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Friday, October 22, 2004

IT'S REALLY JUST THIS SIMPLE    Keith Burgess-Jackson writes,
John Kerry will raise your taxes. If you vote for him, you are voting for higher taxes. Read this. These are John Kerry's friends. They want big government -- government that dictates and coerces, government that subsidizes bad choices and immunizes people from the consequences of their own folly. Note the disingenuous rhetoric. The Times doesn't call for a tax increase. It calls for a rollback of the tax cuts. Nifty, eh? By making the pre-tax-cut situation the baseline, the Times is able to avoid saying that it wants higher taxes on middle-class and working-class Americans. Don't fall for it. Perhaps if liberals such as George Soros would distribute their wealth directly to the needy, there would be no need for big-government programs. It's really very simple. If you want to eliminate or alleviate poverty, work harder and share your wealth. Stop trying to coerce others into promoting your values.

Posted by Donald L. Luskin at 6:36 AM | link  

Thursday, October 21, 2004

JOHNSTON KEEPS PLUGGING AWAY    I continue to be bombarded with increasingly loony emails from New York Times reporter David Cay Johnston -- all because I wrote a column saying he has "liberal credentials" (he does) and that he wrote a deceptive story about falling incomes (he did). Since my last posting on this, he's written three more. In his latest he informs me that "I lecture widely on integrity, ethics and honorable conduct, as many thousands of Americans can attest." All I can say is that I hope these lectures are free. If any of you out there have attended one, let me know what you thought of it (there are "thousands" -- so let's hear from you... No one? Hmmm...). I wrote Times "public editor" Dan Okrent to see if there was anything he could do to make this bothersome man stop harassing me, and he replied "As you know, Johnston is no favorite of mine. But The Times believes in free speech, which is to say your complaint is with him, not with the institution. I handled it; I'm sure you can."

Posted by Donald L. Luskin at 5:41 AM | link  

Wednesday, October 20, 2004

THE PRICE OF GREATNESS    Arnold Schwarzenegger, on his fabulous "don't be economic girlie men" speech:
In a Q&A with former White House Chief of Staff and ex-Rep. Leon Panetta in Monterey, the host asked Schwarzenegger how his famously Democratic wife, Maria Shriver, had reacted to his speech supporting President Bush at the Republican National Convention.

"Well, there was no sex for 14 days,'' the governor told the thousand- person audience. "Everything comes with side effects.''

Thanks to reader Jill Olson for the link.

Posted by Donald L. Luskin at 4:34 PM | link  

EDWARDS DOES HIS DO    Remember the scene at the beginning of "Fahrenheit 9-11" where Michael Moore shows Bush and Cheney being made up before a television appearance? That was nothing compared to this revealing video of John Edwards, the vain Breck girl of American politics, doing his do till it's just so and brandishing a compact. Thanks to reader Christine VanDeVelde for the link.

Posted by Donald L. Luskin at 6:32 AM | link  

Tuesday, October 19, 2004

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Lot of good bloggings on Paul Krugman's New York Times column today reinforcing the DNC talking point that Bush will reinstate the military draft.

First prize goes to Jon Henke on the Q and O blog, pointing out that Krugman's statement that "Thousands of reservists and National Guard members are no longer serving voluntarily: they have been kept in the military past their agreed terms of enlistment by 'stop loss' orders." Henke links to the agreement that all reservists sign, which makes it perfectly clear that extensions of duty in times of emergency are, indeed, what reservists have agreed to. Reader Al Canata points out that Krugman's ideal president -- Bill Clinton -- invoked "stop loss" in 1999 during the Kosovo conflict

Mathew Schiros (on the Radio Free Roider blog) and Tom Maguire (on the Just One Minute Blog) call Krugman on the non sequitur of claiming that just because Bush was wrong about the sustainability of budget surpluses (Krugman, of course, calls this a Bush lie), he is per force lying about not reinstating a military draft. Maguire adds some good statistics that suggest recent historical precedent for believing strongly that an all-volunteer military is eminently viable.

