Sunday, May 31, 2009

The Federal Reserve sees the rise in yields as part of a bumpy normalisation process

TO BE NOTED: From the FT:

US and China eye economic co-ordination

By Krishna Guha in Washington and Geoff Dyer

Published: May 31 2009 18:44 | Last updated: May 31 2009 18:44

Tim Geithner, US Treasury secretary, begins two days of top-level economic talks in Beijing on Monday amid a tightening focus on the need for the US and China to co-ordinate their exit strategies from the financial crisis.

Tim Geithner, US Treasury secretary
Hands-on approach: Tim Geithner, US Treasury secretary, said the US was committed to a strong dollar and reducing the fiscal deficit
With the US and China expected to lead the world out of recession, much rests on their ability to manage financial, trade and currency tensions while laying out mutually consistent frameworks for recovery.

The China talks follow recent weakness in the dollar and a surge in bond yields that partly reversed on Friday.

The Federal Reserve sees the rise in yields as part of a bumpy normalisation process, and is not inclined to be bounced into any immediate policy reaction, but is monitoring market developments carefully.

“The two countries are getting locked into an increasingly tight embrace,” said Eswar Prasad, a professor at Cornell University.

The US wants China to boost domestic demand in a way that will make it easier for the US to withdraw fiscal and monetary stimulus. China is worried about the value of its roughly $1,400bn in dollar assets and wants reassurance on US fiscal discipline as well as protectionism.

“We have lent a huge amount of money to the United States,” Wen Jiabao, China’s premier, said earlier this year. “Of course we are concerned about the safety of our assets.”

Any overt discord in the talks could rattle the bond and currency markets. Even if this can be avoided, the two nations face a tough challenge agreeing how to reconcile short-term counter-cyclical policies with the longer-term need for both countries to change their growth models. These are characterised by a focus on consumer spending in the US, and exports and infrastructure investment in China.

This will be a key theme of Mr Geithner’s speech in Beijing.

Many US-based analysts see China’s stimulus plan as offering more of the same. However, Nicholas Lardy, a fellow at the Peterson Institute, disagrees. “They have become more serious about rebalancing,” he said. “But it is a long-term process.”

China has vented its frustration over its exposure to the US – and pushed back against criticism – by floating suggestions to reduce reliance on the dollar.

Mr Geithner will stress the US desire for China to gain influence in multilateral economic debates in the hope that this will assuage China’s dissatisfaction at the current economic order."

building projects that marry form and function for both human and environmental needs


Slide Show: Top 10 Earth- and People-Friendly Buildings

The American Institute of Architects pick their top examples of building projects that marry form and function for both human and environmental needs

By Katherine Harmon

top ten green buildings

A HUMANE GREEN: Some eco-friendly buildings help inhabitants lead greener lives even after they've crossed the threshold. The Terry Thomas office building, seen here, is situated by a new streetcar line for commuters to use.

Can a building be as easy on the environment as it is on the eyes? Without a doubt, says The American Institute of Architects (AIA), a professional association based in Washington, D.C. To prove it, for the past 12 years, the organization and its Committee on the Environment (COTE) have awarded the top 10 green projects across the globe.

At the same time, science is providing new ways to build green buildings—from using paints with low VOCs (volatile organic compounds) to high-efficiency ventilation—as well as revealing just how important a pleasing and healthy environment is to our interiors.

Of course, the devil is in the details, and as Scientific American Mind reported in its April issue, neuroscience is shedding new light on how constructed environments impact health and well-being. As it turns out, green buildings don't always put the humans who will be using them first. For instance, they're often, as we reported last week, downright noisy.

As a host of organizations and publications have created their own rankings of buildings based purely on eco-standards, the AIA has created a list of green buildings that also meet the aesthetic and functional needs of the people and communities that encounter and inhabit them. From a low-income apartment building situated by a light rail line to a new town center that reused materials from its old municipal buildings for construction, these projects are putting Earth and its residents on equal footing.

View a slideshow of AIA's top 10 green architectural projects worldwide

with regard to interrogation, administration officials conducted no meaningful professional analysis of which techniques worked and which did not

TO BE NOTED: From the WaPo:

"The Trauma of 9/11 Is No Excuse

By Richard A. Clarke
Sunday, May 31, 2009

Top officials from the Bush administration have hit upon a revealing new theme as they retrospectively justify their national security policies. Call it the White House 9/11 trauma defense.

"Unless you were there, in a position of responsibility after September 11, you cannot possibly imagine the dilemmas that you faced in trying to protect Americans," Condoleezza Rice said last month as she admonished a Stanford University student who questioned the Bush-era interrogation program. And in his May 21 speech on national security, Dick Cheney called the morning of Sept. 11, 2001, a "defining" experience that "caused everyone to take a serious second look" at the threats to America. Critics of the administration have become more intense as memories of the attacks have faded, he argued. "Part of our responsibility, as we saw it," Cheney said, "was not to forget the terrible harm that had been done to America."

I remember that morning, too. Shortly after the second World Trade Center tower was hit, I burst in on Rice (then the president's national security adviser) and Cheney in the vice president's office and remember glimpsing horror on his face. Once in the bomb shelter, Cheney assembled his team while the crisis managers on the National Security Council staff coordinated the government response by video conference from the Situation Room. Many of us thought that we might not leave the White House alive. I remember the next day, too, when smoke still rose from the Pentagon as I sat in my office in the White House compound, a gas mask on my desk. The streets of Washington were empty, except for the armored vehicles, and the skies were clear, except for the F-15s on patrol. Every scene from those days is seared into my memory. I understand how it was a defining moment for Cheney, as it was for so many Americans.

Yet listening to Cheney and Rice, it seems that they want to be excused for the measures they authorized after the attacks on the grounds that 9/11 was traumatic. "If you were there in a position of authority and watched Americans drop out of eighty-story buildings because these murderous tyrants went after innocent people," Rice said in her recent comments, "then you were determined to do anything that you could that was legal to prevent that from happening again."

I have little sympathy for this argument. Yes, we went for days with little sleep, and we all assumed that more attacks were coming. But the decisions that Bush officials made in the following months and years -- on Iraq, on detentions, on interrogations, on wiretapping -- were not appropriate. Careful analysis could have replaced the impulse to break all the rules, even more so because the Sept. 11 attacks, though horrifying, should not have surprised senior officials. Cheney's admission that 9/11 caused him to reassess the threats to the nation only underscores how, for months, top officials had ignored warnings from the CIA and the NSC staff that urgent action was needed to preempt a major al-Qaeda attack.

Thus, when Bush's inner circle first really came to grips with the threat of terrorism, they did so in a state of shock -- a bad state in which to develop a coherent response. Fearful of new attacks, they authorized the most extreme measures available, without assessing whether they were really a good idea.

I believe this zeal stemmed in part from concerns about the 2004 presidential election. Many in the White House feared that their inaction prior to the attacks would be publicly detailed before the next vote -- which is why they resisted the 9/11 commission -- and that a second attack would eliminate any chance of a second Bush term. So they decided to leave no doubt that they had done everything imaginable.

The first response they discussed was invading Iraq. While the Pentagon was still burning, Secretary of Defense Don Rumsfeld was in the White House suggesting an attack against Baghdad. Somehow the administration's leaders could not believe that al-Qaeda could have mounted such a devastating operation, so Iraqi involvement became the convenient explanation. Despite being told repeatedly that Iraq was not involved in 9/11, some, like Cheney, could not abandon the idea. Charles Duelfer of the CIA's Iraq Survey Group recently revealed in his book, "Hide and Seek: The Search for Truth in Iraq," that high-level U.S. officials urged him to consider waterboarding specific Iraqi prisoners of war so that they could provide evidence of an Iraqi role in the terrorist attacks -- a request Duelfer refused. (A recent report indicates that the suggestion came from the vice president's office.) Nevertheless, the lack of evidence did not deter the administration from eventually invading Iraq -- a move many senior Bush officials had wanted to make before 9/11.

