Kyle Bass on Sovereign Default

One of the people in finance to come to my attention recently is Kyle Bass, a Texas hedge fund manager. He's profiled briefly in the introduction to Michael Lewis's recent book "Boomerang." This interview with Michael Lewis gives an outline of some issues from his book, as well as a bit of background on Kyle Bass.

An absolutely fascinating (and frightening) video is an hour-long talk he gave in Austin in November 2011. (Title: AC2011 Session 1.2 Come Undone: Kyle Bass redux) The main topic is the direction of the ongoing global financial crisis, including the sovereign debt problem (which will likely lead to default). This video should not be missed.

(Business Insider put together a list of 15 insights from the video, which give an idea of what he discusses.)

This guy really does his homework. See the video link. He discusses gold at the 42-minute mark, and specifically why he took physical delivery. At the 46 minute mark, he forecasts money printing. At 47 minute mark, he reports talking to Obama cabinet, who say they intend to kill the dollar.

Scary.

The Secret Diary of Warren Buffett's Secretary

Dear Diary,

Wow OMG!! I was on national TV! I got to sit with the First Lady! Woo hoo! My girlfriends were soooo jealous when I showed them all the pictures I got with the Obamas.

When Warren first brought up this whole tax fairness thing, I had no idea how far it would go. Out of the blue, he called me into his office and explained he was working on a “special project” with the White House.  Pretty cool, I thought.

Warren wanted to talk publicly about his taxes and mine and wanted to know if I had a problem with that. I shrugged and said sure, whatever. I mean, he’s my boss and all, so I can’t really say no, you know?

So then he’s explaining about this super big oil deal in North Dakota. Warren bought the train to ship oil out of there and is making beaucoup bucks (as usual) because he has no competition. But some Candians want to put in a big pipeline to get the oil out of there. Then he’s all blah, blah, blah, numbers, numbers, numbers –Yawn- we lose money.

So the “special project” is we help the President get re-elected, and the President promises to keep the Canadians out of the deal. Sweeeeet! Warren’s smart like that.

But I asked what that has to do with our taxes.

“Well,” he said, “it isn’t fair that you pay less taxes than me.”

I was stunned.  “Wait a minute,” I said. “I pay more taxes than you? You’re one of the richest dudes in the world. How come you’re not paying more than me?”

Warren goes, “I am paying more – millions and millions of dollars compared to your thousands. But I’m paying a lower rate than you overall because of capital gains.”

“Huh?”

“If things were fair I’d pay even more millions in taxes.”

“Oh, is that like the flat tax thing?”

“Oh no no no. We don’t want that. That’s not fair either.”

I was confused. “But doesn’t that make everyone pay the same rate? Wouldn’t that be fairest?”

“No, poor people can’t afford to pay taxes. Fairness means taking money from rich guys like me and giving it to poor people like you.”

Cool! Warren’s plenty rich and he won’t miss a few million dollars. I started thinking about all the things I could buy – an iPad would be sweet!

“Cool! How much would I get?”

“Well, that’s a tough question,” he said before explaining why it was all so complicated. I nodded along until he finished talking. My eyes glaze over so much when he talks like that. I tried really hard not to yawn. I think he answered my question but I didn’t get it.  I didn’t want to seem stupid by asking him to explain it again. Still, if Warren’s paying more taxes then he’d be paying out huge amounts. An iPad? Maybe I could get a Corvette! Or take a big vacation. I wondered if it would make me rich like Warren.

I looked him square in the eye. “Are you suuurre you won’t mind paying more taxes?” I sure as hell would.

“Oh no! Rich people like me have tons of money sitting around. We just sip martinis on our yachts while ordinary people are out of work. That’s just unfair.”

I nodded. I wanted a yacht. How unfair that only a few people had yachts. “Yeah! Everyone should have a yacht – that would be fair!”

“Right!” he said. “And that’s where our ‘special project’ comes in.”

I was confused.

“See the President is in real trouble for this election. The economy is a big problem. People are mad at the President because of it.”

I nodded.

“So he wants to deflect that anger. He wants to get people mad at someone else.”

“Who?”

“Millionaires and billionaires like me. See Obama wants to say that the problem with the economy is that people like me aren’t paying enough taxes.”

“Oh.”

“Saying it that way doesn’t matter to most people. But tell them that it isn’t fair somebody has a lot of money while you’re out of work, and that fires ‘em up!”

“But can’t people just get a job and make money?”

“Sure, but not everyone wants to.  Lots of people – let’s call them the President’s main audience – don’t think it’s fair that they have to work for a living. They’d rather just get someone else to give them money.”