Roland Patrick on the Fly Under the Bridge blog notes that John Kerry is calling for an increase in military personnel, too -- so does this mean, by Krugman's assumptions, that Kerry has a secret plan to reinstate the draft?

Krugman's columns, like the Kerry campaign, are getting sloppy and desperate. I love it.

Posted by Donald L. Luskin at 9:54 PM | link  

KRUGMAN PLAYS THE DRAFT CARD    Why does Paul Krugman say in his Times column today that "Mr. Bush is prepared to seek a much larger Army -- and that means reviving the draft"? Obviously, he's promoting the desperate myth already circulated by the Democrats that Bush has a "secret plan" for a military draft -- but that's not what I mean. Why, for Krugman, is the idea that the Army would be expanded evidence that a draft is inevitable? Is a draft the only way to build the Army? For Krugman it is -- but remember, Krugman is an economist who hates free markets. For him, it's not even worth considering that incentives for voluntary enlistment could be created. For Krugman, whatever government wants government is justified in seizing by force. If government wants to give everyone health care coverage, it should seize the means to do so by force through taxing "the rich." Same for the Army. Krugman's logic reveals nothing about Bush's plan for a draft, but a lot about Krugman's view of the role of government.

Posted by Donald L. Luskin at 7:01 AM | link  

JOHNSTON MAKES MY DAY    I've heard from New York Times reporter David Cay Johnston, offering flimsy and deceptive evidence to justify the false statements he made about me yesterday in a letter to Human Events. It's revealing that a reporter for the "newspaper of record" would behave like this. Is this the quality of evidence and research he brings to his reporting for the Times? His employer ought to muzzle him -- he's giving away the game.

As I reported yesterday, Johnston called me "a writer so unreliable that he has misquoted me and publicly denied his own published words labeling my writing 'unbiased' (and in bold face capitals at that)."

According to an email from him yesterday, it turns out that the supposed "misquotation" was when I said, replying to a letter from Johnston to National Review Online, that "I emphatically dispute the truthfulness of Johnston’s statement that I acknowledged on my personal blog, grudgingly or otherwise, that Johnston’s work is 'enterprising, fearless and rounded.'" That was no misquotation -- "enterprising, fearless and rounded" was exactly what he said, and these words were printed in their entire context above my reply, in the very letter to which I was replying.

According to the same email, my "labeling" of Johnston's "writing 'unbiased'" relies on a post to this blog from June 2003, about a Johnston Times story. Yes, the bold capitalized headline for the post said "MAN BITES DOG! UNBIASED TAX STORY IN THE TIMES!" Read the whole post -- the headline is sarcastic and ironic. I begin the posting by saying that this particular Johnston story "shows remarkable progress toward balanced economic reporting," but then go on for hundreds of words to show how distorted it still is nevertheless. Even if my use of the word "unbiased" had been entirely sincere and unqualified -- rather than sarcastic and heavily qualified -- it was by no means a judgment of Johnston's "writing." It concerned a single story, and in no way makes me a hypocrite for finding fault with subsequent Johnston stories. And by the way, all my blog headlines are bold and capitalized, as a matter of style (Johnston implies the capitalization and boldness were for emphasis; they were not).

Just remember when you read a story by Johnston in the Times -- if he can distort and lie about what I've written about him like this, imagine what he's doing with the IRS statistics he cites or the supposed "experts" he's always quoting.

Posted by Donald L. Luskin at 6:57 AM | link  

Monday, October 18, 2004

AND JUST WHAT DOES THE "C" STAND FOR, AGAIN?    From the Toledo Blade:
A Defiance County man has been arrested for allegedly filing more than 100 false voter registration forms in exchange for crack cocaine from a Toledo woman working on behalf of the NAACP’s voter registration drive.

Chad Staton, 22, of Stratton Ave., faces a fifth-degree felony charge of false registration after sheriff’s deputies said he filled out the registration forms by himself — using either fictitious names or addresses...

Thanks to Jill Olson for the link.

