Submitted by Mark J. Grant, author of Out of the Box $118 Million Dollars An Hour That is how much money the Federal Reserve Bank of the United States is creating as you wake, work or sleep. That is $85 billion a month and the stuff must go somewhere. It pours out like sugar upon the markets, each market, every market and it is no wonder that the American stock markets are hitting new highs. The spice must flow. In the bond markets it is low interest rates and compression, a vice closing in progress, as each sector of the Fixed Income markets grinds closer and closer to Treasuries. It is real, it is not an avarice, but it is also the most manipulated market in the history of our country and something that could not be accomplished in other responses to Recessions because the world’s central banks had never worked in this kind of collective action before. It is not earnings and it is not technicals; it is just money and vast quantities of it that come pouring out of Washington each day. The United States found manna from Heaven. The initial call had been for Inflation, even Hyper-Inflation from some well-known thinkers. It has not happened and the reason, I postulate, is because the underlying economy is in far worse shape than the numbers indicate or most think. The earnings at corporations also rely upon this injection of capital and so the whole boats floats but the underpinnings are shaky, risky and fraught with danger. Any hint of curtailment by the Fed throws out tremors as everyone wonders for how long this will go on and will the rising tide turn to a flood and upset the American boat. It is a very good question. The other possibility is an “Event;” some shattering moment that punctures the hull and sends the whole enterprise into a waterspout where the boat is sucked up into a vortex that will certainly not be Oz. I play the game. The Rule is to win and not to be eventually right and lose your capital during the process. The compression in bonds has been an absolutely winning hand and in many cases a better bet than equities have been. One of the interesting reasons for this has been the structure of bonds as compared with equities or preferred stocks. Bonds accrue interest every day while dividends are paid quarterly with no accrual. Consequently if you are trading bonds and taking advantage of what you can the accrual part of the equation can add to your winnings in a substantial fashion when interest rates are this low. There are two maxims in operation now. The first is that euphoria continues on right up until the day when it does not. In the last go-round the “Event” was Lehman and the music stopped. The second maxim is that there is not strategy that wins forever. Frequently the winning bet of last year is the losing bet of the next and I always bear this in mind. In this light one also looks at the Fed; will this outpouring of money go on forever? Fairy godmothers are children’s tales and when someone offers you the glass slippers; let me know. I have been asked numerous times why the Fed’s balance sheet can’t be thirty trillion dollars and so the game continues. The answer is that it can be but, and a very big but, is that the debt of the United States would also be ten times the size it is now and it would have to be serviced by an economy that only has so many resources as the debt to GDP ratio of the country would be out of sight. Perhaps if Europe and Asia expanded their balance sheets by ten times as well so that on a relative basis everything remained in tandem it could happen but the amount of debt issued by our Treasury would be at levels that would portend some kind of nightmare scenario. The catch here is the amount of debt that would be created along with the creation of money and that is where the game halts or reverses the course. I suppose it is theoretically possible that the Fed bought all of every new issue, bought 100% of each new Treasury or Agency offering but there are consequences for that kind of behavior that, while unknown, would disrupt private capital in some very significant ways. It would no longer be, and we are close to it now in my opinion, that the Fed is “the lender of last resort” but the only important lender in town. What would it be; JP Morgan at Treasuries +1, Bank of America at Treasuries +2 and Morgan Stanley at Treasuries +3? The boys are driving the train in that direction as risk becomes quite secondary to the money in the system that must be utilized. Cowardly Lion: I *do* believe in spooks, I *do* believe in spooks. I do, I do, I do, I *do* believe in spooks, I *do* believe in spooks, I do, I do, I do, I *do*! Wicked Witch of the West: Ah! You'll believe in more than that before I'm finished with you. -My cousin in Oz
The powerful documentary Inequality for All was an unexpected hit at the recent Sundance film festival, arguing that US capitalism has fatally abandoned the middle classes while making the super-rich richer. Can its star, economist Robert Reich, do for economics what Al Gore did for the environment?In one sense, Inequality for All is absolutely the film of the moment. We are living through tumultuous times. The economy has tanked. Austerity has cut a swath through the country. We're on the verge of a triple-dip recession. And, in another, parallel universe, a small cohort of alien beings – or as we know them, bankers – are currently engaged in trying to figure out what to spend their multimillion-pound bonuses on. Who wouldn't want to know what's going on? Or how it happened? Or why? Or if it is really true that the next generation down is well and truly shafted?And yet… what sucker would try to make a film about it? It's not exactly Skyfall. Where would you even start? Because there are some films that practically beg to be made. And then there's Inequality for All; the kind of film that you can't quite believe that anybody, ever, considered a good idea, let alone had the passion and commitment to give it two years of their life.How did you even come up with the idea of making a film about economics? I ask the director Jacob Kornbluth. "I know! People would roll their eyes when I told them. They'd say it's a terrible idea for a film." On paper it is, indeed, a terrible idea. A 90-minute documentary on income inequality: or why the rich have got richer and the rest of us haven't (I say "us" because although it's focused on America, we're snapping at their heels) and which traces a line back to the 1970s, when things stopped getting better for the vast majority of ordinary working people and started getting worse."It always sounded so dry," says Kornbluth. "But then I'd tell people it's An Inconvenient Truth for the economy and they'd go, Ah!"In fact, Inequality for All, which premiered at the Sundance film festival a fortnight ago, is anything but dry. It won not just rave reviews but also the special jury prize and a major cinema distribution deal, and while it owes an obvious debt to Al Gore's An Inconvenient Truth, it is, in many ways, a much better, more human and surprising film. Not least because, incredibly enough, it's actually pretty funny. And, in large part, this is down to its star, Robert Reich.Reich is not a star in any obvious sense of the word. He's a 66-year-old academic. And he's been banging on about inequality for more than three decades. At one point in the film he looks quite downcast and says: "Sometimes I just feel like my life has been a total failure." An archive clip of him on CNN from 1991 looking fresh-faced and bushy-haired shows that he has literally been saying the same thing for decades upon decades. And yet, as he tells me cheerfully on the phone from his home in California, "It just keeps getting worse!"These days he's a professor of public policy at the University of California at Berkeley and while he's not a figure we're familiar with in the UK, he's been part of American public life for years. At the start of the film, he introduces himself to a lecture hall full of students, telling them how he was secretary of labour under Bill Clinton. "And before that I was at Harvard. And before that I was a member of the Carter administration. You don't remember the Carter administration, do you?" The students remain silent. "And before that," says Reich with impeccable comic timing, "I was a special agent for Abraham Lincoln." He shakes his head. "Those were tough times."Reich's books and ideas have been at the forefront of Democratic party thinking for a generation. He is an intellectual heavyweight, a veteran policymaker, a seasoned political hand, and yet he also has the delivery of a standup comedian. His ideas were the basis for Bill Clinton's 1992 election campaign slogan, "Putting People First" (they were both Rhodes scholars and he met Clinton on board the boat to England; he once dated Hillary too, though he only realised this when a New York Times journalist rang him up and reminded him). And they were still there at the heart of President Obama's inaugural address last month. America could not succeed, said Obama, "when a shrinking few do very well and a growing many barely make it". What Reich, basically, has been saying since the year dot.What's extraordinary is how, somehow, these ideas have been translated into a narrative that shows every sign of being this year's hit documentary film. It certainly shocked Reich. He says he was amazed when Kornbluth first pitched the idea of a film. "He came and said that he'd read my book, Aftershock, and that he loved it and wanted to do a movie about it. And I honestly didn't know what he meant. How could you make a movie out of it?"But Kornbluth has made a movie out of it. A really astonishingly good movie that takes some big economic ideas and how these relate to the quality of everyday life as lived by most ordinary people. The love and care and artistic flair that Kornbluth brought to it is evident in every frame. It was really really hard work, he tells me, to make something look that simple. But then "I grew up poor. So I've always been very aware of who has what in society." His father had a stroke when Kornbluth was five and died six years later. And his mother, who didn't work because she was raising three children, died when he was 18.Any synopsis of the film runs the risk of making it seem dry again, but essentially it describes how the middle classes have come to have a smaller and smaller portion of the economic pie. And how, since 70% of the economy is based on the middle classes buying stuff, if they don't have any money to buy this stuff, it cannot grow. Meanwhile, the government has allowed the super-rich, the "one per cent", to take more of the nation's wealth. Half of the US's total assets are now owned by just 400 people – 400! – and, Reich contests that this is not just a threat to the economy, but also to democracy.Reading this on mobile? Click here to view videoKornbluth tells me that he initially had the idea of casting Reich in a feature film. "I'd seen him on TV and I just thought he'd make a great tax inspector in this film I was making. Although, actually, it turned out he was a terrible actor. But we hit it off. And I discovered that he and I share a sense of humour. I'm not a documentarian. My background is comedy. Yet I just thought that this could be an amazingly riveting film. To me it's the most important story of our time. And nobody was telling it. I kept on reading the papers and watching the news and I really wanted a story. I craved it. I just knew that to do it, we would have to make it as funny and human as possible."And it's this, the gentle humour at the heart of the film, and the lightness of its direction, that are its winning ingredients, disguising what is, in fact, incredibly powerful. Because at heart Inequality for All is a revolutionary film. Or, at least, its dearest desire is to precipitate a revolution in the way that we think about economic matters. As Reich tells me, "the economy is not like the weather". It's not inevitable. It's not determined. "An economy does not exist in nature. We don't have to settle." And, crucially, it can be changed.But the film's main stroke of brilliance is to put Reich, the unlikely hero, at the centre. "I had never done anything political before," says Kornbluth. "I didn't consider myself political. But seeing his example, the way that he has fought this fight for so many years has been an absolute inspiration to me. I see it in his students, they really do walk out of his lectures and want to change the world."As in An Inconvenient Truth – or "the most lucrative PowerPoint presentation in history", as one critic called it – the film is structured around a lecture, or rather series of lectures: Reich's incredibly popular wealth and poverty class at Berkeley. But it is only loosely used as a vehicle. There are also news clips and interviews and stylised graphics and archive footage.And what the film tries to do is thread together evidence that many people know about – the increasing struggle of the middle classes to just get by, the way that the top 1% of society has unshackled itself from the rest of us and has seen its income increase exponentially, and the ever-increasing cost of the traditional avenues of improvement, such as higher education – and weave it into a cohesive and convincing narrative. It is, in some respects, a theory of everything. Reich charts the three decades of increasing median income after the second world war, a period he calls "the great prosperity" and then examines what happened in the late 1970s to put an end to it. The economy didn't falter. It kept on growing. But wages didn't.The figures that Reich supplies are simply gobsmacking. In 1978, the typical male US worker was making $48,000 a year (adjusted for inflation). Meanwhile the average person in the top 1% was making $390, 000. By 2010, the median wage had plummeted to $33,000, but at the top it had nearly trebled, to $1,100,000."Something happened in the late 1970s," we hear him tell his Berkeley class. And much of the rest of the film is working out what happened.Some inequality is inevitable, he says. Even desirable. It's what makes capitalism tick. But at what point does it become a problem? When the middle classes (in its American sense of the 25% above and below the median wage) have so little of the economic pie that it affects not just their lives but the economy as a whole.Reich's thesis is that since the 1970s a combination of anti-union legislation and deregulation of the markets contrived to create a situation in which the economy boomed but less of the wealth trickled down. Though for a while, nobody noticed. There were "coping mechanisms". More women entered the workforce, creating dual-income families. Working hours rose. And increasing house prices enabled people to borrow.And then, in 2007, this all came crashing to a halt. "We have exhausted all the options," he says. There's nowhere else left to go. It's crunch time.It's crunch time that so many working families understand too well. They may not be familiar with the theory of income inequality but they haven't been able to avoid noticing that they've got less money in their pockets. "I've always thought that kitchen-table economics is the most important topic to most people," says Reich. "Their wages, their jobs, getting by. I've always tried to relate economics to where people live. That's why I was so excited about the film."The human stories of working American families struggling to cope are at the emotional centre of the film. At a Q&A after the Sundance screening, a third of the audience admitted that they'd cried during the film at some point.There's Erika and Robert Vaclav, for example, who pay $400 a week to keep their daughter in after-school care so that Erika can work on the checkout at Costco. "And I'm trying to work out if I should get her a phone so that she can walk home from school alone, and I know she's OK, or if I should continue paying the money." They lost their house when Robert was made redundant from his job as a manager at the now defunct electrical retailer Circuit City. And, it gradually transpires, that he's a student in Reich's wealth and poverty class at Berkeley."How much money do you have in your checking account?" Kornbluth asks Erika from off camera as she drives her daughter to school. "$25," she says and her voice starts to crack and waver.One of Reich's greatest sources of humour is himself. In the opening shots of the film, the camera follows him walking to his car, a Mini Cooper. "I sort of identify with it," he says. "It's pretty little. I feel we are in proportion. Me and my car. We are together facing the rest of the world."Later he takes a box out of the back of his car. "I always travel with my box," he says and explains that he suffers from a rare genetic condition – Fairbanks disease – that led to him only growing to 4ft 10in in height. The box is what he always takes to public-speaking events so that he can reach the podium.He was bullied as a child "because that's just what happens when you're small" and repeatedly beaten up. His grandmother consoled him by telling him that when he was 10, 11 or 12 he'd shoot up. He never did. "It's never been a conscious thing on my part but that feeling of being bullied, and feeling vulnerable, has stayed with me. And maybe it's because of that that I can empathise with poor people. Because they are the most vulnerable. There is no one to protect them."In the film, he tells how he made strategic alliances with older boys who could protect him. And years later, he discovered that one of them had travelled down to Mississippi to register voters and had been tortured and then murdered. "That changed my life," he says."He has never cashed in," says Kornbluth. "He's an incredibly smart guy and he could have found a way to correlate that into money as so many people do. But he never has. He has absolute integrity. It's almost shocking now for someone not to do that. I mean one of the film-makers I admire is Mike Leigh. And he does McDonald's commercials and I was like 'Whoa!' when I found out but I can't hold it against him. You can't hold it against anybody who's trying to make a living. But it makes Rob all the more amazing. He doesn't sit on boards. Or on thinktanks. He draws a modest salary. He has this absolute moral compass. And he's still trying to change the world."In the 60s and 70s, this wasn't such a surprising thing. Reich recounts how he grew up "in a time of giants". His first job was working for Bobby Kennedy. Changing the world was what everyone wanted to do.The world has changed. Just not in the way many thought it would. We fell victim to what Reich calls "the huge lie". That the free market is good. And government is bad. Government makes the rules, Reich keeps on reminding us, over and over. And it decides who benefits from those rules, and who is harmed. And increasingly, that boils down to the rich and the poor.Perhaps the most surprising voice in the film is Nick Hanauer's. He's just your ordinary, everyday billionaire. One of the 1%. Except that he believes – like Warren Buffett – that he doesn't pay enough tax. And that hammering the middle class, the ones who buy actual stuff, who create demand, which in turn creates jobs and more taxes, is simply bad for the economy. "I mean, I drive the fanciest Audi around, but it's still only one of them… Three pairs of jeans a year, that will just about do me."The system simply isn't working, he says. It's put the millionaires and the billionaires, the Nick Hanauers and the Mitt Romneys – the people that Republican rhetoric describes as job creators – at the centre of the economic universe, rather than what Hanauer calls the true job creators – the middle classes.The problem is, he says, is that they've been attacked from every side. He was one of the initial investors in Amazon, a business of which he's "incredibly proud", but he points out that on revenues in the last three months of 2012 of $21bn (£13bn), Amazon employs just 65,600 people. "If it was a mom and pop retailer, it would be 600,000 people, or 800,000 or a million."Globalisation and technology have played their role. But so has the government. For decades, under both Republicans and Democrats the highest rate of tax didn't dip below 70%. Now, Hanauer says he pays 11% on a six-figure income. Hanauer believes that if he was taxed more, he would be better off, because his company – he's a venture capitalist and his family own a pillow factory – would sell more products, and he would, therefore, make more money.This is inequality imposed from the top. Reich's charts show that for years, chief executives' earnings kept in step with other employees. And then in 2000-03 "It went kerbluey", by which he means off the charts.Which is where it still is. In the UK, Royal Bank of Scotland, having covered itself in glory in the Libor interest-rate fixing scandal, is currently contemplating bonuses for its investment banking division of £250m, according to reports last week. This, to put it another way, is the annual wage bill for at least 12,500 of its call-centre workers. Because this isn't just an American problem. It's a British one too."If there was upward mobility it would be OK," says Reich in the film. "But 42% of children born in poverty in the USA will stay there. In Denmark it's 24%. Even in Great Britain, where they still have an aristocracy, it's 30%."It's probably a shocking statistic for Americans to hear. The problem is that by every index you can measure, inequality is worsening in Britain. There are fewer opportunities to overcome the barriers of your birth in the UK than in any other country in Europe. One of the most chilling moments in Inequality for All for a British audience is that how, faced with the same choices that America had in the 70s, we have, in the last year or so, taken the same path.One of the key moments for Reich was the underinvestment in education, particularly higher education in the 70s. This was when America introduced tuition fees and its workforce started to fall behind the rest of the world's. When opportunities for those from low- and middle-income backgrounds began shrinking: precisely where the UK is today.It's not just that wages have remained flat in America – as they have in the UK – it's that the expenses of everyday life have soared, in particular education and healthcare.Last October, an independent commission in the UK led by the Resolution Foundation predicted that in 2020 wages for low- to middle-income families would be the same as they were in 2000. And yet everything else will have gone up. We too are facing the crunch.In December, the Office for National Statistics found that richest 10% of people in Britain own 40% of the national wealth. In London and the south-east, one in eight households has almost £1m of assets. The bottom half of the country has no net property wealth and only £4,000 in pensions savings. For them, there is just rising prices. And the ever diminishing possibility of things ever being different for them or their children."Where America leads, sadly the rest of the world follows. This same thing is affecting people all over the world," says Reich. "If nothing is done to reverse this trend, Britain will find itself in exactly the same place as America in just a few years' time."Earlier in the week, I notice that he'd tweeted: "Britain's austerity economics is complete disaster. Its economy shrinking." And pasted a link to the Wall Street Journal in which the head of the IMF took George Osborne to task. When I ask him about it, he calls our austerity economics "a cruel hoax". Cruel because "it hurts people who have been hurt enough". And a hoax because, "It simply doesn't work. Look at the figures."It should be our crunch time too. We have more people living in poverty who have jobs than those who don't, according to Oxfam. The average British citizen – the average – is three pay cheques away from destitution. And with the entire country poised on the brink of a triple-dip recession.Perhaps the unlikeliest thing about Robert Reich is how very chipper he is. Even though, by every measure, inequality has got worse in the United States since he started preaching his doctrine. He doesn't seem to let it get to him.There are clips of him from the 90s when he used to be a regular pundit on Fox News, but as American politics has moved to the right, he has found himself cast as a dangerous leftie. "Robert Reich?" says a pundit on one news clip. "He's a communist. A socialist." It's not a coincidence that he makes a point of saying in the film that he is not, and never has been, a member of the Communist party. And he and Kornbluth go to extraordinary lengths not to mention the word "Sweden" or "Japan" and barely even "Germany".No good will come of telling the American people what funny foreigners get up to. It is, instead, rather gently subversive, the aesthetic opposite of any film by Michael Moore. It tries to politely prod its viewers into looking at the world differently rather than beating them around the head with a heavy wooden bat marked "polemic".But American politics has become so polarised, so ideologically vicious, that it's only a matter of time before it's attacked by the right as Stalinist propaganda. "But I'm used to that," he says. "I've been attacked at a personal level for the last 30 years. I'm just excited that this might trigger a debate. Though I'm trying not to get my hopes up."Crunch time in the US is looking ugly. Reich believes that both the Tea Party and Occupy movements spring from the same sense of anger and frustration that people fear. That politics will become more polarised, more extreme, more hate-filled.One of the key pieces of research that Reich cites is a study of tax data by Emmanuel Saez and Thomas Piketty which shows that the years of peak income inequality in America were in 1928 and 2007. Right before both crashes. "The parallels are striking," he says. It's also striking what happened in the years after 1928. How in Germany, to take a random example, worldwide depression also led to a vicious polarisation of right and left. And certain other outcomes.Could that happen in America? "Oh good heavens, I hope not!" he says. "Though when you go into periods of economic insecurity with widening inequality which puts the middle class under stress, you create fertile ground for demagogues from left or right. The politics of hate. The politics of fear. We're already seeing that."And yet, despite, it all, he remains hopeful. "Change has always been difficult," he says. It's why he teaches. If he can't change the world, maybe his students will. Or people who watch the film? I ask and get a classic, understated, deadpan but not entirely unoptimistic Reichian reply. "I'm trying to keep my expectations in check."DocumentarySundance film festival 2013Sundance film festivalAl GoreUS economyEconomicsEqualityCarole Cadwalladrguardian.co.uk © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds
So maybe too-big-to-fail banks aren't too big to jail after all. At least, it is starting to look as if tiny, digestible chunks of big banks are potentially subject to criminal charges, if the bank's evil deeds are obvious and egregious enough. The Wall Street Journal reports today that U.S. government officials are within days of announcing a $790 million fine and possible criminal charges for Royal Bank of Scotland over manipulation of the key short-term interest rate known as Libor. A deal could come in the next couple of weeks, the WSJ writes, but RBS officials are balking at the idea of pleading guilty to criminal charges. It is hard to blame RBS officials for balking -- only recently have U.S. prosecutors gotten brave enough to actually file criminal charges of any sort against banks. They started with the Swiss bank UBS, whose Japanese unit pleaded guilty last month to criminal charges to help settle that bank's massive Libor headache. Before that, ginormous banks such as Barclays (Libor) and HSBC (money-laundering) managed to dodge any criminal charges at all because officials were terrified of rattling the global financial system. When the world didn't end after UBS criminal charges, officials got a little bolder, the WSJ writes, meaning RBS might have to ritually sacrifice one of its own Asian subsidiaries. So that's good news: Actual criminal charges are likely to have more of a deterrent effect than the usual wrist-stinging fines and avoidance of admitting wrongdoing. Also helpful would be actual charges against individuals, of which there have been noticeably few in the Libor scandal. The BBC reported recently that dumb trader emails about Libor in the RBS case are "particularly lurid," which is really saying something, considering the history of dumb trader emails in this wide-ranging scandal. That suggests there could be grounds for some people to be sent to jail. And who knows? Maybe if prosecutors discover that they can send some people to jail over Libor without the world ending, then they might be emboldened to revisit the possibility of sending people to jail for the even more damaging mortgage-market shenanigans leading up to the financial crisis. Ah, but that's probably too much to ask.
