The Quotable Thomas Paine

Let it be told to the future world, that in the depth of winter, when nothing but hope and virtue could survive, that the city and the country, alarmed at one common danger, came forth to meet and to repulse it. — President Barack Obama quoting Thomas Paine, The American Crisis #1, December 23, 1776

Not bad for a man that Teddy Roosevelt once described as "that filthy little atheist." The line that President Obama quoted today at the end of his Inaugural Address is from Thomas Paine's The American Crisis #1, the first in a series of 16 essays written between 1776 and 1780. Most Americans know the opening line "These are the times that try men's souls." Beyond that, most Americans are less aware of the circumstances or the rest of the contents of the American Crisis though it is perhaps the second most important piece of political essay writing, because of its immediate impact, in American history. It can be said that it saved the Revolution. The only other work of greater importance in the annals of American political essay writing is also from Paine. Common Sense stands apart in the annals of American political essays for the forty-seven page pamphlet published in January 1776 presented the argument for independence from British rule at a time when the question of independence was still undecided.

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Ethanol To Consume 34% of US Corn Production in 2009

Ethanol manufacturers are expected to use 3.6 billion bushels of corn, or about a third of the US corn crop during 2008/09 marketing year. This is an increase of about 7 percentage points up from about quarter of the US corn crop the prior marketing year. As I have noted previously, ethanol from corn has a horrible ROE (Return on Energy). Corn ethanol only nets 1.3 times the fossil fuel energy required to produce it.

From All About Feed:

A study by Informa Economics forecast ethanol to climb to 34% of US corn production in 2009.

Nearly 80% of the 820 farmers surveyed at the American Farm Bureau Federation's annual meeting in San Antonio said ethanol was beneficial for agriculture, but 17% of respondents said it did more harm than good.

The Farm Bureau is the nation's largest farm group, representing producers of cattle and hogs as well as growers of cotton, wheat and corn.

Lower oil demand and the financial problems in the ethanol sector might depress corn use for ethanol. The Reuters poll found that still about 55% expected some of their corn crop to go toward production of the renewable fuel this year.

Ethanol has been sharply criticized by the food industry and aid groups for diverting corn away from livestock and food makers, pushing world food prices up.

Higher feed costs
Farmers were aware of the criticism, and 35% said ethanol's biggest impact was creating higher livestock and feed costs as well as higher food prices.

Farm and biofuel groups, along with the US Department of Agriculture, have deflected that criticism, saying factors other than ethanol are primarily to blame, including volatile oil prices and increased global food demand.

Slow growth
After years of rapid growth, ethanol has begun to show its age. But the government's so-called renewable fuels standard, which requires the use of 11.1 billion gallons of renewable fuels in 2009, should help growth during the next few years. But some analysts and the Renewable Fuels Association, which represents the industry, are forecasting consolidation among ethanol firms due to tighter operating margins and less demand because of a drop in gasoline use.

USDA has cut its projection for corn used for ethanol by 400 million bushels in two months to reflect these concerns.

Coincidentally today an editorial from the New York Times on America's Energy Inefficiencies. We cannot afford mistakes of this magnitude. The question is how do we fight the perception of ethanol as a viable alternative fuel?

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A Man of the People

When on April 12, 1945, President Franklin Delano Roosevelt died in Warm Springs, Georgia, the nation's grief was overwhelming. First Lady Eleanor Roosevelt would receive thousands if not millions of condolences but few more poignant than this one:

I didn't know FDR but FDR knew me.

That note, I think, encapsulates why FDR was a transformative President and why he was ultimately a successful one who is fondly remembered. FDR, who despite being crippled and largely unable to travel the length and breadth of this great land, still was able to intimately judge the mood of the country, to realize and reflect upon the hopes, dreams and aspirations of the nation he governed.

