It looks like some of the Fed’s insiders aren’t joining Bernanke’s suicide pack.

Yesterday it was Philly Fed’s Plossner, today it is Richmond Fed’s Jeff Lacker who joins the chorus demanding an end to Bernanke’s insane monetary policy of drowning the market with unprecedented liquidity which is not getting to consumers but merely propping Amazon stock at a bubblelicious 100x P/E.

In a speech before the Charlotte Chamber of Commerce, Lacker stated: “The perception of inflation risk could be particularly pertinent to the current recovery, given the massive and unprecedented expansion in bank reserves that has occurred, and the widespread market commentary expressing uncertainty over whether the Federal Reserve is willing and able to promptly reverse that expansion… If we hope to keep inflation in check, we cannot be paralyzed by patches of lingering weakness, which could persist well into the recovery. In assessing when we will need to begin taking monetary stimulus out, I will be looking for the time at which economic growth is strong enough and well-enough established, even if it is not yet especially vigorous. Although it is hard to predict when that will occur, I can confidently predict that monetary policy will remain particularly challenging for some time to come.” Then again, the stock market does not seem to share Mr. Lacker’s concerns.

via Uh-Oh: One By One, The Fed’s Inflation Hawks Are Speaking Up.

Remember what I said about the S&P? When the Fed prints money, it flows somewhere. We may not have seen inflation yet, but that could be because regular consumers haven’t seen the money yet. On the other hand, it sure seems like there is inflation in stock and gold prices.

Typically, the money flows into some investment vehicle, most recently real estate and tech stocks before that, and then it all comes crashing down. I sold my S&P holdings (not that I owned much), and I’ve held off on the gold surge. I have a feeling both are going to come crashing down as the  next bubble bursts. Then again, what the hell do I know.  I’m just an IT guy, who loves the free market.

FYI, here’s a chart going back to the civil war for gold prices from Businessinsider.com. Again, I think there is a bubble about to burst.

I saw this article in my local paper. While I don’t use drugs, I think our government’s policy on drugs is ridiculous. It’s immoral how many people our government locks up for drug possession. People die from too much alcohol in their system, but I haven’t heard of any deaths from people smoking too much marijuana. The other thing I find funny is how all the sudden states are coming around once they need the money from taxing marijuana and saving money from all the wasted resources that are used chasing after marijuana users. Apparently, it’s not so bad after all.

From Maine to California, muddled thinking over the use of marijuana, medical and otherwise, finally is beginning to clear, giving way to reason over its future use.

Fourteen states are moving to decriminalize possession of small amounts of marijuana. In Maine, residents have overwhelmingly voted to allow the sale of medical marijuana over the counter. And in California, signatures are being collected to put legalization before voters next year.

It’s estimated that taxing and regulating pot, much like cigarettes and alcohol, could raise $1.3 billion in California alone.

In Los Angeles, where medical marijuana dispensaries have opened, experts say more violence stems from its prohibition than from its use.

From federal regulators to the American Medical Association, the mind-set over marijuana’s use gradually is changing — and for good reason. Notes a spokesman for one marijuana advocacy group, “(T)here’s a reason you don’t have Mexican beer cartels planting fields of hops in the California forests.”

As we’ve stated before, the production and use of marijuana should be fully legalized with the same prohibitions against use by minors. The only “refer madness” is to continue the indefensible status quo that costs taxpayers billions in related enforcement costs while funding organized crime and violence on a massive scale.

via The marijuana debate: Welcome progress – Pittsburgh Tribune-Review.

I’m not even going to get into the article by Obama’s chair of Council of Economic Advisers. It’s more of the “Hi, I’m from the government, and I’m here to help.” craziness. I just find the subtitle of the article hilarious. It reminds me of a rapist saying, that he (or she) and his (or her) victim need to partner up to address the victim’s pain.

With the economy stabilized and starting to grow, business and government must come together to boost private-sector hiring

via Christina Romer: Putting Americans Back to Work – WSJ.com.

I’m not going to defend this guy, but the whole story of the government convicting someone of a ponzi scheme is so ironic.

Federal prosecutors filed criminal charges against Scott Rothstein, accusing the once prominent Florida lawyer of running a $1.2 billion Ponzi scheme.

Mr. Rothstein, who pleaded not guilty in court Tuesday, faces five felony counts, including wire fraud and federal racketeering. He allegedly sold stakes in fictitious settlements he claimed his firm had struck in employment disputes, such as sexual harassment and whistleblower claims, according to the U.S. attorney’s office in Miami.

Prosecutors allege that Mr. Rothstein was aided by conspirators who weren’t identified in the government’s filing.

Mr. Rothstein allegedly used funds from new investors to pay back previous investors

via Rothstein Charged in Ponzi Scheme – WSJ.com.

