Author: bill

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Questions I Have From Currency Wars

Last week I finished listening to the audio book version of Currency Wars: The Making of the Next Global Crisis. The part of the book talking about the financial war game he participated in was entertaining. His discussions of the history of the Federal Reserve and currency wars was both very dry and important. I could not help but try to apply some of his ideas to today’s events. Here are some of my questions.

  1. If the Federal Reserve is concerned with US economic weakness then why did the Federal Reserve allow the dollar to appreciate so much compared to the Euro? When you look at the drop in the price of oil and the appreciation of the Euro, it is not hard to see weak US earnings. The latest GDPNow forecast from the Atlanta Federal Reserve is forecasting a GDP growth of less than 1% for the first quarter. So why is the Federal Reserve talking about raising interest rates when this would likely slow the economy even more and increase unemployment?
  2. The second question is how does the Federal Reserve unload its mortgage bond and long-term Treasury notes portfolio and not go broke? I understand why it makes sense for the Federal Reserve as the lender of last resort to not mark their securities to the market price since they have the financial wherewithal to hold the securities to maturation. The Federal Reserve can publicly ignore the mark-to-market value of their portfolio but at some point somebody inside the Federal Reserve is going to have a panic attack that the size of the long term bond portfolio is impacting the Fed’s ability to manage the financial markets with talk. Eventually the Fed will have to back up its talk by acting more like a bank and rebuilding its capital or risk expediting the decline of the dollar as the world’s reserve currency. The recent enthusiasm for the Asian Infrastructure Investment Bank (AIIB) among American allies not just in Asia but in Europe has to be worrisome for the Fed. Mr. Rickards framed this problem nicely in a recent article on the Daily Reckoning, “6 Major Flaws in the Fed’s Economic Model“.

    5) The Fed is now insolvent. By buying highly volatile long-term Treasury notes instead of safe short-term treasury bills, the Fed has wiped out its capital on a mark-to-market basis. Of course, the Fed carries these notes on its balance sheet “at cost” and does not mark to market, but if they did they would be broke. This fact will be more difficult to hide as interest rates are allowed to rise. The insolvency of the Fed will become a major political issue in the years ahead and may necessitate a financial bail-out of the Fed by taxpayers. Yellen is a leading advocate of the policies that have resulted in the Fed’s insolvency.

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Roberts Choice

Once again the Supreme Court will rely on Chief Justice Roberts to craft a political decision in the King v. Burwell case that no one likes but allows the federal government to subsidize health insurance in states that did not set up exchanges. In this case I would not be surprised that he leans with the conservative side. It is obvious that this bill needs to go back to Congress to fix and deferring to the IRS to authorize billions of dollars of subsidies without the very, very clear intention of Congress is just too big a step. Somewhere along the way the judicial system is going to remind Congress that there are consequences in writing ambiguous laws. The obvious choice is to make a Sophie’s Choice type decision and allow the people in those states that did not setup exchanges to avoid the individual mandate penalty and for companies to avoid the employer mandate penalty.  That is what the plaintiffs want. This decision would be the natural sequel to Roberts’ previous political decision on the Affordable Care Act. Like Sophie who had to send one of her children to the gas chamber, Justice Roberts may choose to send the subsidized exchange system to the gas chamber so that the subsidized health insurance lives. This decision has political value in that it allows each side to claim they won something. For the Affordable Care Act supporters they get federal subsidies for health insurance. For the Affordable Care Act critics they get out of the hated mandates and America gets another chance to see if exchanges are sustainable or just the most recent example of cronyism in health care leading to higher costs. If the Affordable Care Act supporters are right that both the individual and employer mandates are necessary for sustainable exchanges then they can make their case to the American people. If the critics are right then they can make the case that we should replace the exchanges with something that is more efficient and sustainable. The exchanges are dead! Long live the exchanges!

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Kennedy’s Dilemma, Is Deferring To The IRS A Wise Decision?

Nicholas Bagley highlighted the primary dilemma confronting the Supreme Court in the King v. Burwell case. I do not think anyone will argue that the Affordable Care Act is a fatally flawed bill. So how do we fix it? Here is what Justice Kennedy asked:

Well, if [the statute is] ambiguous, then we think about Chevron. But it seems to me a drastic step for us to say that the Department of Internal Revenue and its director can make this call one way or the other when there are, what, billions of dollars of subsidies involved here? … And it—it seems to me our cases say that if the Internal Revenue Service is going to allow deductions using these, that it has to be very, very clear.