On detention, the Bush team leaped to the assumption that U.S. courts and prisons would not work. Before the terrorist attacks, the U.S. counterterrorism program of the 1990s had arrested al-Qaeda terrorists and others around the world and had a 100 percent conviction rate in the U.S. justice system. Yet the American system was abandoned, again as part of a pattern of immediately adopting the most extreme response available. Camps were established around the world, notably in Guantanamo Bay, where prisoners were held without being charged or tried. They became symbols of American overreach, held up as proof that al-Qaeda's anti-American propaganda was right.

Similarly, with regard to interrogation, administration officials conducted no meaningful professional analysis of which techniques worked and which did not. The FBI, which had successfully questioned al-Qaeda terrorists, was effectively excluded from interrogations. Instead, there was the immediate and unwarranted assumption that extreme measures -- such as waterboarding one detainee 183 times -- would be the most effective.

Finally, on wiretapping, rather than beef up the procedures available under the Foreign Intelligence Surveillance Act (FISA), the administration again moved to the extreme, listening in on communications here at home without legal process. FISA did need some modification, but it also allowed for the quick issuance of court orders, as when President Clinton took stepped-up defensive measures in late 1999 under the heightened threat of the new millennium.

Yes, Dick Cheney and Condoleezza Rice may have been surprised by the attacks of Sept. 11, 2001 -- but it was because they had not listened. And their surprise led them to adopt extreme counterterrorism techniques -- but it was because they rejected, without analysis, the tactics the Clinton administration had used. The measures they uncritically adopted, which they simply assumed were the best available, were in fact unnecessary and counterproductive.

"I'll freely admit that watching a coordinated, devastating attack on our country from an underground bunker at the White House can affect how you view your responsibilities," Cheney said in his recent speech. But this defense does not stand up. The Bush administration's response actually undermined the principles and values America has always stood for in the world, values that should have survived this traumatic event. The White House thought that 9/11 changed everything. It may have changed many things, but it did not change the Constitution, which the vice president, the national security adviser and all of us who were in the White House that tragic day had pledged to protect and preserve.

Richard A. Clarke, the national coordinator for security and counterterrorism under Presidents Bill Clinton and George W. Bush, is the author of "Against All Enemies" and "Your Government Failed You."

But all this does not justify the draft law and does not detract from its wickedness and stupidity

TO BE NOTED: From Haaretz:

"Wickedness and stupidity
By Shlomo Avineri
Tags: Palestinian Nakba

There is no doubt that the radical elements among Israeli Arabs will secretly welcome the bills imposing a prison sentence on anyone commemorating the Palestinian Nakba and prohibiting debate on the Jewish character of the State of Israel. Clearly such steps - which turn part of the public discourse into a criminal offense - would only encourage extremism in the Arab public and weaken the groups seeking integration into Israeli society.

It is especially astonishing that MK Alex Miller of Yisrael Beiteinu was the one to propose the Nakba ban. As a native of Moscow who immigrated to Israel in 1992 at the age of 15, perhaps he does not remember the struggle to leave the Soviet Union and realize one's national identity in Israel. But he grew up in a family that came from the Soviet Union, and a considerable part of his party's members and voters experienced the Soviet attempts to suppress expressions of national identity with so-called administrative measures. Miller should know that such measures not only fail to achieve their goal but do the opposite - they enhance what they want to eliminate and crush.

Undoubtedly, the attitude of some Israeli Arab leaders and elected officials toward what they call the Nakba is infuriating. First, because its message implies a challenge to Israel's legitimacy. Second, because of their lack of any self-criticism toward the fact that the Arab community in pre-state Israel chose to respond to the Partition Plan with armed struggle. This reveals the moral obtuseness of those who present the Arab public as a pawn in the hands of external forces and argue that it was not an active partner to what took place in 1948.
Indeed, it is hard to admit responsibility for failure in war, and one of the failures of the Palestinian leaders of the time, headed by the grand mufti, was their shirking of moral responsibility for the results of the war that their choice caused. The Israeli Arab leaders who continue their denial today are making a grave political and moral error.

But all this does not justify the draft law and does not detract from its wickedness and stupidity. I do not believe this proposal is likely to be passed in the Knesset, but if it is passed it is clear it would not stop Israeli Arabs from commemorating their failure and disaster in 1948. The law will turn an act of political protest - annoying as it is - into an act of crime. May 15 would become even more central in affecting the self-identity of Israel's Arabs.

Orlev's bill, which if passed would set limits to the permitted criticism of Israel's character as a Jewish state, also indicates a basic misunderstanding of the essence of public discourse in democratic society. These attempts to criminalize the collective consciousness are shameful, and are already leading to increased radicalization and social fermentation.

These complex questions should certainly be confronted. But this should be done through public discourse and open debate, as customary in democratic society. It should be done by investing in education in both the Jewish and Arab communities and by making a serious effort to increase the integration of Israeli Arabs into the country's economy, workforce and Israeli society in general.

The attempt to use "administrative measures" from the Soviet arsenal failed there - and is doomed to fail here too."

With Netanyahu and Foreign Minister Avigdor Lieberman, the world may wake up and end the sleight of hand.

TO BE NOTED: From Haaretz:

"Gideon Levy / What if Tzipi Livni were prime minister of Israel?
By Gideon Levy
Tags: Benjamin Netanyahu

Did you see Tzipi Livni's speech in the Knesset last week? It was the best show in town. She was outstanding. Sharp as a razor, sure of herself, eloquent, refined, witty and downright venomous. The head of the opposition has come across in her latest appearances as an excellent speaker. "The flip is worse than the flop" and "Be a man and give in" - everyone keen to mercilessly attack the prime minister would use her witticisms, calling him by his nickname "Bibi" as he pretended not to listen. It set off the imagination: What would have happened had Livni formed the coalition? Well, the situation would be even worse.

If Livni were prime minister, she of course would have traveled to Washington, just like Benjamin Netanyahu, but she would have returned home in a hail of glory and success. Barack Obama and his guest would have emerged from their meeting smiling and embracing to tell reporters of the palpable "chemistry" between them. Two states for two peoples, the end of the occupation, they would recite. Two fresh, promising, young leaders taking the journey together, because it is their lot.

Back in Israel, Livni would have immediately invited Mahmoud Abbas to renew the negotiations, and he would have happily consented. Once a week, perhaps every two weeks, they would meet at the Prime Minister's Residence for one-on-one sessions, and the chemistry would know no bounds. He would jot down some poetic phrase in the guest book, she would host him hospitably and with respect. Livni, after all, is a pleasant conversationalist. Just ask Abu Ala - Palestinian Authority chief negotiator Ahmed Qureia.
On the plus side, the "peace process" would be launched once again. Obama would ease the pressure on Israel to dismantle the outposts and freeze settlement construction because we have a fruitful negotiation process that has seen unprecedented success; there is simply no need to intervene too much.

Even Europe would be nice to a prime minister who says the things Europeans very much want to hear, just like her predecessor, Ehud Olmert, the man they embraced after two futile wars. The settlers - those dispossessed Cossacks of ours - would scream at the injustice, for they always scream at the injustice. Every now and then, they would put up another mobile home and pave another road, because heck, who cares? The shelf agreements are on the verge of being signed and the shelf is about to be stacked with agreements. Peace is at hand.

Livni would ostensibly put off talks with Syria; this is not the time for two parallel tracks. President Bashar Assad can continue to speak of peace and wait for George W. Bush. We don't have time for him. And there is of course nothing to talk about when it comes to beginning negotiations with Hamas. Lifting the endless siege on Gaza wouldn't even be considered. This would likely harm the negotiations with Abbas, Livni would tell her interlocutors.