The White House, they say, can be a bubble. Harry Truman called the White House a "glamorous prison." Bill Clinton said the White House was the "crown jewel of the federal penitentiary system." William Howard Taft thought it was "the loneliest place in the world." It's certainly a tough job but if Obama is to succeed, I suggest, that he look at FDR and how he approached the Presidency. To quote FDR:

"The Democratic Party is the party of the people. I'm a man of the people." - FDR

It doesn't have to be more complicated than that.

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Jill Biden's Candor

Dr. Jill Biden today on the Oprah Winfrey show said that her husband Joe Biden, the Vice President-elect, had been given a choice by the President-elect back in August of being either Vice President or Secretary of State. Apparently the gift of candor runs in the family. Well, at least, we now know how Joe Biden chose and we gained some insight into the decision-making process but one does wonder what if Joe Biden had chosen the other post, who would have been picked as the number two? I doubt it would have been Hillary Clinton.

From Jake Tapper's ABC News blog:

During the taping of the Oprah Winfrey show today, Dr. Jill Biden said that her husband, the vice president-elect, was given a choice of being either vice president or secretary of State.

This revelation came after Vice President-elect Joe Biden told Oprah that after then-Sen. Obama offered the job of VP he asked for some time to think about it and talk it over with his family.

Mrs. Biden interjected: "Joe had the choice of being secretary of State or vice president." She then seemed to realize she'd said something she wasn't supposed to have said.

Her husband laughed.

Said Oprah, trying to continue the conversation, "You said, 'Joe...?'"

"I said, 'Joe if you are secretary of State you will be away, I'll never see you,'" Mrs. Biden said. "We will see you at a state dinner once in a while. But I said if you are vice president, the entire family, because they worked so hard for the election, they can be involved ... They can come to our home, they can go to events, they can be with us and that is what is important to us."

Oprah turned to the VP-elect, asking "Were you worried about being number 2 because you wanted to be number one?"

"I think Barack was worried about it," the former senator said with a laugh.

This can't be the kind of thing that would please Sen. Hillary Clinton, D-NY.

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The Obama Treatment

It's fair to say, BHO is no LBJ at least in terms of persuasion techniques. Each President, no doubt, has their own style. LBJ's style known as "The Treatment", of course, is lore.

The Treatment could last ten minutes or four hours. It came, enveloping its target, at the LBJ Ranch swimming pool, in one of LBJ's offices, in the Senate cloakroom, on the floor of the Senate itself -- wherever Johnson might find a fellow Senator within his reach.

Its tone could be supplication, accusation, cajolery, exuberance, scorn, tears, complaint and the hint of threat. It was all of these together. It ran the gamut of human emotions. Its velocity was breathtaking, and it was all in one direction. Interjections from the target were rare. Johnson anticipated them before they could be spoken. He moved in close, his face a scant millimeter from his target, his eyes widening and narrowing, his eyebrows rising and falling. From his pockets poured clippings, memos, statistics. Mimicry, humor, and the genius of analogy made The Treatment an almost hypnotic experience and rendered the target stunned and helpless.

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Senator Murkowski Seeks Pardon for Convicted Felon Ted Stevens

Michael Brumas, the Communications Director for Alaska Senator Lisa Murkowski, confirmed to the Anchorage Daily News that her office is seeking a Presidential Pardon for convicted felon Ted Stevens.

With less than 48 hours left of the Bush presidency, U.S. Sen. Lisa Murkowski's spokesman said today that Murkowski had asked the White House to pardon the former senior senator of Alaska, [convicted felon] Ted Stevens. Michael Brumas, Murkowski's communications director, said the pardon request was made earlier this month. He declined to give other details, including whether Stevens himself wanted the pardon and had asked Murkowski to pursue it on his behalf. "It's just a very sensitive issue and a sensitive time - a couple days left," Brumas said. "We're just not saying anything more."

