Brian's Brain

The timing and circumstances surrounding the upcoming interest-rate decision on Tuesday, September 18th is really interesting.

Nearly everyone on wall-street expects the feds will lower interest rates on their session next week. It's actually becoming not even a question of "if", but "how much". Conservative estimates are that they will only lower then 0.25 points, while some are even talking about 0.75 all at once. I watched an interview today with a guy at Morgan Stanley who said the market has ALREADY priced in a half-point interest-rate drop. (In other words, the stock market should theoretically be 400 to 500 points lower right now, if not for the fact that most people believe the feds will bail them out).

Today was a key day, as we saw presidents of several key banks make statements about interest rates and the economy Investors were hoping for some hint about what the feds might do... What they got was a statement from at least 2 different bank-heads (who sit on the federal reserve board) who reiterated that it wasn't the job of the federal reserve to bail out institutions who had made bad investments... and yet there's still hope from the street that the fed "can't be serious"... many saying if they don't lower interest rates, we'll head almost immediately into a deep recession. Nobody wants to believe the fed is so stupid they won't lower rates, even though the comments they're making are clearly hinting that they don't want to.

The big reason the fed doesn't want to lower interest rates is simple: the dollar is really in bad shape right now -- it's been in a steady free-fall for the last 3-months... It's been many, many decades since the dollar has seen levels this low. The international markets have caught on that the fed is printing their way out of the national-debt and social-security problems (among other things). They were also not amused with the decision to lower the rate on the discount-window in response to the mortgage crisis (this also de-values the dollar). All of these things have a HUGE impact on how much confidence the world-markets have in the U.S. dollar... Combine these problems with the fact that SOMEONE appears to be engaging in a slow-but-steady sell-off of U.S. dollars (many speculate it's China, and for good reason), and we can see confidence levels in the dollar plummeting world-wide. IF the fed lowers interest rates, you can expect accelerated dollar sell-off's and possibly a tightening of the credit that's extended to the U.S. by the rest of the world (can you imagine what would happen if confidence in the dollar dropped so low that the U.S. government could no longer borrow money?!)

So.... the situation is simple. They have two choices.

Choice A) If the fed lowers interest rates, the stock markets will rally and everyone here in the states will be very happy as they see the feds making money cheap.... This will cause inflation to jump by 2 to 5 percent almost overnight (depending on how much they choose to lower rates) as many take advantage of the cheap money -- and confidence in the U.S. dollar will plummet simultaneously. The world-markets will accelerate their current sell-off of the U.S. dollar -- putting the future confidence of the dollar at serious risk, and causing a long-term, accelerated inflation slide that the feds may no longer be able to control.

Choice B) If the fed chooses to leave interest rates as-is, the market will probably plummet by 400 to 800 points in one day (with a long-term broad sell-off lasting a few months.. but the international markets will be happy as they see the fed standing behind their currency and not intentionally de-valuing it. The dollar will rally. The confidence in the U.S. dollar will remain strong, and American corporations will really take a hit. A long-term recession will set in with a bursting liquidity and real-estate bubble in the U.S.

It's the day of reckoning for the fed. Congress has put us in this situation with their drunken spending, and now the federal reserve will have to choose their poison.

News outlets are buzzing with information about potential threats with more activity than I think I've ever seen before. We've seen all of this float across the news at various times... Since there's so many inaccurate or non-credible things that float through, I thought it would be interesting to compile the information I considered CREDIBLE in relation only to potential terror attack, put it side-by-side, and see what it looked like.

I went through each item and researched it carefully to make sure multiple MAJOR media outlets agreed on the facts before writing my comment on each one. Several candidate headlines were thrown out because the facts were inconsistent or questionable.

So... specifically in relation to credible evidence that the terrorists are planning an attack on U.S. soil in the very near future, here's what I came up with:

Three Videos and a Black Beard: We know that Bin Laden has issued two videos recently and he has dyed his hair black (it is a fact that a beard being dyed black is a sign of Jihad). We also know that a third video was announced this morning. It has been 3 years since he last released a video, and now we have 3 within a week. Is is highly likely that “3” marks the completion of a signal. Islam also requires Jihadists to provide warning and a chance for the enemy to change its ways before executing an attack. Also, there are many similarities in this video and the one given to Europeans in 2004 just prior to the London Subway bombings. The latest video is definitely recent, since he makes references to the current mortgage crisis and several other current events.

Warnings of an attack from the CIA: CIA director Michael Hayden warned last Friday (Sept. 8th 2007) that Al-Queda was planning new, large-scale attacks on US targets.