She, too, would have raised hell and fury in threatening Iran, though much less so than Netanyahu - this is his raison d'etre. In the West Bank, Livni's defense minister, Shaul Mofaz, would have continued with the only handiwork he knows: liquidations, liquidations, liquidations. America would have given us a pass here as well, because the negotiations would be in full force. Journalists would have reported on significant progress.

A year would pass, maybe two. These are, after all, "complex" negotiations that have no equal. Every so often there would be some mini-crisis about Jerusalem or the right of return. There would be an occasional outbreak of violence, which the Americans would make sure to extinguish immediately. But this chorus - the negotiations - mustn't be stopped. The settlement enterprise would continue to flourish, and the Palestinians' lives would continue as they were: killing, destruction, checkpoints, arrests, unemployment and humiliation.

All this would end in tears. Time more valuable than gold would be wasted for nothing. Livni would not have taken any tangible steps - no evacuation of settlements, no release of prisoners, no lifting of the siege and no reconstruction of Gaza, all of which are much more vital than any declaration of negotiations. In contrast to the Netanyahu era, the U.S. and world would once again have allowed this masquerade ball to take place. They even would have taken part.

Thankfully, Livni was not elected. True, with her, things would have been much more pleasant, but this would be a deceptive charm. With Netanyahu and Foreign Minister Avigdor Lieberman, the world may wake up and end the sleight of hand. Who knows, maybe some Israelis will follow its lead and wake up as well."

Geithner, 47, also said that the rise in yields on Treasury securities this year “is a sign that things are improving”

TO BE NOTED: From Tim Duy's Fed Watch:

A Return to a Nasty External Dynamic?

At the moment, the economic dynamic is exceedingly complicated. An understatement, I fear. The crosscurrents in the data and the markets are treacherous, and I suspect will have Fed officials scratching their heads. Hold steady with existing plans? Step up the liquidity provisions? More actively engage plans to tighten policy? The latter option seems almost inconceivable; for the moment, the debate will focus on the issue of further easing. At this point, I think the Fed will sit tight, allowing further easing to come from the already active TALF program, rather than expanding outright purchases of Treasuries.

The core issue is the steep rise in Treasury yields, which apparently were kept in check only by the expectation that the Fed would continued to gobble up the endless stream of securities issues by the US Treasury. The Fed sank that hypothesis at the last FOMC meeting, and a subsequent statement by Federal Reserve Chairman Ben Bernanke made clear that the Fed does not have a 3% target on 10 year Treasury yields. Since then, yields have climbed as high as 3.75% before prices rebounded today, bringing yields down to 3.61%. Should we be concerned with the gains?

Brad DeLong argued a few weeks ago that the Fed's reluctance to cap rates was a policy error in the making. Indeed, it would seem that rising yields are toxic for debt heavy balance sheets, especially where housing is concerned. Officials repeatedly point to the importance of supporting housing prices, a policy that would be undermined as rising Treasury yields boost mortgage rates higher. And while we have seen some stability in recent months in existing homes sales - of which foreclosures and distressed sales are no small part - the recent Case-Shiller data makes clear that housing markets remains under severe pricing pressure:

Home prices in 20 major metropolitan areas fell in March more than forecast as foreclosures surged, threatening to extend the housing slump.

The S&P/Case-Shiller home-price index decreased 18.7 percent from March 2008, matching the drop in the year ended in February. The measure declined 19 percent in January, the most since data began in 2001.

In contrast is the view that rising yields signal an unambiguously positive environment in future months, a sentiment echoed by US Treasury Secretary Timothy Geithner:

Geithner, 47, also said that the rise in yields on Treasury securities this year “is a sign that things are improving” and that “there is a little less acute concern about the depth of the recession.”

Likewise, Alan Blinder is confused by thoughts that the Fed would attempt to control yields at all:

Blinder said he’s “more dubious” about the Treasury purchases themselves. Any reduction in long-term rates makes it more difficult for U.S. banks to generate earnings to make up for what the Fed estimated earlier this month would be $600 billion in losses under adverse economic conditions. “It makes it harder for them to earn their way out,” he said.

So we are stuck with two apparently contrasting views. On one hand, rising long rates and the related steepening of the yield curve should indicate improving economic conditions - after all, rising yields simply imply that market participants are gaining confidence to put their money to work in more risky endeavors. The steeper yield curve should boost bank earnings and, in time, encourage lending. On the other hand, higher yields may undermine support for the housing market, thus extending the downturn. The Wall Street Journal believes the Fed is choosing the positive spin:

Federal Reserve officials believe the recent sharp rise in yields on U.S. Treasury bonds could reflect a mending economy and a receding risk of financial catastrophe, suggesting the central bank won't rush to react -- even though some investors see danger in the government's rising cost of borrowing.

The WSJ is most likely correct. Indeed, I too want to believe the first story; the steep yield curve should be a clear signal that economic activity is poised to soar. Two things are holding me back. First, the 10-2 spread went positive in mid-2007, which should have indicated that the expected Fed easing later that year would catch fire and the economy would be clear of recession territory by mid-2008. Oops - the signal was premature. Something was different (just as I had come to embrace the yield curve's signals). My second concern is that rising yields indicate capital is fleeing the US, and the shape of the yield curve is being influenced significantly by shifts in patterns of foreign central bank purchases. And while the resulting depreciation of the Dollar will support US growth over time, the transition can be very disruptive. Interestingly, the Wall Street Journal story quoted above does not point to this possibility.

As Brad Setser highlights, the current dynamic is eerily similar to that of late 2007 and early 2008. In hindsight, this should have been anticipated. Financial market stability has improved dramatically as Federal Reserve Chairman Ben Bernanke and Geithner have made clear that no major US bank will be allowed to fail. It just won't happen. That stability makes way for a reversal of the flight to safety, and the Dollar comes under pressure, and, with it, US Treasuries. The reversal must be strong - note how Treasuries sank this week despite a clear escalation in North Korean rhetoric, which should have driven some safety trades. Moreover, with the US consumer widely expected to not be a driver of growth going forward, market participants look toward the emerging markets for growth. In essence, the Fed's ZIRP policy combined with stable financial markets once again makes the Dollar carry trade attractive. Since old habits die hard, this should "force" foreign central banks to accumulate Treasury assets - and it has. ( NB DON )

In this scenario, stable financial markets are now pushing for further reduction in the US external deficit. To be sure, while the deficit is much smaller, it still exists . And, once again, it looks like much of the world, from the Fed to the Treasury to the emerging market central banks, are resisting the adjustment as it requires continued soft domestic demand in the US to limit imports. Eventually, that resistance will reveal itself. For example, additional US weakness will be offshored to those regions not supporting the Dollar - hence Euro and Yen strength. And commodity prices might catch a stronger bid. Indeed, this explains the gains in oil in recent weeks.

But Brad identifies an important twist on that story:

Third, the rise in central bank reserves isn’t translating into a rise in demand for longer-term US bonds. Central banks are just buying short-term bills. That presumably is one of the reasons why long-term rates are rising now – while they remained (surprisingly) low back in 2006, 2007 and 2008. Central banks weren’t willing to buy long-term notes at 2% — or even at 3%. Maybe they just didn’t want to lock in low rates. Maybe they feared a mark-to-market capital loss if rates rose. Or maybe they fear that inflation will rise, eroding the real value of longer-term claims. In some sense, it doesn’t matter. The dynamics of the market changed …

Brad has more in a subsequent post. It is almost as if foreign central banks know that the endgame of everyone's behavior is inflation, and thus avoid longer dated securities. Not a particularly comforting thought - but one consistent with the steady rise in the 10 year Treasury-TIPS breakeven spread. Perhaps too foreign central banks realize that if the Fed is no longer willing to be a buyer of last resort of longer dated Treasuries, why should they?