Posted by Donald L. Luskin at 10:53 PM | link  

MORE ON SOROS' TRADESPORTS MANIPULATION    I've gotten dozens of emails responding to my posts about the possibility that George Soros (or someone who thinks like him) has been manipulating the Bush re-election futures contracts on Many readers have asked whether it's possible that Soros is manipulating the oil futures market, driving it higher to make Bush look bad. Well, I have no direct information on this. But as a long-time trader, I can tell you for sure that the oil market has speculation and manipulation written all over it. Could it be Soros? Sure. It might be. No evidence that it is. But it certainly could be.

I was particularly interested in this letter from reader Gary Renaud examining the problems of moral hazard and assassination risk in the Tradesports contract:

I wonder about your recent post in which you quoted Tradesports:
"Note: in the highly unlikely event of the premature death of John Kerry or George W Bush preventing them from standing or winning re- election, all trades will be unwound and fees will be reimbursed on both contracts."
and then noted:
Obviously Tradesports wishes to remove the "moral hazard" of offering contracts that allow people to profit from such a heinous crime. I stand corrected, and happily so.
Would there not be a similar hazard to someone who is deeply invested the wrong way? If I sunk a million dollars into "Bush will lose" and it appears that won't be the case, wouldn't an assassination allow me to at least recover my investment?

Posted by Donald L. Luskin at 10:36 PM | link  

NOW WE KNOW WHY KRUGMAN SUPPORTS MAHATHIR MOHAMMAD    Or is the anti-Semitic Malaysian former premier one of those "foreign leaders" whom Kerry says support him? Now we learn that "Former Malaysian leader Mahathir Mohammad has appealed to American Muslims not to vote for George Bush on November 2." Thanks to reader Jill Olson for the link.

Posted by Donald L. Luskin at 9:55 PM | link  

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Too bad this dipshit doesn't spend as much time researching his inaccurate left-biased stories for the New York Times as he spends writing angry letters to the editor anytime anyone dares hold him to account. David Cay Johnston complained to this blog (here and here) and to National Review Online (here) about my postings about him. And now he's written a letter to Human Events about an Alan Reynolds column mentioning him and referencing me as a source. From Johnston's letter:

Mr. Reynolds also relies on the jaundiced words of Donald Luskin, a writer so unreliable that he has misquoted me and publicly denied his own published words labeling my writing "unbiased" (and in bold face capitals at that).

Here's an email I just sent to Johnston:

To use the words you prefer when you are writing rambling letters to NRO, you have "smeared" me and "slimed" me and "attacked my integrity." Snore.

I defy you to show where I "misquoted" you.

I defy you to show where I "publicly denied his own published words labeling my writing 'unbiased' (and in bold face capitals at that)."

I’m waiting.

Make my day.

Here's an email I just sent to Human Events:

In a letter to Human Events dated October 18, 2004  David Cay Johnston says,

Mr. Reynolds also relies on the jaundiced words of Donald Luskin, a writer so unreliable that he has misquoted me and publicly denied his own published words labeling my writing "unbiased" (and in bold face capitals at that).

Mr. Reynolds is incorrect that I ever "misquoted" him. He is also incorrect that I "publicly denied" my "own published words labeling" his "writing 'unbiased' (and in bold face capitals at that)."

He has simply made these charges up out of thin air, and apparently Human Events has seen fit to publish those charges without investigating their truthfulness. I demand a retraction.

Posted by Donald L. Luskin at 8:58 PM | link  

AREN'T THEY WORRIED ABOUT A DRAFT?    Headline in today's San Diego Union Tribune:
Navy changes skirt policy, making apparel optional
Thanks to reader Dave Duval for the link.

Posted by Donald L. Luskin at 8:31 PM | link  

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Here's a draft version of my column today for National Review Online, going over once again the manipulation of the market in the Bush futures contracts at -- with a few more details.
President Bush's enemies have found a new way to attack him -- through the online financial markets.

There have now been four separate "speculative attacks" on the market in futures contracts on Bush's re-election probabilities traded online at the Dublin-based website These futures are real-money "bets" placed by thousands of traders around the world on whether George Bush will be re-elected. For the last several months the futures have been a reliable leading indicator of where conventional polls are heading, and they've received increasing mainstream media attention.

