miercuri, 17 decembrie 2014

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Napoleon vs. Cheney: "Interrogation That Actually Works"; Icing on the "Hate-Cake"

Posted: 17 Dec 2014 06:11 PM PST

Not only is torture against international law, it also produces no useful intelligence. Common sense is enough to prove that statement.

If someone threatened to rape your sister, kill your mom,  or shackled you until you were half-dead while feeding you up your anus, you would say nearly anything to ease the pain. So would I, and so would everyone else. Anyone who disagrees is either a liar or a fool.

Even Napoleon recognized that fact.

Warning: This is a very long post. Please allow adequate time to read and digest what follows. I sincerely appreciate your effort to reading this post in entirety. Thanks.

From a Napoleon Letter to Louis Alexandre Berthier in November 1798: "The barbarous custom of having men beaten who are suspected of having important secrets to reveal must be abolished. It has always been recognized that this way of interrogating men, by putting them to torture, produces nothing worthwhile. The poor wretches say anything that comes into their mind and what they think the interrogator wishes to know."

Precisely.

"I'd Do It Again in a Minute"

Regardless of the complete futility and illegality of torture, former vice president Dick Cheney Pushes Back on Torture Report: 'I'd Do It Again in a Minute'.
"I'd do it again in a minute," Cheney told Meet the Press's Chuck Todd, offering an unqualified condemnation of the Senate Intelligence Committee's investigation into the Bush administration's post-9/11 interrogation methods used at foreign "black sites," which many regard as torture.

When asked about rectal feeding, which the Senate torture report said at least five detainees were subjected to, Cheney acknowledged that it was not approved as part of the program and said he believed it was done for "medical reasons." The Senate report said there is no evidence medical need was a factor for rectal hydration.

Cheney also didn't blink when asked about the report's findings that at least 26 of 119 detainees were wrongfully held, including two former CIA operatives and a mentally challenged man.

"I'm more concerned with the bad guys that were released than the few that were, in fact, innocent," said Cheney, adding that the man who became ISIS's leader, Abu Bakr al-Baghdadi, was held in custody by the U.S. military in Iraq before being released in 2004.
No Concern for Innocents

There you have it. Dick Cheney does not give a rat's ass about innocent people swept up in the process, about people tortured to death, or for that matter about anything else.

Our CIA kidnapped people on German soil and elsewhere, took them off to torture camps, only to find they got the wrong guys.

Wrong People Kidnapped, then Tortured

A search for Wrong German Citizen Kidnapped Tortured turns up many links.

And let's not forget that one of Cheney's reasons for invading Iraq was "Hussein tortured people".

Dick Cheney is the epitome of hypocrisy.

Hypocrisy aside, Dick Cheney is also a war criminal under international law and any reasonable moral standard.

If anyone in this world deserved to be kidnapped then tortured, Dick Cheney is right at the top of the list. Yet, as I have commented before, two wrongs don't make a right, so that is not action I advocate.

"Interrogation That Actually Works"

Instead of torture, let's consider "The Humane Interrogation Technique That Actually Works".
The Senate Intelligence Committee report released this week found that the CIA tortured terror suspects by, among other things, putting hummus in a man's anus, forcing suspects to stand on broken feet, and blasting detainees with songs such as "Rawhide" at loud volumes on repeat.

Many of the interrogators' actions were shocking and cruel, but some might argue (and some have argued) that torture is a necessary tool for extracting information. This, too, is dubious. The Senate investigation revealed that the CIA learned most of the valuable intelligence it gathered during this period through other means.

Military leaders have known about the pointlessness of torture for centuries. A quote by Napoleon, which was widely shared after the report's release, reads, "It has always been recognized that this way of interrogating men, by putting them to torture, produces nothing worthwhile. The poor wretches say anything that comes into their mind and what they think the interrogator wishes to know."

A study published this year by Jane Goodman-Delahunty, of Australia's Charles Sturt University, interviewed 34 interrogators from Australia, Indonesia, and Norway who had handled 30 international terrorism suspects, including potential members of the Sri Lankan extremist group Tamil Tigers and the Norwegian-based Islamist group Ansar al Ismal. Delahunty asked the interrogators what strategies they used to gain information and what the outcomes of each interrogation session were.

The winning technique, as BPS Research Digest notes, was immediately clear: Rapport-building interrogation is more effective than torture.