How will the Fed behave in this environment? Presumably, if inflation expectations were to rise significantly, policymakers would need to respond by chasing long rates. After all, they have made clear that the target range is 1.7-2%, and want to anchor inflation expectations at those levels. With this in mind, expect policymakers to continue to emphasize their readiness to wind down their programs and raise the Fed Funds rates, when necessary, in order to combat inflation. Also, policymakers will likely turn attention toward commodity prices, particularly oil - saying something to the effect that they are keeping their attention on energy costs, but remain focused on the wide output gap, which suggests disinflation pressure in wages and core prices.

It remains difficult, however, to imagine that the Fed is truly ready to start reversing policy in the near term. Despite green shoots, US economic growth remains anemic. The green shoots really don't look all that green. Initial jobless claims may have peaked, but they are certainly not dropping at a rate consistent with a strong rebound. Hovering just above 600,000 claims a week promises to sustain weak employment reports in the months ahead, as long as rising unemployment. Can we see a policy reversal with unemployment rates on the rise? Consistent with ongoing job market weakness, policymakers continue to commit to a sustained period of near zero rates. See Federal Reserve Vice Chair Donald Kohn last week:

In my view, the economy is only now beginning to show signs that it might be stabilizing, and the upturn, when it begins, is likely to be gradual amid the balance sheet repair of financial intermediaries and households. As a consequence, it probably will be some time before the FOMC will need to begin to raise its target for the federal funds rate. Nonetheless, to ensure confidence in our ability to sustain price stability, we need to have a framework for managing our balance sheet when it is time to move to contain inflation pressures.

Moreover, the financial stability we have seen in recent months is clearly dependent on the willingness of the Fed to commit large quantities of liquidity in various guises. Policymakers are wary that financial markets can stand on their own, and will not be eager to speed up their eventual withdrawal. Start-stop policy would certainly impose a fresh policy uncertainty that could trigger a new chapter in the crisis. No, policymakers will not change course unless a new disorderly Dollar-commodity price dynamic emerges. Even then, Bernanke kept the accelerator to the floor as such a dynamic took hold in the early part of 2008. I would imagine that the bar to policy reversal is very high at this point.

What about additional easing? From Bloomberg:

“The market expects the Fed to enhance buying of Treasuries very soon,” wrote David Ader, head of U.S. government bond strategy at Greenwich, Connecticut-based primary dealer RBS Greenwich Capital, in a note to clients. “The bear market in Treasuries is having an impact on other things. Mortgages were the most notable victim.”

I was expecting more easing last month, believing the output gap would prod policymakers forward. And there is no indication that the Fed is planning to back off the TALF program (they are even expanding it too include "legacy" but possibly soon to be "toxic" assets.) But I am now wary that the Fed will increase the size of the expected Treasury bond purchases at this juncture. This is especially the case if they view rising rates as consistent with economic healing. Moreover, questions of outright monetization of the debt would intensify if the Fed appeared to be compensating for a lack of sufficient demand from the private sector, thereby driving more market participants, including central banks, out of the market.

So where does this leave us? In a environment pushed and pulled by contradictory trends:

  • The wide US output gap suggests there is plenty of room for monetary and fiscal stimulus to operate without triggering higher interest rates. Yet rates have moved higher, and while I can’t say that 3.7%, or even 4.7%, or even 5.7%, would be surprising given the pace of Treasury issuance, the rapidity and direction of the move should give one pause - especially given the likelihood of prolonged US economic weakness. The rate increase should give policymakers pause, too.

  • The continued existence of the current account deficit suggests the US remains dependent on capital inflows. To be sure, the need is not as great as a year ago, but significant nonetheless. Failure to attract those inflows would trigger downward pressure on bonds and Dollars.

  • Greater financial stability should force market participants out of low yielding assets. But, absent a safety flight to US Dollars, there is no reason those assets have to be in the US. Low short term rates - and the Fed's promise to keep those rates low for an extended period of time - open up opportunities for a Dollar carry trade that yields capital outflows.

  • If so, we would expect downward pressure on the Dollar and upward pressure on long rates. The former supports export growth and import compression, while the latter helps prevent the decline from becoming disorderly by attracting capital into the Dollar and by further import compression (slower domestic demand).

  • If foreign central banks choose to resist these trends, we would expect global reserves to rise. We are seeing this. The shift to purchasing at the shorter end of the yield curve, however, indicates that global central banks are wary of taking on additional Treasury risk. Perhaps they are finally beginning to choke on the debt.

  • Downward pressure on the Dollar, in addition to the liquidity provided by central bank reserve accumulation, should put upward pressure on commodities. This is particularly evident in oil prices. This will increase headline inflation, and with it inflation expectations among the general public.

  • US labor market weakness appears inconsistent with a sustainable inflation dynamic; thus, rising oil prices simply cut into domestic demand. Thus, the Fed will be inclined to hold policy steady, rather than exacerbating oil driven weakness by tightening. Tightening policy would also reverse the evolving stability in financial markets and threaten a new credit crunch. And given the Fed's willingness to accept a benign view of the yield increase, they are not likely to increase Treasury purchases. Policy on hold. This may again have the side effect of putting relentless downward pressure on the Dollar. This is probably necessary to achieve further rebalancing of economic activity, but I suspect in the near term it will be disruptive. Alternatively, the dynamic could be reversed again by a new crisis that drove flows back to Dollars. There may be so much directionless liquidity flowing through the global financial system that it just starts constantly shifting here and there, looking for a home.

Bottom Line: I want to believe that the rapid reversal of Treasury yields is a benign, even positive, event. This is likely the Fed's view; consequently, the will hold steady on policy( NB DON ). Challenging this benign view is that the reversal appears to be lock step with a return to dynamics seen in 2007 and 2008 - exceedingly low US rates encouraging Dollar outflows, stepping up the pace of foreign central bank reserve accumulation and putting upward pressure on key commodity prices. I worry that policymakers have forgotten the external dynamic that was hidden by the crisis induced flight to Dollars last fall. Indeed, capital outflows (indicated by a foreign central bank effort to reverse those flows) would signal that much work still needs to be done to curtail US consumption to bring the global economy back into balance. Policymakers are unprepared for this possibility. "

Treasuries are the only US financial asset that the rest of the world is still buying in large quantities


"Record demand, record angst

The bond market vigilantes are (supposedly) back. And this time, they aren’t just Wall Street traders. America’s foreign creditors are no longer willing to provide endless amounts of long-term credit to the US at low rates. So argues Mark MacQueen of Austin, Texas- based Sage Advisory Services (via Bloomberg):

“The vigilante group is different this time around … It’s major foreign creditors. This whole idea that we need to spend our way out of our problems is being questioned.”

From all this talk, you would never know that the world is actually still buying record amounts of US Treasuries. In fact, Treasuries are the only US financial asset that the rest of the world is still buying in large quantities. Demand for Agencies — and asset backed securities — has fallen off a cliff. Demand for equities has been anemic (though the last data point comes from March). By contrast, the 52 week increase in the New York Fed’s custodial holdings is way, way up.


Over the last four weeks of data — basically the month of May — central bank Treasury purchases topped $70 billion even as their Agency holdings inched up. That is a big sum, almost a record sum. It implies that the rest of the world is currently shifting their US portfolio into Treasuries, not moving out of them.


To be sure, not all is well.

Foreign central bank demand is still concentrated at the short-end of the curve,* and the US is issuing more long-dated bonds.