The attacks involved massive sell orders placed by a single individual -- the same individual all four times -- according to a spokesman for Tradesports. Each attack caused a massive temporary drop in the price of the Bush re-election futures. The most recent one, last Friday at about 1:30 EDT, whacked the Bush futures from a price of 54 (indicating the market's estimate of a 54% probability of Bush's re-election) all the way down to a price of 10 (indicating a 10% probability) -- in just eight minutes. Six minutes later the futures were back to 54. That's the equivalent of an 8000-point crash in the Dow Jones Industrial Average -- followed by an 8000 point recovery, all within 14 minutes.

What could be the attacker's motive? Obviously, it can't have been to maximize profits. Even if Bush loses the election and the futures position pays off, the attacked would make more money by being patient and selling at 54 instead of 10. In fact, when the futures snapped back to 54 when he was done selling, every contract he'd sold at 10 showed an immediate 44 point loss.

If the motive wasn't profits, then it can only have been to use the Bush re-election futures market to send a political signal -- to spread fear, uncertainty and doubt among Bush supporters, and to create the false impression of winning momentum for John Kerry. Indeed, two of the attacks occurred immediately after the second and third presidential debates. The seller must have wanted to make it seem as though the futures -- an instantaneous poll of very special credibility, in which you have to really put your money where your mouth is -- were giving Bush a big thumbs-down.

If these attacks were carried out for such purposes, then they are flat-out market manipulations. Tradesports says these trades are entirely legal both within their offshore regulatory framework, and by their own house rules. But if such manipulations had occurred on regulated stock or futures exchanges in the United States, they would likely result in criminal charges of securities fraud.

Who would stoop to such a sleazy -- even if entirely legal -- trick? One person comes to mind -- and I'm not thinking of Hillary Clinton, despite her ample sleaze experience in futures markets. I'm thinking of a billionaire market speculator who has pledged to spend $100 million dollars of his own fortune to bring down President Bush. A man who said this week that "These aren't normal times. The ends justify every legal means possible." Of course, I'm thinking of George Soros.

Soros is the master of the speculative attack. In 1992 he became famous as "the man who broke the Bank of England" with similar attacks against the British pound. He is widely believed to have earned $1.1 billion in trading profits when the pound finally collapsed under his onslaught, and the BoE was forced to withdraw England from the European Exchange Rate Mechanism. He did the same thing in 1997 against the Malaysian currency, the ringgit, during the Asian financial crisis.

In those escapades Soros risked billions to make billions. The trades involved in the speculative attacks on the Bush re-election futures are miniscule by comparison -- measured only in the tens of thousands of dollars, yet sufficient to have a major impact on a small market. They'd be pocket change for someone like Soros -- and their big effect on that small market could have a big effect on the real world.

The potential for manipulating the futures to demoralize the Bush camp is one thing. But there's more. The Bush re-election futures -- and similar futures that trade on the Iowa Electronic Exchange -- are closely watched by Wall Street traders, and have an influence on stock prices. I was the first market analyst to point out, early this year, that the stock market trades in near tandem with the ups and downs of the Bush futures. In fact, the Bush futures, the S&P 500, and the NASDAQ all made their lows for the year on the very same day -- August 12. Then when Bush rallied as the lackluster Democratic convention played out, so did the market. The stock market swoon of the last couple weeks has corresponded with a drop in the Bush futures, a drop that began even before the first presidential debate.

Manipulating the Bush re-election futures to spook the stock market would be one terrific trick for making voters feel down about the economy when they step into the voting booth on November 2. Would the man who broke the Bank of England hesitate to do it? "The ends justify every legal means possible."

And it's not as far fetched as you think. Soros has written extensively on what he calls his "theory of reflexivity" -- and years ago, before he got involved in politics, he used to grouse that he was being passed over for the Nobel Prize in Economics for this idea. Simply, "reflexivity" says that financial markets can have impacts on the real world. So if you want to move the world, just move the markets. That's what he did with the British pound -- and it's what someone is doing right now with the Bush futures. If it isn't Soros, then it's someone who has read his book.