This isn't just theoretical, either. One former U.S. Army interrogator told PRI this week that he was able to break through to an Iraqi insurgent over a shared love of watching the TV show 24 on bootleg DVDs.

"He acknowledged that he was a big fan of Jack Bauer," he told PRI. "We made a connection there that ultimately resulted in him recanting a bunch of information that he had said in the past and actually giving us the accurate information because we had made that connection."

Torture can either be viewed as a punishment or as a way to gain life-saving intelligence. International conventions prohibit the former. Psychology studies suggest it's ineffective at the latter. Which brings us, once again, back to the question: Why do it?
Torture Doesn't Work — So Here's What Does

Please consider Torture Doesn't Work — So Here's What Does.


A former US Army interrogator says it's possible to "bond" with an insurgent during questioning, and building the relationship starts the moment the detainee arrives at the military facility.

Iraqi militant groups, he says, prepared their members to expect torture by the US military — and it wasn't just propaganda: The torture and abuses at the Abu Ghraib prison, exposed at the start of the war, were well-known. This was also several years after the CIA's far more extensive torture program, detailed in a gruesome report released on Tuesday by the Senate Intelligence Committee.

But Andrew says he saw none of that with his unit, and, in fact, when detainees weren't dealt with harshly, they got confused. "We use techniques that manipulate people, but we don't physically or psychologically harm them," he says. Instead the interrogator might talk about the detainee's family and offer tea.

"They see that this isn't the big, bad American facade that they were led to believe," he says. "It changes their perspective, and almost turns their mindset against their organization, and they're thinking, 'Why would they lie to me?' And then they're more willing to actually share secrets with us."

Andrew says the Iraqi detainees he questioned knew their rights under international law. Copies of the Geneva Conventions, he says, were posted in their cells.

"I was working within the guidelines, and within my conscience," he notes. "I never harmed anybody, I never threatened anybody, and I think at the end of the day, if anything, I provided them with that ounce of hope, at least, that things would get better as long as they told the truth."
Ticking Time Bomb Fallacy

Research Digest says People's support for torture in "ticking time bomb scenarios" is influenced by their desire for retribution.
In the wake of a report published yesterday into the CIA's use of torture, many people are shocked and appalled. Yet one defense of the practice remains popular - "the ticking time bomb scenario".

This is the idea that torture is justified if a suspect knows the location of bomb in a public place, and many lives would be saved if he or she were coerced into telling authorities the location in time for it to be deactivated. The new Senate Intelligence Committee report describes how the ticking time bomb scenario was in fact used by the CIA to defend its use of torture or "enhanced interrogation".

The ticking time bomb scenario is usually presented as a "utilitarian" argument for the moral good of torture in certain circumstances, when one person's suffering is preferable to the deaths of many. Some commenters have gone as far as claiming that most people endorse torture in the ticking bomb situation.

A new study puts this to the test. Joseph Spino and Denise Cummins surveyed hundreds of people online asking them for their views about the acceptability and appropriateness of torturing a suspect in variations of the classic ticking bomb scenario. In particular the researchers were interested in whether people's views vary according to changes in the "hidden assumptions" with which the scenario is loaded.

The researchers found that people's endorsement of torturing a suspect is reduced when they are told that torture is likely to be ineffective (which, by the way, is true), and when they are told other interrogative methods are available. The researchers also found that people's support for torture increased when they were told the suspect was a terrorist, or that the suspect was guilty of actually planting the bomb. People's increased support in this context was not because they thought the suspect was more likely to hold information about the bomb. This suggests that the participants' endorsement of torture was based on retribution, rather than being a cool utilitarian judgment.

Spino and Cummins said their results show that people's support for torture in the ticking time bomb situation depends on a "highly idealised" and "highly unrealistic" set of assumptions being met.
Tick, Tick, Bull, Shit

In Tick, Tick, Bull, Shit, Foreign Policy magazine says "Don't believe the CIA's ticking time bomb excuse when it says it had to torture."
The ticking bomb scenario is a powerful hypothetical, and it's one that several former CIA directors really, really hope you'll keep in mind this week to counterbalance all those not-so-nice revelations contained in the just-released Senate Select Committee on Intelligence (SSCI) report on CIA interrogations.

