North Korea, VAR, USD, Gossip, Bacteria...and CEOs!!

* "Gary Brecher," self-titled "war nerd," (and a more-than-likely fictious persona), offers an interesting perspective on how the US has been ignoring a real threat (North Korea) while getting worked up about a threat that doesn't mean much (Hezbollah). This particular passage discusses the significance of the recent ICBM test flights launched by North Korea, which were described in the US press as "failures." Brecher says we shouldn't take any comfort in the fact that the ICBM tests were such short flights:

Two key points [about North Korea's nuclear tests]: first, developing a working ICBM takes a lot of tests, and not all of them are meant to test the full trajectory of the missile. US ICBMs generally need about 20 test launches before they go into production. Smaller missiles get way more than that; the reason ICBMs only get 20 is that they're so damn expensive even the DoD has to economize. So maybe this was a typical first test in a series, designed to check out launch and first-stage components. 42 seconds may have been the programmed duration of flight.

Second point: short flight means the test-bed falls into the ocean near the NK coast, where our subs and recovery ships (like the Glomar that retrieved half a Soviet sub from the deep ocean) can't grab the remains. After all, Kim doesn't have the whole of the South Pacific to test and recover ICBMs like we do, or all of Siberia like the Soviets did.

* File this item from IDD on the weakness of VAR as a risk measurement to recall at some point in the next 24 months (in the event we see some kind of crash):

IDD: In the report, [Moody's analysts] Geny and Mongiardino are particularly critical of the short "look-back" period of two years or less that many banks use for their VaR calculations. "In our opinion this does not provide a sufficiently representative window of market data and might be considered too little a statistical sample for the confidence intervals used to compute VaR," they wrote. [...]

They also suggest that instead of reporting either a 95% or 99% confidence interval, firms should show both ... but they should calculate them independently, rather than using a consistent conversion factor, which leads to inaccuracies.

* The US Dollar (and its remonetization) as a Nash Equilibrium (by John Law, "Gonzo Economist"): at this point, you either (1) care about the issues with the dollar, (2) understand and have dismissed it, or (3) are dangerously clueless and need to get reading. This is an old article, but an entertaining and accessible one:

The global financial system is about to collapse because the US dollar is about to collapse.

The US dollar is about to collapse because of a simple economic fact that no one has the power to change or conceal.

The fact is that the spontaneous remonetization of the precious metals is a Nash equilibrium.

What this means in English is that an ideal financial strategy for everyone on Earth is to buy as much gold and silver as they can, as soon as possible. (Continued)

* The Mogambo Guru weighs in on illegal immigration:

Congress is crafting an "immigration bill" that is the poster child for everything that is wrong with America. On the one hand, the Democrats are parading their bigotry and filthy racism by fawning over trespassing, border-jumping illegal Mexicans as merely darling wayward little brown children, who just need grownup white people to take care of them.

Democrats forget completely that these Mexicans are fully grown adults from a democratic republic. These are the same people who have, decade after decade, deliberately elected a corrupt, economy-destroying government. It has now finally gotten so bad there that millions of them desperately want to escape the dysfunctional economic, political and social system they deliberately created. Talk about Americans underwriting moral hazard!

The despicable Republicans, on the other hand, also want an immigration bill, only one that will supply them with lots of cheap, disposable strong-back labor ("It's not slavery!  Same wages and benefits, but they can leave anytime they like!"). Republicans further want employers to be allowed to pass the enormous costs of health care and the other crippling transfer costs (contained in the hundreds of welfare-type programs made available to these exploited working-poor) to the general public. Their argument is that this is desirable since a low cost of agricultural and manual labor keeps inflation low!  Hahaha! Wrong, morons! Jeez! How morally and intellectually bankrupt can you be?

This is the same ridiculous argument that I get from my own kids. They say that they can easily live on a part-time, minimum-wage, no-benefits, slave-labor job! No problem, as long as they can live free at my house forever, eat my groceries, stay on my health insurance plan, and maybe get a few bucks from me every once in a while. Hahaha!

What in the hell does this have to do with economics? Just this: Whatever happens, it will be expensive. Very expensive. And for a long time, too.

* In the category of if-the-internet-is-good-for-one-thing-it-is-gossip category, I give you Page Six's contribution to the GWAVE (Global War Against Violent Extremism):

Osama bin Laden has more on his mind than just the destruction of the United States - the world's most wanted terrorist is obsessed with Whitney Houston, so much so that he's even mulled a hit on her hubby, Bobby Brown.