Science has determined that people need to know 7.5 things per day, on average, about the world of business. You can't argue with science. Lucky for you, The Huffington Post has an email newsletter, delivered first thing every weekday morning, boiling down the day's biggest business news into the 7.5 things you absolutely need to know. And we're giving it away free, because we love you, and also science. Here you go: Thing One: Prosecutors Could Get Used To This 'Criminal Charges' Thing: So maybe too-big-to-fail banks aren't too big to jail after all. At least, it is starting to look as if tiny, digestible chunks of big banks are potentially subject to criminal charges, if the bank's evil deeds are obvious and egregious enough. The Wall Street Journal reports today that U.S. government officials are within days of announcing a $790 million fine and possible criminal charges for Royal Bank of Scotland over manipulation of the key short-term interest rate known as Libor. A deal could come in the next couple of weeks, the WSJ writes, but RBS officials are balking at the idea of pleading guilty to criminal charges. It is hard to blame RBS officials for balking -- only recently have U.S. prosecutors gotten brave enough to actually file criminal charges of any sort against banks. They started with the Swiss bank UBS, whose Japanese unit pleaded guilty last month to criminal charges to help settle that bank's massive Libor headache. Before that, ginormous banks such as Barclays (Libor) and HSBC (money-laundering) managed to dodge any criminal charges at all because officials were terrified of rattling the global financial system. When the world didn't end after UBS criminal charges, officials got a little bolder, the WSJ writes, meaning RBS might have to ritually sacrifice one of its own Asian subsidiaries. So that's good news: Actual criminal charges are likely to have more of a deterrent effect than the usual wrist-stinging fines and avoidance of admitting wrongdoing. Also helpful would be actual charges against individuals, of which there have been noticeably few in the Libor scandal. The BBC reported recently that dumb trader emails about Libor in the RBS case are "particularly lurid," which is really saying something, considering the history of dumb trader emails in this wide-ranging scandal. That suggests there could be grounds for some people to be sent to jail. And who knows? Maybe if prosecutors discover that they can send some people to jail over Libor without the world ending, then they might be emboldened to revisit the possibility of sending people to jail for the even more damaging mortgage-market shenanigans leading up to the financial crisis. Ah, but that's probably too much to ask. Thing Two: Immigration As Stimulus: President Obama today will announce immigration-reform plans that will be more liberal than the roadmap introduced by a group of Senators yesterday, including a quicker path to citizenship for millions of people in the U.S. illegally, writes the Washington Post. Though this is sure to get many conservatives' blood a-boiling, it could also be a boon to the U.S. economy, writes Edward Krudy of Reuters: "Relaxed immigration rules could encourage entrepreneurship, increase demand for housing, raise tax revenues and help reduce the budget deficit, economists said." See, the world's biggest economies all have demographic headaches, including rapidly aging populations. An influx of new blood could help solve that problem in the U.S., giving it an economic advantage. Thing Three: Fed Watch! The Federal Reserve starts a two-day policy meeting this morning, where it will discuss just how much money it wants to print to keep the U.S. economy moving along. Economists estimate the Fed will end up buying more than $1.1 trillion worth of bonds under its latest bond-buying program by 2014, Bloomberg writes. But economists aren't exactly sure how much this bond-buying will actually, you know, help the economy. And Fed officials are starting to get nervous about the possible side effects of all of this money flying around, Quartz's Simone Foxman wrote recently. Thing Four: Here In My Car I Feel Safest Of All: U.S. auto makers start telling us about their 2012 profits today, starting with Ford, which reported a $1.6 billion profit. Taken together, the past two years have been among the most profitable for the U.S. auto industry "in decades," the Wall Street Journal writes. Pretty impressive, considering two of the Big Three went bust just a few years ago. And now they have something to shoot for: Toyota last year regained the title of the world's biggest auto maker, overcoming natural disaster and recalls to sell 9.75 million units, compared with 9.29 for GM, the WSJ writes. Thing Five: Slow Down, You Move Too Fast: U.S. officials have been looking into whether media companies, including Bloomberg, Dow Jones and Thomson Reuters, have been letting critical economic data slip a few microseconds too early, giving high-speed trading robots an advantage, the Wall Street Journal reports. They decided against filing criminal charges, in part because it's too hard to figure out what stuff got released too early and whether it actually helped any traders. Thing Six: Runaway Pay: Bailed-out U.S. companies such as GM and AIG have given their executives big raises for the past two years, while the Treasury Department twiddled its thumbs, according to a new report by the special inspector general for the Troubled Asset Relief Program, Christy Romero. She said Treasury essentially outsourced decisions about executive pay to the companies themselves, despite the fact that the U.S. government was still a stakeholder in those companies. Thing Seven: Mortgage Skimming: Federal prosecutors yesterday charged a former trader at the brokerage firm Jefferies & Co. of skimming a little bit of money here and there from clients in trades of residential mortgage-backed securities, writes the New York Times. Among the victims were funds set up by TARP to help bolster the market for RMBS, according to the government. The probe was led by Romero's busy TARP watchdog office. The total amount allegedly taken was not much, a little more than $2 million, but the case is an example of Romero's aggressive approach to enforcement, writes the NYT's Peter Lattman. Feel free to compare and contrast that to the approach taken by other government agencies (cough, Justice Department, cough). Thing Seven And One Half: The Yankees Still Suck: On this day in 1900 baseball's American League was founded in Philadelphia. The league originally consisted of eight teams, including the progenitors of today's New York Yankees (then called the Baltimore Orioles; today's Orioles were then called the Milwaukee Brewers) and Boston Red Sox (then called the Boston Americans). Only one of those teams, the Detroit Tigers, still has the same name and location as it did 112 years ago. Detroit also happens to be the most recent AL champion. The AL champion in the league's first year of play, 1901, was the Chicago White Stockings, now White Sox. Now Arriving By Email: If you'd like this newsletter delivered daily to your email inbox, then please just feed your email address to the thin box over on the right side of this page, wedged narrowly between the ad and all the social-media buttons. OR, if you are logged into a HuffPost account, you could simply click on this link and tick the box labeled "7.5 Things" (and any other kind of news alert you'd like to get). Nothing bad will happen to you if you do, unless you consider getting this newsletter delivered daily to your email inbox a bad thing. Calendar Du Jour: Economic Data: 9:00 a.m. ET: S&P/Case-Shiller Home Price Index for November 10:00 a.m. ET: Consumer Confidence for January Corporate Earnings: Amazon.com Ford Harley-Davidson Pfizer U.S. Steel Heard On The Tweets: Barnes & Noble to close 20 stores a year. For the next 600 years. $BKS— Downtown Josh Brown (@ReformedBroker) January 28, 2013 Hey guys, wondering if the SAG Awards were full of class AND sass--- oh never mind. The CNN front page answered that exact question for me.— Kumail Nanjiani (@kumailn) January 28, 2013 I've been voted Most Likely To Never Exercise for three years not running!— Derek Lawler (@RowdyBowden) January 28, 2013 Me: want me to help you cook? Mom: no, all you ever make in the kitchen is a mess. Me: False. I've made several stellar fires.— Manda (@lilgapeach30) January 28, 2013 "Gangster Squad" is such a dumb name for that movie. It should be called "Ryan Gosling Is In This".— Robin McCauley (@RobinMcCauley) January 25, 2013 -- Calendar and tweets rounded up by Alexis Kleinman. And you can follow us on Twitter, too, if you want, no pressure: @AlexisKleinman and @MarkGongloff
Submitted by Jim Quinn of The Burning Platform blog, Mother, do you think they’ll drop the bomb?Mother, do you think they’ll like this song?Mother, do you think they’ll try to break my balls?Ooh ah,Mother, should I build the wall? Mother, should I run for president?Mother, should I trust the government?Mother, will they put me in the firing line?Ooh ah,Is it just a waste of time? Pink Floyd – Mother The lyrics to Mother had both a literal and figurative meaning for Roger Waters. He was literally describing his overprotective single mother (his father was killed in World War II) building walls to protect him from the outside world. The figurative meaning is Big Mother sending its boys off to war and using fear to control and manipulate the masses. At the time he wrote this song in 1979, the Soviet Union was thought to be at its peak of power and the Berlin Wall represented a boundary between good and evil. Nuclear war was still a looming fear. Waters has always had a dim view of totalitarian states and institutions (English schools). Having seen his Wall Tour performance this past summer at Citizens Bank Park with a diverse crowd of 40,000, ranging in age from senior citizens to teenagers, it seems this song has gained new meaning. He sang a duet with himself from 1980 projected on the Wall and when he sang the lyric, “Mother, should I trust the government?” the entire stadium responded in unison – NO!!! This revealed a truth that is not permitted to be discussed by the corporate mainstream media acting as a mouthpiece for the ruling class. A growing legion of citizens in this country does not trust the government. This is very perceptive on their part. In part one of this two part series – Hey You – I examined how an invisible government of wealthy, power hungry men have utilized the propaganda techniques of Edward Bernays and lured the American people into a narcissistic, techno-gadget, debt based servitude. Over the last one hundred years they have created a totalitarian state built upon egotism, material goods, and fulfilling our desires through Wall Street peddled debt and mass consumerism. It has been an incredibly effective form of control that has convinced the masses to love their servitude. The ruling oligarchs correctly chose the painless, amusement saturated, soft totalitarianism of Huxley’s Brave New World over the fearful, pain inflicting, surveillance state, house of horrors detailed in Orwell’s 1984. “A really efficient totalitarian state would be one in which the all-powerful executive of political bosses and their army of managers control a population of slaves who do not have to be coerced, because they love their servitude.” – Aldous Huxley – Brave New World The nefarious establishment of the Federal Reserve in 1913, launch of welfare programs in the 1930s, expansion of the entitlement state in the 1960s, creation of the credit card in 1970, mass media marketing propaganda, and the formation of an empire of debt laid the foundation for a society based on triviality, egotism, irrelevance and mass delusion. The conscious manipulation of the habits and opinions of the masses by an invisible government of powerful men using media propaganda and easy to access consumer credit has reached its mathematical limit. The oligarchs built a society dependent upon exponential growth. This unsustainable prototype began to show signs of strain in the 1990s. The powerful interests have been growing ever more desperate and blatantly obvious in their looting and pillaging of the debt bloated carcass of a country. They used their control of the political system to repeal Glass-Steagall, allowing the Wall Street banking cabal to become Too Big to Control. The oligarch puppets at the Wall Street controlled Federal Reserve did the bidding of their masters by reducing interest rates and expanding the money supply to create two epic bubbles. The Dot.com bubble was created by Wall Street utilizing hype and misinformation to fleece millions into believing we had entered a new paradigm. The only people who got rich were the Wall Street hucksters, shysters and shills. When the Dot.com bubble burst, Alan Greenspan came to the rescue, at the urging of Nobel prize winner Paul Krugman, by creating the largest banker made bubble in the history of the world. The combination of excessively low mortgage rates, complete lack of regulatory oversight by the Federal Reserve, control fraud committed by the Wall Street banks, and buying frenzy stirred up by the corporate MSM and NAR, led to the biggest financial collapse since 1929. The white collared psychopathic criminals on Wall Street reaped billions in profits, paid themselves millions in bonuses, and cost taxpayers trillions when it all blew up in 2008. The ruling elite have added $6 trillion to our national debt and their central banker has added another $2 trillion to our ultimate tab, while providing free money to their Wall Street bank owners. They realize their efforts to restart the exponential growth engine have failed. They gutted our productive manufacturing based economic system by shipping the blue collar jobs overseas to Chinese slave labor facilities, replaced workers with machines, stimulated consumption with unlimited distribution of high interest debt, and allowed conglomerates to drive small business owners out of business with their cheap foreign sourced goods, all in the name of capitalism. The plan worked so well that real wages haven’t risen in 40 years, inflation has destroyed the purchasing power of the middle class, 47.7 million people are dependent on food stamps to survive, and the masses can’t even afford the cheap slave labor produced trinkets anymore. There is too little cash, too few jobs, too much debt, too many takers, too few makers, too many bankers, too much delusion, and too few resources to sustain the unsustainable. We have entered the end stages of a ravenous locust swarm. The fields have been stripped barren. When the men in smoke filled rooms realized their soft totalitarianism was losing its grip on the oblivious, submissive, egoistical, distracted masses, they began phase two of their effort to retain their wealth, power and control. They began to institute Orwellian measures to strike fear into the populace. Their illusion of control is dissipating and they are resorting to force in order to maintain hegemony. It began with the immediate passage of the Orwellian Patriot Act one month after 9/11. Did the corporate media question how a 363 page all-encompassing expansion of police state power was written in a few weeks after 9/11 and passed by October 26? They did not. The bill was pre-written and ready for instant implementation when the time was right. The Orwellian version of America was launched. “If the ideology had been a lie, then they are not heroes and gods on earth, but monsters and criminals, and their life has been self-serving and meaningless, without significance and honor. And that is the credibility trap. It is the impulse for the leaders to keep doubling down in the hope of a win, until exhaustion and collapse.” – Jesse Obedience to Authority “Ordinary people, simply doing their jobs, and without any particular hostility on their part, can become agents in a terrible destructive process. Moreover, even when the destructive effects of their work become patently clear and they are asked to carry out actions incompatible with fundamental standards of morality, relatively few people have the resources needed to resist authority.” - Stanley Milgram – Obediance to Authority Just as Edward Bernays knew the unruly masses could be manipulated by propaganda and molded to believe whatever the small group of intellectually superior men wanted them to believe, conditioning using fear and authoritarian methods have also been perfected by the ruling class. Doctor Stanley Milgram unwittingly provided the oligarchs with confirmation the average citizen could be ordered to do anything by invoking expertise and authority over their subjects. Milgram started his experiments in 1961, shortly after the trial of the World War II criminal Adolph Eichmann had begun. Eichmann’s defense that he was simply following orders when he exterminated millions of Jews roused Milgram’s interest. How could millions of Germans participate and condone such genocide? Milgram’s testing suggested that it could have been that the millions of accomplices were merely following orders, despite violating their deepest moral beliefs. Writer Kendra Cherry describes the experiment: The participants in the Milgram experiment were 40 men recruited using newspaper ads. Milgram developed an intimidating shock generator, with shock levels starting at 30 volts and increasing in 15-volt increments all the way up to 450 volts. The many switches were labeled with terms including “slight shock,” “moderate shock” and “danger: severe shock.” The final two switches were labeled simply with an ominous “XXX.” Each participant took the role of a “teacher” who would then deliver a shock to the “student” every time an incorrect answer was produced. While the participant believed that he was delivering real shocks to the student, the student was actually a confederate in the experiment who was simply pretending to be shocked. As the experiment progressed, the participant would hear the learner plead to be released or even complain about a heart condition. Once the 300-volt level had been reached, the learner banged on the wall and demanded to be released. Beyond this point, the learner became completely silent and refused to answer any more questions. The experimenter then instructed the participant to treat this silence as an incorrect response and deliver a further shock. Most participants asked the experimenter whether they should continue. The experimenter issued a series of commands to prod the participant along: “Please continue.” “The experiment requires that you continue.” “It is absolutely essential that you continue.” “You have no other choice, you must go on.” The level of shock that the participant was willing to deliver was used as the measure of obedience. How far do you think that most participants were willing to go? When Milgram posed this question to a group of Yale University students, it was predicted that no more than 3 out of 100 participants would deliver the maximum shock. In reality, 65% of the participants in Milgram’s study delivered the maximum shocks. Of the 40 participants in the study, 26 delivered the maximum shocks while 14 stopped before reaching the highest levels. It is important to note that many of the subjects became extremely agitated, distraught and angry at the experimenter. Yet they continued to follow orders all the way to the end. Why did so many of the participants in this experiment perform a seemingly sadistic act on the instruction of an authority figure? According to Milgram, there are a number of situational factors that can explain such high levels of obedience: The physical presence of an authority figure dramatically increased compliance. The fact that the study was sponsored by Yale (a trusted and authoritative academic institution) led many participants to believe that the experiment must be safe. The selection of teacher and learner status seemed random. Participants assumed that the experimenter was a competent expert. The shocks were said to be painful, not dangerous. The American people have been participants in their very own Milgram experiment being conducted by their government since 9/11. Since the passage of the Patriot Act, the government continues to demand that its citizens increase the voltage in the name of security. Since 2001, the Orwellian measures have included: Warrantless domestic surveillance. The ability to search telephone calls, emails, financial matters especially involving foreign individuals, and medical records for people who are “suspected” of endangering the country. Color coded risk levels designed to keep citizens fearful of non-existent terrorists. Pre-emptive invasion of foreign countries. Committing U.S. forces to war without a declaration of war by Congress as mandated in the U.S. Constitution. Assassination of people on presidential kill lists. Extermination of “suspected” enemies by predator drones. Camera systems monitoring the movements of Americans in cites and streets across the United States. Torture of detainees in camps outside of the United States. The authority to indefinitely detain America citizens without trial. Executive orders giving the President the ability to unilaterally disregard the U.S. Constitution and take control of private industries. Use of drones to monitor the activities of American citizens. Allowing the very bankers that destroyed the worldwide economic system to blackmail the American taxpayers into handing them $700 billion. Not prosecuting one Wall Street criminal after the largest Ponzi control fraud in the history of the world. Cameras and listening devices on public transit and other public locations. Military exercises conducted in U.S. cities in order to condition the masses. Attempts to control and censor the internet through the introduction of the SOPA bill. The use of tragic mass murders by mentally defective young men on psychotropic drugs to disregard the 2nd Amendment and disarm American citizens. TSA thugs molesting little old ladies and young children to desensitize citizens to gestapo like tactics and treat them like criminals. Government partnering with Facebook, Apple and other corporate entities to monitor, censor, and report the activities of citizens to the authorities. The use of public schools to teach children what to think rather than how to think. Thought control is vital to an agenda of keeping the masses fearful and pliable. Government agencies (FBI, ATF) creating terrorist plots, luring young dupes into the plots, providing fake explosives, and then announcing with great fanfare they have foiled a terrorist plot. “See something, Say something” government media campaign designed to make citizens paranoid and fearful. Just as Milgram pondered how the German people could follow the orders of those in authority to slaughter millions, one must ponder how the American people have allowed those in power to strip us of our Constitutional freedoms and liberties in the name of safety and security. They have conditioned the masses to passively accept their fate by utilizing fear, authoritarian measures, thought control, and propaganda. Human beings never change. They have been driven by emotions throughout history – fear, greed, love and hate. There will always be psychopathic men who seek wealth, power, glory and control. It happened during the decline of the Roman Empire and it is happening today during the decline of the American Empire. “A shocking crime was committed on the unscrupulous initiative of few individuals, with the blessing of more, and amid the passive acquiescence of all.” – Tacitus Big Brother is Watching You “Now I will tell you the answer to my question. It is this. The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power, pure power. What pure power means you will understand presently. We are different from the oligarchies of the past in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites. The German Nazis and the Russian Communists came very close to us in their methods, but they never had the courage to recognize their own motives. They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just around the corner there lay a paradise where human beings would be free and equal. We are not like that. We know what no one ever seizes power with the intention of relinquishing it. Power is not a means; it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power. Now you begin to understand me.” – George Orwell – 1984 What the average person can’t seem to process through their government public school educated non-critical thinking brains is that there are actually a small group of bankers, politicians, corporate executives, media magnets, and shadowy billionaires who call the shots in this country. They constitute Bernays’ invisible government, run the show, mold the minds, form the opinions, suggest the ideas, and create the reality for the masses because they believe they are intellectually superior. The left/right and Democrat/Republican discord is a planned diversion for the masses. The country has devolved into a corporate fascist warfare/welfare state. We are clearly moving in the direction of Orwell’s state in which government monitors and controls every aspect of human life to the extent that even having a disloyal thought will be against the law. The longer this is allowed to progress the more likely any effort to resist like Winston Smith will be met with brutal measures. The parallels to Orwell dystopian nightmare state grow by the day. Those in control use technology to bombard Americans with psychological inducements designed to overwhelm the mind’s capability for autonomous thought. In Orwell’s 1984 the giant telescreen in every citizen’s room blasts a constant stream of propaganda designed to make the failures and shortcomings of the Party appear to be triumphant