But there's one major problem with the ticking bomb scenario: It's entirely irrelevant — morally and legally.

First, in real life you don't get actual ticking bomb scenarios, with their certainty, simplicity, and urgency. In real life, you get ambiguity and uncertainty. You get conflicting information about the nature, magnitude, and timing of threats, and conflicting information about the identity of planners and perpetrators. Sometimes, you get information that's just plain wrong: As the SSCI report notes, more than two dozen people tortured by the CIA were detained in error. In some cases, they were victims of simple cases of mistaken identity. ...

If waterboarding a suspected terrorist might produce valuable information and save lives, why draw the line at waterboarding? Why not pull out a suspect's fingernails with a pair of pliers? Why not sexually assault the suspect, or start chopping off limbs?

For that matter, if efficacy is all that matters, why draw the line at suspected terrorists? Why not torture, rape, or kill the suspect's wife, mother, and children in front of him? That might be effective, too.

Why stop there? Why not take a leaf out of the Old Testament, and slaughter the first-born sons of every extremist we can find? Or just commit genocide to eliminate the populations that seem to produce the most terrorists?

Once we start justifying immoral actions based on their utilitarian outcomes, there's no principled place to stop.

That ticking sound? It's a false alarm, intended to induce panic and overwhelm logic.

Ignore it.
Not only is it morally wrong and intended to produce panic, it doesn't even work. But whether it works or not, torture can never be morally justified.

Emails From Both Sides

For my coverage of the torture issue, I have received many emails on both sides of the camp. Some have been appreciative, others not.

In response C.I.A. Director Brennan, a Proven Liar, Defends Torture; Brennan Should be Fired Immediately, then Prosecuted along with Other CIA Directors and Cheney, reader Randy replied "I agree with every word that Mish has written here! It should be raining pitchforks right now in D.C.!"

A US Army Major Responded "I'm sad and horrified to read the details of the CIA's torture program. To me, it represents the sickest form of consequentialism, one that has run roughshod over any type of moral authority the U.S. can claim in offering its leadership to the world. I'm further upset that my fellow brothers and sisters in uniform will most likely underwrite this disastrous program, as the enemy will now be all too eager to respond in kind to any American serviceman or woman unlucky enough to endure capture. I only wish we had the moral courage to make those responsible accountable for these unmistakable atrocities."

Not to me personally, but FTM Daily notes Evangelical Christian Leaders Rush to Defend CIA Torture. Writing for FTM Daily, Jerry Robinson says "Real patriotism is a willingness to challenge the government when it's wrong, even when that wrong is committed by people on your own side of the political aisle. That our leaders in Washington would be playing politics with clear claims of U.S. war crimes simply reveals the absolute depths that some people will go to win an argument".

Reader Allen writes ...
Hi Mish,

I have subscribed to your blog for several years despite the fact that I am what you would call a Liberal. I seldom agree with you but I want to keep an open mind and realize I do not own the truth — although sometime I wish you were across the breakfast table from me so that I could scream at you after I read what you write.

But I cannot tell you enough how much I appreciate your condemnation of the CIA's secret detention and torture program. It is a betrayal of all our values, whether we are on the right or the left, and it is especially scary because of the precedents it set.

On a more practical level, it completely destroys our moral authority to challenge similar behavior anywhere else in the world and may, in the long run, prove to be a strategic blunder.

You are a powerful and important voice challenging the coordinated campaign to discredit the Senate majority's report. I hope you continue to write about this. In the long run, this may be the most important subject you write about.

Best regards,
Allen Katzoff
Thanks Allen. Powerful I am not, but I do agree this is an extremely important topic.

Reader Rich hits the nail on the head with the fewest words: "No justification - No benefit - No excuse"

Not everyone see it that way. For example reader Lon McCarley called my torture posts a "losers' chicken sh*t solution".

Hypocrites Need to Look in Mirror

In a followup email Lon called me a hypocrite. So did reader Joe who also accused me of backing Obama.

Joe writes "I had many friends and family members die on 9-11 so my perspective is clearly different from yours. Perhaps if you saw your three nieces lose their father your perspective might be different."

In an email conversation, Joe called my link about kidnapping and torturing of the wrong German citizen "unfortunate".

No Joe, it's not "unfortunate"; it's illegal. Imagine Germany kidnapping US citizens on US soil, then torturing them, then admitting it was "unfortunate".