And key emerging market central banks (predictably) ares still reluctant to allow their currencies to appreciate. Tim Duy, in a superb Fed Watch:

The Fed’s ZIRP policy combined with stable financial markets once again makes the Dollar carry trade attractive. Since old habits die hard, this should “force” foreign central banks to accumulate Treasury assets - and it has. In this scenario, stable financial markets are now pushing for further reduction in the US external deficit … And, once again, it looks like much of the world, from the Fed to the Treasury to the emerging market central banks, are resisting the adjustment as it requires continued soft domestic demand in the US to limit imports.

Central banks that effectively peg to the dollar make for a strange kind of vigilante. Countries that do not want their currencies to appreciate have to intervene more when inflows pick up, and they have to invest that money abroad. And if central banks believe that the only acceptable, safe alternative to long-term Treasury notes is short-term Treasury bills, they will end up lending to the US at incredibly low rates so long as the Fed keeps rates low.( NB DON )

Key countries end up piling up short-term Treasury bills at a rate that has to make everyone nervous.

US policy makers have to worry about the weak foreign bid for long-term bonds, and the risk that the rise in mortgage rates will choke off the recovery. And at some point, foreign central banks will have to worry about the lack of interest income of their (now once again growing) foreign portfolio.

* Central banks bought a surprisingly large share of the 5 year auction, so this may be changing. We will have to see."

I think the Miles Davis version demonstrates his genius not only as a musician himself but also as a bandleader.

TO BE NOTED: From In The Dark:

"On Green Dolphin Street

Years ago in 1980, when the great pianist Bill Evans passed away suddenly, Humphrey Lyttelton paid tribute to him on his radio programme “The Best of Jazz” by playing a number of tracks featuring him. I didn’t really know much about Bill Evans at the time – I was only 17 then – but one track that Humph chose has been imprinted on my mind ever since, and it’s one of those pieces of music that I listen to over and over again.

The track is On Green Dolphin Street, as recorded in 1958 by the great Miles Davis sextet of the time that featured himself on trumpet, John Coltrane on tennor sax, Julian “Cannonball” Adderley on alto sax, Jimmy Cobb on drums, Paul Chambers on bass and Bill Evans on piano. This is the same band that played on the classic album Kind of Blue, one of the most popular and also most innovative jazz records of all time, which was recorded a bit after the recording of On Green Dolphin Street. I love Kind of Blue, of course, but I think this track is even better than the many great tracks on that album (All Blues, Flamenco Sketches, Blue in Green, etc). In fact, I’d venture the opinion – despite certainty of contradiction – that this is the greatest Jazz recording ever made.

On Green Dolphin Street was suggested to Miles Davis the band’s leader by the saxophonist Cannonball Adderley. It was the theme tune from a film from the late 1940s. It’s also the title of a more recent very fine novel by Sebastian Faulks.

I think the Miles Davis version demonstrates his genius not only as a musician himself but also as a bandleader. On Green Dolphin Street definitely bears the Miles Davis hallmark, but it also manages to accommodate the very different styles of the other musicians and allows them also to impose their personality on it. This is done by having each solo introduced with a passage with the rhythm section playing a different, less propulsive, beat behind it. This allows each musician to set out their stall before the superb rhythm section kicks into a swinging straight-ahead 4-4 and they head off into their own territory. As the soloists hand over from one to the other there are moments of beautiful contrast and dramatic tension, especially – and this is the reason why Humph picked this one in 1980 – when Bill Evans takes over for his solo from Cannonball Adderley. He starts with hesitant single-note phrases before moving into a richly voiced two handed solo fully of lush harmonies. It’s amazing to me to hear how the mood changes completely and immediately when he starts playing.

Not that the other soloists play badly either. After Bill Evans short but exquisite prelude, Miles Davis takes over on muted trumpet, more lyrical and less introspective than in Kind of Blue but still with a moody, melancholic edge. He’s followed by John Coltrane’s passionately virtuosic solo which floods out of him in an agonized stream which contrasts with Miles’ poised simplicity. By contrast, Cannonball Adderley is jaunty and upbeat, sauntering through his solo up to that wonderful moment where he hands over to the piano. Then Miles Davis takes over again to take them to the conclusion of the piece.

I’m not into League tables for music, but this is definitely fit to put up alongside the greatest of them all…

Local Hero "Going Home"

Mark Knopfler - Going home (Amsterdam 30.03.2008)

I'd smoked my brain the night before, On cigarettes and songs I'd been pickin'.

Well I woke up Sunday morning,
With no way to hold my head that didn't hurt.
And the beer I had for breakfast wasn't bad,
So I had one more for dessert.
Then I fumbled through my closet for my clothes,
And found my cleanest dirty shirt.
An' I shaved my face and combed my hair,
An' stumbled down the stairs to meet the day.

I'd smoked my brain the night before,
On cigarettes and songs I'd been pickin'.
But I lit my first and watched a small kid,
Cussin' at a can that he was kicking.
Then I crossed the empty street,
'n caught the Sunday smell of someone fryin' chicken.
And it took me back to somethin',
That I'd lost somehow, somewhere along the way.

On the Sunday morning sidewalk,
Wishing, Lord, that I was stoned.
'Cos there's something in a Sunday,
Makes a body feel alone.
And there's nothin' short of dyin',
Half as lonesome as the sound,
On the sleepin' city sidewalks:
Sunday mornin' comin' down.

In the park I saw a daddy,
With a laughin' little girl who he was swingin'.
And I stopped beside a Sunday school,
And listened to the song they were singin'.
Then I headed back for home,
And somewhere far away a lonely bell was ringin'.
And it echoed through the canyons,
Like the disappearing dreams of yesterday.

On the Sunday morning sidewalk,
Wishing, Lord, that I was stoned.
'Cos there's something in a Sunday,
Makes a body feel alone.
And there's nothin' short of dyin',
Half as lonesome as the sound,
On the sleepin' city sidewalks:
Sunday mornin' comin' down.

Do do do do do do do do,
Do do do do do do do,
Do do do do do do do do,
Do do do do do do do.

To fade

I don't want to wrong anybody, so I won't go so far as to say that she actually wrote poetry

Right Ho, Jeeves, a novel by P G Wodehouse

Chapter 1

"Jeeves," I said, "may I speak frankly?"

"Certainly, sir."

"What I have to say may wound you."

"Not at all, sir."

"Well, then----"

No--wait. Hold the line a minute. I've gone off the rails.

I don't know if you have had the same experience, but the snag I always come up against when I'm telling a story is this dashed difficult problem of where to begin it. It's a thing you don't want to go wrong over, because one false step and you're sunk. I mean, if you fool about too long at the start, trying to establish atmosphere, as they call it, and all that sort of rot, you fail to grip and the customers walk out on you.

Get off the mark, on the other hand, like a scalded cat, and your public is at a loss. It simply raises its eyebrows, and can't make out what you're talking about.

And in opening my report of the complex case of Gussie Fink-Nottle, Madeline Bassett, my Cousin Angela, my Aunt Dahlia, my Uncle Thomas, young Tuppy Glossop and the cook, Anatole, with the above spot of dialogue, I see that I have made the second of these two floaters.

I shall have to hark back a bit. And taking it for all in all and weighing this against that, I suppose the affair may be said to have had its inception, if inception is the word I want, with that visit of mine to Cannes. If I hadn't gone to Cannes, I shouldn't have met the Bassett or bought that white mess jacket, and Angela wouldn't have met her shark, and Aunt Dahlia wouldn't have played baccarat.

Yes, most decidedly, Cannes was the _point d'appui._

Right ho, then. Let me marshal my facts.

I went to Cannes--leaving Jeeves behind, he having intimated that he did not wish to miss Ascot--round about the beginning of June. With me travelled my Aunt Dahlia and her daughter Angela. Tuppy Glossop, Angela's betrothed, was to have been of the party, but at the last moment couldn't get away. Uncle Tom, Aunt Dahlia's husband, remained at home, because he can't stick the South of France at any price.