successes. In Obama’s 2013 the 72 inch Chinese made HDTVs in every McMansion blasts a constant stream of propaganda designed to make the zombie-like occupants buy trinkets and gadgets with a thin piece of plastic and makes the failures in Iraq, Afghanistan, Egypt and Libya appear to be triumphant successes. Our corporate/fascist party uses their control over the media message to indoctrinate and control the public mind through propaganda and repetitive messaging. In Orwell’s world, the Party undermines family structure by inducting children into an organization called the Junior Spies, which brainwashes and encourages them to spy on their parents and report any instance of disloyalty to the Party. In our world children are indoctrinated in government run public schools that fill their brains with government manufactured history, social engineering claptrap and what they should think, rather than how to think. The Orwellian Department of Homeland Security (Thought Police) instructs them to report anyone they think is suspicious with their “See something, Say something” campaign. Children are “encouraged” to re-educate their parents about green energy and global warming. Corporations fund schools to advertise their products within the hallways of learning. The outputs of this corporate/fascist partnership are non-critical thinking, functionally illiterate, willfully ignorant Proles who obey the Party and consume products as instructed. In Orwell’s 1984 the Party keeps the population in a general state of exhaustion by making them work long grueling hours at government run agencies. This was designed to keep them from thinking or having the energy to resist. About one in six workers work for the government in the United States, with a substantial portion of private jobs dependent upon government largesse. The true distinction in our society can be seen in the income levels over decades of our own Inner Party, Outer Party and Proles. The government educated masses were purposely not taught about the impact of Federal Reserve created inflation on their lives. Even using the government manipulated CPI, the real household incomes of the masses have barely risen in the last forty five years. Using a true measure of inflation, the real household incomes of the average family have fallen. In addition, prior to the 1980s those household incomes were predominantly provided with one parent working and the other raising the children. Today the vast majority of households require both parents to work in order to just tread water. Child rearing was delegated to the state and parents have been kept in a constant state of exhaustion, like hamsters in a cage on a spinning wheel. Household income was replaced by credit card debt, mortgage debt, auto debt, and student loan debt peddled by our very own Inner Party (Wall Street bankers). The Inner Party members have seen their incomes soar over the last four decades. This was not an accident. As those at the top accumulate an ever increasing percentage of the national wealth, while consolidating their power through ever more sophisticated use of technology for surveillance, warfare, and financial theft; urban decay and blight spreads across the land. Totalitarian regimes are ferociously effective at augmenting their own power and wretchedly incompetent at providing for their citizens. Just as the London in Orwell’s dystopian world was a decrepit, rundown city in which buildings were crumbling, amenities such as elevators never worked, and basics such as electricity and plumbing were exceedingly undependable, the urban killing fields that are home to tens of millions in the United States are dangerous, disintegrating, hallowed out carcasses of once thriving metropolises. Hunger, poverty, crumbling infrastructure, and violence are the earmarks of society for the Proles. True unemployment exceeds 20%, with youth and minority unemployment exceeding 40%. There are 47.7 million Americans subsisting on food stamps (program administered by JP Morgan), accounting for 20% of all the households in the country. The incompetency and mismanagement by our totalitarian governing body is evident for all to see, as bridges collapse, water mains burst, gas lines explode, mass transit shuts down and structures deteriorate due to decades of neglect. The priorities of those in power are clearly visible as they spend trillions on weapons used to attack sovereign countries, distribute billions in “aid” to foreign dictators, provide trillions to the criminal banking cabal on Wall Street, and devote billions to technology designed to monitor and control their citizens. Our entire rotting, fetid, bloated, corrupt society has about reached its limits. It is only a matter of time until it implodes like the former Soviet Union. “Diminishing returns of ever-increasing complexity addressed with ever-more layers of complexity, larded with systematic lying based on mystifying, opaque jargon, sanctioned statistical misreporting, felonious cronyism, and scuttling of the rule of law. In short, the markets have been taken over in effect by a criminal racketeering syndicate. In doing this, so much resilience has been removed from these market structures that they are riddled with rot, like a mansion infested with carpenter ants.” – Jim Kunstler We Have Always Been at War with Eastasia Hush now baby, baby, don’t you cry.Mamma’s gonna make all of your nightmares come true,Mamma’s gonna put all of her fears into you,Mamma’s gonna keep you right here, under her wing. She won’t let you fly, but she might let you sing,Mamma’s gonna keep baby cozy and warm.Oooh babe, Oooh babe, Oooh babe,Of course Mamma’s gonna help build the wall. Pink Floyd – Mother The concepts of Doublethink and Newspeak are alive and well in our increasingly Orwellian society. The massive long-term campaign of large-scale psychological manipulation, described in detail by Edward Bernays in 1928, has succeeded in breaking down the capacity for independent thought by the masses. Those in control of the media have molded the minds of millions to believe anything the government tells them, even while possessing information that runs counter to what they are being told. On the eve of the invasion of Iraq, the government and their media propaganda mouthpieces had convinced 69% of the American public that Saddam Hussein was involved in the 9/11 attacks, even though there wasn’t a shred of evidence to support that claim. The storyline of Iraqi soldiers murdering Kuwaiti babies in their incubators during the first Gulf War was another example of propaganda designed to manipulate public opinion. By controlling the media message, those in power control the present and can manipulate the past. The government controls the curriculum in public schools and writes our history to conform to whatever storyline that supports their agenda. With 20% of the adult population in this country functionally illiterate, the formulation of ideas or critical thought is virtually impossible for these people. This is exactly what is desired by the ruling class. The outrageous example of Doublethink in Orwell’s 1984 occurs during the Hate Week rally. The Party shifts its diplomatic allegiance, so the nation it has been at war with suddenly becomes its ally (Eurasia), and its former ally becomes its new enemy (Eastasia). When the Party speaker suddenly changes the nation he refers to as an enemy in the middle of his speech, the crowd accepts his words immediately, and is ashamed to find that it has made the wrong signs for the event. The American people have been programmed to accept the same logic from our leaders. Saddam Hussein was our ally when he was fighting our enemy Iran, who had been our ally ever since we had overthrown their democratically elected leader in the 1950s. Then he became our enemy for using weapons of mass destruction, provided to him by the U.S., on his own people and threatening our control over Middle Eastern oil. Osama bin Laden was our ally when he was fighting our mortal enemy, the Soviet Union. Then he became our mortal enemy because we refused to leave Saudi Arabia after the first Gulf War. Ghadafi was our sworn enemy after blowing up an airliner filled with Americans, until he helped us after 9/11 and became an ally. Then he became an enemy again for fighting to maintain his dictatorship. Mubarak was an ally for decades as we provided him billions in military hardware so he could brutally maintain control. Then he became an enemy when we decided he was no longer of use. Do you get the picture? Do you see any parallels between Orwell’s Ministry of Plenty (oversees economic shortages); the Ministry of Peace (wages war); the Ministry of Truth (conducts propaganda and historical revisionism); and the Ministry of Love (the center of the Party’s operations of torture and punishment) and our Department of Agriculture, Department of Defense, Department of Education, and Department of Homeland Security? “In our age there is no such thing as ‘keeping out of politics.’ All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred and schizophrenia. The very concept of objective truth is fading out of the world. Lies will pass into history.” – George Orwell Should I Trust the Government? So the oligarchs have utilized all the plays in Huxley’s playbook and are half way through Orwell’s playbook, but they are rapidly losing their credibility as a small minority of critical thinking people is using the internet to spread the truth and form phyles with like-minded citizens with similar values based on liberty and freedom. The political system is broken beyond repair as $2 billion was spent during this last “election” to maintain the status quo. The looting and pillaging of the middle class continues, while the poor are kept controlled, sedated and enslaved by entitlements, debt, drugs and prisons. The financial system is succumbing to the mountains of debt that have been accumulated trying to keep the game going. In the last ten years worldwide total credit market debt, on balance sheets, sovereign obligations, corporate debt, household debt – has grown from $80 trillion to just over $200 trillion. U.S. unfunded liabilities committed to by the politician parasites that pass for our representatives surpass $200 trillion. There are $1.2 quadrillion of interconnected derivatives outstanding in the world today, 20 times the size of the worldwide economy. The accumulation of worldwide debt, aging developed country populations, depletion of resources, perpetual war, financial fraud and rampant corruption are going to lead to a collapse of epic proportions. It may not happen in 2013, but it will happen within the next five years. Jesse explains why the status quo will never relinquish their power, illegally acquired wealth and control without a fight: “A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including them. The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards. And so a failed policy and its support system become self-sustaining, long after it is seen by objective observers to have failed. In its failure it is counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for the thought leaders who receive their power from that system. The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious hypocrisy.” The people of this country must regain a sense of responsibility for their lives and the lives of future generations. Enough people need to perceive they are being manipulated, controlled and used by the thought leaders and awaken from their narcissistic materialistic debt financed lives. Our culture has failed. The animosity and anger in the country is beginning to bubble over. The masses are beginning to realize they have been screwed. They haven’t figured out who to blame because they are still trapped in the Republican/Democrat false dogma. There is one Party putting on a show, as displayed this week with the fiscal cliff farce, as the government controlled media proclaimed victory because the status quo was maintained, nothing was cut, and $4 trillion was added to the National Debt. More people need to question and challenge the authorities. We must cast aside our willful ignorance of facts and accept the consequences of decades of bad decisions and delusions of grandeur. More government is not the answer. We must break free of the conditioning and mind control used to make us love our servitude and trust those in power. Kyle Bass recently revealed a fact about our government leaders: “They’re not going to tell you that a collapse is coming. You’re going to have to see it for yourself. The government’s never going to tell you that it’s going to happen. These guys are never going to tell you the truth, because they can’t tell you the truth. Their job is to promote confidence, not to tell you the truth.” We need more people to respond to Roger Waters’ question, “Mother, should I trust the government?” with this answer before we can begin to tear down the wall that seemed too high. “During times of universal deceit, telling the truth becomes a revolutionary act.” – George Orwell
The interview below with Osama bin Laden was conducted by the Karachi, Pakistan, daily newspaper, Ummat and published on September 28, 2001, 17 days after the alleged, but unsubstantiated, al Qaeda attack of September 11, 2001, on the World Trade Center twin towers and Pentagon. The interview was sensational. The alleged “mastermind” of 9/11 said that he and al Qaeda had nothing to do with the 9/11 attack. The British Broadcasting Corporation’s World Monitoring Service had the interview translated into English and made public on September 29, 2001. Osama bin Laden’s sensational denial was not reported by the US print and TV media. It was not investigated by the executive branch. No one in the US Congress called attention to bin Laden’s refusal of responsibility for the greatest humiliation ever inflicted on a superpower. To check my memory of the lack of coverage, I googled “Osama bin Laden’s interview denying responsibility for 9/11.” Some Internet sites reproduced the interview, but the only mainstream news source that I found was a 1 minute YouTube video from CNN in which the anchor, after quoting an al Jazeera report of bin Laden’s denial, concludes that “we can all weigh that in the scale of credibility and come to our own conclusions.” In other words, bin Laden had already been demonized, and his denial was not credible. The sensational news was unfit for US citizens and was withheld from them by the american “free press,” a press free to lie for the government but not to tell the truth. Obviously, if bin Laden had outwitted not only the National Security Agency, the CIA, the Defense Intelligence Agency, and the FBI, but also all 16 US intelligence agencies, all intelligence agencies of Washington’s NATO puppet states, Israel’s Mossad, and in addition the National Security Council, NORAD, US air traffic control, and airport security four times on the same morning, it would be the greatest feat in world history, a movement building feat that would have made al Qaeda the most successful anti-imperialist organization in human history, an extraordinary victory over “the great satan” that would have brought millions of new recruits into al Qaeda’s ranks. Yet the alleged “mastermind” denied all responsibility. I remember decades ago when a terrorist attack occurred in Europe, whether real or an Operation Gladio http://en.wikipedia.org/wiki/Operation_Gladio false flag attack, innumerable organizations would claim credit. Perhaps this was the CIA’s way of diverting attention from itself, but it illustrates that every intelligence service understands the value to an organization of claiming credit for a successful attack.Although bin Laden denied responsibility, in 2011 some al Qaeda leaders, realizing the prestige value of the 9/11 attack, claimed credit for the attack and criticized Iranian President Ahmadinejad for questioning the official US story. Although only a few Americans are aware of the September 28, 2001 interview in which bin Laden states his non-involvement with the 9/11 attacks, many Americans have seen post-2001 videos in which a person alleged to be bin Laden takes credit for the attacks. There are two problems with these videos. Experts have examined them and found them to be fakes, and all of the videos appeared after bin Laden was reported by the Pakistan Observer, the Egyptian press, and Fox News to have died in mid-December, 2001, from lung disease. http://www.foxnews.com/story/0,2933,41576,00.html See also http://www.legitgov.org/News-Bin-Ladens-Death-and-Funeral-December-2001 Bin Laden also suffered from kidney disease. According to a CBS news report on January 28, 2002, Osama bin Laden was hospitalized for dialysis treatment in the Pakistani military hospital in Rawalpindi on September 10, 2001, the day before 9/11. http://www.globalresearch.ca/where-was-osama-on-september-11-2001/3194 Obviously, a man suffering from terminal lung and kidney disease did not survive for another decade to be murdered by a US Navy SEAL team in Abbottabad. A Pakistani TV interview with the neighbor of the alleged “bin Laden compound” exposed the assassination hoax. This sensational interview also went unreported by america’s “free press.” I had the interview translated, and it is available here:http://www.globalresearch.ca/pakistan-tv-report-contradicts-us-claim-of-bin-laden-s-death/25915 See also http://www.bbc.co.uk/news/world-south-asia-13329078 Shortly after the alleged assassination 30 members of the SEAL unit died in a mysterious helicopter crash in Afghanistan, and now we learn that not a single one of the thousands of sailors on the aircraft carrier, the USS Carl Vinson, witnessed bin Laden’s alleged burial at sea from that ship. The press reports with a straight face that for unexplained reasons it was kept secret from the ship’s sailors. This is supposed to be the explanation of the sailors’ emails reporting to family and friends that they witnessed no burial at sea. Some speculate that the SEALs were bumped off before their questions to one another, “Were you on that raid?,” reached outside the unit. Apparently, it doesn’t strike the media or the public as strange that the US government captured and killed the terror mastermind without interrogating him and without keeping any evidence or presenting any witnesses to support the assassination claim. Adolf Hitler claimed that communists burned down the Reichstag and that Polish troops had crossed the frontier and attacked Germany. With 9/11 americans experienced Washington’s version of these grand lies. An omniscient bin Laden dying from terminal illnesses in distant Afghanistan defeated the American National Security State and drove his attack through the walls of the Pentagon itself, requiring for our defense a “war on terror” that destroyed US civil liberties and financially ruined the country in order to prevent the triumph of a man who died of natural causes in December 2001. On May 9, 2011, Professor Michel Chossudovsky republished the September 28, 2001, Osama bin Laden interview in Global Research. Interview with Osama bin Laden. Osama Denies his Involvement in 9/11 By Global Research Global Research, May 09, 2011 Url of this article:http://www.globalresearch.ca/interview-with-osama-bin-laden-denies-his-involvement-in-9-11/24697 Global Research Editor’s NoteWe bring to the attention of our readers the following text of Osama bin Laden’s interview with Ummat, a Pakistani daily, published in Karachi on September 28, 2001. It was translated into English by the BBC World Monitoring Service and made public on September 29, 2001. The authenticity of this interview, which is available in recognized electronic news archives, is confirmed. Osama bin Laden categorically denies his involvement in the 9/11 attacks. Bin Laden’s statements in this interview are markedly different from those made in the alleged Osama video tapes. In this interview, Osama bin Laden exhibits an understanding of US foreign policy. He expresses his views regarding the loss of life on 9/11. He also makes statements as to who, in his opinion, might be the likely perpetrator of the September 11 attacks. This is an important text which has not been brought to the attention of Western public opinion. We have highlighted key sections of this interview. It is our hope that the text of this interview, published barely a week before the onset of the war on Afghanistan, will contribute to a better understanding of the history of Al Qaeda, the role of Osama bin Laden and the tragic events of September 11, 2001. Michel Chossudovsky, May 9, 2011 Full text of September 2001 Pakistani paper’s “exclusive” interview with Usamah Bin-Ladin Ummat (in Urdu), Karachi, 28 September 2001, pp. 1 and 7. http://ummatpublication.com/2012/11/25/ Ummat’s introduction Kabul: Prominent Arab mojahed holy warrior Usamah Bin-Ladin has said that he or his al-Qa’idah group has nothing to do with the 11 September suicidal attacks in Washington and New York. He said the US government should find the attackers within the country. In an exclusive interview with daily “Ummat”, he said these attacks could be the act of those who are part of the American system and are rebelling against it and working for some other system. Or, Usamah said, this could be the act of those who want to make the current century a century of conflict between Islam and Christianity. Or, the American Jews, who are opposed to President Bush ever since the Florida elections, might be the masterminds of this act. There is also a great possibility of the involvement of US intelligence agencies, which need billions of dollars worth of funds every year. He said there is a government within the government in the United States. The secret agencies, he said, should be asked as to who are behind the attacks. Usamah said support for attack on Afghanistan was a matter of need for some Muslim countries and compulsion for others. However, he said, he was thankful to the courageous people of Pakistan who erected a bulwark before the wrong forces. He added that the Islamic world was attaching great expectations with Pakistan and, in time of need, “we will protect this bulwark by sacrificing of lives”. Following is the interview in full detail: Ummat: You have been accused of involvement in the attacks in New York and Washington. What do you want to say about this? If you are not involved, who might be? Usamah [Osama bin Laden]: In the name of Allah, the most beneficent, the most merciful. Praise be to Allah, Who is the creator of the whole universe and Who made the earth as an abode for peace, for the whole mankind. Allah is the Sustainer, who sent Prophet Muhammad for our guidance. I am thankful to the Ummat Group of Publications, which gave me the opportunity to convey my viewpoint to the people, particularly the valiant and Momin true Muslim people of Pakistan who refused to believe in lie of the demon. I have already said that I am not involved in the 11 September attacks in the United States. As a Muslim, I try my best to avoid telling a lie. I had no knowledge of these attacks, nor do I consider the killing of innocent women, children, and other humans as an appreciable act. Islam strictly forbids causing harm to innocent women, children, and other people. Such a practice is forbidden ever in the course of a battle. It is the United States, which is perpetrating every maltreatment on women, children, and common people of other faiths, particularly the followers of Islam. All that is going on in Palestine for the last 11 months is sufficient to call the wrath of God upon the United States and Israel. There is also a warning for those Muslim countries, which witnessed all these as a silent spectator. What had earlier been done to the innocent people of Iraq, Chechnya, and Bosnia? Only one conclusion could be derived from the indifference of the United States and the West to these acts of terror and the patronage of the tyrants by these powers that America is an anti-Islamic power and it is patronizing the anti-Islamic forces. Its friendship with the Muslim countries is just a show, rather deceit. By enticing or intimidating these countries, the United States is forcing them to play a role of its choice. Put a glance all around and you will see that the slaves of the United States are either rulers or enemies of Muslims. The US has no friends, nor does it want to keep any because the prerequisite of friendship is to come to the level of the friend or consider him at par with you. America does not want to see anyone equal to it. It expects slavery from others. Therefore, other countries are either its slaves or subordinates. However, our case is different. We have pledged slavery to God Almighty alone and after this pledge there is no possibility to become the slave of someone else. If we do that, it will be disregardful to both our Sustainer and his fellow beings. Most of the world nations upholding their freedom are the religious ones, which are the enemies of United States, or the latter itself considers them as its enemies. Or the countries, which do not agree to become its slaves, such as China, Iran, Libya, Cuba, Syria, and the former Russia as received. Whoever committed the act of 11 September are not the friends of the American people. I have already said that we are against the American system, not against its people, whereas in these attacks, the common American people have been killed. According to my information, the death toll is much higher than what the US government has stated. But the Bush administration does not want the panic to spread. The United States should try to trace the perpetrators of these attacks within itself; the people who are a part of the US system, but are dissenting against it. Or those who are working for some other system; persons who want to make the present century as a century of conflict between