If it's OK for the US to kidnap German citizens, send them off to Afghanistan or wherever and torture them .... then logically it is OK for every other country on the planet to have the exact same rights.

My position is clear and consistent.

I do not condone torture and I do not condone Obama's drone policy. I have written about the counterproductive policies of Obama's drone policy on many occasions.

US Drone Policy

November 25, 2014: War on Terror: Drones Target 41 but Kill 1,147 Mostly Innocent men, Women, and Children

March 19, 2014: Negative Sum Game.

September 01, 2013: Terrorists Won the War on Terror; 74% of Pakistanis View US as Enemy, 60% Have No Confidence in Obama.

The hypocrites in this world (many republicans, many democrats, and many of the evangelical right) support torture. They sound like Nixon "when the president does it, it's not illegal).

I do not care whether someone is a liberal, conservative, or a hypocrite. I know five things about torture.

  1. Torture does not pay. It's actually counterproductive.
  2. The US has lost its moral authority (assuming it ever had one in the first place)
  3. Dick Cheney is a liar and a hypocrite.
  4. Dick Cheney is a chickenhawk who quipped "I had other priorities in the '60s than military service". He managed to get 5 deferments.
  5. Dick Cheney is a war criminal who deserves to be in prison along with several CIA directors and those carrying out torture orders.

Dick Cheney War Criminal

Former Minnesota Governor Jesse Ventura has the same opinion (see Jesse Ventura on Dick Cheney: A 'chickenhawk' war criminal who should be in jail).

We don't need Jesse Ventura to tell us what's right or wrong about Dick Cheney. It's obvious. Cheney has wrapped himself in the US flag as if that makes him above the law.

I stand by what I have said.

The above articles on the total uselessness of torture speak volumes. The attacks on moral grounds are even more important.

Many readers sent various reports from CIA officials and others in support of torture, citing its effectiveness. Not a damn one of those reports is believable.

What would you expect the top CIA officials to say: We got nothing out of it? Torture doesn't work and we proved it?

Of course these liars are going to deny the truth. Their ass is on the line!

Even if the CIA can cite examples of gaining "intelligence", serious questions remain: Could the CIA have gotten the same information sooner, without torture? Studies suggest "Yes".

Chickenhawk Counterattack

We invaded Iraq for purpose of revenge and to carry out chickenhawk wishes. Now that we have made a total mess of things, the people who f*d it up the most blame Obama.

Of course, Obama is also at fault. And it's infuriating. US drone policy makes more enemies than it does anything else.

No Joe, my position would not be any different if I lost loved ones in 911. The 911 attack does not give the US the right or the "moral authority" to stoop to the level of terrorists.

Majority Say Torture is Acceptable

Yesterday, I reported New Poll Shows US Citizens in Every Demographic Support Torture (Republicans, Democrats, White, Black, Young, Old).

I have never been so disgusted in all my writing career, than after reading that poll.

Atheists have better moral standards on torture than Christians.

Christian advocates claim abortion is wrong because it kills innocent human lives, a very questionable thesis that depends entirely on when life begins.

Whatever your view, unless you have been religiously brainwashed, there is room for debate.

On the other hand, torture that has ended in death, and US drone policy that has done the same to an even greater extent, are supported overwhelmingly by the "religious wrong".

To these hypocrites, the unborn are far more important than the born, including innocent women and children.

Questions on Poll Bias 

A close friend of mine questioned the poll. So did reader Richard who made comment, then asked a question.

Comment: "I couldn't agree more with your stance on torture. Thank you for putting your opinion out for all to see."

Question: "Is there any hope that these polls are tainted?"

Reader Larry also picked up on the question bias thesis and proposed five new poll questions:

  1. Is it OK for the US to torture suspects to get information? 
  2. Is it OK for foreign governments to torture US suspects to get information? 
  3. Is torture OK even if the persons tortured have not been proven guilty? 
  4. Is suspicion alone sufficient grounds for torture? 
  5. If your son or daughter were in the military and captured, would you expect them to be held indefinitely and tortured because that is the American way?

I suspect the poll results would be different with those questions, but how much different?

Why Torture?

If Torture does not work, and it doesn't, why do it?