Officials of Tradesports tell me that they have no intention of taking any action against the attacker. As far as they are concerned, any trade is a fair trade. "All emerging markets will experience volatility," a spokesman said. "We are gratified that the market recovered so quickly and without any intervention on our part."

Fair enough -- and far be it for me to call for more regulation (the best thing about Dublin, Ireland is that it's one of the few places where Eliot Spitzer doesn't have jurisdiction). But there's something that all of us can do ourselves to police the political futures market and keep it free from manipulation. It's simply this: take advantage of the stupid trades the attacker makes.

Here's what I've done, and anyone with an account at Tradesports can do the same thing. I've entered orders to buy the Bush futures at absurdly low prices -- and I'm just going to leave those orders there, in the hopes that the attacker will hit them. If he wants to sell more futures at 10, I'll buy them all day long.

I'll make the attacker a special deal. I'll buy literally as many futures contracts as he wants to sell at a price of zero. It's a riskless trade for me -- and it's a speculative attacker's ultimate dream to beat a market all the way down to nothing. That way, we both win. So to the attacker, whoever he is, I say: are you feeling lucky, punk? Make my day.

Posted by Donald L. Luskin at 2:15 AM | link  

Sunday, October 17, 2004

KRUGMAN ACCUSES WALMART OF TREASON    From the Chiapas Independent Media Center:
Paul Krugman, el analista económico más importante de Estados Unidos, señala que Wal-Mart puede establecer contactos comerciales en cualquier lugar del mundo con rapidez inigualable, y eso liquida a la competencia.
Here's Google's translation:
Paul Krugman, the more important economic analyst of the United States, indicates that Wal-Mart can make commercial contact with the enemy in any place of the quickly matchless world, and that eliminates to the competition.

Posted by Donald L. Luskin at 5:24 PM | link  

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Several readers, and Glenn Reynolds, have asked why the market manipulations in the Bush futures contracts going on at aren't also going on in the similar futures at the Iowa Electronic Markets. There are several technical reasons.

First, and most important, IEM restricts customers from opening accounts with anything greater than $500. They are required to do this by the Commodities Futures Trading Commission in order to escape regulation as an exchange (the IEM is, in fact, only a laboratory market operated by the University of Iowa Business School). In order for a speculative attack to be successful, the attacker has to be able to flood the market with orders large enough to swamp the normal volume of trading. When all participants are limited to just $500, that simply can't be done. The attacks on the Tradesports contract have involved orders worth about $100 thousand. Not very big in the grand scheme of things (compared to, say, the New York Stock Exchange), but still quite large for a betting market like Tradesports.

Second, the futures contracts on the two markets have fundamentally different specifications. They are apples and oranges, or at least apples and pears. The Tradesports contract is based on whether Bush will win re-election -- whether by electoral college vote, tie-breaker in the House of Representative, or a Supreme Court ruling. The IEM contract is based on who will win the popular vote in a two-way race.

Third, another difference between the contracts is that the Tradesports contract is on Bush the person, while the IEM contract is on Bush's party. In other words, betting on Tradesports is betting that Bush will win -- betting on IEM is betting that the Republican Party will win. This is a remote consideration, but if someone had inside information that Bush was going to leave the ticket before the election (because of say, a scandal), he would sell the Tradesports contract (on Bush), not the IEM contract (on the GOP), since there would remain the possibility that Dick Cheney might still beat John Kerry.

Correction... As originally posted, my third point emphasized the possibility that Bush might leave the GOP ticket due to assasination. Several readers have kindly informed me that Tradesports' policy in this event would be to void all contracts. Tradesports notes, "Note: in the highly unlikely event of the premature death of John Kerry or George W Bush preventing them from standing or winning re-election, all trades will be unwound and fees will be reimbursed on both contracts." Obviously Tradesports wishes to remove the "moral hazard" of offering contracts that allow people to profit from such a heinous crime. I stand corrected, and happily so.

Posted by Donald L. Luskin at 8:47 AM | link