Islam and Christianity so that their own civilization, nation, country, or ideology could survive. They can be any one, from Russia to Israel and from India to Serbia. In the US itself, there are dozens of well-organized and well-equipped groups, which are capable of causing a large-scale destruction. Then you cannot forget the American Jews, who are annoyed with President Bush ever since the elections in Florida and want to avenge him. Then there are intelligence agencies in the US, which require billions of dollars worth of funds from the Congress and the government every year. This funding issue was not a big problem till the existence of the former Soviet Union but after that the budget of these agencies has been in danger. They needed an enemy. So, they first started propaganda against Usamah and Taleban and then this incident happened. You see, the Bush administration approved a budget of 40bn dollars. Where will this huge amount go? It will be provided to the same agencies, which need huge funds and want to exert their importance. Now they will spend the money for their expansion and for increasing their importance. I will give you an example. Drug smugglers from all over the world are in contact with the US secret agencies. These agencies do not want to eradicate narcotics cultivation and trafficking because their importance will be diminished. The people in the US Drug Enforcement Department are encouraging drug trade so that they could show performance and get millions of dollars worth of budget. General Noriega was made a drug baron by the CIA and, in need, he was made a scapegoat. In the same way, whether it is President Bush or any other US president, they cannot bring Israel to justice for its human rights abuses or to hold it accountable for such crimes. What is this? Is it not that there exists a government within the government in the United Sates? That secret government must be asked as to who made the attacks. Ummat: A number of world countries have joined the call of the United States for launching an attack on Afghanistan. These also include a number of Muslim countries. Will Al-Qa’idah declare a jihad against these countries as well? Usamah: I must say that my duty is just to awaken the Muslims; to tell them as to what is good for them and what is not. What does Islam says and what the enemies of Islam want? Al-Qa’idah was set up to wage a jihad against infidelity, particularly to encounter the onslaught of the infidel countries against the Islamic states. Jihad is the sixth undeclared element of Islam. The first five being the basic holy words of Islam, prayers, fast, pilgrimage to Mecca, and giving alms Every anti-Islamic person is afraid of it. Al-Qa’idah wants to keep this element alive and active and make it part of the daily life of the Muslims. It wants to give it the status of worship. We are not against any Islamic country nor we consider a war against an Islamic country as jihad. We are in favour of armed jihad only against those infidel countries, which are killing innocent Muslim men, women, and children just because they are Muslims. Supporting the US act is the need of some Muslim countries and the compulsion of others. However, they should think as to what will remain of their religious and moral position if they support the attack of the Christians and the Jews on a Muslim country like Afghanistan. The orders of Islamic shari’ah jurisprudence for such individuals, organizations, and countries are clear and all the scholars of the Muslim brotherhood are unanimous on them. We will do the same, which is being ordered by the Amir ol-Momenin the commander of the faithful Mola Omar and the Islamic scholars. The hearts of the people of Muslim countries are beating with the call of jihad. We are grateful to them. Ummat: The losses caused in the attacks in New York and Washington have proved that giving an economic blow to the US is not too difficult. US experts admit that a few more such attacks can bring down the American economy. Why is al-Qa’idah not targeting their economic pillars? Usamah: I have already said that we are not hostile to the United States. We are against the system, which makes other nations slaves of the United States, or forces them to mortgage their political and economic freedom. This system is totally in control of the American Jews, whose first priority is Israel, not the United States. It is simply that the American people are themselves the slaves of the Jews and are forced to live according to the principles and laws laid by them. So, the punishment should reach Israel. In fact, it is Israel, which is giving a blood bath to innocent Muslims and the US is not uttering a single word. Ummat: Why is harm not caused to the enemies of Islam through other means, apart from the armed struggle? For instance, inciting the Muslims to boycott Western products, banks, shipping lines, and TV channels. Usamah: The first thing is that Western products could only be boycotted when the Muslim fraternity is fully awakened and organized. Secondly, the Muslim companies should become self-sufficient in producing goods equal to the products of Western companies. Economic boycott of the West is not possible unless economic self-sufficiency is attained and substitute products are brought out. You see that wealth is scattered all across the Muslim world but not a single TV channel has been acquired which can preach Islamic injunctions according to modern requirements and attain an international influence. Muslim traders and philanthropists should make it a point that if the weapon of public opinion is to be used, it is to be kept in the hand. Today’s world is of public opinion and the fates of nations are determined through its pressure. Once the tools for building public opinion are obtained, everything that you asked for can be done. Ummat: The entire propaganda about your struggle has so far been made by the Western media. But no information is being received from your sources about the network of Al-Qa’idah and its jihadi successes. Would you comment? Usamah: In fact, the Western media is left with nothing else. It has no other theme to survive for a long time. Then we have many other things to do. The struggle for jihad and the successes are for the sake of Allah and not to annoy His bondsmen. Our silence is our real propaganda. Rejections, explanations, or corrigendum only waste your time and through them, the enemy wants you to engage in things which are not of use to you. These things are pulling you away from your cause. The Western media is unleashing such a baseless propaganda, which make us surprise but it reflects on what is in their hearts and gradually they themselves become captive of this propaganda. They become afraid of it and begin to cause harm to themselves. Terror is the most dreaded weapon in modern age and the Western media is mercilessly using it against its own people. It can add fear and helplessness in the psyche of the people of Europe and the United States. It means that what the enemies of the United States cannot do, its media is doing that. You can understand as to what will be the performance of the nation in a war, which suffers from fear and helplessness. Ummat: What will the impact of the freeze of al-Qa’idah accounts by the US? Usamah: God opens up ways for those who work for Him. Freezing of accounts will not make any difference for Al-Qa’idah or other jihad groups. With the grace of Allah, al-Qa’idah has more than three such alternative financial systems, which are all separate and totally independent from each other. This system is operating under the patronage of those who love jihad. What to say of the United States, even the combined world cannot budge these people from their path. These people are not in hundreds but in thousands and millions. Al-Qa’idah comprises of such modern educated youths who are aware of the cracks inside the Western financial system as they are aware of the lines in their hands. These are the very flaws of the Western fiscal system, which are becoming a noose for it and this system could not recuperate in spite of the passage of so many days. Ummat: Are there other safe areas other than Afghanistan, where you can continue jihad? Usamah: There are areas in all parts of the world where strong jihadi forces are present, from Indonesia to Algeria, from Kabul to Chechnya, from Bosnia to Sudan, and from Burma to Kashmir. Then it is not the problem of my person. I am helpless fellowman of God, constantly in the fear of my accountability before God. It is not the question of Usamah but of Islam and, in Islam too, of jihad. Thanks to God, those waging a jihad can walk today with their heads raised. Jihad was still present when there was no Usamah and it will remain as such even when Usamah is no longer there. Allah opens up ways and creates loves in the hearts of people for those who walk on the path of Allah with their lives, property, and children. Believe it, through jihad, a man gets everything he desires. And the biggest desire of a Muslim is the after life. Martyrdom is the shortest way of attaining an eternal life. Ummat: What do you say about the Pakistan government policy on Afghanistan attack? Usamah: We are thankful to the Momin and valiant people of Pakistan who erected a blockade in front of the wrong forces and stood in the first file of battle. Pakistan is a great hope for the Islamic brotherhood. Its people are awakened, organized, and rich in the spirit of faith. They backed Afghanistan in its war against the Soviet Union and extended every help to the mojahedin and the Afghan people. Then these are very Pakistanis who are standing shoulder by shoulder with the Taleban. If such people emerge in just two countries, the domination of the West will diminish in a matter of days. Our hearts beat with Pakistan and, God forbid, if a difficult time comes we will protect it with our blood. Pakistan is sacred for us like a place of worship. We are the people of jihad and fighting for the defence of Pakistan is the best of all jihads to us. It does not matter for us as to who rules Pakistan. The important thing is that the spirit of jihad is alive and stronger in the hearts of the Pakistani people. Copyright Ummat in Urdu, BBC translation in English, 2001 Read about Osama Bin Laden in Michel Chossudovsky’s international best-seller According to Chossudovsky, the “war on terrorism” is a complete fabrication based on the illusion that one man, Osama bin Laden, outwitted the $40 billion-a-year American intelligence apparatus. The “war on terrorism” is a war of conquest. Globalisation is the final march to the “New World Order”, dominated by Wall Street and the U.S. military-industrial complex. Order Directly from Global Research America’s “War on Terrorism” by Michel Chossudovsky Copyright © 2012 Global Research The post The Osama bin Laden Myth appeared first on PaulCraigRoberts.org.
Every so often, I get an idea that I know would make me millions of dollars. Today, I had another one: develop and market a pill that, when taken, would put you to sleep until the morning after the election. The pill would be magically timed to work no matter when you took it, meaning a citizen in Texas or California might not want to take one until perhaps mid-October, but the folks in Iowa and New Hampshire might be expected to take one New Year's Eve -- thus avoiding not only the debates and punditary frenzy of the general election, but the entire primary season as well. It would be marketed under the name "The Rip Van Winkle Pill." Okay, I fully admit that this would be medically dangerous, and likely downright impossible. But, hey, I bet I'd sell a bunch of RVW pills anyway (at least in the fantasy world of my overwrought imagination). How many of us would be tempted, at some point, to just say to friends and family, "I'll be out until November 7th, so just leave me a message and I'll get back to you then." As the 2012 election season draws to a close, it feels (as always) as though it's lasted four full years. At least to me -- but maybe I'm just jaded and exhausted because I pay such close attention to politics (speaking of things that are medically dangerous...). It's gotten so bad that I can't even bring myself to write a talking points column today. Oh, sure, I could give President Obama another award for his response to Hurricane Sandy, and even say a few nice things about Chris Christie, for whom I've always had a soft spot, just because of his double-barrelled "Chris" name (on which subject, I fully admit, I am biased). I could go back and dig out the best talking points of the election from Obama and other Democrats out there on the hustings, but at this point it really feels like it would be a wasted effort. How many of you, reading this, are still unsure about which candidate you're going to vote for? I have pro-Obama readers, I have pro-Romney readers (no, really!), and I bet I even have a few pro-third-party readers to boot. But I really seriously doubt anyone who is still unsure is spending time today reading my column. I could be wrong (I often am), but it just feels like there's no one left to convince, one way or the other. Of course, I don't live in a swing state -- that could have a lot to do with it. And I am not donating time to any candidate's campaign for "get out the vote" efforts, because my personal professional code of ethics forbids me to do such things (although I did make an exception last week to fully endorse a cat who is running for the United States Senate... which goes to show my own state of mind, I suppose). But I do not fault anyone for doing so, and in fact heartily encourage such participation in our democratic process. Want Obama to win? Call up your local Democrats and offer to put in some hours in a phone bank, cold-calling people in swing states, trying to convince them to vote for Barack. Want to see Romney elected? Call up your local Republicans and offer to do the same for Mitt. One local Republican Party outlet has a new ad up which is well worth viewing -- for all voters. In it, the fictional C. Montgomery Burns offers up the choice between "Broccoli Obama" and "Meat Romney." At this point, we could all use a little comedy relief, right? As in all elections, what interests me most are the things the media get horribly, horribly wrong. The biggest one this year would have to be "debates don't matter, they never change anyone's mind." The first Romney/Obama debate will be what is remembered in this election cycle, no matter who wins next Tuesday. It was a true "game-changer," no matter how overused the term is. It was just as much of a game-changer as, in 2008, the choice of Sarah Palin turned out to be (which was, at the time, dismissed by the punditocracy because: "running mates don't matter, they never change anyone's mind"). The one nugget of conventional wisdom that (thankfully) seems to have gone away this year was the obsession by pundits earlier over whether this would be a "choice" election or a "referendum" election. It's such a nonsensical theme, like saying the choice of eating ice cream is because it is either "sweet" or "cold." Well, um... it's both. It always is. But, like I said, thankfully this seems to have fallen by the wayside. The media did catch one break this time around. In every single election (at least the ones I've lived through), two storylines are consistently pushed by the media -- right up to Election Day itself. The first is the old "this is the most important election in your lifetime." This is trotted out every single time, and nobody ever notices that this cry of "Wolf!" is exactly the same as what was said four years ago. Exactly. Go back and look it up -- just pick any presidential election year, and you'll easily find those stating it's the most important election in all of American history. But it's the second quadrennial media theme in which the pundits actually caught a break this time around. Because every election -- no matter how big a blowout -- is always portrayed as "excruciatingly close" right up until the minute the votes start getting actually counted. This time around, the media may be right. There, I said it: a tired old media theme from the mainstream media could actually come to pass. I know, I'm as shocked as you are. I mean, these things just don't happen normally, right? Another thing this year's election may be remembered for -- if Obama wins -- is the "October Surprise" dished out by Mother Nature. Let's see... in 2008, the first day of the Republican National Convention was disrupted by a hurricane... in 2012, the first day of the Republican National Convention was disrupted by a hurricane... and then Hurricane Sandy arrived just in time for President Obama to look presidential and caring in the final week of the election. Now, I'm not one of those folks who pretends to be able to divine "God's will," so I leave it for others to draw conclusions about deities and what message is being sent, if any. Ahem. The other last-minute news politically looks like it's going to turn out to be pretty much of a non-starter. The unemployment rate inched up from 7.8 percent to 7.9 percent, but more jobs than expected were created in October. This allows both sides to spin things, without giving either side a true knockout punch. Romney will say things are not heading in the right direction -- the rate went up! But with unemployment under the psychologically-important level of 8 percent, Romney and the Republicans are robbed of a big conspiracy theory (the one about how last month's numbers were manipulated for political reasons). If unemployment was back up to 8.1 percent, you can bet your bottom dollar you'd be hearing this theme today. Obama will point to the number of jobs created and say things are heading in the right direction, the recovery is on track, so just give him four more years and things'll be better! But because the number went up, not down, Obama can't point to the rate itself as a good trend. If the rate had fallen to, say, 7.6 percent, Obama would be hammering this number home every chance he got, to put it another way. But they'll have to spin things on their own, because this week is the one week that I don't think anyone needs my help in formulating talking points. I've been doing this column for five years now, and while Democrats certainly need all the help they can get on this front in normal times, at the tail end of a presidential election the party machine is cranked into such a high gear that my efforts wouldn't even be icing on the cake at this point. I checked, and in 2008 the Friday before Election Day had no Friday Talking Points, because it was also the last weekday before Hallowe'en, so my annual "scare the pants off everyone with a little comedy" Hallowe'en column took precedence (if you missed it, check out my scary stories for 2012 from Wednesday). Comedy is important, in the midst of the political maelstrom. It allows us all to gain some well-needed perspective, at times. Which is why I started off joking about a Rip Van Winkle Pill (you can just picture the ads: "Wake me when it's over!"). But in reality nobody should sleep through an election. One of the best lines Obama has been using over the last month or so is to bait the crowd during a speech with a line he knows will get booed, and then respond (seemingly spontaneously) with: "Don't boo... vote!" I think America should enact this into law. I would support making it illegal to complain about politics -- any politics, from any viewpoint or party, including criticizing any politician -- unless you can prove you voted in the last election. I would call it the "If You Didn't Vote, You Can't Complain Act." Republicans want photo identification for voting? Well, I want any political commentator -- even those posting comments to blogs and articles such as this one -- to have to certify that they've voted before they're allowed to say anything -- anything -- about politics. Okay, that was comedy as well, I admit. Or at least a weak attempt. First Amendment... blah blah... unconstitutional... yadda yadda. I know it could never happen, but it certainly would be nice, wouldn't it? I leave you with excerpts from a real comedian (well, he plays one on teevee, at least) ranting about the importance of participating. This was from a rant by Craig Ferguson I heard in the last election cycle (read the whole thing, if you'd like -- it's hilarious). Craig is a naturalized United States citizen, so he personally feels very strongly about the issue of voting. And I can't say I disagree. So, to close, here is Craig Ferguson on why "Wake me when it's over" is really not even an option, or shouldn't be: Are we so lost we have to be sold our own democratic right? What the hell is wrong with... what is going on?!? We have to "sexy-up" the vote for young people? Remember four years ago Puff Diddley had that group "Vote or Die"? Then it turns out he didn't even vote himself! Maybe he forgot which name he registered under. Listen. Here's what I am saying to you... here's what I'm saying. Here's what I've been saying: If you don't vote, you're a moron. Alright? If you... settle down. I know you say: "Well, not voting is a vote" -- no, it isn't! Not voting is... is just being stupid. Voting is not sexy. Voting is not hip. It is not fashionable. It's not a movie. It's not a videogame. All the kids hate doing it. Frankly, voting is a pain in the ass, but here's a word -- look it up -- it is your duty to vote! "Duty?" The foundation in this democracy is based on free people making free choices. So, young people, if you can't take your hand out of your bag of Cheetos long enough to fill out a form, then you can't complain when we wind up with President Sanjaya! Listen. I am an American. This country at... is at war -- right now. Americans, in foreign lands, wearing uniforms representing this country, are losing their lives. Americans here in this country are losing their homes. We have two patriotic candidates, right? They both love this country. They have different ideas about what to do with it. Learn about them. Read about them. Question them. Listen to them. Then, on Election Day, exercise your sacred right as American, and listen to yourself. Craig then took a commercial break, and returned with a second half to his rant, where he gave everyone in the audience voter registration cards: Here's the thing that made me think, though, the... the people who didn't register to vote, when they were asked why they didn't vote, they said, ah... half of them said, "I'm not interested in the election," and the other half said, "I'm not interested in politics." How could you be not interested in politics? You've got, you've got to have an opinion about something. Don't you think? I mean, I don't know -- "I'm not interested in politics" -- do you, do you live anywhere? Do you, do you shop anywhere? Do you drive a car? Do you put on pants? Do you leave the house at any point? Do you own the house? Do you rent the house? Do you ever, ah, hope that the police will save you from something that may or may not be illegal? Of course you're involved in politics. If you're alive you're involved in politics. Chris Weigant blogs at: Follow Chris on Twitter: @ChrisWeigantBecome a fan of Chris on Huffington PostFull archives of FTP columns: FridayTalkingPoints.comAll-time award winners leaderboard, by rank