So there you have the layout--Aunt Dahlia, Cousin Angela and self off to Cannes round about the beginning of June.

All pretty clear so far, what?

We stayed at Cannes about two months, and except for the fact that Aunt Dahlia lost her shirt at baccarat and Angela nearly got inhaled by a shark while aquaplaning, a pleasant time was had by all.

On July the twenty-fifth, looking bronzed and fit, I accompanied aunt and child back to London. At seven p.m. on July the twenty-sixth we alighted at Victoria. And at seven-twenty or thereabouts we parted with mutual expressions of esteem--they to shove off in Aunt Dahlia's car to Brinkley Court, her place in Worcestershire, where they were expecting to entertain Tuppy in a day or two; I to go to the flat, drop my luggage, clean up a bit, and put on the soup and fish preparatory to pushing round to the Drones for a bite of dinner.

And it was while I was at the flat, towelling the torso after a much-needed rinse, that Jeeves, as we chatted of this and that--picking up the threads, as it were--suddenly brought the name of Gussie Fink-Nottle into the conversation.

As I recall it, the dialogue ran something as follows:

SELF: Well, Jeeves, here we are, what?

JEEVES: Yes, sir.

SELF: I mean to say, home again.

JEEVES: Precisely, sir.

SELF: Seems ages since I went away.

JEEVES: Yes, sir.

SELF: Have a good time at Ascot?

JEEVES: Most agreeable, sir.

SELF: Win anything?

JEEVES: Quite a satisfactory sum, thank you, sir.

SELF: Good. Well, Jeeves, what news on the Rialto? Anybody been phoning or calling or anything during my abs.?

JEEVES: Mr. Fink-Nottle, sir, has been a frequent caller.

I stared. Indeed, it would not be too much to say that I gaped.

"Mr. Fink-Nottle?"

"Yes, sir."

"You don't mean Mr. Fink-Nottle?"

"Yes, sir."

"But Mr. Fink-Nottle's not in London?"

"Yes, sir."

"Well, I'm blowed."

And I'll tell you why I was blowed. I found it scarcely possible to give credence to his statement. This Fink-Nottle, you see, was one of those freaks you come across from time to time during life's journey who can't stand London. He lived year in and year out, covered with moss, in a remote village down in Lincolnshire, never coming up even for the Eton and Harrow match. And when I asked him once if he didn't find the time hang a bit heavy on his hands, he said, no, because he had a pond in his garden and studied the habits of newts.

I couldn't imagine what could have brought the chap up to the great city. I would have been prepared to bet that as long as the supply of newts didn't give out, nothing could have shifted him from that village of his.

"Are you sure?"

"Yes, sir."

"You got the name correctly? Fink-Nottle?"

"Yes, sir."

"Well, it's the most extraordinary thing. It must be five years since he was in London. He makes no secret of the fact that the place gives him the pip. Until now, he has always stayed glued to the country, completely surrounded by newts."


"Newts, Jeeves. Mr. Fink-Nottle has a strong newt complex. You must have heard of newts. Those little sort of lizard things that charge about in ponds."

"Oh, yes, sir. The aquatic members of the family Salamandridae which constitute the genus Molge."

"That's right. Well, Gussie has always been a slave to them. He used to keep them at school."

"I believe young gentlemen frequently do, sir."

"He kept them in his study in a kind of glass-tank arrangement, and pretty niffy the whole thing was, I recall. I suppose one ought to have been able to see what the end would be even then, but you know what boys are. Careless, heedless, busy about our own affairs, we scarcely gave this kink in Gussie's character a thought. We may have exchanged an occasional remark about it taking all sorts to make a world, but nothing more. You can guess the sequel. The trouble spread,"

"Indeed, sir?"

"Absolutely, Jeeves. The craving grew upon him. The newts got him. Arrived at man's estate, he retired to the depths of the country and gave his life up to these dumb chums. I suppose he used to tell himself that he could take them or leave them alone, and then found--too late--that he couldn't."

"It is often the way, sir."

"Too true, Jeeves. At any rate, for the last five years he has been living at this place of his down in Lincolnshire, as confirmed a species-shunning hermit as ever put fresh water in the tank every second day and refused to see a soul. That's why I was so amazed when you told me he had suddenly risen to the surface like this. I still can't believe it. I am inclined to think that there must be some mistake, and that this bird who has been calling here is some different variety of Fink-Nottle. The chap I know wears horn-rimmed spectacles and has a face like a fish. How does that check up with your data?"

"The gentleman who came to the flat wore horn-rimmed spectacles, sir."

"And looked like something on a slab?"

"Possibly there was a certain suggestion of the piscine, sir."

"Then it must be Gussie, I suppose. But what on earth can have brought him up to London?"

"I am in a position to explain that, sir. Mr. Fink-Nottle confided to me his motive in visiting the metropolis. He came because the young lady is here."

"Young lady?"

"Yes, sir."

"You don't mean he's in love?"

"Yes, sir."

"Well, I'm dashed. I'm really dashed. I positively am dashed, Jeeves."

And I was too. I mean to say, a joke's a joke, but there are limits.

Then I found my mind turning to another aspect of this rummy affair. Conceding the fact that Gussie Fink-Nottle, against all the ruling of the form book, might have fallen in love, why should he have been haunting my flat like this? No doubt the occasion was one of those when a fellow needs a friend, but I couldn't see what had made him pick on me.

It wasn't as if he and I were in any way bosom. We had seen a lot of each other at one time, of course, but in the last two years I hadn't had so much as a post card from him.

I put all this to Jeeves:

"Odd, his coming to me. Still, if he did, he did. No argument about that. It must have been a nasty jar for the poor perisher when he found I wasn't here."

"No, sir. Mr. Fink-Nottle did not call to see you, sir."

"Pull yourself together, Jeeves. You've just told me that this is what he has been doing, and assiduously, at that."

"It was I with whom he was desirous of establishing communication, sir."

"You? But I didn't know you had ever met him."

"I had not had that pleasure until he called here, sir. But it appears that Mr. Sipperley, a fellow student of whom Mr. Fink-Nottle had been at the university, recommended him to place his affairs in my hands."

The mystery had conked. I saw all. As I dare say you know, Jeeves's reputation as a counsellor has long been established among the cognoscenti, and the first move of any of my little circle on discovering themselves in any form of soup is always to roll round and put the thing up to him. And when he's got A out of a bad spot, A puts B on to him. And then, when he has fixed up B, B sends C along. And so on, if you get my drift, and so forth.

That's how these big consulting practices like Jeeves's grow. Old Sippy, I knew, had been deeply impressed by the man's efforts on his behalf at the time when he was trying to get engaged to Elizabeth Moon, so it was not to be wondered at that he should have advised Gussie to apply. Pure routine, you might say.

"Oh, you're acting for him, are you?"

"Yes, sir."

"Now I follow. Now I understand. And what is Gussie's trouble?"

"Oddly enough, sir, precisely the same as that of Mr. Sipperley when I was enabled to be of assistance to him. No doubt you recall Mr. Sipperley's predicament, sir. Deeply attached to Miss Moon, he suffered from a rooted diffidence which made it impossible for him to speak."

I nodded.

"I remember. Yes, I recall the Sipperley case. He couldn't bring himself to the scratch. A marked coldness of the feet, was there not? I recollect you saying he was letting--what was it?--letting something do something. Cats entered into it, if I am not mistaken."

"Letting 'I dare not' wait upon 'I would', sir."

"That's right. But how about the cats?"

"Like the poor cat i' the adage, sir."

"Exactly. It beats me how you think up these things. And Gussie, you say, is in the same posish?"

"Yes, sir. Each time he endeavours to formulate a proposal of marriage, his courage fails him."