Explaining Torture

  1. Torture is condoned and defended at the highest levels.
  2. People want to believe our leaders, even when it's proven they are liars.
  3. Torture and the desire for revenge go hand in hand.
  4. Bad things stir up hate.
  5. Extreme emotions and logical thinking seldom, if ever, go hand in hand.

Of those reasons, numbers one and two are key.

Head of the Luftwaffe, and Nazi Gestapo founder, Hermann Wilhelm Göring explained in prison following the Nuremberg Trials.

Goering at the Nuremberg Trials
Göring: Why, of course, the people don't want war. Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to his farm in one piece? Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship.

Gilbert: There is one difference. In a democracy, the people have some say in the matter through their elected representatives, and in the United States only Congress can declare wars.

Göring: Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country.
Icing on the "Hate-Cake"

Polls aside, torturing never does any good, ever. Reputable studies, as cited above prove it!

And when innocent people are killed, we make more enemies than we had before. But as Nazi Gestapo founder, Hermann Wilhelm Göring states "people can always be brought to the bidding of the leaders."

And so they have.

Thoroughly Disgusted

Reader Ben writes ...
Hello Mish

Thanks for your blog, I'm a daily reader. I am equally flabbergasted at how many torture apologists there are in the U. S.

Even in the comments section of your blog there is an abundance of folks defending torture. The assumptions folks are making include that the tortured folks are guilty without any kind of due process or review of any evidence against the suspects. As others have noted, many folks who ended up in Guantanamo were likely innocent. At least one in 5 according to the CIA'S own stats did not meet the criteria for detention. This is a likely the result of the high rewards offered for "terrorists". KIDS were detained as well as random farmers, etc. We tortured innocent people. Anyone defending this should better explain this to me.

When we went into Iraq the battle cry was "Remember 9/11", totally unrelated to the event. Now, folks are citing ISIS beheadings as justification for torture. These bogus justifications are spoken by the politicians and bureaucrats responsible for our torture program to redirect the debate and, frankly, keep themselves from being prosecuted for their immoral, illegal acts.

I am completely disgusted with the actions of my government and the response of a large percentage of our citizens.

Thanks for sharing your opinions on the topic. It's good to see some of our moral compasses still know true North.

Regards, Ben Kirchmeyer
US Government Interrogator Chimes In

Reader Peter, a US government interrogator chimes in ...
Hey Mish,

Having conducted over 2000 interrogations of my own in support of a variety of different government operations, I can say that you are 100% correct. Torture doesn't work. Not when you want the truth, and not when you want to retain your humanity. Thanks for keeping a spotlight on this. It's a blight on our nation and is quite indicative of a government run amok and too separated from its original mission.

Peter
Hate Us for Our Freedoms?

No one "hates us for our freedoms" as the claim goes. They hate us for our blatant hypocrisy, for our might-makes-right attitude, and for our constant meddling where we have no business at all.

Torture and defense of it by Dick Cheney, by flag-waving hypocrites, and by brainwashed fools who believe everything the CIA and torture advocates claim, is icing on the extremely counterproductive hate-cake, sure to cause more global misery.

Perpetual War

Those looking for a reason the "Battle for Perpetual War is Won" need look no further than torture-supporting hypocrites, wrapped in a US flag, and singing a "holier-than-thou" tune.

Addendum:

In spite of the above logic, twisted minds persist with "Tick, Tick, Bull, Shit". For example: In a comment to this post, reader Jay Kurtz asks ...
Assume you are the President, and the country has just been attacked on the country's soil in which thousands of citizens where killed. You are concerned that other attacks, in a manner which are of course unknown, are imminent. The military (or intelligence agency) has captured a person who is believed (say with 50% probability) to have information regarding possible future attacks. Your CIA director tells you that interrogation has failed, and recommends torture methods. Suppose there is only a 1% probability of gaining novel and useful information from such torture methods to head off a 2nd attack (of which, say, for argument's sake there is a 25% chance of occurring).

Yes or no?

And, my understanding is that you are arguing that there is an absolute ZERO probability of EVER gaining any useful information via torture.
Jay's comment and question was pure "Tick, Tick, Hypothetical, BullShit" at it's finest.

OK Jay Kurtz, suppose the authorities are 50% sure your son or daughter is involved with a group that may be planning to bomb a school. Is it OK for the authorities to pull out your kid's fingernails? Cut off limbs? Threaten to torture your kids friends? Where does your support for tick, tick, hypothetical bullshit stop?