Mr. Bagley argues that it is appropriate to defer to the agencies best judgment when it confronts big, difficult questions that arise in the course of administration. He argues in an amicus brief that:

It is then that the agency’s expertise and political accountability are most essential—and where the structure of the federal government most forcefully counsels judicial restraint.

If I follow his logic correctly then the agency’s expertise and political accountability must be beyond reproach if this is to work.  We recently learned that despite President Obama’s admonition that there is not “even a smidgen of corruption” in the IRS scandal, Ms. Lerner’s Lerner’s e-mail records were “right where you would expect them to be.” A year ago, the IRS claimed after two months of looking that the e-mail records were irretrievably lost so it is not surprising that the Inspector General is looking at a criminal investigation of the IRS for its role in obstructing an ongoing investigation.  Recently I looked at the Form 990 for the Clinton Foundation and for kicks I decided to compare it to one of the organizations that was targeted by the IRS, True The Vote. I was shocked to find out that True The Vote raised only $64,687 in 2010. This amount would be a round-off error on the transportation budget for the Clinton Foundation so I find it incredulous that the IRS decided to pursue them. Regardless of the legality it shows that the IRS was incredibly short-sighted politically. They gave their professional credibility away for nothing. Were there any adults in the room for that decision? So the Supreme Court justices are stuck with the dilemma of how to fix the Affordable Care Act if most of the people view the IRS as an incompetent if not corrupt organization? Are we comfortable with letting an organization who says it cannot find Ms. Lerner’s emails make a decision involving billions of dollars of subsidies? If you agree with Mr. Bagely’s argument that deferring to the IRS is okay, then you have to address the question under what circumstances should the Supreme Court send fatally flawed bills back to Congress to fix if billions of dollars of subsidies is not sufficient cause? If expediency is our only concern then the easiest solution is to send a box of blank paper to the IRS and tell them to fix the flawed legislation. Unfortunately the IRS cannot fix this bill or any other bill without input from Congress and their adversarial relationship with Congress should immediately disqualify them from this special task. To restore a less adversarial IRS-Congress relationship, Congress has to be very, very clear on the parts of laws involving the IRS. If we are to learn anything from the many mistakes made by the Affordable Care Act supporters, we need some adults in the room to craft bipartisan agreements that actually reform health care. As long as the American people want laws that work, the importance of the legislative process is not dead.

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A Couple More Reasons Why Hillary Clinton Should Not Use A Private Email Server For Official Correspondence

I was pondering whether anyone could be stupider than the IRS with handling emails when I learned that Ms. Clinton ran her own computer system for her official emails. Which part of violating government document retention requirements of the Federal Records Act, impeding an ongoing investigation, and potentially leaking sensitive government information does she not understand? They just threw the book at General Petraeus over leaking sensitive government information! I immediately came up with a bunch of questions like:

  • How did she read top secret emails?
  • Were any of the Benghazi emails on her server confidential or secret?
  • Which Inspector General signed off on this email server fiasco?
  • Is she deliberately sabotaging her 2016 presidential election?

Then I decided I should give her the benefit of the doubt till I did a little more research. With a little more time to ponder the AP report,  Clinton ran her own computer system for her official emails, I have to say that of all of the bone-headed things for a Secretary of State to do, running a mail server from your home is at the top of my list. I am an IT professional who ran a mail server from my home and I can say unequivocally that it is a pain in the butt. In addition to the hardware requirements you have to be concerned about security, backups, and disaster recovery. To top it off it is particularly difficult to get the Domain Name System settings correct so that your emails do not end up in everyone’s spam folder. Even if you have to pay Google, Microsoft, or Yahoo, let them do it. You will be much better off. It is not worth your time and money to run a mail server from your home!