Published: Wednesday, 24 Oct 2012 | 7:11 PM By: Alex CrippenExecutive Producer CNBC/Lacy O'Toole Warren Buffett and Becky Quick Warren Buffett appeared live on CNBC's Squawk Box for a two-hour interview with Becky Quick. During their conversation, Buffett said there's "no question" the global economy is slowing and he's "salivating" for Berkshire Hathaway to make a "big acquisition." He also offered some timeless advice on investing in stocks. In addition, they covered many other topics, including the "fiscal cliff," adding to Berkshire's Wells Fargo [WFC 33.72 -0.15 (-0.44%) ] stake, and his prostate cancer treatments this summer. Here's a transcript of their complete conversation, along with video clips. The transcript is also available as a PDF for downloading. ANNOUNCER: “Squawk Box” is on Buffett watch. The "Oracle of Omaha" joins Becky Quick to talk about the issues that matter most to your money —earnings, the economy, and the election. It's a special two-hour event with Warren Buffett as the second hour of “Squawk Box” begins right now. ANDREW ROSS SORKIN, co-host: Good morning and welcome to “Squawk Box” here on CNBC. I'm Andrew Ross Sorkin along with Joe Kernen. We're going to be getting to Becky and Warren Buffett in just a moment, but first let's get a quick check on the markets. * * * ANDREW: Mr. Kernen. JOE KERNEN, co-host: Thanks, Andrew. Let's get to Becky, who is in Columbus, Ohio, this morning with Berkshire Hathaway chairman and CEO Warren Buffett. Is he there, Becky? I saw him. I heard him. BECKY QUICK, co-host: He is here. JOE: Good, with the … BECKY: He is, he's ready to go. JOE: … with the … a spanking new NetJets tie on, I see, huh? ANDREW: Is that what that is? JOE: Yeah. BECKY: He does. You like that? JOE: You said he had a nice... BECKY: Yeah. JOE: ...NetJets tie, and I asked you did he also bring a nice NetJets card, and I'm sure he didn't. BECKY: And what did I tell you? What did I tell you? JOE: That I can ask him myself. BECKY: I said you'd have to ask him. Yes. JOE: Yeah, and did you bring one, Warren, or am I getting another brick? WARREN BUFFETT (Berkshire Hathaway Chairman and CEO): Just beg a little, Joe. We'll get to it later. BECKY: He wants to hear you beg for two hours first, Joe. JOE: I know, and then he doesn't do anything. And I'll —you know, I'm going to try. BUFFETT: Oh no, I got —I'll come up with something for you. JOE: I'm going to try. BECKY: All right, well, you know, Joe, we are very fortunate to have Warren with us here this morning. And, Warren, this is the first time we've gotten a chance to sit down and talk with you since the prostate cancer treatment. BUFFETT: Right. BECKY: How are you feeling? BUFFETT: I feel fine. I feel great. I —you know, they gave me some hormones, too, so occasionally I get some hot flashes, which I —we males call those power surges actually. And —no, it was —it got tiring after a while. The radiation does. You don't feel anything, but... BECKY: Of course. BUFFETT: ...I felt it was time to quit when I started getting the urge to pee sitting down. BECKY: But you're feeling good. BUFFETT: I feel great. BECKY: Well, you look great, and we are very happy to have you with us today. Thank you for joining us. You know, this is one of the best times that we've gotten to talk to you because there have been so many questions lately about what's happening in the economy. We've heard from major companies like 3M [MMM 88.39 -0.34 (-0.38%) ], Caterpillar [CAT 82.73 -0.85 (-1.02%) ], DuPont [DD 44.91 -0.34 (-0.75%) ], all of these companies, UPS [UPS 73.12 -0.61 (-0.83%) ], who have all come out and said that the global economy is very uncertain, it's slowing down a little bit. They're not sure about what they see in the future. And it's raised a lot of questions in the market, too. The market's been selling off over the last week or so. Real concerns. People sitting up and saying, `Oh oh, maybe there's something really happening here.' Do you think the market's overselling the situation, or do you think it's catching up with reality? What do you see? BUFFETT: Well, I think —I think the stock market generally is the best place to have money, and —but I think that there's no question that worldwide there is some slowing down going on. And in the United States, actually, residential housing is picking up, and we've been waiting for that a long time, and that will have a significant impact. It hasn't gotten to any big level yet, but our carpet businesses and brick businesses and all of that will come on with residential construction, and that has turned. But the general economy, I think it's a little bit better in the U.S., certainly better in the U.S. than it is in Europe. And in terms of the rate of decline in Asia, it's reasonably steep and we're still inching ahead. But it's inching. BECKY: When did you first start to notice this global decline, this global slowdown? BUFFETT: Well, we've got a couple of companies that really are kind of real time as to what's going on. The number one would be Iscar because they sell these little tiny punching tools or cutting tools, and they fit in these huge machine tools that cost millions of dollars. So anybody that's turning out anything big are buying these little, call them razor blade type items, from us. And they don't need a big inventory. They can —we can deliver very quickly. So their purchases reflect usage, and there our strongest market is in the United States, but Europe and Asia have fallen off some. And we're gaining market shares. So there's a decided decline in activity in all that manufacturing where you're stamping metal and doing that sort of thing. BECKY: Oh, we heard from (CEO) Doug Oberhelman from Caterpillar the other day, and he says that he looks around the globe and he doesn't expect to see a recession anywhere in 2013, but Europe is the biggest problem spot. Would you agree with that assessment? BUFFETT: Well, it is at present. Its rate of decline —I mean, it's way off a lower base —its rate of decline is not greater, in my view, than the regular decline in Asia. It's just that Asia was doing much better. The United States actually has got the steadiest trajectory, and I don't see any change in that. I mean, you know, we got the freight car rollings, and that —we got a big energy pick up in the United States, we're getting a housing pickup. Those are pretty big —pretty big industries. BECKY: Well, let's talk about some of those numbers because housing is a huge key. You had told us before that we are not going to see a turn in the unemployment picture until we see a turn in the housing. BUFFETT: Right. BECKY: And Doug Oberhelman had told us the reverse of that the other day. He said you're not going to see a turn in the unemployment picture until you see the turn in housing, and he kind of set the thing on its head and said it's the other way around. Which comes first? BUFFETT: Yeah. Well, demand I think comes first. BECKY: Yeah. BUFFETT: I mean, you hire people when you start seeing demand, and you are seeing more demand. You're seeing —you're seeing greater purchases of lots. I was with a guy last night at the GE dinner that is in the business of selling lots, and the —and the builders are starting to clamor more for those. We have the largest housing manufacturing company in the country at Clayton Homes, it's manufactured homes. BECKY: Right BUFFETT: But those —that business is up in the area of 10 to 15 percent. We see it in our... BECKY: In terms of volume? In terms of.. BUFFETT: In terms of units, yeah. BECKY: Right. BUFFETT: In terms of units. Real estate brokerage, we not only see about a 15 percent increase in transactions, but we also see a small increase in the median price. And this —and this comes from all over the country. I mean, we're in California, we're in Nebraska, Minnesota, Florida, you know, you name it. So that's changed. Our —you know, we're going to make a lot more money in carpet this year than we made last year. You know, more than double probably, and we hire people when that happens. BECKY: Mm-hmm. BUFFETT: So the United States economy is not tanking. Asia from a higher level, I wouldn't necessarily call it tanking, but it's heading down, and Europe has been having its troubles for some time and they haven't ended. BECKY: Does that —does that catch up with us? Does that affect us at some point, too? BUFFETT: Well, what we really hope is we affect them over time. And no, I don't —I don't necessarily think so unless there gets to be chaos someplace. We've already adapted to what's going on around the world. BECKY: Tell me what you see in terms of the rail cars. You were saying you were watching loadings on those, Burlington Northern obviously moving a lot of materials. And natural gas is big for them, too, correct? BUFFETT: Yeah. Well, at Burlington coal is down, as it is with the other railroads. Oil is up, and when you're fracking you bring in lots of sand. So sand would be up, for example. And the UP just reported, and they're seeing small gains in things other than —they're seeing it in lumber. You know, they're seeing it in cars. We're seeing it intermodal. They do —we're the biggest in intermodal. We carry 15 percent of all the freight measured by tonnage in miles in the United States. I mean, it's —just the Burlington Northern carries almost half as much as all the trucks in the United States in terms of ton miles. BECKY: And you're not seeing any downturn? You're seeing actually numbers go up on those? BUFFETT: We're seeing numbers go up. Now, that was a little deceptive a month or two ago because we had these floods last year and so the figures were very easy there for July and August. But we are seeing small gains, but they're small. BECKY: And in terms of what you see at Mid-American, you talked about some energy demand. That had been weak for quite a while because companies weren't using as much energy. How's the —how's the picture on that? BUFFETT: Yeah, well, you know, kilowatt hours we're down this year. BECKY: Yeah. BUFFETT: But we —well, look at it this way. Berkshire Hathaway in 2010 spent six billion on plant and equipment. That was a record. BECKY: Mm-hmm . BUFFETT: We spent last year eight billion on plant and equipment. Another record. This year we'll spend nine billion on plant and equipment, another record. And practically all of that's in the United States. I mean, we see lots of things to do. Now, a good bit of that is in the rail business and the energy business. BECKY: Right. BUFFETT: But there —there's a lot to do. And incidentally you hear a lot about infrastructure and, you know, the terrible shape it's in. BECKY: Right. BUFFETT: The rail industry's infrastructure's in the best shape it's ever been in. BECKY: OK. Joe has a question for you as well. Joe: JOE: Yeah, along the same lines, Warren. If —let's say that you were going to start a new Berkshire Hathaway, and it was just going to be based on energy. Now, only energy stock could be in it and you were trying to play whatever happens in —or trying to take advantage of what happens in this country over the next 20 years, what would —how would you do that? Would it be natural gas? Would it be coal? Would it be solar? Would it be —how do you think you would do that? All of the above or I mean are you smart enough to see how this plays itself out with fracking and natural gas? BUFFETT: No, but I —but I, you know, I'm interested enough to follow it, but I don't —I don't think I'll be able to write the newspaper two years from now at the current time. But we are putting a lot of money into solar and wind. That's just part of what we do at Mid-American. You know, if you get into producing energy itself I'm not —you know, I would be no good at that game. I'd have to join with somebody else that I thought was terrific. But I don't know a blame thing about it. I mean, I read about it and I —and I feel very good about what I read, and we transport a lot of oil, but I don't —you know, you stick me in —next to an oil well, and I go back to thinking of some Clark Gable movie or something as to what I'm supposed to do, and I think that's a little out of date. JOE: Becky, have you shared your thoughts about, you know, exporting natural gas? BECKY: Oh, I know where you're going. Oh, he.. JOE: Well, I just —I just wondered whether you've talked to Warren about that. I mean, you listen in... BECKY: I haven't. Warren, let me —let me tell you before Joe makes it even sound worse than it is. I have had some concerns about this idea of exporting natural gas because, look, this is from the Charlie Munger school of thought. If you want to be energy independent, he thinks it's a stupid idea. He thinks we should use all of their stuff. But I worry, if we really do want to get energy independent why would we ship this natural gas to other people? Why don't we build it and keep it here? Go ahead, tell me why that's wrong. Warren Buffett on CNBC's "Squawk Box" BUFFETT: I'm with —no, I'm with you. Sure. JOE: Oh. BECKY: You are? JOE: Ah! See? BUFFETT: You got to —no, no. If you —if you've got a national treasure, and we had that in oil if you go back 50 years. We're an exporter of oil. I mean, we were producing way more than OPEC. And the Texas Railroad Commission used to —used to announce every month how many days you could produce in Texas. It was an OPEC of its time. And so we took these huge prolific fields, the East Texas field and, you know, we sent that stuff abroad. We were getting three bucks a barrel for it. And, you know, and then we built a strategic oil reserve later on. Well, that's the strategic petroleum reserve. No, I believe if you're dealing with a scarce commodity, something that you know is finite... BECKY: Ha! BUFFETT: ...over time use the other guys'. BECKY: Ha! Joe, there, take that. I'm back on the bean wagon. JOE: Well, I never —I never thought Warren was a protectionist. That's amazing. BUFFETT: No, I'll protect something that we're going to need to keep this country going 50 or 100 years from now. JOE: Right. BUFFETT: I don't want to ship our talent overboard. JOE: We may have enough —we may actually have enough, though, for the entire world. And that would be a great export business eventually to be in if we were self-sufficient ourselves. BUFFETT: It would be for a while, but if you're looking out 100 or 200 years —and thank God people 200 years ago were looking out in many respects, although we weren't looking at it —we weren't looking out in the 1950s when we were —when Texas was producing. JOE: But I love that you're worried about like 100 years from now, and it's not just for your ancestors. It's for you 100 years from now. BUFFETT: Exactly. JOE: Which I like. Which —I like that. BUFFETT: Exactly. You've got —listen, I like it that you like it, Joe. JOE: Yeah, because I do. Andrew, go ahead. ANDREW: OK, real quick, Warren. You —I'm curious, with the market selling off $500 billion in the past three days, knowing you, I think you're probably watching this thinking, `What am I buying?' So I want to know, is there anything —have you done anything in the past three days? BUFFETT: Maybe in the past week we've done some things. Yeah, we —but basically I like to buy and, you know, so if the market is down, you know, I'm happier buying, I like to buy. If I got to a supermarket and they reduce prices, you know, I feel better. If I got to a men's clothing shop and they've reduced prices, I feel better. So if I go to the stock exchange and they reduce prices, I still feel better. ANDREW: You want to give us a.. BECKY: What have you been —what'd you buy in the last week BUFFETT: In the last week, I bought some Wells Fargo. BECKY: You did? BUFFETT: Yeah. BECKY: So continue to buy. BUFFETT: But we only have 430-something million shares, so I didn't feel we had enough. BECKY: Do you —you look at the banking business, though, overall, is it going to be as profitable? BUFFETT: No, it can't be as profitable. The profitability of banking is a function of two items. Return on assets and assets to equity. BECKY: Hm. BUFFETT: And return on assets is not going to go up particularly. USB has done the very best on that. They're at about 1.7 percent. Wells is between 1.4 and 1.5 percent. But most banks are lower. Now, if you have 20 times leverage and you're getting 1.5 percent on assets, you're making 30 percent on equity. BECKY: Mm-hmm. BUFFETT: And that was not lost on people a few years back. And they pushed balance sheets, and they're still pushing them in Europe. But they've cut back on that here. So they will not be having the leverage in the banking system. It'll be even more restricted among the bigger banks as part of the new rules, and you won't be able to earn more on assets than before, and so with less leverage in the same return on assets, you will have a lower return on equity. Banks were —banks were earning 25 percent on tangible equity not so many years ago. And really, that's kind of a crazy number. You know, for a basic semi-commodity business, you really don't want to allow that. But that was allowed because people felt that their bank deposits, and they were, were guaranteed by the government; and, therefore, there was no market force that would look at the —at the shape of a —condition of a bank and say, `Well, I won't put my money there because they look kind of dangerous with all this leverage.' And therefore, people got to push and push it and push it, and then the government says, `Listen, we got a vested interest in this. You're using our credit, in effect, and if you want to play, you're only going to have 10-to-1, or some number like that. So the returns on banks have come down. It's still a good business. BECKY: But you still think it's a good business and you still buy it because you like the price. BUFFETT: It's a good business. Wells is —Wells is very well run. And it's a good business. BECKY: OK. BUFFETT: But it's not like —it won't get to what it was. BECKY: OK. BUFFETT: The European banks still are leveraged to an extraordinary extent just because they don't know how to get out of it. BECKY: Right. BUFFETT: But they aren't earning 1.5 percent on deposits either. BECKY: Right. OK, well, Warren hold with us just a moment. We're going to take a quick break. When we come back we're going to continue this conversation with Warren Buffet. By the way, if you've been looking at the futures this hour, they are pointing to a slight rebound after yesterday's sell-off. You can see right now the Dow futures up by about 13 points above fair value. As Andrew pointed out, though, stocks have lost $500 billion just in the last three trading days. We're going to see if today's earnings news and the Fed decision can spark a change in investor sentiment, and maybe Warren Buffett's words, maybe that'll spark things for the markets. We'll talk more with him right after the break. Also, coming up at the top of the next hour General Electric Chairman and CEO Jeff Immelt will talk to us about the company's latest quarter, the fiscal cliff, the global economy. “Squawk Box” is live this morning from the GE Middle Market Summit in Columbus, Ohio. We're back with Warren Buffett in two minutes. JOE: We are speaking to Warren Buffett, and Becky is out there. Mr. Buffett just telling us that he's been buying Wells Fargo this week. That stock has now turned positive since those comments. Becky, they told me to ask a question. Is that OK? I'm not going to... BECKY: Yeah, go ahead. JOE: Are you sure? Hey, Warren... BECKY: Yes, go ahead, Joe. JOE: Warren, you like to buy. You just said you like to buy. Peter Sellers liked to watch, but you like to buy. I remember that. BUFFETT: Yeah, yeah. Well, buying doesn't —buying doesn't preclude watching. JOE: No. No, I know. Not with you, I'm sure. But —so that —I figure anything that moves the market higher, you know, you're not going to —it's like, you know, better than a sharp stick in the eye. So QE3 is great; market's been going up. But if you were a voting member and their —I don't know, they got another one of their meetings today, two-day —their —yes —I don't know. They come so quickly, I don't even remember. But I know I've been reading something about that. If you were there when they voted for QE3, would you have voted yes for QE3 if you were a voting member? BUFFETT: No, I haven't thought about that, but I would say this: I would listen very carefully to Bernanke, but my instincts would probably be to go the other direction. But I —but I would listen to his arguments. And... BECKY: But wait a second. BUFFETT: Yeah. BECKY: You said with QE2 you thought maybe it was going too far at that point. BUFFETT: Yeah. That's why... BECKY: So QE3 is doubling down on that. BUFFETT: That's why I'd listened carefully. But my instincts are to go against it. I think it's much easier if you're —if you're a central bank and you could print money. It's much easier to acquire 2.6 or 7 billion or trillion, actually, of securities than it will be to unwind that operation. BECKY: Yeah. BUFFETT: And you can expand it indefinitely. I mean, if you wanted QE2 to be, you know, 100 billion a month —or QE3 —100 billion, it —he's the one guy that can do it. He has unlimited buying power. Unlimited selling power could be a little different. You need some cooperation on that. ANDREW: Warren, you're supportive of the president, though. Governor Romney suggested that he would —I wouldn't suggest he would fire Bernanke, but he wouldn't pick him up for a third term. Not clear, by the way, that Bernanke wants a third term even under Obama. But how does —how does that affect or impact your thinking in terms of politics? BUFFETT: I think Bernanke has done an absolutely superb job. I mean, what he did in the fall of 2008 was gutty. It was —it was basically right. You know, everybody talking about tinkering at the edges. But I will say this: If Ben Bernanke hadn't been there in 2008, I'm not sure where we would be now. So I have enormous respect for him. I —he's a very, very intelligent man. I don't know if you've ever read his four lectures that were given at George Washington U about a year ago. He —you've got to respect him enormously. And, you know, he sees an economy that he's sort of fighting by himself to get started when he looks over —you look over at Congress that's more or less paralyzed. And I would never bet against him. I still would say that I get a little worried about continuously expanding the balance sheet of the Fed. You know, we now are getting 3 percent of our revenues from the profit of —that the Fed is running out as carry trade, if you look at the... BECKY: The United States gets 3 percent of its revenue? BUFFETT: Yeah, the United States —that 2.4 or 5 trillion of revenue, the third —the third-biggest —the fourth-biggest item. The first item is personal income taxes and then payroll taxes, then corporate income taxes. The fourth is dividend from the Fed. BECKY: Wow. BUFFETT: Yeah, he made 70 or 80 billion last year. This is —this is unheard of, you know, if you go back a few years. So he's got the perfect carry trade. I mean, when he —when he —when he borrows —he's got a trillion and a half borrowed from the banks, which he pays them a quarter of a percent for. Then he's got a trillion in money in circulation, which he doesn't pay anything for, except the cost of the paper. BECKY: But do you worry about inflation down the road? Is this something that we'll see coming? Will we be able to put the brakes on in time and try and get some of that liquidity back out of the system? BUFFETT: Well, I —there's nobody that understands that problem better than Bernanke. BECKY: Yeah. BUFFETT: But that doesn't mean that I necessarily think that the solution is going to be perfect. I'd rather have him thinking about it and trying to modify the impact of...(unintelligible). BECKY: But to Andrew's point, if he doesn't have another term, or if he chooses not to stand for another term and there's someone else there, that person's going to have a pretty difficult job. BUFFETT: Yeah, it depends who it is, but I would vote for Bernanke again. I'd —you know, and I'd get my kids out and everybody else to vote for him. BECKY: But if Bernanke says that he's not even interested in staying —because they're —the people... BUFFETT: Well, then you get worried because —maybe that he knows what he's leaving behind. BECKY: Yeah. People like (former Fed governor) Kevin Warsh, who knows him closely, has said that, you know, he may have done enough time there. BUFFETT: Yeah, well, I think he feels that way, particularly after his congressional testimony. But I do think if the president of the United States asks somebody like Ben Bernanke to stay on, I think he will stay on. I think he's —I think he's that devoted to the country. BECKY: Hm. JOE: All right... BUFFETT: And I would rather have him there than anybody else. BECKY: Mm-hmm. JOE: Warren, do you... BECKY: Joe: JOE: Do you think that where the bond market is right now, given the extraordinary action by the Fed, do you think it's not that far from where it would be if they hadn't been as active? And then I guess it's OK. But if it be a long way from where it is without them, doesn't that sort of cause some dislocations that eventually are going to come back to haunt us? I like when stocks go up, too. And I can see it in your eye, you like it when the market's going up. But I'm just wondering, is it —is it worth it with... BUFFETT: No, no, no. JOE: Huh? You do. And who doesn't like when the market goes up for whatever reason? BECKY: (As Buffett raises his hand) You. JOE: But if it gets to a point where it's not up —where it's not up based on the underlying fundamentals, it seems like sooner or later something has to happen. No? BUFFETT: Interest rates are to the prices of all assets, you know, like gravity is to the function of the Earth. I mean, everything is based off interest rates. It may not seem obvious, you know, and —that the value of some, you know, plantation in Brazil or something is geared off it, but everything relates to interest rates. I mean, you start with what you can get from a risk-free interest rate. JOE: Right. BUFFETT: And so there —it has a huge, huge, huge gravitational pull. It affects what I'm doing, you know? It affects —it affects what everybody's doing. So... BECKY: It affects what you're doing at Berkshire? BUFFETT: Oh, yeah. I mean, if I'm —if I'm getting zero percent on money, I am going to look at other assets somewhat differently, whether it's buying a farm or an apartment house or anything else. And, of course, the people who will lend money to me to buy the apartment house are going to lend it to me cheaper. It's one of the reasons I recommended housing six months ago, because the low interest rates had caused low mortgage rates, and low mortgage rates, when you can sign up for 30 years off a policy that may be —only be in effect for another year or two... BECKY: Mm-hmm. BUFFETT: ...you're getting a tremendous deal. But no, Joe, the Fed has had an enormous effect on interest rates. JOE: Is it —but it's OK? BUFFETT: Now —well, I don't know if it's OK or not, but I know that... JOE: You like the prices going up. BUFFETT: I know that it's being —well, I would say that it's marvelously OK if you're buying a house or something like that now. But in terms of policy —in terms of policy, the chairman of the Fed and the members of the Fed made a decision that this economy needed enough of a jolt and it wasn't going to get it through enlightened fiscal policy and that they were going to basically carry the whole load themselves. I don't —I don't think they enjoy it... JOE: Right. BUFFETT: ...but I think that Bernanke —I think he's a very responsible guy. Now, it doesn't mean he calls them all right, but I think he's a very responsible guy and a very smart guy. ANDREW: OK, Warren. BECKY: Andrew ... ANDREW: ...we're going to slip in a quick break, try to make some money ourselves during the commercial. We're going to have a lot more to come from Becky and, of course, Warren Buffett. Plus, we've got earnings from aircraft giant Boeing ahead. The numbers and market reaction. We'll talk to Warren about that, as well. And then at the top of the hour, GE Chairman and CEO Jeff Immelt's going to join the conversation. "Squawk's" back in two minutes. ANDREW: Welcome back to “Squawk Box” this morning. (Headlines and earnings news) ANDREW: But as I was making my way to the AT&T [T 34.71 -0.29 (-0.83%) ] news, that popped off the screen. JOE: Are you avoiding AT&T? ANDREW: I'm not avoiding AT&T. JOE: OK. Would you like to take a shot at that? Or —I'm going to look at it right —no. You —OK, Becky, good, save it. BECKY: I have it. AT&T earnings. They came in with an adjusted 63 cents. That was 3 cents ahead of consensus. Consolidated revenue up 2.6 percent when you exclude —or the divested Advanced Solutions***(as spoken)***unit. That was the Yellow Pages one. Company had record cash flow, cash from operations of 11 1/2 billion, free cash flow of 6 1/2 billion in the third quarter. And it's increasing its full year of free cash flow guidance by more than $2 billion. IPhone is always a big deal when it comes to AT&T. They had 4.7 million activations in the third quarter. I'm not sure what the analysts were looking for. But they also are saying that they had the best ever third quarter churn, postpaid churn of 1.08 percent. So again, a beat by 3 cents, and it looks like some pretty strong numbers also increasing their free cash flow guidance by more than $2 billion. JOE: Yeah. So the lowest churn, is what you mean, not the —yeah, so the...