Air-Force Stand-Down on 9/14: The air-force has ordered a command-wide stand down on Friday the 14th. According to the Air Force Times, Command boss Gen. Ronald Keys ordered the Sept. 14 safety stand down in which the entire command — about 100,000 active-duty airmen — are standing down training flights and many other operations as part of a command-wide safety day. What’s not being published is what the phrase “many other operations” actually means. This could be nothing, but it’s significant enough it should be on our radar.

Head of the National Counterterrorism Center says “We’re going to get hit again”: According to Newsweek (and many other credible news outlets), Retired Vice Admiral John Scott Redd, head of the National Counterterrorism Center, says, "We have very strong indicators that Al Qaeda is planning to attack the West.". During the interview on August 27th, he indicated that “chatter levels” were similar to what they were seeing during the summer just prior to 9/11/2001.

Democrats and Republicans Agree: The only way for the GOP to win the Whitehouse in ’08 is if we get attacked again. Hillary Clinton said it, so did Dennis Milligan (republican state party chairman).. Here’s his quote: "At the end of the day, I believe fully the president is doing the right thing, and I think all we need is some attacks on American soil like we had on [Sept. 11, 2001], and the naysayers will come around very quickly to appreciate not only the commitment for President Bush, but the sacrifice that has been made by men and women to protect this country"

Schools a Possible Target: 17 yellow school busses were stolen from various charter schools, business schools, and private bus companies in Houston in the last few weeks. Published reports in 2004 said that the U.S. military found information in Iraq pertaining to U.S. schools. In March 2007, the FBI issued an informal bulletin to state and local officials to watch out for people tied to extremist groups trying to earn licenses to drive school busses.

Specific Nuclear Threats in Al-Qaeda Chatter Uncovered: “They will soon realize their mistake when American cities are hit by quality operations” were the words uncovered August 8th amidst Al Qaeda chatter. Another said the attacks would be carried out by means of trucks loaded with radioactive material against America’s biggest city and financial nerve center. A third mentioned New York, Los Angeles, and Miami as targets. It drew the message: "The attack, with Allah's help, will cause an economic meltdown, many dead, and a financial crisis on a scale that compels the United States to pull its military forces out of many parts of the world, including Iraq, for lack of any other way of cutting down costs." No specific time-period was mentioned or hinted. It is unknown if these threats are credible, but they were thought to be credible enough to warrant a full-scale dirty-bomb-hunt in NYC immediately after the statements were made. The problem is that, since no time period was mentioned, we don't when this is supposed to occur.

In response to my previous post, I thought it was interesting to tackle what it actually means (in my opinion) for something to be credible.

The dictionary defines credibility as "Worthy of confidence; reliable." -- this means credibility is subjective because we each decide for ourselves what is "worthy of confidence". My personal standard is pretty high.

In my opinion, things are credible when they can be independently verified..

Example: Can you verify that 17 school buses were stolen in Houston? Sure.. call the Houston police, they'll tell you (don't trust them? I suspect you could call the victims themselves!). Can you verify that the air force is planning some sort of stand-down on the 14th? Call them and ask (I guess they could be lying -- but it is a fact that they CLAIM there is a stand-down). Can you verify Hillary Clinton and Dennis Milligan made the statements? It's on video.. you can see it for yourself. Can you verify that a black beard is a sign of Jihad? Absolutely.. talk to a Muslim Cleric, or study the ancient religious texts yourself.

See the pattern? You can know for YOURSELF if these things are true.

By this standard, credibility slips when items cannot be verified at the source. As soon as we use words like "my sources tell me", we've broken the chain of credibility, unless I can verify your sources. The problem is that conspiracy theorists will rarely let you verify their sources. There are a few exceptions (like Dr. Jones and the great work he's done with his 9/11 research). The more a conspiracy theory has verifiable subtext, the more credible it becomes. Unfortunately, once you can verify more pieces of the theory for yourself, it becomes less of a conspiracy theory and more of a conspiracy fact (and people tend to find "theories" to be a lot more fun).

The philosophical subtext around credibility is certainly interesting!

Most modern retail outlets (walmart, sams, costco, kroger, etc.) all use "Just In Time" (JIT) shipping and delivery. This means supplies arrive just before they're needed for the shelves. This keeps things fresh, minimizes the amount of "back-room" space needed to store things not on shelves, and generally helps to keep costs down across the board (they almost never have excess inventory they have to get rid of, for example). Remember in the old days if something wasn't on the shelf they could generally find it "in the back" ? Ever notice how that's never the case anymore? "Hey, if it's not on the shelf, we don't have it!" This system really does save money, and in turn, keeps the price of goods a lot cheaper.