"And yet, if he wants this female to be his wife, he's got to say so, what? I mean, only civil to mention it."

"Precisely, sir."

I mused.

"Well, I suppose this was inevitable, Jeeves. I wouldn't have thought that this Fink-Nottle would ever have fallen a victim to the divine _p_, but, if he has, no wonder he finds the going sticky."

"Yes, sir."

"Look at the life he's led."

"Yes, sir."

"I don't suppose he has spoken to a girl for years. What a lesson this is to us, Jeeves, not to shut ourselves up in country houses and stare into glass tanks. You can't be the dominant male if you do that sort of thing. In this life, you can choose between two courses. You can either shut yourself up in a country house and stare into tanks, or you can be a dasher with the sex. You can't do both."

"No, sir."

I mused once more. Gussie and I, as I say, had rather lost touch, but all the same I was exercised about the poor fish, as I am about all my pals, close or distant, who find themselves treading upon Life's banana skins. It seemed to me that he was up against it.

I threw my mind back to the last time I had seen him. About two years ago, it had been. I had looked in at his place while on a motor trip, and he had put me right off my feed by bringing a couple of green things with legs to the luncheon table, crooning over them like a young mother and eventually losing one of them in the salad. That picture, rising before my eyes, didn't give me much confidence in the unfortunate goof's ability to woo and win, I must say. Especially if the girl he had earmarked was one of these tough modern thugs, all lipstick and cool, hard, sardonic eyes, as she probably was.

"Tell me, Jeeves," I said, wishing to know the worst, "what sort of a girl is this girl of Gussie's?"

"I have not met the young lady, sir. Mr. Fink-Nottle speaks highly of her attractions."

"Seemed to like her, did he?"

"Yes, sir."

"Did he mention her name? Perhaps I know her."

"She is a Miss Bassett, sir. Miss Madeline Bassett."


"Yes, sir."

I was deeply intrigued.

"Egad, Jeeves! Fancy that. It's a small world, isn't it, what?"

"The young lady is an acquaintance of yours, sir?"

"I know her well. Your news has relieved my mind, Jeeves. It makes the whole thing begin to seem far more like a practical working proposition."

"Indeed, sir?"

"Absolutely. I confess that until you supplied this information I was feeling profoundly dubious about poor old Gussie's chances of inducing any spinster of any parish to join him in the saunter down the aisle. You will agree with me that he is not everybody's money."

"There may be something in what you say, sir."

"Cleopatra wouldn't have liked him."

"Possibly not, sir."

"And I doubt if he would go any too well with Tallulah Bankhead."

"No, sir."

"But when you tell me that the object of his affections is Miss Bassett, why, then, Jeeves, hope begins to dawn a bit. He's just the sort of chap a girl like Madeline Bassett might scoop in with relish."

This Bassett, I must explain, had been a fellow visitor of ours at Cannes; and as she and Angela had struck up one of those effervescent friendships which girls do strike up, I had seen quite a bit of her. Indeed, in my moodier moments it sometimes seemed to me that I could not move a step without stubbing my toe on the woman.

And what made it all so painful and distressing was that the more we met, the less did I seem able to find to say to her.

You know how it is with some girls. They seem to take the stuffing right out of you. I mean to say, there is something about their personality that paralyses the vocal cords and reduces the contents of the brain to cauliflower. It was like that with this Bassett and me; so much so that I have known occasions when for minutes at a stretch Bertram Wooster might have been observed fumbling with the tie, shuffling the feet, and behaving in all other respects in her presence like the complete dumb brick. When, therefore, she took her departure some two weeks before we did, you may readily imagine that, in Bertram's opinion, it was not a day too soon.

It was not her beauty, mark you, that thus numbed me. She was a pretty enough girl in a droopy, blonde, saucer-eyed way, but not the sort of breath-taker that takes the breath.

No, what caused this disintegration in a usually fairly fluent prattler with the sex was her whole mental attitude. I don't want to wrong anybody, so I won't go so far as to say that she actually wrote poetry, but her conversation, to my mind, was of a nature calculated to excite the liveliest suspicions. Well, I mean to say, when a girl suddenly asks you out of a blue sky if you don't sometimes feel that the stars are God's daisy-chain, you begin to think a bit.

As regards the fusing of her soul and mine, therefore, there was nothing doing. But with Gussie, the posish was entirely different. The thing that had stymied me--viz. that this girl was obviously all loaded down with ideals and sentiment and what not--was quite in order as far as he was concerned.

Gussie had always been one of those dreamy, soulful birds--you can't shut yourself up in the country and live only for newts, if you're not--and I could see no reason why, if he could somehow be induced to get the low, burning words off his chest, he and the Bassett shouldn't hit it off like ham and eggs.

"She's just the type for him," I said.

"I am most gratified to hear it, sir."

"And he's just the type for her. In fine, a good thing and one to be pushed along with the utmost energy. Strain every nerve, Jeeves."

"Very good, sir," replied the honest fellow. "I will attend to the matter at once."

Now up to this point, as you will doubtless agree, what you might call a perfect harmony had prevailed. Friendly gossip between employer and employed, and everything as sweet as a nut. But at this juncture, I regret to say, there was an unpleasant switch. The atmosphere suddenly changed, the storm clouds began to gather, and before we knew where we were, the jarring note had come bounding on the scene. I have known this to happen before in the Wooster home.

The first intimation I had that things were about to hot up was a pained and disapproving cough from the neighbourhood of the carpet. For, during the above exchanges, I should explain, while I, having dried the frame, had been dressing in a leisurely manner, donning here a sock, there a shoe, and gradually climbing into the vest, the shirt, the tie, and the knee-length, Jeeves had been down on the lower level, unpacking my effects.

He now rose, holding a white object. And at the sight of it, I realized that another of our domestic crises had arrived, another of those unfortunate clashes of will between two strong men, and that Bertram, unless he remembered his fighting ancestors and stood up for his rights, was about to be put upon.

I don't know if you were at Cannes this summer. If you were, you will recall that anybody with any pretensions to being the life and soul of the party was accustomed to attend binges at the Casino in the ordinary evening-wear trouserings topped to the north by a white mess-jacket with brass buttons. And ever since I had stepped aboard the Blue Train at Cannes station, I had been wondering on and off how mine would go with Jeeves.

In the matter of evening costume, you see, Jeeves is hidebound and reactionary. I had had trouble with him before about soft-bosomed shirts. And while these mess-jackets had, as I say, been all the rage--_tout ce qu'il y a de chic_--on the Cote d'Azur, I had never concealed it from myself, even when treading the measure at the Palm Beach Casino in the one I had hastened to buy, that there might be something of an upheaval about it on my return.

I prepared to be firm.

"Yes, Jeeves?" I said. And though my voice was suave, a close observer in a position to watch my eyes would have noticed a steely glint. Nobody has a greater respect for Jeeves's intellect than I have, but this disposition of his to dictate to the hand that fed him had got, I felt, to be checked. This mess-jacket was very near to my heart, and I jolly well intended to fight for it with all the vim of grand old Sieur de Wooster at the Battle of Agincourt.

"Yes, Jeeves?" I said. "Something on your mind, Jeeves?"

"I fear that you inadvertently left Cannes in the possession of a coat belonging to some other gentleman, sir."

I switched on the steely a bit more.

"No, Jeeves," I said, in a level tone, "the object under advisement is mine. I bought it out there."

"You wore it, sir?"

"Every night."

"But surely you are not proposing to wear it in England, sir?"

I saw that we had arrived at the nub.

"Yes, Jeeves."

"But, sir----"

"You were saying, Jeeves?"

"It is quite unsuitable, sir."

"I do not agree with you, Jeeves. I anticipate a great popular success for this jacket. It is my intention to spring it on the public tomorrow at Pongo Twistleton's birthday party, where I confidently expect it to be one long scream from start to finish. No argument, Jeeves. No discussion. Whatever fantastic objection you may have taken to it, I wear this jacket."