(unintelligible). ANDREW: The lowest churn...(unintelligible)...right. JOE: Yeah, churn. BECKY: Yeah, best ever, lowest —best ever meaning lowest churn. JOE: Yeah. Yeah, with... BECKY: Postpaid churn of 1.08 percent. JOE: At this point, with AT&T, people just look at how they do in terms of wireless and wireless ads... BECKY: Yeah. JOE: ...and how much people are spending for... BECKY: And iPhone. JOE: Yeah. And then, of course, you know, you watch —what unbelievable yield, 5 percent yield. I don't know why Buffett doesn't put all his money in Verizon [VZ 44.23 0.16 (+0.36%) ] and AT&T. I'd get —I mean, when you're getting... BECKY: Warren, you want to answer that? Verizon and AT&T, you ever look at those companies? BUFFETT: I don't know what it'll look like five or 10 years from now. BECKY: All right...(unintelligible). JOE: There he goes again. ANDREW: (Unintelligible) JOE: Wow. You get a hundred years from now, five or 10. ANDREW: Hundred years from now, right. JOE: So 5 percent in the meantime. You know, that's true, though, Warren. People would say, 'Wow, you got a 5 percent yield.' Doesn't take much for stock to go down 5 percent, does it? I mean, that yield doesn't necessarily hold up if the markets had its... ANDREW: But these things are like tollbooths, so... JOE: Yeah. ANDREW: Right? JOE: Yeah. BUFFETT: Yeah. Yeah, we mostly buy stocks for future earnings. And if they use the money to —if you used all the money to repurchase shares like Henry Singleton did with Teledyne years ago, that could be even more advantageous. JOE: Yeah. BECKY: Because you end up owning a bigger and bigger chunk of the company. BUFFETT: Bigger, bigger. IBM [IBM 190.72 -0.53 (-0.28%) ] spent 3 billion in each quarter this year, almost to the dollar, buying in stock. The cheaper they buy it, the more our interest goes up. BECKY: You still like IBM even after all the troubles technology companies have seen? BUFFETT: Well, they're struggling a little, and it was kind of interesting, in the —we owned —we own a little more than we owned at year-end, and we got great confidence in that over the years. But in the third quarter, they had a sale of a subsidiary, RSS, that produced about 288 million, I think, after tax, which was all the gain. And to my knowledge, The New York Times did not have a line on it, The Wall Street Journal did not have a line on it, the FT did not have a line on it. Didn't get discussed. It was one line in the report and it accounted for all the gain and earnings, and it was a sale of a part of a business. BECKY: Hm. BUFFETT: You know, I think the reporting missed the boat on that one. ANDREW: Yeah. BECKY: OK, we're going to talk more about IBM and some of your other investments when we come back. And, Andrew, we'll send it back over to you guys. ANDREW: OK, thanks, Becky. Still to come from GE's Middle Market Summit in Columbus, Ohio, we've got more of Warren Buffett. And then later, General Electric chairman and CEO Jeff Immelt on business conditions, avoiding the fiscal cliff and much, much more. You don't want to go anywhere. We've got a big show ahead. JOE: We got a new —there's a new picture. ANDREW: And we got a new picture. BECKY: Welcome back, everybody. We are with Warren Buffett this morning in Columbus, Ohio, at the National Middle Market Summit, which is sponsored by General Electric and Ohio State University's business school here. You know, Warren, we've talked an awful lot about businesses. I want to get back to IBM in a little bit. But the reason we're here today is because of this focus on midsized businesses. There's been an awful lot of questions about jobs and the jobs picture out there. Midsized companies account for a lot of the job growth that we have seen over the last several years. They've been net adders of jobs. Can you talk to us a little bit about what Berkshire's been doing in terms of jobs? BUFFETT: Well, yeah. Berkshire probably has at least 50 of its 75 companies that would fit the —fit the middle market 10 million to 1 billion of sales category. It looks to me —there's a few months left —but it looks to me like we'll add at Berkshire, on a base of 270,000, we'll probably add about maybe 8,000 jobs organically, and then we'll probably add another 10 or 15,000 on acquisition, so... BECKY: For this year that we're in right now? BUFFETT: This year, yeah, yeah, yeah. Certain businesses like GEICO and Burlington Northern add people and then we bought —we bought a fair number of what we call bolt-on acquisitions, not big deals but they bring with them a thousand or 2,000 people sometimes. BECKY: In terms of the jobs growth, what about the companies that are related to housing? You've been talking about how you've seen a turn there. Has that translated into any jobs growth and... BUFFETT: There's some jobs growth. I mean, you know, our Clayton Homes is going to produce maybe 15 percent more homes or something like that this year, and that takes more people. And GEICO is going to sell more insurance policies and that takes more people. And the —our furniture businesses are doing very well. We're selling a lot of carpet and furniture. And so we add people, but we've also going to add quite —we've made more bolt-on acquisitions this year than ever before in our history by some margin. And they bring with them thousands and thousands of people. BECKY: How much cash do you have on hand right now? BUFFETT: We probably have at least 40 billion. BECKY: Are you in the hunt —on the hunt for another big acquisition? BUFFETT: I'm salivating, yeah. A fellow handed me a card last night and he said, `This will cost you 6 billion.' And he didn't give me the financials, but I'm going to call him when I get —I know the company so when I get home I'll call him and I'll ask him for the financials and... BECKY: What —have you looked at any other big acquisitions? BUFFETT: We had two acquisitions this year, possibilities, that were plus and minus 20 billion and where the CEO wanted to do it but it didn't get done. Prices are tough. BECKY: Prices are tough right now. BUFFETT: Yeah. BECKY: All right. We're going to... BUFFETT: And cheap money makes that —that's a factor in there. BECKY: We're going to talk more about that in just a moment. We're going to slip in a very quick break right now. When we come back, we'll talk a little bit more about the market for acquisitions and why there's so much money around out there. By the way, tomorrow is a big day for Joe. He's going to be hosting "Office Hours" after the show. You can like our Facebook page, you can send him comments and questions, and he'll be responding starting at about 9 AM Eastern time. “Squawk” with Warren Buffett back after this quick break. ANNOUNCER: Welcome back to this special one-on-one interview with Warren Buffett, chairman and CEO of Berkshire Hathaway. Here now, Becky Quick. BECKY: Welcome back, everybody. We are coming to you live from GE Capital's Middle Market Summit that's taking place at Ohio State University in Columbus. I'm joined this morning by Berkshire Hathaway chairman and CEO Warren Buffett. And, Warren, you were just talking about how you've been on the prowl looking for big acquisitions around 20 billion or so. A couple of them have fallen through, but part of it is because pricing is so difficult right now. It's... BUFFETT: Pricing's difficult and money's cheap so... BECKY: Yeah. BUFFETT: ...we don't leverage our purchases so we're buying on an all equity basis. But people who do leverage are getting significant portions of the purchase price at very, very low rates, probably as low as they've ever gotten. So that enables them to bid pretty aggressively. And it doesn't factor into our thinking. BECKY: But you think at this point maybe some of these acquisition prices are getting a little out of control? BUFFETT: Well, that's the way I feel but, you know, that'd be —that's natural when you're getting beaten out. BECKY: But you won't raise your prices to compete. BUFFETT: No. No. We —but —now we've had a record for bolt-on acquisitions. We've probably done, I don't know, maybe 15 different acquisitions, but they probably only add up to maybe $2 billion or something of the sort. And they're good and they fit in with the companies we have, but what I really like is the elephant. BECKY: So you're always out elephant hunting... BUFFETT: Absolutely. BECKY: ...with your elephant gun? BUFFETT: Yeah, yeah. BECKY: Can you... BUFFETT: And they're more likely to come along when either money conditions are fairly tight or something of the sort because if you can borrow money at these rates, you can pay a lot of money, and, you know, and other people, if they pay the wrong price, they walk away from them, but if we pay the wrong price, we live with them forever. BECKY: So if these deals haven't gone through, that means you've been looking more aggressively for stocks to buy in the market and as a result, you've got more cash to do that? BUFFETT: Well, we're always looking for stocks, and I've got two fellows that are working for me that are really looking for stocks all the time. And —but I usually end up buying more of something I already know. Any new company, any new stock I look at, I measure it against the best idea I've got among the present ones. And I'm perfectly willing to just keep adding to the present ones. So it has to beat them. And I know those companies pretty well so it's a pretty high threshold. BECKY: Let's go back to IBM. BUFFETT: Right. BECKY: You were talking just a moment ago about IBM. Have you added any shares to that company in the last couple of months? BUFFETT: Maybe —I don't know if it'd be quite a couple of months. We've added —we've added shares this year. We haven't added a lot of shares but we've —well, we've probably added, you know, it'd be in many hundreds of millions. Wells, we probably added maybe a billion dollars’ worth this year, something like that. BECKY: When you first announced your stake in IBM, it caught a lot of people by surprise because you have always stayed away from technology companies. You've said it's something you didn't really understand and so you didn't want to get involved with it. BUFFETT: Right. BECKY: What —in looking at IBM, you said it was a little different situation. It made sense to you at that point. I guess part of that is the services factor of it. BUFFETT: Right. BECKY: But when you look at these big technology companies, it looks like some of them may be maturing. Have you regretted getting into IBM shares at all? BUFFETT: No. I'm delighted to be in it. But —and I think they'll probably do better abroad than in the United States over time. But I do —when we buy something like that, I go to our companies and see what they're doing and what they plan to be doing in future years and how tied in they are with given suppliers and how much stickiness there is to it. And so we —I —even though, you know, if you put me in a computer room and spin me around, I'm lost, you know. I'm just hoping somebody comes here and helps me get out. But I do know what our managers tell me about their plans and the degree to which they're involved. I had one manager tell me something —I guess it isn't quite repeatable, nevertheless, in terms of you get pretty locked in sometimes with your —with your supplier. BECKY: What's not repeatable? BUFFETT: Well, I asked him how sticky —I won't name the company —necessarily was when you got in there, and he said, `Well, it's like getting AIDS.' BECKY: So it sticks and it sticks around. BUFFETT: Yeah, yeah. BECKY: It really does. You know, I should bring up the insurance companies because we didn't talk about that before. BUFFETT: They're big. BECKY: Jim Cramer had said he's very interested in hearing more about what's happening with insurance because a lot of insurance companies have been doing very well lately. BUFFETT: Yeah. BECKY: What can you tell us about Berkshire's insurance companies? BUFFETT: Well, Berkshire's insurance companies are doing well. I mean, we have about 70 billion or other people's money. We call it float. And when we run at an underwriting profit, that money is just like you gave me 70 billion and I get to earn all the money on it. And this year so far we've had an underwriting profit. So not only have they given us the 70 billion, but they've given us some more money to hold it, and we get all the investment income from it. So when insurance is good, it's terrific, and it's been good this year. BECKY: What do you know about the consumer, not only from the companies you have at Berkshire that you own outright, but from a company like Coca-Cola [KO 36.88 0.27 (+0.74%) ] and from being able to look around the globe to see how consumers are feeling? There's been a lot of pressure on some of these consumer products companies because prices for commodities have gone up and sometimes they can't pass those on to their consumer. BUFFETT: When you think about it, Coca-Cola's been around since 1886. That's pretty amazing, isn't it? BECKY: Yeah. BUFFETT: And it's the basic product. Now it's got a whole bunch of extensions, too. But Coca-Cola's physical volume, not dollar sales but physical volume, was up 4 percent in the first nine months, and that's in a world that's growing maybe at 1 percent. So their per capita usage or Coca-Cola products has gone up almost every year since 1886. I mean, they — (CEO) Muhtar Kent has done a terrific job running that company. It's a huge distribution machine. In Mexico I think the number now is up to over 600 plus eight-ounce servings per capita of Coca-Cola products man, woman and child, which is at least 50 percent higher in the United States, but that —and it grows every year. It grew in the first nine months. It's quite a product. BECKY: We still have a lot of your other investments to talk about including American Express, Procter & Gamble. We'll get to that in just a little bit, Warren, if you'll hold on with us through another commercial break. BUFFETT: I'm not going anywhere. BECKY: Still to come this morning, as we mentioned, we have much more with Warren. We are also going to be talking about everything from the fiscal cliff to Simpson-Bowles. We're going to be adding the man who runs one of the nation's biggest conglomerates. We're going to find out what GE's Jeff Immelt is hearing from customers about the state of the economy. We will find out at the top of the hour. By the way, check out the futures right now. We have been higher throughout the morning. Right now, those Dow futures are up by 42 points after a big down day for the markets yesterday. "Squawk" will be back after a quick break. JOE: Let's now get back to Becky at the GE Capital Middle Market Summit at Ohio State University in Columbus. She is joined by Warren Buffett and another special guest. Hey, Becks. BECKY: Hey, thank you, Joe. You know, as you mentioned we have another special guest with us joining us right now. Jeff Immelt, who is the chairman and CEO of General Electric. And, Jeff, thank you very much for joining us this morning. JEFFREY IMMELT (General Electric Chairman and CEO): Becky, good to see you again. BECKY: You know, Warren's been laying out for us what he sees from the economy this morning, and GE probably has one of the best vantage points of any company to see what's happening around the globe. I know you talked a little bit about it with earnings but the market seems to have been caught by surprise by what it's been hearing from companies just over the last week or so. What does it really look like out there and do you think the market's overreacting? IMMELT: You know, Becky, I think the general trend is still positive. There's just volatility as we've kind of climbed out of this recession. I always think about four big factors. The U.S. gets a little bit better every day, we can see that around housing. You know, I think there would be more investment in the U.S. if there was more clarity around the fiscal cliff and things like that. BECKY: Yeah. IMMELT: Europe is bad, but not shockingly bad. You know, in other words it's going to be tough, there are still pockets, but Europe's tough. China is —there's not one China, there's multiple economies in China. Construction I think is slow, but if you're in the health care or aviation business in China, it's still very robust. And I just got back from a trip to Saudi Arabia, Abu Dhabi, Algeria, Bangladesh. There's business in all those places, right. So I think if you're out hustling you can find business. So I think the general trend is positive, but there is volatility in the world. BECKY: But so from that perspective, I mean, from both you, you seem to have a more positive outlook than maybe what the market is reacting to over the last several days. IMMELT: Look, I think you can't blame investors for, you know, what they read and what they see. And you're going to have a couple of days like what we've had. But if you —if you step back, you know, I think, you know, for a company like ours, our organic growth was up 8 percent on the quarter. BECKY: Yeah. IMMELT: That is —that is high, you know, and 10 percent year-to-date on a company our size, that is pretty good. A backlog of more than $200 billion, that's pretty good. So I just —and, you know, we had dinner last night with 20 mid-market companies. BECKY: Yeah. IMMELT: Some are doing poorly, but a lot are doing well. But, you know, I just think it's volatile, right, and so you're going to have a day like we had yesterday or a day like we had Friday and people are going to have concerns. Who can blame investors for, you know, for seeing it that way? But the general trend that I see, and we see 140 countries, is still generally positive, with volatility. BECKY: With volatility. IMMELT: Yeah. BUFFETT: And he's getting good prices for locomotives and turbines and all these things he's selling. IMMELT: Would you like to buy —would you like to buy a few more, Warren, or I could sell you this morning. Get out my order book. BUFFETT: He's never given me a cents-off sale. BECKY: Hey, I know Joe has a question as well. Joe: IMMELT: Hey, Joe . JOE: Jeff, I'm Joe Kernen with CNBC. We used to be one of your favorites, I don't know, a while... IMMELT: Joe, 49 percent of —49 percent of NBC is still 100 percent of CNBC. So don't forget that. (GE owns 49 percent of NBCUniversal, CNBC's parent.) JOE: All right, all right. Jeff, you know, GE Capital, the other report that's like raking in money again and what I'm told is that the company continues to shrink it to some extent I guess to right-size it if you will, but wow, it's making money, it's paying a dividend back to GE again and is there a tendency to want to say 'let's ramp it back up'? And I mean it was a great unit for years and years and years. You know, giving so much profit to the company. Is there a tendency to want to do this? Do you have to pull yourself back and say, all right, we're going to get this to where we don't what to get, you know, get to that point again? IMMELT: Look, it's a great business, OK? I think the difference in this recovery vs. previous recoveries is just one of discipline. There are segments in financial services that we do better than banks. This is one of them. Mid-market lending, we just do it well. We're going to continue to grow the places that we do better than our competitors and let those grow. I think what's different, Joe, is you know, we're just not going to do the incremental or the —you know, some of the distressed stuff we used to do just because we could and I think we're —you know, we've got a green light on assets we're great at. We're going to continue to grow those. And look, you know, GE Capital in almost every way is healthier today than at any time in its history. We —our leverage is lower, our liquidity is better, our margins are better. And someday, investors will agree with me that this is a valuable business. JOE: Yeah. IMMELT: But, you know, we're going to stay in it and there's segments that we're going —we're going to do really well in. JOE: Yeah. We're —I have one more... BUFFETT: I was —I... JOE: Oh, sorry, Warren. We're —Warren and I are both large shareholders in GE and I —we have a lot of questions. BUFFETT: That's right. JOE: Yeah, we have a lot of questions about, you know, the portfolio mix as, you know, as shareholders, maybe. I think Warren's got a little bit. BUFFETT: Joe, if we —if we vote together, Joe, I think we can control the company. JOE: I'm with you, I'm with you on that. Jeff, my other question had to do with —I mean, we keep talking about the natural gas story and fracking. And number one, I know GE's involved in a big way in all parts of energy production and natural gas. Is the portfolio right now in energy, does it have enough exposure to natural gas, that's my first question. And number two, have you looking out 20 years, has wind become less of a —less attractive long-term because of what's happened with natural gas? IMMELT: You know, Joe, I think natural gas is one of the big stories of our generation. It's big, it's real, it's a game-changer. We made the decision 10 years ago to be long gas, both from an exploration standpoint and from a power generation standpoint. So we see the trend unfolding. We have a great exposure to it. We think this is a long-term really dominant trend and we love it. We've also made the choice to be a broad-based energy supplier. Wind is going to have its fit, nuclear's going to have its fit, coal's going to have its fit. You know, we paid $200 million for Enron's wind business 10 years ago. Let me tell you, we've generated billions of cash. The cost of electricity of wind is down to 7 to 8 cents a kilowatt hour. So it's going to have a fit. Whether it's in the U.S. or not, you know, remains to be seen, but I'm glad we've got the breadth. But, you know, Joe the big story's gas, let's be clear. The big story's gas and we are super long gas. BECKY: OK, gentlemen, let me ask you both about the fiscal cliff. We have talked to a lot of business leaders about it. I know it's an issue that you are both concerned about. In fact, yesterday the lead story in the Financial Times, Jeff, was a story that we talked about on "Squawk" ... IMMELT: Yeah. BECKY: ...about how GE is actually looking to make some moves ahead of that, selling bonds to make sure it doesn't have to be in a position to get caught up in whatever's happening in Washington in that point. How big of a problem is it, what do you think needs to be done? And I'd like to hear from both of you on that. IMMELT: You know, Becky, the research that we've released today among mid-market companies I think says that they've all slowed down because of the uncertainty. BECKY: Right. IMMELT: In the case of GE we're a high-tech, long-cycle business. Boeing [BA 72.71 -0.11 (-0.15%) ] depends on us to keep investing in our engines no matter what, so we're going to do that. We're going to keep going. But there's no reason why this can't get resolved. You know, we're a group, we're a member of a group called Fix The Debt. BECKY: Right. IMMELT: There's almost 100 CEOs that are parts of that. It basically endorses Simpson-Bowles. I think everybody believes that we're going to be plus or minus 10 percent of Simpson-Bowles. Let's get it done. You know, people say business leaders should be more vocal. Look, we're vocal. BECKY: Mm-hmm. IMMELT: You know, this is a —this is a complete distraction at a time —an important distraction at a time when the country doesn't need it. So I just think, you know, everybody is planning. Every business is planning for something that's plus or minus 10 percent of Simpson-Bowles. I don't get it, and you're going to have (Honeywell [HON 61.02 -0.53 (-0.86%) ] CEO) Dave Cote on tomorrow. BECKY: Right. IMMELT: He's been the leader of this. You know, he's a very respected guy in the business community. It is filled with everybody who's run big companies in the country. We are —we are saying let's get this done. BECKY: You guys feel like you're talking and Washington's not listening? What... BUFFETT: Well, Washington's on hold because of the election. BECKY: Right. BUFFETT: But they'll not only hear people talking, they'll hear people shouting. There'll be a march on Washington by business if something akin to it. I mean, it's man-made. Everybody knows what the general solution should be and you can argue about whether revenue should be 19 or 18 1/2 percent of GDP or whether expenses should be 21 or 21 1/2 or —but everybody knows basically what the solution is. And Bowles-Simpson fits in there —Simpson-Bowles. We're going to stay away from that acronym of Bowles-Simpson. The Rivlin-Domenici, I mean, there are hundreds of people that could —that you know that could design a sensible plan, and any plan that gets Dick Durbin (Democratic Senator from Illinois) and Tom Coburn (Republican Senator from Oklahoma) to sign on, you know, that reflects a lot of negotiation and effort by two terrific people in Simpson and Bowles. It's going to get done and the American people won't stand for it not getting done. And I —incidentally, I think it'll get done with —I don't mean Simpson-Bowles precisely, but something materially... BECKY: Some sort of a... BUFFETT: ...close to it will get done by either person selected. BECKY: And by that I mean, a lot of Americans probably don't even understand what's in it. You're basically talking about a plan that will lower tax rates, strip out a lot of the loopholes or things that we've built in as policy and decided that we want. IMMELT: Four trillion dollars over 10 years, Becky. It's about a billion four or five of revenue. It's 2 1/2, 2.6... BUFFETT: Yeah. BECKY: Of cuts. IMMELT: ...you know, lower the tax rate, broaden the base, you know, global system, stuff like that. You know, we're not going to like —you know, I guarantee we're not going to like all of it. BUFFETT: No. BECKY: Right. And that's... IMMELT: You know, so I guarantee you. BECKY: ...just it. Everybody's going to have something they don't like in it . BUFFETT: And you got to deal with signing on to it, too, right? IMMELT: But you know, you know, Warren, I think the beautiful thing about American business is how flexible and how fast we adjust, you know. It just is today the most resilient economic system on earth. And I've seen them all. And business people small and large are going to figure out, 'OK, this is a business I can be in. I can —I can do this, I can't do that, let's go.' BECKY: But you want a plan, you want to know what it is. IMMELT: Look, it's just the stakes are so gosh darn high for the country and for all of us. I don't get why we can't do something this important. You know, in other words, you know, I understand there's two opinions on everything, I understand there's Republicans and Democrats. I just think, you know, what I say inside GE is nervous laughter is a bad strategy, you know? It's kind of like 'oh, my, this is really important, I hope something bad doesn't happen.' That's a bad strategy, you know, so I think it's —we just need.. . BUFFETT: We're...