“Like welfare?”

“Sure, but that’s small potatoes. Some people have actual jobs but want lots of more money without working really hard. Those are the people Obama wants to vote for him.”

“So how does he get them to do that?”

“He’s going to campaign on the idea that everyone is entitled to more money. Well, except the rich, who aren’t entitled to anything.”

“Why not?”

“Because we’re rich.”

I was confused again.

“If guys like me work hard and save, we can get rich. But then what do we need to President for? We don’t need a handout.”

“But then why do you need this ‘special project’?”

“Oh, but that’s totally different. It’s not a handout, it’s a business deal.”

I didn’t get that.

“I help the President, he helps me. I help him get elected, he keeps competitors out of the way.”

“Oh, I see,” I said, but I didn’t get it. I don’t get a lot of things Warren said.

“So this is where you and I come in. See, some people will look at the President’s talk about the rich paying their ‘fair share’ and feel like there’s something wrong with it. They won’t quite see it clearly. It’ll be more of a sense that something is wrong. This is where I come in. If a rich guy, a successful businessman, says it’s ok, and it’s the right thing to do, and will make a difference to the economy, then people will believe it.”

“Oh. You do have a great reputation. People respect your opinions,” I said, but didn’t add that I didn’t understand them a lot of the time.

“Exactly! They’ll feel reassured. They’ll say to themselves: ‘Well, I think there’s something fishy about it, but if Warren Buffett says it makes business sense for the country, then it must be true. He’s made billions so he knows what he’s thinking about.’”

I nodded.

“And they may wonder about whether it’s fair or the right thing to do. Well, if they think I have nothing to gain by doing it, and end up giving up lots of money in higher taxes, then they must agree that I’m doing a very moral thing.”

“Ok.”

“So if a rich businessman like me endorses Obama’s plan, then people will think there’s no ground to object. It’s like both sides – government and business – agree on this.”

“Oh, I get it! When everyone agrees about something, there won’t be lots of questions. People will just accept it as the right thing to do.”

“Exactly! So this is why we’re going to talk about your taxes and mine. People will see that I pay a lower rate than you do, and agree to raise taxes on the rich.”

“But… Warren, why not just lower my rate to yours? That would make things fair, right? And I’d get to keep more money that I earned and you’d keep yours.”

“Well, that’s just naïve,” he said. I felt small. Warren was so smart. I didn’t understand this but I trust Warren and didn’t want to upset him.

“If we all kept the money we earned, the President couldn’t hand out money to other people. In the real world, he has to hand out favors to people to get their votes. Everyone does it. That’s just the way it is.”

“So taking money from one group of people is fair, and letting everyone keep their own money is unfair?”

“Now you get it!”

I didn’t but I went along anyway. It didn’t make sense to me. I guess I just wasn’t smart enough for that. It takes a lot of smarts to make sense out of this.

And boy is Warren smart!

The Iranian and Islamic Threat

Ron Paul’s GOP candidacy has helped spread the claims that Iran poses no threat to the US, and the hostility they do show is due to our involvement in the Middle East, that America is to some degree to blame for their acts of terror against us.

Both claims are false. Mark Helprin has an excellent WSJ editorial, The Mortal Threat From Iran, (01/18/2012) that gives an excellent overview of the issue.

Iran has been at war with the US since 1979 when the revolutionaries invaded the US embassy in Tehran and took US citizens hostage for over a year. Since then, Iran has been the leading state sponsor of terror. This timeline shows some of the attacks by Iran or its proxies or allies.

A recent court case found that “…Iran and Hezbollah materially and directly supported al Qaeda in the September 11, 2001 attacks and are legally responsible for damages to hundreds of family members of 9/11 victims who are plaintiffs in the case.” 

There are many issues associated with Iran gaining nuclear weapons. A good discussion on the topic is this 4-part 2009 discussion with historian Victor Davis Hanson and ex-CIA field agent Robert Baer.

A nation poses a threat if they are willing and able to cause us harm. Thus no discussion of Iran’s threat is complete without understanding their motivation. They are explicitly and in fact an Islamic theocracy. They have a somewhat pro-western middle class and an impressive scientific and engineering community, but the ruling class – the Mullahs, the IRGC – are devoutly Muslim.

It is false to claim they are responding to attacks from the west or incursions onto “their lands.” Under Islam, muslims have a duty to reconquer any land that was once under muslim control – which would include much of Europe. This is true even if the US had not gone into the Middle East, for oil or any other reason. It is not because US and/or British intelligence installed the shah in 1953. They are militant and at war with us because they are muslim.

