This horrifying discovery was promptly classified and White House staffers immediately declared a DEFCON 1 condition and sprang into action to execute the plan designed to protect the nation’s leaders in the event of imminent destruction of the planet. Frenzied calls were made to the Area 51 Air Force Base at Groom Lake, Nevada to secure a captured alien saucer to evacuate President Obama, Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke. The saucer was dispatched without delay and the trio was whisked away to an undisclosed location somewhere in the cosmos.

Democratic congressional staffers told Speaker John Boehner and Congressman Paul Ryan that a Commander would be waiting for them on the mall in front of the Capitol and proceeded to herd them into what the two legislators were led to believe was a nuclear powered evacuation pod.

Speaker Boehner and Congressman Paul Ryan think they are in nuclear powered evacuation pod

Speaker John Boehner and Congressman Paul Ryan were elated when they thought they would escape in a nuclear powered evacuation pod, but when the frenzy subsided they soon realized that they were sitting in a 1951 Studebaker Commander

Illustration by Kim Harris
Story by Don Rudisuhle

Secretary Geithner’s Failed Rescue Plan

Alien UFOs are beaming up valuable items at the Treasury Department

After the value of their investment in T-Bills dropped dramatically, the extraterrestrials sent a repo fleet to Washington to collect all the valuable items they can find

Secretary Geithner’s ingenious rescue plan is thwarted by the unexpected demands of unusual and unexpected bondholders.

The warning signs of the stress cracks in the US financial system had been appearing for some time now, but the cunning team of Geithner and Bernanke had it all figured out well in advance. The Chinese will continue to buy our Treasury debt no matter what, because they need to continue providing fuel to the American consumers to buy products from China and help deal with the growing overcapacity in that country’s manufacturing sector. Also, a selloff of their US Treasury holdings could trigger a drop in the dollar, which would deprecate the value of their investment.

For some months now, the financial press has been abuzz with increasingly alarming stories about the unthinkable prospect of a default on US Treasury obligations. Opposing congressional factions are far from agreeing on the prerequisites for containing the burgeoning national debt and President Obama has made it clear that any compromise the legislators arrive at must also conform to his vision for the country. Otherwise, he will not hesitate to exercise his veto power.

The storm clouds began to gather back in March when Pacific Investment Management Co sold off all the government debt from their $237 billion PIMCO Total Return Fund, the largest mutual fund in the world. Then, in April the respected ratings agency Standard & Poor’s announced that it was revising the United States’ AAA sovereign credit rating from ‘stable’ to ‘negative.’ That move was precipitated by the agency’s concern that a budget ceiling agreement between the parties might not be reached in time to be implemented and thus lowering the US’s creditworthiness with respect to other peer sovereigns who enjoy the same coveted rating.

Treasury Secretary Tim Geithner promptly shrugged off S&P’s ominous announcement and told Bloomberg Television that the low cost at which the US can borrow is proof that both local and foreign investors believe that the US economy is strong and that its debt will hold its value. However, S&P placed US sovereign ratings on formal credit watch, stating that there is a 50-50 possibility that the agency could downgrade the country’s debt. Yesterday, S&P reiterated that the country’s rating could be cut to AA as early as August, move that would likely trigger an increase in short and long-term interest rates.

At present, just days short of the predicted meltdown deadline of August 2nd, the polemics in Washington continue to rage unabated, with legislators seeming oblivious to the implications of S&P’s stern warnings which were soon echoed by Moody’s Investor Service, who also put the US on a downgrade watch. The Chinese credit ratings agency Dagong followed on Moody’s heels with a similar warning of their own, citing the sluggish growth and persistent deficits in the US.

Andy Xie, the former chief economist for Asia for Morgan Stanley, recently stated that China’s financial policy makers are “very, very bearish” on the US dollar and are seeking to diversify the country’s holdings away from America’s faltering currency. China’s purchase of euro-denominated bonds may provide them with some diversification of risk, although the Chinese recognize that the euro might be a poor substitute for the dollar due to the precarious financial state of the PIIGS countries, all of which may have to be bailed out in the future as the European Central Bank attempts to contain that continent’s sovereign debt crisis. Citing John Maynard Keynes’ supranational currency proposed back in 1940, the ‘Bancor,’ Zhou Xiaochuan, the Governor of the People’s Bank of China, has advocated replacing the US Dollar with IMF Special Drawing Rights (SDRs) as the new centrally managed global reserve currency.

Unbeknownst to Geithner and Bernanke, officials at the People’s Bank of China secretly devised a novel strategy to decrease their exposure to the dollar component of their portfolio currently estimated to contain in excess of $1 trillion in US Treasuries.

Those who follow UFO events are likely aware of the rumored existence of a secret alien base located in the vicinity of the Kongka La Pass in the disputed area of Aksai Chin on the India-China border. This bleak, frigid, inhospitable Himalayan pass sits at 17,000 feet elevation and has a population density of only 3 people per square mile. It is here where strange glowing cylindrical objects and silent triangular craft are said to emerge from the ground and depart vertically at unearthly speeds.