(unintelligible)...about it at Berkshire. BECKY: You know, I know Andrew has a question, too. Andrew ... ANDREW: Hey, Jeff, I'm curious on the issue of Simpson-Bowles, have you scored what GE's effective tax rate would ultimately be and how it would impact the business? IMMELT: You know, my hunch, Andrew, is that the tax rate goes up probably and I think we're kind of ready for that. But, you know, the notion that you can have a territorial system and have flexibility on cash, I think that's a positive that supersedes everything else. I just think that's —you know, and again, we're not asking for —we're asking for the same system that every one of our global competitors has. Siemens, Toshiba, every one of our global competitors lives in a territorial system. All we're asking is for the chance to compete on a —on a level playing field against those guys. I —you know what I always say, Andrew, is 'look, like us or hate us we're kind of the last American company standing in all the industries we're in.' You know, we compete against global guys in everything we do. Just give us the same system that they've got. ANDREW: Right. IMMELT: And I don't think that's too much to ask for. ANDREW: Hey, Jeff, real quick while we have you, we talked to Warren in the last hour about Bernanke and QE3 and the impact. Your —you were able to see some bonds at some pretty great prices. Are you worried? Warren seemed to suggest that he was a little bit about where we really are. IMMELT: You know, again, I think as much as anything else as I read what Chairman Bernanke has said there's a sense of consistency in his actions where he has said he's going to keep the cost of money low until the economy gets better and he's been consistent to his word. So if you love him or hate, you know, QE1, QE2, QE3, I think he's been the one person that has led to some consistency around where we are. Now, did business need —when interest rates are zero do you need interest rates lower to borrow money? I don't think so. You know, in other words this is not necessarily the problem we have to solve today, you know? And so I think there's people smarter than I am that can figure that out. But I think if you take that aside and given the gridlock in Washington, it ain't —and what's going on in Europe and other places, it's not bad to have had one person in power who's been more or less consistent from 2008 to today. BECKY: Yeah. IMMELT: And I think we at least have to give him credit for that. BECKY: Absolutely. Gentlemen, very quickly, when it comes to the fiscal cliff, would you each put odds on whether you think we go over this fiscal cliff in January and go over maybe a day or two or something? What are the odds you think we go over in a bad way vs. we find some sort of a solution? BUFFETT: I would say there's a pretty fair chance we go over for a short period of time. But, you know, who knows? It'll —it depends on which fellow's elected president and it depends on the composition of the House and —but they will —it's going to get done, Becky, and... BECKY: Quickly. BUFFETT: ...how much —you know, how long they want to be in the sandbox before they come up with answer that's obvious, they can come up with today, that just depends on the personalities of leaders of the House and leaders of the Senate and the president. I don't think it will go on a long time. BECKY: But you get a... IMMELT: But if August —you know, Becky, if August of 2011... BECKY: Mm-hmm. IMMELT: ...hadn't happened I would say the odds were zero, you know, when we —when we defaulted and lost the credit rating. So I think companies have to be prepared that it might happen. But let's be clear, it shouldn't. BUFFETT: It shouldn't. IMMELT: You know, let's be really clear. If it does happen, that's a failure of governance and that's something that we shouldn't expect. BECKY: Yeah, and shame on them if it does happen. Gentlemen, thank you both very much. Warren's going to be sticking with us. Jeff, I know you have to get to the summit here. IMMELT: We got —we got... BECKY: A lot of guests. IMMELT: I got to do some selling —I've got to do some selling, so... BUFFETT: Yeah, yeah, I'm a lousy salesman so I'll stay. BECKY: We appreciate your time very much. IMMELT: Great. Thanks. BECKY: When we come back, as we mentioned, we will have more from Warren Buffett throughout the show. Up next, though, we're also going to be talking about some stocks on the move this morning. We'll tell you which companies to watch ahead of the opening bell. A lot of earnings out there this morning. Also, a very quick programming note for you. Don't miss a CNBC exclusive interview with Goldman Sachs chairman and CEO Lloyd Blankfein. That is today 11 AM Eastern, "Squawk On The Street." JOE: And another stock we're going to be watching this morning, Warren Buffett telling us earlier that he's been buying Wells Fargo this week. And that stock has turned up since those comments. ANDREW: OK. Coming up, we have a lot more ground to cover with Warren Buffett. We're going to get back to Becky and Warren in just a moment. (Announcements) ANNOUNCER: Welcome back to this special one-on-one interview with Warren Buffett, chairman and CEO of Berkshire Hathaway. Here now, Becky Quick. BECKY: Welcome back, everybody. We've been speaking with Warren Buffett all morning long. And, Warren, one of the things we haven't talked about yet is another one of your major holdings. I think Procter & Gamble [PG 68.08 0.64 (+0.95%) ] is maybe your fifth largest holding? BUFFETT: It could be. BECKY: Well, there was a story yesterday in The Wall Street Journal that took a look at Bob McDonald, the CEO. There had been a lot of questions in the past raised by Bill Ackman, an investor who's put quite a bit of money into it about whether or not Bob McDonald's up to the job. Yesterday, the Journal added that there was a letter sent to the board of directors that came from a former manager who said a lot of managers agreed with him about some of his concerns about Bob McDonald's leadership. So where do you stand as an investor in Procter & Gamble and what do you think of Bob McDonald? BUFFETT: Well, we've owned more shares in the past, but we sold some shares under A.G. Lafley, we sold some shares, that's related to valuation. And frankly, the earnings on Procter & Gamble have been disappointing now for a few years. McDonald's a terrific human being. What goes inside the place, what mistakes have been made, what the plans are, I'm really not —I don't know the answers on that. But you've got to say that Procter & Gamble was, you know, the jury's out on that now because they have disappointed in terms of earnings and we'll see what happens. I know that the board is actively engaged in trying to come up with a strategy that they think makes sense to take the earnings forward. BECKY: In the past, you've said that when you sell a stock, it's because you find something else that is a better investment, a better place to put your money. Did you sell that stock to —for any other particular purchase or was it just... BUFFETT: No. We sold that, we've sold Kraft [KFT Unavailable () ], we've sold some companies that are very, very good companies. And we've used that money, we've used it to buy, what, 11 or $12 billion worth of IBM in the last 12 months. We've bought —we bought more Wells, another billion dollars’ worth of that. And then we bought some more Wal-Mart [WMT 74.82 0.06 (+0.08%) ] a while back, another 7 or 800 million of that. And then additionally, I've given some money to these two new managers to run, too. So you'll see a lot of stocks that they've selected. So the money moves around. It moves around pretty slowly, but it moves around. BECKY: Todd and Ted, we maybe talk more about them in just a little bit. Those are the two managers that you're just referring to . BUFFETT: Right. And I'm giving them more money as we go along. BECKY: OK. We'll talk more about that in just a moment. When we come back, we'll have more from Mr. Buffett. Stick around, “Squawk” will be right back. JOE: Let's now get back to Becky and Warren Buffett. Can you —can I —do you mind? BECKY: No. JOE: Can I ask him.. . BECKY: No, no, no. JOE: Are you sure? BECKY: You have to wait. Yes. You can wait. You can come in in just a moment. JOE: Oh, OK. You're good. BECKY: I have one question I want to ask him and then you. JOE: OK. BECKY: I have one question I want to ask him and I know that you're going to want to play in this, so stay with me for one moment. JOE: OK. All right. BECKY: But Warren, I think we've let you go for long enough. You are a big supporter of President Obama. BUFFETT: Correct. BECKY: We have an election coming up. BUFFETT: Correct. BECKY: Things have changed in the polls over the last month or so, probably since the first debate. What do you think's going to happen at this point? BUFFETT: Well, I have no insight that anybody else doesn't have. I —you know, I —if you go to InTrade or something, I —their odds would be about the same as my odds. BECKY: InTrade's odds are different this morning. Joe was just pointing them out a little bit. BUFFETT: If they —well... BECKY: What are they this morning, Joe, 54 percent? JOE: Fifty-five now. Fifty-five and change. BECKY: Yeah. BUFFETT: That's movement. That's a fair amount of movement and I think there's active movement... JOE: Now 56. BUFFETT: ...and it may come down to who has the better ground game right here in Ohio. BECKY: Right. You've been watching elections a long time, though. What do you think happened? I mean... BUFFETT: Oh, I think the first debate changed things dramatically. I mean, they say in life you never get a first chance —a second chance to make a first impression. Romney got a second chance to make a first impression. And he had been portrayed a certain way. Through the Republican debates, through a lot of advertising, I mean, and he —in the first debate, 69 million people saw a different Romney... BECKY: Mm-hmm. BUFFETT: ...than they had more or less expected from the earlier Republican debates, as well as the advertising, so. He really got a chance to —it was huge. ANDREW: Did you see a different —did you see a different Romney? CNBC Warren Buffett and Becky Quick BECKY: Mm-hmm. ANDREW: Warren, did you —did you feel that you saw a... BECKY: He's asking if —did you see a different Romney in that —in that first debate? BUFFETT: Well, I saw —yeah. I saw him behave differently, yeah. I mean, he was less robotic. You know, I mean, he was —he was aggressive without being rude. BECKY: Mm-hmm. BUFFETT: And Obama was down that night. I mean, there's no question about it. I mean, that was a —that was a huge factor in the campaign. BECKY: You know, you've been a huge supporter of the president. Do you think it matters who gets elected and what it means just for business next year based on who gets elected? BUFFETT: Well, I do think that under either of the two candidates, either one that becomes president, American business is going to get a lot better over the next four years. I think that in terms of social policies, I think if I were a woman concerned about reproductive rights, I think there could be a very distinct difference. I was concerned about Supreme Court appointments. I think there could be a distinct difference. But in terms of the economy, I think the economy will get better under either one of them. BECKY: Joe, go ahead, I'm sorry. JOE: I want to stick with politics a little bit, Warren. BECKY: Yeah. JOE: And you always surprise me. I never know how you're going to answer this. I want to talk about a local politician here in New York, and I'm talking about Mike Bloomberg, every Democrat's favorite Republican. Let's say that this caught on and that it was a nationwide ban on any Coca-Cola sold in a container which —that had sugar —any Coca-Cola sold over 16 ounces. Does that make sense to you, that to do that for the obesity problem? You're a big Coke shareholder. And then I think about, you know, Dairy Queen, and you know, ice cream's not good for you, either. And I figure there must be a way that's heading to obesity. And neither are those crummy hot dogs you sell in your Dairy Queens, but do you see this as something that makes sense to you? I mean, I know you... BUFFETT: But first.. . JOE: Yeah, go ahead. BUFFETT: First of all, I've got to say Dairy Queen sales were up 5.8 percent in September, same store. So that —we did quite a bit better than McDonald's [MCD 87.28 -0.68 (-0.77%) ]. JOE: But do you see —do you see where I'm going with this? BUFFETT: But I —and ice cream, I, you know, I thrive on ice cream. I eat it for breakfast sometimes and I'm 82, so you'll have to judge, you know, how I'm doing at this point. JOE: Somebody might not like —somebody might not like you doing that at your age, Warren. BUFFETT: Yeah. JOE: Adding to cholesterol and you might get taxed on it because we don't really think it's a good idea for you to have ice cream for breakfast. Is that OK? BUFFETT: Yeah. Well, let's look at the 16 ounces of Coke. Sixteen ounces of Coke has 200 calories in it. And I would say that there's an awful lot of servings and an awful lot of things that have 200 calories or more and the idea that you should say that you can drink 200 calories of something but not 210 or 220 seems to be kind of silly. You know, in the end, I've elected the foods to eat over the years that I like to eat and I think it's kept me quite healthy. And I think if I'd been on broccoli and spinach, I mean, I would've been gone a long time ago JOE: I mean, to me it's just... BUFFETT: But I drink —I drink about —I drink... JOE: I think it's —why don't you tell me it's preposterous and Bloomberg has got a screw loose. Why don't you say that? BUFFETT: Well, because you've said it for me. But you know, I drink about... JOE: All right. But you wouldn't disagree with me. It did just —and then, you know, I've had people in from Mount Sinai, doctors that tell me, hey, oh, well, cigarettes. You don't want to —you don't —want —it's like cigarettes, you don't want to tax cigarettes? We can't tax —and I go, well, red meat 20 years ago was supposedly the cause of all heart disease. And oops, that may not have been the end all, be all. So when did they decide... BUFFETT: I eat lots of red meat. JOE: No, it's not. BUFFETT: I eat lots of red meat, Joe. JOE: I... BUFFETT: And I drink about 60 ounces, about five 12-ounce cans of Cherry Coke a day. JOE: Whew. BUFFETT: And that, you know, that's 750 calories. But I elect to get, you know, I'm going —I'm going to burn up 2700 calories or so a day. ANDREW: It's your prerogative there, Warren. Right. BUFFETT: And 750 of them are going to be Cherry Coke. And my doctor told me during those things is drink more —drink more liquids. And I said, you know, I said, how about Cherry Coke? He said it's fine. JOE: It's insanity. It's insanity. And someone needs to tell this guy that, although he's still —he's still going to be every Democrat —or every Republican's favorite Democrat. I don't —Andrew, God, if he ran for president, you'd be out there. BUFFETT: Yeah. JOE: You'd have 40 signs in your yard, Bloomberg for president. If you had a —if you had a yard. BUFFETT: I think —I've got to say, Mayor Bloomberg has done a lot of terrific things. I've seen him do it in charity, all kinds of things. JOE: Well, this ruins it. BUFFETT: But I —but I also had dinner with him in Sun Valley right after this came out and when they brought out the dessert, there was more than 200 calories in this dessert. And I was unable to determine why those 250 or 300 calories of dessert he was eating was different than my 20 ounces of Coke. JOE: Right. Do what I say, not what I do. BECKY: Did you ask him about that? BUFFETT: Well, I actually had a great big bottle of Coke brought out. It was the biggest bottle I could find in Sun Valley. BECKY: You really did? BUFFETT: Yeah, absolutely. BECKY: And did he drink from it? BUFFETT: I drank from it. I wasn't going to let him have any. BECKY: Getting back to the national election, you point out that it could be the ground game right here in Ohio... BUFFETT: Sure. BECKY: ...that makes all the difference. And I know you don't have inside information, but you've been watching elections for a long time. Your father was a congressman. BUFFETT: Sure. BECKY: You used to watch those races very quickly. What do you think it actually comes down to, what it means? BUFFETT: Well, I think in —you know, in Ohio it may very well come down to organization. Now there's been a lot of early voting in Ohio. BECKY: Right. BUFFETT: That's organization. I mean, you want to get out your vote. You know, a lot of people say they'll show up on Election Day and particularly when you've got a history, as the Democrats do, of turning out less of their base than the Republicans, so early voting is a huge advantage to Democrats. They are not going to get the same percentage of their base out on Election Day as Republicans traditionally. So we'll see who has the better ground game. BECKY: No matter who wins the election, we are going to be looking at different Treasury secretary. BUFFETT: Right. BECKY: Tim Geithner has made it pretty clear that he wants to go. You know a lot of people in finance, you know a lot of people. Have you thought about who might make a good pick for Treasury secretary? BUFFETT: Yeah, I do. And I won't get a call from —I won't get a call from Governor Romney asking me my opinion, but I think I've got a pretty good idea. But I'll save that —we'll wait to see whether Obama's elected and then we'll wait to see if he calls. BECKY: Is it a name that's been out —I mean, Erskine Bowles has been mentioned pretty frequently. BUFFETT: Erskine Bowles would be a terrific guy. I mean, he is —he's smart, he's patriotic. You know, he would absolutely do the best job for the country. I'm not saying that's the name at all, but I —but I would —Erskine Bowles is a fine —a very fine human being and what he and Alan Simpson accomplished in getting those 11 to sign on, that is —that's huge. That takes real negotiating ability. That takes —it takes humor, it takes a decent human being to get people to come together like that. So I admire —I admire Erskine a lot. BECKY: OK. Guys, I will send it back to you because I know we have to slip in another break. ANDREW: OK. We're, of course, going to have much more from Warren Buffett still ahead. And don't miss “Squawk Box” on Friday. We're going to be getting third quarter GDP numbers. That's coming up 8:30 AM Eastern. We've also got a huge lineup leading up to that data. Former Treasury Secretary Larry Summers is going to join us for an hour. We're also going to talk to BlackRock's Larry Fink. They're going to weigh in on the markets, the economy, and the looming fiscal cliff. ANNOUNCER: Welcome back to this special one-on-one interview with Warren Buffett, Chairman and CEO of Berkshire Hathaway. Here now, Becky Quick. BECKY: I'd say it's more of a three-on-one interview, but let's get back to our newsmaker of the morning, Warren Buffett, who's been kind enough to be with us for the past, oh, hour and 45 minutes or so. You know, Warren, we look at Europe all the time and you've talked to us in the past about the euro zone crisis and what you see happening. You already talked a little bit about the European banks that you think that they're in a very different position than the American banks. But last week, François Hollande suggested that the euro zone is well on its way past this crisis, is really moving out the other side of things. Is that the impression that you get? BUFFETT: No, I wouldn't say so. I mean, I don't —I don't know how it plays out, but I certainly don't feel that it's clear that it's on the road to recovery. I mean, they have a real banking problem. I mean, they, to some extent, encourage their banks to load up with sovereign debt so you have the sovereigns counting on the banks and the banks counting on the sovereigns. And you know, that creates a problem. And then it's going to be a very tough thing to have austerity and at the same time grow GDP. I —it's not an easy solution. Europe isn't going to go away. I mean, we'll be doing lots of business there five or 10 years from now, but I think it could be pretty rough there for a while. BECKY: Is that a good argument for pulling back from the area? Or is this a time you think businesses should be reinvesting? BUFFETT: Well, they either have to come closer together or —I mean, they're going to go in one direction or the other, but the idea of having a monetary union independent of, really, discipline on the fiscal side, although they said they had it originally, they've got to come closer together or it won't be sustainable. BECKY: Although the ECB has made some major moves to try and reassure the markets . BUFFETT: Yeah. BECKY: And that certainly has given them quite a bit more time. BUFFETT: Yeah. Well, it —you know, central banks can print money. They —it's a wonderful machine to have. Every —in economics, just like in life, generally, you never can do just one thing. I mean, anything you say you're going to do, it's going to have consequences. BECKY: Mm-hmm. BUFFETT: And sometimes those consequences are delayed. Certainly printing money has consequences. And you can say not printing money would have consequences to the United States, too, but we haven't seen —the movie's not over in Europe. BECKY: Joe, you have a question, too? JOE: Warren, do you —do you still think a single family home is one of the best investments around? And have you actually tried to figure out a way to invest in that? You'd like to buy 100,000 —you've said that you'd like to buy as many as you could, but they're impossible to manage and you can't really do it. Have you figured... BUFFETT: Yeah. JOE: Have you tried to figure out a way to do it? BUFFETT: Yeah. And I've had a lot of suggestions from people after I made that statement. But it's not really feasible, certainly, compared to other things we can do with money. They're —it's just too big a problem to deal with small units like that and management problems and human problems. So I think that anybody that knows where they're going to want to live, has a reasonably assured income. I think they're making a terrible mistake if they don't buy a single family home now and get a mortgage at these rates. And they should get a 30-year mortgage. It's a —it's a —really a golden opportunity. It was a little bit better six months ago, but it's still wonderful now. You're not going to see a chance like this five years from now. I'll guarantee you that. BECKY: Five years from now it's going to be a different picture, and that's interesting. BUFFETT: Yeah. Rates will be higher and all kinds of things. I mean, this is —this is the time to buy. BECKY: And you think prices will rebound, too. BUFFETT: If you know where you want —you've got to want to live there, I mean, and a home's a wonderful thing BECKY: Hm. BUFFETT: But I wouldn't buy one if I was going to move in six months or something of the sort. BECKY: Hm. BUFFETT: And I wouldn't buy one if I was terribly nervous about my job. BECKY: Warren, a couple of times you have mentioned Ted and Todd. BUFFETT: Yeah. BECKY: Ted Weschler and Todd Combs talked about what they've been doing as an investment cycle. A lot of times we get these notes from the SEC just about what Berkshire's doing with its investments. How much of that is yours? How much of that is theirs? BUFFETT: Very little of it's mine. I mean, if it's Wells Fargo or IBM or Coca-Cola, I mean, I've got four stocks that aggregate over 50 billion that I manage. And then I've got a bunch of other things, too. But the action is with Ted and Todd. And they're building up portfolios, and they will buy $500 million at a time of something. And they're probably more prone —one of the two is more prone to move around in securities than I would be. But there's a lot of styles that work. So I am enormously pleased. They're getting lots of contingent compensation, less than they would if they were running a hedge fund, and they're paying a higher tax rate than if they were running a hedge fund, even though they're doing exactly what they would be doing if they ran a hedge fund. It's a real —it's a real indictment of the tax system when you look at two guys who've just moved to doing the same exact thing from morning the night they did before and now they pay double the tax rate for it. CNBC Warren Buffett on CNBC BECKY: Uh-huh. BUFFETT: More than double. BECKY: Wow. That's a good point. Andrew .. ANDREW: Hey, Warren, I wanted to get an update on my favorite subject, newspapers. You bought the Omaha World-Herald earlier this year. BUFFETT: Right. ANDREW: You now had a little bit of time to get —to get under the hood. What do you think? BUFFETT: Well, I'll have a big section in the annual report about newspapers, and I did write a letter to all our newspaper publishers. If you find —if you have a newspaper that's indispensable to a significant percentage of its community, I think you're going to do reasonably well over time. We still pay very, very low multiples for them. The trend of the newspaper industry is down. But you have to be primary about things that are of interest to your readers. And if they're —you know, if you're in Grand Island, Nebraska, where we have a product, we've got to be relevant to what people in Grand Island are interested in. ANDREW: Right. BUFFETT: And that's a much tougher problem as you get into bigger, metropolitan papers. ANDREW: But it's working better... BECKY: You know, this week... ANDREW: Better or worse than you expected? I only say it because, you know, Newsweek just said they were going to stop printing recently. I know community newspapers are a different situation, but a lot of people always have questions. BUFFETT: Yeah. Our small newspapers —and by that I mean towns of 20,000, 25,000 —our small newspapers this year that have operated throughout the entire year for us, the revenues are down about 1 percent. Our larger newspapers like Buffalo and Omaha and now Richmond, those papers, which are larger communities, their revenues, on average, would be down more like 4 or 5 percent. So there's a real difference based on the —on the relevance of the paper to a very wide —very significant portion of the community. The bigger the community, the harder it is to have a community feeling. BECKY: You know, Warren, very quickly, earlier this week was the release of Greg Smith's book about Goldman Sachs [GS 119.77 0.77 (+0.65%) ], the guy who wrote that op-ed piece in The New York Times saying, `This is why I left Goldman Sachs.' Did you see any of the interviews that he has done? Did you take a look at any of the book. What do you... BUFFETT: I haven't read the book. I saw an interview, but I think the idea of a guy 33, who was making $500,000 a year and is unhappy because he isn't making a million and probably in any other occupation but investment banking would be making $75,000 a year, I thought it was —I thought —the idea that one disgruntled employee leaving a company with 30,000 employees warrants an op-ed with no specifics really in it except the word Buffett, so I think I —I did not think that reflected great editorial judgment. BECKY: OK. I bring this up because Lloyd Blankfein's going to be on a little later in the morning. Warren, obviously, we've covered a lot of ground, and we appreciate you for spending so much time with us and talking so much. When we come back, we still have the last word that we'll be giving to Mr. Buffett. And as we mentioned, coming up on "Squawk on the Street," there is a CNBC exclusive interview today with Goldman Sachs Chairman and CEO Lloyd Blankfein. Make sure you tune in for that. That's coming up at 11 Eastern. ANDREW: Let's get back to Becky and Warren Buffett for the last word. Becky... BECKY: Andrew, thank you. Last word, Warren, is a sort of free word association game that we've been playing lately. I say a word, you tell me what it makes me think of. And the question we get most frequently from people about you coming on is what should they be buying right now? So if I say buy, you say... BUFFETT: I say —I say hold —basically hold. I mean, the idea that the European news or slowdown in this or that or anything like that, that would not cause you to own a good farm and had a run by a good tenant, you wouldn't —you wouldn't sell it because somebody said here's a news item, you know, this is happening in Greece or something of the sort. If you owned an apartment house and you got to raise your rents a little, it's well located and you have a good manager, you wouldn't dream of selling it. If you had a good business personally, the local McDonald's franchise, you know, you wouldn't —you wouldn't be thinking about buying or selling it every day. Now, when you own stocks, you own pieces of businesses, and they're wonderful businesses. So you can pick the best businesses in the world, and to buy or sell on current news is just crazy. You're in a wonderful business, you've got people running it for you. You know you're going to do well over five or 10 years, and to think news events should cause you to try and dance in and out of something that's a wonderful game is a terrible mistake. So get into a bunch of wonderful businesses and stay with them. BECKY: But you said hold —I said buy and you changed it to hold. Does that mean don't sell or does that mean... BUFFETT: Well, I mean, if you haven't —if you haven't got them yet, you buy them consistently over time. So you sort of average over time. And I've been buying all my life. I bought my first stock, you know, when I was 11 years old and it was about three months after Pearl Harbor and Corregidor was falling and they had the Death March at Bataan, and all the news was terrible. It was a great time to buy stocks. And I should've held that stock forever, and I've been buying stocks ever since. BECKY: All right. Guys, do you have any last quick thoughts? JOE: So, hey —I do. Warren, you —have you met (Facebook CEO Jeff) Zuckerberg? And if you sat down with him and he told you, is there any way that he could explain the business well enough to you to where you'd take a huge stake in Facebook [FB 23.2299 3.7299 (+19.13%) ]? BUFFETT: Probably not. That doesn't mean that I'm negative about it, I just don't understand it well enough, and I'm actually not even a member. JOE: Yeah. BUFFETT: There's a billion of them out there. JOE: There's... BUFFETT: So I have —I like to buy things where I feel I've got a reasonable idea about how a business is going to be doing five or 10 years ago —just like —10 years from now —just like I would buy an apartment house or a farm with the idea that I would think it was going to be a good thing to own five or 10 years later. And you... JOE: Well, there is —there is a watershed event tomorrow that might change your view, and you are free to send me questions as well, if you'd like, Warren. But this is —this is a game-changer for Face... ANDREW: Kernen's going to be on Facebook, so. BUFFETT: Well, actually, Joe, I thought instead, you know, you've always wanted a share of NetJets. I've got a NetJets tie here, and instead of giving you an eighth, I'm going to take this —there's dozens of planes on this, and I'm going to give this to Becky to take back to you. ANDREW: Wow. BUFFETT: You are now a major Net —I mean... BECKY: Here we go, Joe. BUFFETT: Yeah, exactly. JOE: A tie. BECKY: Here we are. BUFFETT: Dozens, dozens... JOE: Thousands of jets, and I'm getting a tie. All right. BUFFETT: Dozens of planes. Dozens of planes on it. JOE: All right. Nice, Warren. BUFFETT: OK. BECKY: Well, thank you very much for your time today. ANDREW: Thank you. Thank you, thank you. BECKY: We appreciate it. Guys .. ANDREW: Make sure you join us tomorrow. "Squawk on the Street" begins right now. JOE: I get a tie. 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History will judge our willingness to defend moral principles against the corrupting influence of the Wall Street capos. So far, their campaign cash and lucrative revolving-door jobs have kept them above the law, while their PR firms and personal salesmanship have largely exempted them from moral judgement in the inner corridors of wealth and power. Chicago in the 1920s, the Chicago of Al Capone, had nothing on today's Washington D.C. A new lawsuit against JPMorgan Chase is being met with both optimism and skepticism. But, ironically, investigators have finally broken their silence on criminal indictments for bankers... to protect its chief executive. The Chicago-style immunity enjoyed by today's bankers will only be broken if this recent lawsuit is followed by many more -- along with criminal indictments where appropriate. And these lawsuits will only deter future crimes if bankers are forced to make restitution from their own pockets, not their shareholders'. Look Who's Talking The Justice Department has been stonewalling the public for years on Wall Street crime by saying it "can't comment on ongoing investigations." But when it comes to investigations designed to exonerate those same bank CEOs, look who's talking now! "Federal authorities are using taped phone conversations to build criminal cases related to the multibillion-dollar trading loss at JPMorgan Chase," The New York Times "Dealbook" blog reported this week, "focusing on calls in which employees openly discussed how to value the troubled bets in a favorable way." Why so chatty all of sudden, "sources close to the investigation"? The answer becomes obvious a few paragraphs into the piece: "The investigation does not appear to touch the upper echelons of the executive suite ... The findings could insulate JPMorgan and its chief executive, Jamie Dimon, from further fallout." (emphasis ours) Got that? Investigators won't say a word when big bankers are under suspicion. But when talking will help them you can't shut 'em up! Lucky Jim And ah, yes. James "Jamie" Dimon. Dimon, the CEO whose bank has apparently been above the law, suddenly finds that his institution is the target of a criminal investigation. At long last. And the Justice Department's even willing to talk about it! But whaddya know? They're claiming it will exonerate Mr. Dimon. Jamie Dimon. Like the man in the Dylan song says: He can't help it if he's lucky. Dealbook's anonymous source is quite the chatterbox, even offering the names of the individual suspects -- most of whom, as fate would have it, are French citizens who have returned to their home country and are therefore beyond the reach of U.S. law. Zut alors! (Ah, how we wish we could indict them, one imagines the Justice Department official whispering to the journalist. But their government will not extradite. You know how it is with the French, our anonymous source adds with a shrug. I ask my friends at the Sûreté what can be done, but they merely light another Gauloise and sayC'est la vie.) Looks like Jamie Dimon's luck is contagious. London Calling Even this happy accident -- from a Justice Department that has yet to convict a single employee from a major bank! -- isn't the exoneration that Dealbook seems to think it is, not even if it were to genuinely clear Chase's senior executives on the original fraud. Au contraire, mes amis! There's evidence -- very public evidence -- which suggests that Dimon and other senior executives may have misled investors about the extent of the losses on an investor call. If true, that's a crime, too: It's called 'stock fraud.' and the SEC says it's investigating. In cases of this kind, the SEC must refer any evidence of a crime to the Justice Department for investigation. But when it comes to the investor fraud angle, the Chatty Kathies at the DOJ have apparently clammed up again. Mr. Dimon also reassured investors of JPM's fiscal soundness by describing the bank's rigorous internal risk management controls. What investors didn't know was that he apparently exempted the London unit from those controls without any public notice. That's also potentially illegal, under both Sarbanes-Oxley and the 1933 law that created the SEC. The London unit reportedly bypassed the bank's normal organizational chart and reported directly to Dimon himself. As CEO, Dimon is required to confirm in writing every year that he has personally reviewed the company's procedures to ensure that they prevent fraud of this kind. It's illegal to do so falsely. ProPublica's Jesse Eisenger asks the right question: What did Jamie Dimon know and when did he know it? But investigators are apparently too busy pursuing errant Frenchmen to ask it. Diamond Jamie Dimon wasn't acting like somebody who was worried about accounting for his own actions this week. He was too busy traveling to Washington to lecture the government on what's doing wrong financially. "Jamie Dimon is mad at the government," says CNN Money. Why? Because it's not cutting spending quickly enough to please him. Some people still have the silly notion that we need to help the millions of people who have been economically victimized by people like, well, like Jamie Dimon. When we call Dimon's JPMorgan Chase a serial corporate criminal, it's not empty rhetoric: It's documented fact. Chase was implicated in a recent municipal bid-rigging case which led to two convictions. It has paid settlements in six fraud cases over the last thirteen years. It paid more than $2 billion to settle fraud charges in the WorldCom case, $135 million in the Enron case, and more than $153 million to settle charges of investor fraud regarding mortgage-backed securities. JPM gave up nearly three quarters of a billion dollars in fines and lost fees over the Jefferson County, Alabama bribery case. Then there's the $25 million for unlawful IPO (stock) allocations; $25 million (and possibly more) for what was essentially illegal restraint of trade in forcing retailers to use the credit card network it co-owned; and $6 million regarding illegal profit-sharing and tie-ins at JPMorgan Chase Securities. And yet, other than a low-level guilty plea in the bribery case, no individual bankers have ever paid for these misdeeds -- not with jail time, and not even financially. As far as the Justice Department is concerned, it looks like all this fraud just... committed itself. These fines and settlements were all paid by shareholders. That's right: Nobody went to jail. That means bankers at institutions like JPMorgan Chase have absolutely no reason not to keep breaking the law. Meanwhile Jamie Dimon, a man whose gluttony for praise rivals that of namesake Diamond Jim Brady's for food, roams the corridors of power seeking influence ... and flattery. New Suits What about the lawsuit that New York Attorney General Eric Schneiderman filed recently against JPMorgan Chase? A certain skepticism was to be expected at this point, after the government's long-standing failure to take action and the many disappointments surrounding the $25 billion mortgage fraud lawsuit. Could this suit change that pattern? The Schneiderman lawsuit, filed with the long-moribund presidential task force on mortgage securities fraud, focuses on crimes committed at Bear Stearns, the subsidiary that JPMorgan Chase acquired with strong encouragement -- and a lot of financial incentives -- from the Federal Reserve and the Treasury Department. Why not go after an active bank? There's also a new lawsuit against Wells Fargo involving what David Dayen describes as "incendiary charges" -- but which has been met with some skepticism as well. I shared the doubts, although I was heartened by an initial assessment from Prof. Adam Levitin. Levitin, who's highly respected in the field of bank fraud, thinks that this lawsuit could set an important precedent. The suit was filed under New York state's Martin Act, which allows for broader charges than Federal law does. Levitin observes that Schneiderman's is a "platform-wide case" covering a broad and long-standing pattern of fraudulent activity. "That's a new type of suit," Levitin writes, "not one that has been brought under the Martin Act before." He adds that it "majorly ups the ante for JPMorgan" and "covers an enormous volume of deals." Levitin argues that this might result in substantial damages. If the Schneiderman suit is followed by filings against several other banks, as some stories have suggested, it could be the start of something important. But even if they're successful they'll fail to deter future Wall Street crimes -- that is, unless courts demand that bankers personally return their ill-gotten gains. And ultimately only prison sentences will deter future criminals. Will these lawsuits rock these banks back on their heels? Market Predictors The market doesn't seem to think so. It rewarded JPMorgan Chase with another excellent week of trading. It also offered its blessing to Wells Fargo, whose was filed under the False Claims Act which forbids defrauding the government and under the little-used FIRREA statute. If the market doubts that these banks will be brought to justice, it can hardly be blamed for that. Investors are letting recent experience guide their judgement. Some of us lapsed into optimism at this year's first attempts to hold banks accountable. Those of us who allowed ourselves to feel that optimism more than once wound up feeling like Charlie Brown. This Administration has pulled the football from us one too many times. So far the naysayers have had a better track record when it comes to predictions than we do. It's up to Schneiderman and the task force to prove them wrong. Good Grief, Charlie Prince! According to the Wells Fargo suit, the bank continued to illegally conceal its "materially deficient" loans until the end of 2010, well after the wheels of justice were allegedly turning against them. They clearly didn't believe it either. It was Charles Prince, CEO of crime-plagued and failed Citigroup, who most eloquently described the motivation behind bankers' willingness to follow each bubble, each greed-driven whim, as far as it will take them: "As long as the music is playing, you've got to get up and dance." Looks like some of them are still dancing, So far nobody has made bankers pay for their crimes with criminal indictments, or even with fines paid from their own pockets rather than that of shareholders. And ego-driven financiers like "Diamond" Jamie Dimon haven't even faced much public approbation the actions of their institutions -- actions which include bribery and fraud. The mildest slights to their vanity throw them into rage, as a recent Vanity Fair article on Dimon demonstrates once again. But the real shaming they've earned has yet to be leivered. Yves Smith believes that "One of these days, Dimon's lack of caution will catch up with him." Let's hope so. But man, he sure is... lucky Hopefully Adam Levitin is right and the Bear Stearns suit is prelude for more actions to come. But those actions must have a deterrent effect which can only come when bankers are held personally accountable for their actions. Until then, for Jamie Dimon and other executives, the beat goes on.
Via Bill Blain of MINT Partners, The markets mood is shifting from certainty to uncertainty. I've noticed over the last few days clients are less and less sure of their ground. Too much attention on 'end of the world' analyst reports and press drivel. Much of the wibble seems due to doubts whether QE3 will work and what hope is there for global economies, but we're also getting more concern about coming trials like 'The US Fiscal Cliff' as the 'Next Insurmountable' market threat, and the combination of recent Bundesbank snapping at the ECB plus Spain et al. triggering another round of Euro-wobble. Just to add a seasoning of my own doubts even the mighty new issue market seems to be stalling. If a safe names like the EIB only got a slightly oversubscribed deal done, while a new Deutsch Hypothek struggled over the start line too tight even for domestic buyers then you have to worry. If the mighty new issue stream is drying up (unlike the British weather).. then heaven help us all Get over it... Uncertainty and greedy borrowers are fact. I would simply point out that volatility looks awfully low, and its maybe time to take a view going long increased vol. The final quarter of 2012 never promised anything except likely excitement. As Jimbo often reminds us: No point in worrying about it today when you're going to have to worry about it when it happens tomorrow... On the other hand, fore-warned is never a bad thing. The risk the US will grind to a sickening full stop if/when Obama beats Romney and the Republicans stay in control of the senate seems exaggerated. Its fuelled by political scaremongering: Elect Romney or well shut-down America is the Republicans subliminal message, being delivered by purveyors of right wing thought across the States. As has been shown before, a grid-lock ratings cut is immaterial to the US bond market. And while compromises may be last minute, its unlikely the US will enact automatic budget shutdown triggering deeper recession. Get over it. Unfortunately pragmatism and Europe are words seldom used together. So its entirely likely the Bundesbank will continue to behave like a scolded toddler stomping its little feet and moaning about the ECB not playing by its rules. But Germans believe the Bundesbank is a raging rock of Teutonic stability in the crazy madness that is Europe, so politically Merkel can't simply tell Axel and chums to shut the **** up and get over it its getting too electorally sensitive. So despite more soothing words from Draghi, Europe is wobbling. The consensus is shaky. Spain doubts are mounting with the threat we previewed last week of regional independence demands growing. Meanwhile the Greeks are revolting (ba-boom), and they are going to demonstrate on the streets while staging a national strike. The unpalatable truth about a stable Europe is it takes all its many and diverse participants to be singing off the same hymn sheet. Unfortunately they aren't. The different objectives and aims of each group are becoming increasingly apparent; chancers like Catalunya using weakness to further separatist goals, or technocrats using crisis to further their divine mission to correct foolish political mistakes, etc etc etc. The Bottom line remains if the Euro can be held together, then Italy and Spain bond yields will tighten. Simple. Unfortunately, the tensions inherent in the system threaten to pull it apart. A brief study of history will show conflict and naked self-interest are the only permanent features inherent to any human system. Name me an alliance, an empire, a union, a nation or any large political unit that has, at some point, not tried to pull itself apart? At the other end of the same scale I'm sure I'm not the only human economic actor who joined in fiscal matrimony with another only to see it collapse in the acrimony of the divorce courts! (Ah still bitter after all these years) So I'm still betting against the ability of Europe's talented Eurocrats to solve the complexity of the European Gordian debt knot... Meanwhile.. the global recession gets deeper. Yesterday the slowing European economy caused Volvo to acknowledge slowing truck demand.. Who could have predicted that (US Readers Sarcasm Alert!) And its going to get worse. A couple of months ago I cautioned the Bo Xilai scandal in China could have dramatic knock on effects on both Europe's luxury good market and German precision engineering. Its certainly not fashionable to be part of the China conspicuous consumption society any more. That means a check to the market in premium wine sloshed down with coke, expensive BMWs and Porsches, and any watch as long as its blingy. I read in y'days IHT the China government will impose Frugal Working Style rules from Oct 1 banning civil servants from accepting banquets, cars and other expensive gifts. So forget that Ferrari for planning permission, luxury watches in return for an intro, or even a place for the kids at expensive US universities from now on Chinas bureaucrats are going to have to explain how they can afford it. All of which kills the previous German car metric that German exports of premium Mercs to Shenzen were price insensitive. Sell Sell Sell. And this month's prize for noticing the Titantic has sunk - FT front page reported Bunds have been higher (shock horror) on the back of Swiss Central Bank buying with all the Euros they bought to protect the CHF. Really, Wowser.. and if SNB eases up its buying or changes CHF target.. GUESS WHAT
Genesee & Wyoming (GWR) -4.4% AH after announcing a public offering of 3.5M common shares and 2M tangible equity units through Bank of America, Citi and JPMorgan. GWR intends to use the net proceeds to partially fund its acquisition of RailAmerica or for general corporate purposes.
Genesee & Wyoming (GWR) -4.4% AH after announcing a public offering of 3.5M common shares and 2M tangible equity units through Bank of America, Citi and JPMorgan. GWR intends to use the net proceeds to partially fund its acquisition of RailAmerica or for general corporate purposes. Post your comment!
Scotiabank (BNS) agrees to buy the Canadian unit of [[ING]] for $3.1B, with the net investment (after deducting excess capital at ING Bank of Canada) footing to $1.9B. To fund the purchase, Scotiabank will undertake a secondary of 29M shares at $52. BNS -2.1%, ING +1.7% AH. (PR)
Scotiabank (BNS) agrees to buy the Canadian unit of ING for $3.1B, with the net investment (after deducting excess capital at ING Bank of Canada) footing to $1.9B. To fund the purchase, Scotiabank will undertake a secondary of 29M shares at $52. BNS -2.1%, ING +1.7% AH. (PR) 2 comments!