So to grasp the threat from Iran one must also see the threat from Islam. A very good introduction to this is a 98-minute video, What the West Needs to Know About Islam.

As that video points out, the ultimate goal is a global caliphate. This is a long-term goal to which all other goals are subordinated. Thus if Obama tells the world the US military will withdraw from Afghanistan by a certain date, muslims like the Taliban will gladly wait until that date to return and reconquer the country. The western view of short-term, pragmatic thinking entirely misses the point about the patience and long-term perspective of the theocrats.

Muslims will kill or convert all nonbelievers. Muslims under sharia law are repressed and censored, subject to dictates from religious leaders. They are stoned or burned with acid or hung or beheaded for various “crimes.” Women are especially persecuted, regularly treated as less than second-class citizens, subject to sanctioned rape and abuse, and face genital mutilation and honor killings.

The deeper problem of Iran is its Islamic fundamentalism. It is not enough to call for a global “war on terror” because that fails to identify the root cause of the terrorism: Islam itself.

Some of the “new atheists” such as Richard Dawkins and Christopher Hitchens have taken on Islam directly, indicating its vile and irrational nature.

In the west, a massive evasion about the nature of Islam is allowing it to fester. Radical Islam is taking over Europe. What allows it to do so is the political correctness of the west under the ideology of multiculturalism. This holds that no culture is any better or worse morally than another. So for instance a repressive regime such as Iran’s or Afghanistan’s is to be morally equated with that of England or the United States. This equates theocracy with constitutional republics recognizing individual rights; the repression of women under the burqa with a modern western woman able to work, be educated, speak freely, dress how she wishes, and date or marry whom she pleases. It equates cultures which recognize the rights of homosexuals with those which kill them outright.

Some like the leaders in Iran aim to convert the world by the sword. Yet there is a massive demographic trend across the world which may convert the west without the need of a war between nations. This video, How Islam is Taking Over the World, outlines how demographic trends (immigration rates and differences in birth rates) are rapidly changing Europe and America from within. Another video addresses the same issue.

Iran is not the only Islamic or terror threat to the US. Islamists from other nations pose a threat as well. Despite claims to the contrary there have been many terror attacks on American soil since 9/11. Some may be directed from Iran, some from other countries; some may be inspired by US-born Islamic leaders. What they have in common though is Islam.

It’s time to stop pussyfooting around and realize that Islam is evil. Islam is not in some unknown manner correlated with terrorism; Islam CAUSES terror. It endorses and sanctions it. Why? One reason is the Koran holds that committing jihad, and dying in battle against infidels is the ONLY way to GUARANTEE entrance to heaven. In Christianity and other religions, one can get to heaven simply through personal belief. Islam is NOT just another religion.

On the contrary, Islam is a system of life that encompasses a religious component, but also prescribes details across life – politics, diet, work, marriage, commerce. Under Islam there is no separation of church and state; the “church” is all.

My goal here is indicate that Iran and Islam are major threats to the west. I aim to provide an introduction and some basic facts, rather than a comprehensive analysis and policy solution. The links above provide much more resources and details. Other good resources include:

The Ayn Rand Institute has excellent videos, lectures, books, and op-eds by Yaron Brook, Elan Journo, and others.

The Middle East Media Research Institute

Jihad Watch

AHA Institute run by Ayaan Hirsi Ali

Creeping Sharia

Bare Naked Islam (Note: Wordpress ordered this blog taken down, possible under pressure from CAIR. It is currently renamed "End Times Today.")

Other excellent authors include Daniel Pipes and Robert Spencer.

So what should be done about Iran? The “peace process” and a series of negotiations and talks since 1979 have failed. Some argue that a policy of mutually assured destruction, which helped check Soviet power in the cold war, would work here. But that assumes all sides desire to live and care sufficiently to act rationally. I will not bet my life that Iran is a rational actor or desires to live – not when they explicitly claim they’d rather die than allow us to live; not when they openly embrace Islam and strive for a global caliphate; not when they believe in jihad.

After 9/11 Leonard Peikoff wrote an opinion piece calling for war with Iran. Perhaps that is now the only option.

Fans of Ron Paul should review this material and give serious thought to voting for him. His pretty good economic ideas are outweighed by terrible and dangerous foreign policy ones. Keep in mind that even if the economy improved the Islamic threat could accelerate rapidly. Iran could get a nuclear weapon. The “Arab Spring” – which has radicalized much of the Middle East and turned secular Libya and Egypt over to al-Qaeda associates and the Muslim Brotherhood, respectively – could continue to spread. The sooner Islam is dealt with the better. The longer we wait the harder it will be to handle, and the greater the chance of losing this war.