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More Evidence of a Balance Sheet Recession

"Make more loans? We're not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans." -- John C. Hope III, the chairman of Whitney National Bank in New Orleans

Back in early December, I highlighted a warning from UCLA Anderson Forecast Senior Economist David Shulman that the US economy, indeed perhaps much of the world economy, faced what is known as a "balance sheet recession."

To refresh your memories, a balance sheet recessions are highly uncommon and happen following the bursting of a nation-wide asset price bubble such as the one we face now in the housing and commercial real estate markets. Nomura Securities Chief Economist Richard Koo first described the phenomenon, where the vast majority of companies in an economy devote most of their resources to paying off their debts even when interest rates are near zero.

Balance sheet recessions are as rare as a nation-wide asset price bubble which happens perhaps once every two generations. This type of recession is unlike other recessions in that the inventory cycle is not the key driver. The key driver in this recession is the corporate effort to repair their balance sheets by postponing investments and instead, paying down debt. When a large number of companies move away from the usual goal of profit maximization to debt minimization all at the same time in their effort to regain their financial health, the balance sheet recession starts.

A snowballing debt burden may freeze any recovery, since companies and consumers care mostly about paying off debt, choking consumption and investment sentiment. This leads to another round of asset deflation further deepening the economic slump. This vicious cycle is dubbed a balance sheet recession. In effect, companies are looking to wipe under-performing assets off their balance sheets. Japan's experience from 1991 through 2005 is the main and best known example of a balance sheet recession.

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Small Community Banks and the TARP

Earlier this week, President George W. Bush made a formal request to Congress on behalf of President-elect Barack Obama for the release of the second $350 billion tranche from the $700 billion Troubled Asset Relief Program (TARP) fund. Though Congress passed the TARP rescue program back on October 3, 2008 to deal with the most serious financial crisis to impact the country since the 1930s, smaller community banks have had to wait to seek financial support until the government was able to draw up the rules under which they could apply, a delay that had caused unhappiness in the banking community and likely caused further turmoil on Main Street.

This past Wednesday, the Treasury Department finally released the rules that small banks will need to follow in order to seek support from the government's $700 billion financial rescue program. The Treasury Department gave the small banks until February 13, 2009 to submit their requests for money. The new rules cover approximately 2,500 banks that are organized as S corporations which do not pay any income taxes. Instead, an S corporation's income or losses are divided among and passed through to its shareholders. Most of them are set up as partnerships, with no more than 100 shareholders. Thus these small community banks aren't able to issue preferred shares to the government in exchange for capital injections from the TARP, as other publicly-traded banks can.

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Selling The Stimulus

Americans United for Change is a progressive non-profit issue-advocacy group that is helping to lead a coalition of more than 30 progressive and labor organizations all of which are working to ensure passage of the American Recovery and Reinvestment Act. Today, the group unveiled a new television ad campaign in Ohio targeted at GOP Senator George Voinovich.

The spot titled `Day and Night - Ohio' features highlights from a recent speech by President-elect Obama and will air on all four Cleveland area broadcast stations on Friday, January 16th during Obama's planned visit to the area to promote his plans for jobs and economic recovery.  

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Don't Ask, Don't Tell, Just Wait Awhile

From CNN:

In an overlooked YouTube video posted on Friday, a spokesman for Barack Obama said the president-elect is committed to ending the policy that bars openly gay men and women from serving in the U.S. armed forces.

In a response to a question on the Web site asking whether Obama would get rid of the "don't ask, don't tell" policy, Obama spokesman Robert Gibbs said: "You don't hear politicians give a one-word answer much. But it's 'Yes.'"

Gibbs on Wednesday expanded on his answer, saying, "There are many challenges facing our nation now and the president-elect is focused first and foremost on jump-starting this economy.

"So not everything will get done in the beginning but he's committed to following through" with ending the policy against being openly gay in the military.

The DADT policy, which dates from the Clinton era, bans military recruiters or authorities from asking someone about his or her sexual preference, but also prohibits a US service member from revealing if he or she is gay.

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