Isn’t the government supposed to prevent this type of thing from happening? Of course, the government cannot protect you from anything. It can only come in after a crime has been committed and play hero of the day. The problem is because the government involves itself so much in our lives, people assume it is going to protect them. They then are less skeptical about investments and many other decisions. Because the government wrote a law against something, they think they don’t have to worry. As is always the case, they are dead wrong. It’s no different than not owning a gun, because you think the police can save you. Criminals don’t obey laws, and believing the government is your protector only leaves you defenseless.

While I don’t think tax payers should be subsidizing other people’s home purchases, this is what happens when the government’s games catch up with them. They are trying to prop up the housing market from the mess they created, but at the same time they are looking at contradictory policies that will harm the housing market.

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, plans to ask Congress on Wednesday to raise the cap on the annual insurance premium that the FHA can charge borrowers. In testimony before a congressional panel, he will also outline steps the agency is considering to set minimum credit scores, to require home buyers to put more money down, and to make lenders more accountable for loans that the agency insures.

Those measures are designed to begin rebuilding the agency’s depleted capital reserves. An independent audit last month said that the estimated value of those reserves had dropped to $3.6 billion, or about 0.5% of the $685 billion in loans the FHA has insured.

But any sharp crackdown could limit the pool of potential home buyers. Many rely on FHA-backed home loans.

“We have to replenish the reserves and we have to be prepared for a market outcome that may not be as favorable” as one that was forecast by the auditor, said David Stevens, the FHA’s commissioner, in an interview Monday. The audit estimated that the agency wouldn’t need any funds from the U.S. Treasury next year.

Raising insurance premiums could help avert the need for a taxpayer bailout of the agency, but the move would raise borrowing costs for home buyers. The FHA charges an upfront insurance premium of 1.75% of the loan amount. Borrowers pay additional annual premiums of either 0.5% or 0.55%.

The FHA will also limit the amount of money that sellers can provide for closing costs on home sales to 3% of the home price, from the current level of 6%. The agency is also finalizing plans to set a minimum credit score for borrowers, possibly by requiring those making small down payments to have higher credit scores.

via FHA Considers Ways to Boost Its Reserves – WSJ.com.

Many people are calling for a second decline in housing. It’s not hard to figure out why. FHA is looking to make it harder to get an FHA insured loan. Also, come April of next year, the tax rebate will expire and those who were going to buy will have already done so. There will be a decline at that point in buyers. The government should have just stayed out of the housing decline in the first place. The decline would have been quicker, and it would have stabilized leaving a bottom to build on. Instead, it is doing as it always does. It’s delaying the bottoming and leading to a new decline shortly in the future. So, it won’t prevent the eventual bottoming, and it leaves us with massive debt as a reminder of their failed policies.

If you wonder why Obama believes only government can cure all our ills, this chart tells you all you need to know.

A friend sends along the following chart from a J.P. Morgan research report. It examines the prior private sector experience of the cabinet officials since 1900 that one might expect a president to turn to in seeking advice about helping the economy. It includes secretaries of State, Commerce, Treasury, Agriculture, Interior, Labor, Transportation, Energy, and Housing & Urban Development, and excludes Postmaster General, Navy, War, Health, Education & Welfare, Veterans Affairs, and Homeland Security—432 cabinet members in all.

via Help Wanted, No Private Sector Experience Required « The Enterprise Blog.

The Wall Street Journal had an article about how construction companies are going to be laying people off as the stimulus money projects run out.

WASHINGTON—Highway-construction companies around the country, having completed the mostly small projects paid for by the federal economic-stimulus package, are starting to see their business run aground, an ominous sign for the nation’s weak employment picture.

Tim Word, vice president of Dean Word Co., a heavy-construction company in New Braunfels, Texas, said his income is now coming mostly from projects that are winding up. He said that in normal times he has about $100 million of signed contracts in hand. But that number has fallen to $30 million, and the pipeline is empty.

via Job Cuts Loom As Stimulus Fades – WSJ.com.

This is why stimulus does not create jobs. It does not create permanent jobs, because it does not create wealth. Where does the government get the money? It must take it from one area of the economy whether through taxes or borrowing, and it gives it temporarily to another area of the economy. This is temporary, and businesses aren’t stupid enough to fall for it. Yeah, the businesses who receive the money love it. They aren’t going to turn it down. But the other businesses that don’t receive it are either laying off or not hiring because of it. They either don’t have the money to hire because it was taxed away, or they are competing with the government to borrow money. The more money the government is borrowing, the harder it is for small businesses to borrow. After all, who is considered the safest bet when lending, and if the government keeps demanding more money in a slow economy, wouldn’t it be best to lend them the money?

This whole story highlights several things. The government cannot create jobs, create wealth, control the economy, fix economic problems, or help you in anyway that doesn’t hurt you more in other ways.