"Very good, sir."

He went on with his unpacking. I said no more on the subject. I had won the victory, and we Woosters do not triumph over a beaten foe. Presently, having completed my toilet, I bade the man a cheery farewell and in generous mood suggested that, as I was dining out, why didn't he take the evening off and go to some improving picture or something. Sort of olive branch, if you see what I mean.

He didn't seem to think much of it.

"Thank you, sir, I will remain in."

I surveyed him narrowly.

"Is this dudgeon, Jeeves?"

"No, sir, I am obliged to remain on the premises. Mr. Fink-Nottle informed me he would be calling to see me this evening."

"Oh, Gussie's coming, is he? Well, give him my love."

"Very good, sir."

"Yes, sir."

"And a whisky and soda, and so forth."

"Very good, sir."

"Right ho, Jeeves."

I then set off for the Drones.

At the Drones I ran into Pongo Twistleton, and he talked so much about his forthcoming merry-making of his, of which good reports had already reached me through my correspondents, that it was nearing eleven when I got home again.

And scarcely had I opened the door when I heard voices in the sitting-room, and scarcely had I entered the sitting-room when I found that these proceeded from Jeeves and what appeared at first sight to be the Devil.

A closer scrutiny informed me that it was Gussie Fink-Nottle, dressed as Mephistopheles.

Saturday, May 30, 2009

The Organian Peace Treaty

We keep turning the pages, hoping for something, something like mercy or change,

The Story Of Our Lives by Mark Strand
We are reading the story of our lives
which takes place in a room.
The room looks out on a street.
There is no one there,
no sound of anything.
The tress are heavy with leaves,
the parked cars never move.
We keep turning the pages, hoping for something,
something like mercy or change,
a black line that would bind us
or keep us apart.
The way it is, it would seem
the book of our lives is empty.
The furniture in the room is never shifted,
and the rugs become darker each time
our shadows pass over them.
It is almost as if the room were the world.
We sit beside each other on the couch,
reading about the couch.
We say it is ideal.
It is ideal.

We are reading the story of our lives,
as though we were in it,
as though we had written it.
This comes up again and again.
In one of the chapters
I lean back and push the book aside
because the book says
it is what I am doing.
I lean back and begin to write about the book.
I write that I wish to move beyond the book.
Beyond my life into another life.
I put the pen down.
The book says: "He put the pen down
and turned and watched her reading
the part about herself falling in love."
The book is more accurate than we can imagine.
I lean back and watch you read
about the man across the street.
They built a house there,
and one day a man walked out of it.
You fell in love with him
because you knew that he would never visit you,
would never know you were waiting.
Night after night you would say
that he was like me.
I lean back and watch you grow older without me.
Sunlight falls on your silver hair.
The rugs, the furniture,
seem almost imaginary now.
"She continued to read.
She seemed to consider his absence
of no special importance,
as someone on a perfect day will consider
the weather a failure
because it did not change his mind."
You narrow your eyes.
You have the impulse to close the book
which describes my resistance:
how when I lean back I imagine
my life without you, imagine moving
into another life, another book.
It describes your dependence on desire,
how the momentary disclosures
of purpose make you afraid.
The book describes much more than it should.
It wants to divide us.

This morning I woke and believed
there was no more to to our lives
than the story of our lives.
When you disagreed, I pointed
to the place in the book where you disagreed.
You fell back to sleep and I began to read
those mysterious parts you used to guess at
while they were being written
and lose interest in after they became
part of the story.
In one of them cold dresses of moonlight
are draped over the chairs in a man's room.
He dreams of a woman whose dresses are lost,
who sits in a garden and waits.
She believes that love is a sacrifice.
The part describes her death
and she is never named,
which is one of the things
you could not stand about her.
A little later we learn
that the dreaming man lives
in the new house across the street.
This morning after you fell back to sleep
I began to turn the pages early in the book:
it was like dreaming of childhood,
so much seemed to vanish,
so much seemed to come to life again.
I did not know what to do.
The book said: "In those moments it was his book.
A bleak crown rested uneasily on his head.
He was the brief ruler of inner and outer discord,
anxious in his own kingdom."

Before you woke
I read another part that described your absence
and told how you sleep to reverse
the progress of your life.
I was touched by my own loneliness as I read,
knowing that what I feel is often the crude
and unsuccessful form of a story
that may never be told.
"He wanted to see her naked and vulnerable,
to see her in the refuse, the discarded
plots of old dreams, the costumes and masks
of unattainable states.
It was as if he were drawn
irresistably to failure."
It was hard to keep reading.
I was tired and wanted to give up.
The book seemed aware of this.
It hinted at changing the subject.
I waited for you to wake not knowing
how long I waited,
and it seemed that I was no longer reading.
I heard the wind passing
like a stream of sighs
and I heard the shiver of leaves
in the trees outside the window.
It would be in the book.
Everything would be there.
I looked at your face
and I read the eyes, the nose, the mouth . . .

If only there were a perfect moment in the book;
if only we could live in that moment,
we could being the book again
as if we had not written it,
as if we were not in it.
But the dark approaches
to any page are too numerous
and the escapes are too narrow.
We read through the day.
Each page turning is like a candle
moving through the mind.
Each moment is like a hopeless cause.
If only we could stop reading.
"He never wanted to read another book
and she kept staring into the street.
The cars were still there,
the deep shade of trees covered them.
The shades were drawn in the new house.
Maybe the man who lived there,
the man she loved, was reading
the story of another life.
She imagine a bare parlor,
a cold fireplace, a man sitting
writing a letter to a woman
who has sacrificed her life for love."
If there were a perfect moment in the book,
it would be the last.
The book never discusses the causes of love.
It claims confusion is a necessary good.
It never explains. It only reveals.

The day goes on.
We study what we remember.
We look into the mirror across the room.
We cannot bear to be alone.
The book goes on.
"They became silent and did not know how to begin
the dialogue which was necessary.
It was words that created divisions in the first place,
that created loneliness.
They waited
they would turn the pages, hoping
something would happen.
They would patch up their lives in secret:
each defeat forgiven because it could not be tested,
each pain rewarded because it was unreal.
They did nothing."

The book will not survive.
We are the living proof of that.
It is dark outside, in the room it is darker.
I hear your breathing.
You are asking me if I am tired,
if I want to keep reading.
Yes, I am tired.
Yes, I want to keep reading.
I say yes to everything.
You cannot hear me.
"They sat beside each other on the couch.
They were the copies, the tired phantoms
of something they had been before.
The attitudes they took were jaded.
They stared into the book
and were horrified by their innocence,
their reluctance to give up.
They sat beside each other on the couch.
They were determined to accept the truth.
Whatever it was they would accept it.
The book would have to be written
and would have to be read.
They are the book and they are
nothing else.

Janis Joplin - Cry Baby (live in toronto 1970)

lord buckley vs. groucho marx

Hank Williams: Lovesick Blues

Thelonious Monk - Epistrophy

Stravinsky Conducts Firebird

Gordon Lightfoot-Beautiful-Soundstage-(1979).

Or is stability achieved by simplifying the mandate of the institutions in our system?

TO BE NOTED: From Shopyield:

Complex regulations or simple banks

As we restructure oversight of the financial system it’s important to think about the motivations of institutions… and ask if stability can be achieved by concentrating enormous power in the hands of a “systemic regulator”?

Or is stability achieved by simplifying the mandate of the institutions in our system?

Would returning to something along the lines embodied in the Glass Steagall Act be more effective? More stable?

Someone needs to map the quantity and severity of financial crisises with and without Glass Steagall… I think we know what the evidence would look like…

This was written by cate"