I cringe thinking about this but if we assume the AP report is correct then what can we say about her email server setup. My first check found out that her email is filtered from spam and protected from viruses by Mxlogic. This matches the claim in the article but it begs the question what did she do before she signed up with Mxlogic in 2013? I know Mxlogic was protecting my company email back in 2008. Did she run a naked email server? Then I checked for TXT records. I did not find any. This is the part of the DNS that email providers check to see if you are who you say you are. In my day job I manage a newsletter with over 80,000 subscribers. To keep in the good graces of the email world we include TXT records for SPF and DKIM so the major email providers know that we really are the one sending the email and not a spammer. At the very minimum you should have a static IP for the mail server and the DNS should have a TXT record for SPF, an A record for the sub-domain pointing to the IP of the email server, and a reverse PTR record for the sub-domain. So how did a person getting an email from this server know it was Ms. Clinton and not someone impersonating her? I don’t think I want to know  any more. Ms. Clinton running an email server is far worse than anything that General Petraeus did!

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Is Anyone Surprised That Lois Lerner’s Emails Were Found?

I am not surprised that Ms. Lerner’s emails were found. As an old IT guy who is very familiar with the email system used by the IRS I found it almost impossible to believe that the IRS was so inept with implementing their email backup policies that they could not retrieve her emails. They do not pay IT guys enough to take on that risk without direct orders from upper management. In fact several people familiar with the IRS email systems said it was unlikely the backup tapes were permanently lost because government IT systems almost never destroy or re-use backup tapes. They just buy more. My solution to finding the missing tapes was to arrest the IT guys and see if that improves their memory. Fortunately they did not have to resort to that since Ms. Lerner’s email records were “right where you would expect them to be”. If this report is true, then the question becomes when did the IRS leadership know of the cover-up, what did they do about it, and why did the IRS deliberately impede an ongoing investigation. If the cover-up stretches up to the White House this could be another case like the Watergate scandal where the cover-up is worse than the crime.

In fact, Camus stated, Lerner’s e-mail records were “right where you would expect them to be.” A year ago, the IRS claimed after two months of looking that the e-mail records were irretrievably lost; it took TIGTA just two weeks to find them in the usual backup records. The rather obvious conclusion is that the IRS didn’t want to find those records, and hoped that announcing them as destroyed would end the probe into Lerner’s records. If that’s the case, then it raises the question about just how much IRS leadership knows about Lerner’s communications, and how much they might be involved in them (worth noting: Koskinen came in afterward).

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Did Jonathon Gruber Advise The FCC Commissioner On How To Pass Net Neutrality?

As a long time IT guy I am embarrassed to say how much time I wasted trying to figure out what the FCC’s version of “Net Neutrality” means? It was as if the FCC was deliberately trying to make their reasons for increasing internet regulation as difficult to understand as possible. They seem to be using the same lack of transparency tactic Jonathon Gruber made famous. Whether you are lying about health care policies or Internet regulations, it looks like political suicide on the big stage. As both a retail and commercial Internet client I have no idea what problem they are trying to solve that would not be solved faster and better via the marketplace.

I think we can agree that the Internet is a fairly, robust free market. On the other hand health care is a heavily regulated market and the additional Affordable Care Act regulations did not make health care more efficient or result in better health care outcomes. So if the government cannot wring out increased health care efficiency in a heavily regulated market like health care, what do you think the chances of continued Internet improvements are when the government is converting a robust free market into a heavily regulated market. Is this change as potentially disruptive to the internet market as the federal government’s last technology flop, healthcare.gov, was to the health care market? The government technology track record is pretty dismal. They violated practically every software development best practice known to man in developing healthcare.gov and then acted surprised that the site did not work and ran over-budget. This Administration is not technologically savvy so it is way too early to risk killing our golden goose for nothing.

May be it is best to listen to the concerns expressed by FCC commissioner, Ajit Pai. Click on this link to view the Bloomberg interview.

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Will Congress Help Small Businesses By Reviving HRAs?

Christina Merhar wrote a nice post over at Zane Benefits updating the status of reviving HRAs in the current Congress. Although I would like to move on from the HRA subject, I cannot. The most cost effective health care plan available is my grandfathered health insurance plan from Aetna-AARP and I would like to pay those insurance premiums with pre-tax money like I did in 2014. Although my company tried to make do with a bad situation by giving me a raise, the bottom line is that I will have un-reimbursed health insurance costs in 2015 because of the payroll taxes on the raise. For a healthy family that last made an insurance claim in the 1990s, this is unacceptable. Here is my reason to revive HRAs.