Kola Boof, 37, the Sudanese poet and novelist who claims to have once been bin Laden's sex slave, writes in her autobiography, "Diary of a Lost Girl," which is excerpted in the September Harper's: "He told me Whitney Houston was the most beautiful woman he'd ever seen." [...]

Boof - who wrote for the soap opera "The Days of Our Lives" [ed: read into this what you will] until she was axed last month - continues, "He said that he had a paramount desire for [Houston] and although he claimed music was evil, he spoke of someday spending vast amounts of money to go to America and try to arrange a meeting." [...]

"In his briefcase, I would come across photographs of the Star [magazine], as well as copies of Playboy. It would soon come to the point where I was sick of hearing Whitney Houston's name," Boof writes.

* In the category of beating-a-dead-horse:

The 26 top executives at Toyota Motor Company earn an average of $320,000. Good money, but hardly obscene. Toyota is a growing, profitable concern. And Japan is a country with a positive trade balance.

Across the wide Pacific, the U.S. trade deficit went further negative in the month of April, to $63.4 billion. But America's top dogs aren't complaining. The heads of America's 500 biggest companies received an aggregate 54% pay raise last year. As a group, their total compensation amounted to $5.1 billion, versus $3.3 billion in fiscal 2003.

G. Richard Wagoner, Jr, heading up Toyota's rival, General Motors, received total compensation of $8.5 million. That's what you get when capitalism enters its degenerate phase. The parasites make sure they get their money...even as the company sinks.

* But, if you have any doubt that America's CEOs are parasitical, check this one out:

More than a half-dozen years ago, I had lunch with President Reagan’s former press secretary, Marlin Fitzwater, and he confirmed Iacocca’s rejection, but added that his reasons were more about economics than loyalty. Had Iacocca been nominated and approved by the Senate, he would’ve had to liquidate tens of millions in Chrysler stock in order to steer clear of any conflict-of-interest laws, thus resulting in a massive tax bill.

Reagan was disappointed with Iacocca’s decision, but it was understood. Going forward, though, this historical event would soon change policy as politicians realized the importance of having high-level executives fulfill roles in the executive branch.

So, in 1989, then-President George H.W. Bush signed a bill that would grant a tax-exemption to individuals required to liquidate all or part of their stock holdings in order to accept a position in the West Wing. The purpose of this tax loophole is to allow government officials to defer capital gains taxes on assets they have to sell to avoid a conflict of interest.

The proceeds, though, have to be reinvested in government securities, like U.S. Treasury bills and notes, or a broad array of mutual funds approved by the government. Once the proceeds are diversified within the approved investments, the capital gains taxes are deferred until the holder decides to sell the securities at a later date. Think of it like a temporary tax-deferred IRA with no penalty for early withdrawal.

To make the exemption official, a cabinet nominee would need to obtain a “certificate of divestiture” from the Office of Government Ethics within 60 days of the sale of the assets. This, however, is a piece of cake considering a long list of approved options is available for investment.

The tax exemption has been taken advantage of in recent memory by the current Bush and Clinton administrations. Outgoing U.S. Treasury Secretary John Snow, who was the former chairman of CSX Corporation, received the “certificate of divestiture” when he sold his $20 million worth of CSX stock. And Snow’s predecessor, Paul O’Neill, received the same treatment when he liquidated his $100 million position in Alcoa. O’Neill had served as chairman of Alcoa before joining the Bush cabinet.

Hank Paulson saved about $70 million in taxes on his company stock when he took the position of Treasury Secretary. No big deal, right? After all, it's aout public service...

* And, on the subject of parasites, go buy some anti-bacterial wipes and use them regularly:

Your mobile phone could be a major health hazard, research shows. The phones, an essential part of everyday life for 55 million Britons, are crawling with potentially lethal bacteria.

With tens of thousands of microbes living on each square inch, they harbour more bacteria than a lavatory seat, the sole of a shoe or a door handle. Microbiologists say the combination of constant handling and the heat generated by the phones creates a prime breeding ground for all sorts of bugs that are normally found on our skin. [...]

"In other words, they come into contact with more parts of our body and a wider range of bacteria than toilet seats. The phones contained more skin bacteria than any other object. This could be due to the fact that this type of bacteria increase in high temperatures and our phones are perfect for breeding these germs as they are kept warm and cosy in pockets, handbags and briefcases."

Mobile firm Dial-a-Phone advised owners to use anti-bacterial wipes to keep their handsets germ-free.