The answer of course is "torture is always morally wrong". But hypocrites only see it that way when it affects them adversely.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Pass the Cigars: US Lifts Some Restrictions on Cuba; Why Now?

Posted: 17 Dec 2014 02:12 PM PST

Sanctions and embargoes don't work. And in the case of Cuba, it took the US 52 years to partially realize that.

In 1962, President John F. Kennedy signed into law a Cuban trade embargo. I have long known how foolish Kennedy's decision was (and the decision of every president since).  But I did not know until today how blatantly hypocritical Kennedy's action was.

A clip from Cigars All Around in the Financial Times explains: 

The day before Kennedy signed the law, "Kennedy ordered an aide to buy him 1,000 Petit Upmanns cigars. It was only after Kennedy got word that his request had been carried out that he authorised the new regulations that banned Cuban imports and would have made the purchase illegal."

Wow.

For 52 years, the US embargo poisoned he Cuba-US relationship. What good did it do? Did it drive Castro out of power? Or did it help keep Castro in power?

I suggest the latter.

Free trade is always beneficial and always better than war or cold war. US goods flowing into Cuba and tourists with money would have done more for a regime change than pressure.

Hopefully it won't take 52 years for the US to realize the stupidity of sanctions on Russia. Don't hold your breath.

Cuba's Support of Terrorism

The Financial Times notes "Obama ordered a six month review of Cuba's designation as a 'state sponsor of terrorism'. Even the State Department no longer attempts to justify this label, which devalues Washington's word on international terrorism issues and triggers international financial sanctions against Cuba."

In other words, we've been lied to for years about Cuba. Hardly shocking.

Why Now?

I would like to suggest Obama is taking this step because it's the right thing to do, but that's not what is likely happening.

I believe this sentence explains what's going on. "In 2000, Cuban-American voters broke three-to-one for Republicans in the presidential election. But in 2012, exit polls showed Cuban-Americans splitting 50:50."

When push comes to shove, expect a choice to be made on how many votes that decision may win. Right vs. wrong is simply not part of the decision-making process!

Regardless, doing the right thing for the wrong reason is better than doing the wrong thing for the right reason.

So pass the cigars. Just don't smoke the damn things unless you want cancer of the tongue and mouth.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

FOMC Statement: Does Change From "Considerable Time" to "Patient" Make Any Difference Whatsoever?

Posted: 17 Dec 2014 12:50 PM PST

Today the Fed made its much awaited FOMC Announcement.

Pundits poring over the statement have generally concluded as does the Financial Times, that Fed Signals Tightening by Mid-2015.

Why?

Because the Fed dropped its forecast that it will keep low interest rates for a "considerable time".

Now the Fed says it can be "patient" in judging when to start raising rates.

The Financial Times claims the "new language is designed to reassure markets that rate rises are not imminent."

If rate hikes are not imminent, what difference does the change make?

Three Dissents

Hawk: Richard Fisher objected because "improvement in the U.S. economic performance since October has moved forward, further than the majority of the Committee envisions, the date when it will likely be appropriate to increase the federal funds rate"

Dove: Narayana Kocherlakota believes "the Committee's decision, in the context of ongoing low inflation and falling market-based measures of longer-term inflation expectations, created undue downside risk to the credibility of the 2 percent inflation target."

Data Dependent: Charles Plosser believes "the statement should not stress the importance of the passage of time as a key element of its forward guidance and, given the improvement in economic conditions, should not emphasize the consistency of the current forward guidance with previous statements."

Of the three dissents, there is one hawk, one dove, and one statement can be interpreted any way you want, but generally seems neutral. What Plosser failed to say is what he would have done today, if he was running the show.

As for where interest rates should be now, the answer is clearly "not here" based on numerous asset bubbles the Fed is too blind to see.

In terms of what to expect down the road, it's quite preposterous to pore over every word as if it means anything. Actions speak louder than words.

Expectations vs. Reality

The market expected a word change, so the Fed made one. But a lot can happen in the next six months. The US could be back in recession next month, or the next four job reports can be 500,000 each.

Those are extremes of course, but they are possible.