Walmart has this one down to a science... Their system is REALLY fascinating (without a doubt, the most sophisticated supply chain management system ever built). They do a couple of interesting things...

First, every purchase you make is tracked (not necessarily back to YOU).. they want to know what you buy with what. What do they do with this data? Well, there's a 20% chance that someone who buys a Hersheys candy bar will also buy Graham Crackers and Marshmallows -- so it makes sense to put some of each next to the Hersheys bars, or put some Hersheys bars next to the graham crackers (or both)... If you walk around a walmart store, you'll find they have this down to a total science -- you'll see all these random items being placed next to each other (many seemingly have nothing to do with the other one -- but their computer tells them to do it)... This is no parlor trick. The system has a MAJOR impact on walmart revenue -- ever notice how you can walk into walmart intending to spend $10 and walk out having spent $40?... Yeah.. they're pretty good!

The other thing they can do with this system is connect it to predictive modeling systems... such as weather. People tend to buy more Popsicles on a hot day -- so guess what walmart does? 2 days before a heat-wave, their computer system AUTOMATICALLY ships extra Popsicles to stores in areas that will experience the higher temperatures. No people are even involved. The guys in the warehouse get a "packing slip" (generated completely by the computer).. so they load up the truck, and it shows up at the walmart store where it's unloaded. I've heard jokes from guys who've unloaded the trucks that they can predict all sorts of funny things based on what supplies the computer decided to put on their truck.

Think about what this means in terms of "Just in time" arrivals... In the summer, people drink more lemonade. During storms, people buy more batteries, water, and flashlights. On extra hot days, they buy more ice cream, on extra cold days, they buy hot chocolate, On Saturdays, people tend to buy more milk and bread. All of these events can be predicted with a great deal of accuracy now, thus the stores always have "just enough" inventory, despite seemingly strange fluctuations in demand. They get down to very granular levels with their predictions (these are very simple examples).

Also, this is a REALLY slick system for hurricanes.... A few days before a major storm hits an area, truck-loads of diapers, batteries, toilet-paper, flashlights, bottled water, etc. will arrive at stores.... Again, the computer does all of this (no human EVER needs to be involved).

Some parts of the country have different purchasing habits -- the walmart system is smart enough to "learn" this.. (Example: In Utah, milk and eggs are a popular saturday-night staple -- the walmarts in Utah are ready, while they may not care in other parts of the country -- this is completely automatic).

I also know that fuel companies (like Flying-J) use a similar system for predicting where fuel demands will be, and thus automatically deciding how much gasoline should go to their different service stations across the country. When big storms are predicted, trucks are usually arriving with extra fuel before the storm is ever a problem.

While this is really an amazing technological feat, it does expose a certain amount of vulnerability in our current distribution system. If everything is Just In Time, what happens if a major event occurs that could not be predicted? (Example: an earthquake). Also consider, if purchasing habbits in a given area suddenly change, it may leave shelves a little empty until the system can re-learn what's going on.

Food for thought.

I thought this was interesting, and a good example of how news outlets will spin the facts in order to get the headline they're after to further their agenda. The topic is the federal deficit / congressional spending reports that were released today. Both articles are written about this report and the numbers that are in it.

Both of these articles are completely factual. There are no incorrect statements in either article -- but the headlines, AND the text of each article, inspire polar opposite reactions towards the way our government has been spending money.

Article A: Federal Deficit Running Lower This Year (Associated Press)

Article B: Budget Deficit Jumped in August (Wall Street Journal)

The moral of the story is that you can't just read a headline to understand the news. You have to carefully consider what information was compiled to create the story, and what the author might be trying to teach you despite what the facts say.

Don't let this slip through the cracks. This is a BIG deal.

Russia has veto power on UN security-council resolutions. This means it will now be nearly impossible to pass security-related sanctions against Iran. This is significant because it's almost identical to what we went through with Iraq....

When the U.S. was actively trying to pass sanctions and get international approval for other operations against Iraq, Russia eventially got sick of it and made a statement similar to this one. Effectively, it meant the international community was no longer capable of supporting any further actions against Saddam. Having exhausted all channels within the UN, we were at war a few months later -- the army was referred to as the "coalition of the willing" (in other words, a coalition made up exclusively of countries willing to wage a war without UN support).