Yes, I think they should revive HRAs and allow them to pay for grandfathered health insurance plans. I will encourage my congressman to support the bill as one of those bipartisan changes to the Affordable Care Act that makes it less evil. I will go a step farther. I want to keep my existing plan and HRA until the Affordable Care Act reforms actually result in falling costs and more cost effective plans being offered via the exchanges. This is what the President promised and I think we should hold him to his promise.

Here is part of the press release from Representative Boustany(R-LA) web site in which he says, “ObamaCare Delay Not Permanent Solution.”

Boustany questions Treasury Secretary Lew on the Administration’s policy on HRA’s.

Last year Representative Boustany(R-LA) and Representative Mike Thompson (D-CA) introduced the Small Business Healthcare Relief Act last year that permanently reverses this guidance, giving employers and employees more flexibility in choosing coverage. This legislation is supported by the United States Chamber of Commerce, the National Federation of Independent Business (NFIB), the National Association of Manufacturers (NAM), the Retail Industry Leaders Association (RILA), the National Association of Homebuilders (NAHB), the National Association for the Self-Employed, and the Council for Affordable Health Coverage (CAHC).

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HRAs Were A Smart, Affordable Way For Small Businesses To Pay For Health Care To Employees That The ACA Screwed Up

I was reading a post over at Hot Air, Administration delays another Obamacare rule, this time for small businesses, when I realized there is still a lot of confusion over what HRAs are and how they pay for health care. HRAs were adopted by small businesses because the individual health insurance market had better prices than the group market. Small businesses really liked the idea that the employee could get the best bang for their health care dollar with a portable plan available in the individual insurance market while the business could take a health care tax deduction just like the big companies. As an example my 2014 HRA was funded at $500 per month. The HRA funding was adequate enough to reimburse me for my health insurance premiums, my out of pocket health care expenses, and to roll $3,000 over to 2015. I think everyone would agree that the ACA never intended to change HRAs. Due to misguided rulings by the IRS in 2014 we find that many HRAs are not in compliance with the ACA and small businesses are royally pissed! Small businesses who were nice enough to offer HRAs were hoping they can redo their HRA before they get penalized. As a last resort they could choose the safe alternative that is both bad for the company and the employee. As an example since my HRA is no longer being offered as a benefit, my company opted to give me a $500 per month raise. When you remove the payroll taxes from the raise, it is not enough to pay my 2015 health insurance premium. Both the company and I are paying more. The only beneficiary of this scheme is the government who is collecting higher payroll taxes. So it is not surprising that the IRS has decided to show leniency to the small businesses they just screwed. It was the least they could do! Last year H.R.5860 – Small Business Healthcare Relief Act of 2014  was introduced with bipartisan support to try and overcome the hardships the ACA inadvertently created for small businesses. Maybe it will pass in 2015 and small businesses can go back to growing their businesses.

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Cooking Pork Chops With The Anova Sous-Vide Cooker

IMG_20150217_192242Yesterday I had a hankering for pork chops so I was curious whether my sous-vide cooker could make me a better week night pork chop than the traditional method. I like my pork chops thick, juicy, and flavorful. For thick pork chops and tenderloins the thickness of the meat butts up against my self-imposed time limit of one and a half hours of cooking. If I cook pork with too much heat, the meat dries out. If I cook pork with too little heat, I have under-cooked pork. Since pork tenderloins were on sale for $1.99/lb. yesterday, I gave the sous-vide pork chop recipe from ChefSteps a shot at fixing my problems. Here is my version of his recipe.

  1. While I pre-heated the sous-vide water on the stove, I sliced several one inch pork chops, tossed a little pork chop seasoning on it for good measure, and briefly seared both sides in a pan over high heat.
  2. Then I put the chops in a Ziploc-style bag, put the bag in the water, and turned on the sous-vide cooker. I cooked the meats at 144° for 45 minutes. Since the water was pre-heated it only took a few minutes for it to get to the right temperature.
  3. Ten minutes before the meat is done I chopped some shallots and sautéed them in the pan over medium heat.
  4. When the timer went off for the meat I took the pork chops out of the bag and briefly seared them in the pan with the shallots.
  5. When the searing was done I moved the finished pork chops to the serving plate and added a little of a vegetable broth to the pan to make a little sauce to drizzle over the pork chops.
  6. Serve immediately!

The pork chops came out perfect and I like the simple shallot sauce. The outside of the pork chops had all of the flavor. The inside was cooked but still juicy. All of this was done in 45 minutes on a week night. Life is good!