The Chinese have been aware of this base for a long time and some years ago established a friendship with the extraterrestrial beings who have built a vast underground facility in the area. At some point during a casual discussion concerning the mineral resources on Earth, the aliens mentioned that gold exists in abundance on their home planet and is mined principally for use in electronic circuitry, as it has no other real value to them. The Chinese delegation got the aliens’ immediate attention when they told them about their vast holdings of interest-bearing paper instruments issued by the richest and most powerful nation on the planet. The aliens were unfamiliar with the concept of lending something of value and actually getting back more than you lent out, and rapidly warmed up to the Chinese proposal to trade gold for US Treasury obligations.

A quick back-of-the-envelope calculation was performed, and it was agreed that the People’s Bank of China would trade 20,000 tons of gold in exchange for $500 billion of US Treasury notes. The deal, which represented about a 50% discount on the current market value of gold was quickly consummated and a cargo saucer was dispatched to fetch the gold.

Well, the end result was predictable. In spite of all the effort put forth by the Congress and President Obama, the dollar declined in value, interest rates soared and bond values collapsed. The extraterrestrial investors were outraged as they had been led to believe that their investment would be backed by the ‘full faith and credit’ of the most powerful nation on the planet

However, when the extraterrestrials went to cash in their T-Bills, they found them to be worth a lot less than they had been told and so they sent a repo fleet to collect whatever Earth items of value they could find. They felt it was appropriate to start with the US Treasury Department, so upon arrival they quickly put their tractor beams and giant vacuums to work to collect everything they could interpret as collateral.

Illustration by Kim Harris
Story by Don Rudisuhle

Romanian Witches Save the US Economy

Three Romanian witches stand in front of the US Capitol

The Romanian Witches arrive in Washington

President Obama recently gave his second State of the Union address and announced a number of measures he proposes to take to help bring the federal deficit under control. However, given the structure of entitlements and the growing cost of servicing the national debt, it will be a daunting task to reign in spending to a level where a balanced budget can be envisioned for the future. To help achieve this objective, the President called on both parties to work together for the purpose of stabilizing our country’s finances and returning the nation to prosperity.

The deficit has been accelerating for some years, and although leaders from both parties have repeatedly called for spending cuts, government expenditures have continued unchecked and the national debt now stands at more than 14 trillion dollars and is rapidly approaching 100% of Gross Domestic Product. Congressional Budget Office Director Douglas Elmendorf recently cautioned that unless federal spending is cut soon, the country could tumble into a serious fiscal crisis. Heeding the Budget Director’s admonition and realizing that a tax increase in the middle of a recession would not play well with their constituents, Senate Budget Committee Chairman Kent Conrad (D-ND) and fellow committee member Sen. Mike Crapo (R-ID) both called for a bipartisan plan to trim federal spending without delay.

Recognizing the extreme urgency of moving to stop the financial hemorrhage, the two legislators concurred that nothing short of a radical solution would suffice. They had both read a recent BBC news story regarding the considerable political influence wielded by the Romanian Witch Guild in its successful attempt to persuade that country’s legislators to abandon a controversial income tax that had been proposed for the purpose of boosting revenues by taxing several new categories of independent contractors, including witches, magicians, fortune-tellers and tarot readers.

The senators were cognizant of the fact that some years back there had been rumors that Nancy Reagan’s trusted psychic Joan Quigly had cautioned the first lady that spendthrift malevolent spirits were slowly possessing key government office buildings in Washington, including the halls of Congress. Although their presence was characterized primarily by harmless pranks, it eventually became evident that they were using supernatural suggestion techniques to render legislators powerless to vote against new spending bills and unfunded mandates to the states.

Acting upon the two senators’ recommendations and exhibiting extraordinary bipartisan agreement and collaboration, both houses of Congress overwhelmingly voted to provide supplementary funding to the United States Agency for International Development’s Regional Contracting Office in Budapest to travel to Bucharest to recruit the Romanian witches and issue them each a Personal Services Contract to come to Washington for the purposes of exorcising the Deficit Demons from the halls of Congress.

As soon as they arrived in the nation’s Capitol, the Romanian witches immediately went to work. Dressed in their purple ceremonial garbs that shield them from evil, the three set up their cauldron in the middle of the Capitol rotunda and proceeded to boil up a powerful brew consisting of swamp water from Foggy Bottom, dried Russian moles, soiled congressional laundry and old bones from long-forgotten skeletons secreted away in legislators’closets. They pronounced the requisite incantations as they circled the cauldron stoking the fire and stirring the thick toxic gruel. In a final gesture to seal the spell and command the spirits to depart the Capitol, the witches cast a mandrake root into the Potomac River. Within very few minutes, the effect of the witches’ spell was evident to all of Washington’s residents. In a scene reminiscent of the movies Poltergeist or Ghostbusters, the spirits were seen to depart en masse in all directions of the compass. The President and his Cabinet were in awe, and members of the normally restrained judiciary broke out into applause as the last spirits disappeared over the horizon. Within minutes, liberal and conservative legislators alike immediately saw the virtue inherent in fiscal restraint and responsible spending. Thanks to the Romanian witches, the United States was set on a course back to solvency and budgetary bliss.

Validating the long held principle that once government consultants are hired, they never go away, prominent members of Congress suggested since the Romanian witches had been so successful in bringing about a balanced budget, they will immediately consider Fed Chairman Ben Bernanke’s request that their contracts be extended indefinitely so that they can continue to produce spells that will keep inflation in check for the foreseeable future.

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