"Patient for a Considerable Time"

If a slowdown comes at all,  and I believe one is coming, then expect the Fed to be "patient for a considerable time" whether the fed mentions  the words "considerable time" again or not.

Viewed that way, the language change is meaningless.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Gasoline Expenditure Forecast at Lowest Levels in 11 Years

Posted: 17 Dec 2014 11:38 AM PST

The US Energy Information Administration (EIA) forecasts U.S. Household Gasoline Expenditures in 2015 On Track to be the Lowest in 11 Years.
The average U.S. household is expected to spend about $550 less on gasoline in 2015 compared with 2014, as annual motor fuel expenditures are on track to fall to their lowest level in 11 years. Lower fuel expenditures are attributable to a combination of falling retail gasoline prices and more fuel-efficient cars and trucks that reduce the number of gallons used to travel a given distance.

Household gasoline costs are forecast to average $1,962 next year, assuming that EIA's price forecast, which is highly uncertain, is realized. Should the forecast be realized, motor fuel expenditures (gasoline and motor oil) in 2015 would be below $2,000 for the first time since 2009, according to EIA's December 2014 Short-Term Energy Outlook (STEO).

The price for U.S. regular gasoline has fallen 11 weeks in a row to $2.55 per gallon as of December 15, down $1.16 per gallon from its 2014 peak in late April and the lowest price since October 2009. Gasoline prices are forecast to go even lower in 2015. Gasoline prices are falling because of lower crude oil prices, which account for about two-thirds of the price U.S. drivers pay for a gallon of gasoline.

Increases in fuel economy are also contributing to lower motor fuel expenditures, as cars and trucks travel farther on a gallon of gasoline. According to the Environmental Protection Agency, the production-weighted fuel economy of cars has increased from 23.1 miles per gallon (mpg) for model-year (MY) 2005 cars to almost 28 mpg for MY2014, an increase of about 21%. Similarly, the fuel economy for trucks has increased 19%, from 16.9 mpg to 20.1 mpg in the same time frame.
Expenditure Forecast



The expenditure forecast is not surprising given the drop in oil prices.

West Texas Crude



I commented on oil factors in What's Behind the Plunge in Oil? Winners and Losers? Boon to Spending or Recessionary?

Short and Longterm Factors

  1. Slowing global economy, especially China and Europe
  2. US production expansion
  3. OPEC pumping above quotas – they all cheat
  4. Iran embargo failing
  5. Increased fuel economy
  6. Attitudes of millennials towards cars and driving

I give heaviest weight to number one, but they all cascade. Points 5 and 6 play out slowly over time.

At some juncture, point 6 will reverse from being a drag on consumption to an expansion of consumption, but that could take a long time. Demographic attitudes take a long time to peak.

Boon to Spending or Recessionary?

Credit Suisse Group economists think cheaper oil will make "Fed tightening in the first half more likely."

Is it that simple? I think not, siding with Early Slowdown Signs Emerge for U.S. Oil States After Crude Slide.
After leading the U.S. economic recovery out of recession, some of the nation's top oil states are showing early signs of a slowdown as a result of the plunge in crude prices.

In Houston, Texas, the first oil industry layoffs have been announced, with realtors there predicting a sharp decline, up to 12 percent, in home sales next year.

Alaska's 2015 fiscal year budget revenue forecast will have to be lowered by almost $2 billion, according to Fitch Ratings, because of the sharp drop in the state's forecast crude prices. That will widen Alaska's budget gap to almost $3.4 billion, Fitch said in a Dec. 11 report.

States such as Texas, North Dakota, Alaska, Oklahoma and New Mexico are all likely to feel strains next year, Wells Fargo Securities municipal analyst Roy Eappen said in a recent report.

Meanwhile, household sentiment in Texas, Louisiana, Oklahoma and Arkansas where memories of the catastrophic 1980s oil crash are still fresh, weakened in October more than any other region, according to a report by Decision Analyst Inc. The Texas-based research company surveys monthly thousands of homeowners in the Census Bureau's nine regional divisions.

The West South Central division, comprising those four states, had seen the strongest growth for four years, but in October survey lagged the rest of the nation, with economic gauges improving in six regions and two recording no change.
View on 2015

The energy shakedown, currency volatility in numerous countries, a slowdown in China, numerous Eurozone problems, and bubbles in bonds and equities do not bode well for 2015.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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