The Government Accountability Office issued a report on former federal employees registering as foreign agents when they lobby for other countries. It's mainly about paperwork and compliance, but the appendix offers an interesting snapshot of some of the Washington influence that foreign nations buy at very nice sums from our former public servants.

GAO identified 29 senior government officials who left government between 2000 and 2007 and went on to work as influence peddlers for other nations. The former officials weren't named, and they haven't been accused of wrongdoing. But it's interesting to see some of the clients and the nature of the work. A selection:

A former senior Commerce Department official "provided advice and assistance in connection with maintaining and strengthening Haiti’s relations with the U.S. government."

Here is Haiti's record on human rights, according to the State Department:

Despite some improvements, the government's human rights record remained poor. The following human rights problems were reported: alleged unlawful killings by HNP officers; ineffective measures to address killings by members of gangs and other armed groups; HNP participation in kidnappings; overcrowding and poor sanitation in prisons; arbitrary threats and arrests; prolonged pretrial detention; an inefficient judiciary subject to significant influence by the executive and legislative branches; severe corruption in all branches of government; violence and societal discrimination against women; child abuse, internal trafficking of children, and child domestic labor; and ineffective enforcement of trade union organizing rights.

A former senior Transportation Department official "provided government relations services to the Royal Embassy of Saudi Arabia. The purpose of the government service was to defend and advance the Royal Embassy of Saudi Arabia’s international trade and other interests before the government of the United States."

Here is Saudi Arabia's record on human rights:

During the year, the following significant human rights problems were reported: no right to peacefully change the government; infliction of severe pain by judicially sanctioned corporal punishments; beatings and other abuse; arbitrary arrest and detention, sometimes incommunicado; denial of fair public trials; political prisoners; exemption for the rule of law for some individuals and lack of judicial independence; restrictions on civil liberties such as the freedoms of speech, including the Internet, assembly, association, movement, and religion; corruption and lack of government transparency. Violence against women and discrimination on the basis of gender, religion, sect, and ethnicity were common. Limitations on the rights of foreign workers remained a severe problem.

A former senior official from the U.S.-China Economic and Security Commission "provided advice concerning allegations of misconduct directed at President Sassou-Nguesso by creditors of the Republic of Congo."

According to the Boston Globe, creditors Hemisphere Associates and Kensington International "say the thousands of pages of documents they have compiled reveal hidden identities, multiple sham traders for every deal, and the son of President Sassou-Nguesso overseeing most of the sales as a private businessman. The transactions were designed to 'loot the Congolese national economy,' according to a lawsuit filed by Kensington in New York this past May."

A former senior State Department official "provided advice, expertise, and assistance to aid the State Intelligence Agency of the Republic of Indonesia."

Indonesia's State Intelligence Agency, Badan Intelijen Negara, goes by the acronym BIN. Here is Australia's Sydney Morning Herald:

In September 2004, mounting evidence suggests, BIN orchestrated the murder of the human rights activist Munir Said Thalib on a Garuda flight to Amsterdam.

Posted by Jay Hancock at 10:05 AM | Permalink | Comments (0)
        

The folks at Hoisington Investment Management are out with their always excellent, always well thought out quarterly analysis. Despite signs of inflation in many places, they say, rising unemployment, lackadaisical consumers and a slowing world economy make deflation more likely than further inflation.

Widespread is the notion that inflation is back for good. Many assume that the relative price stability of the past two decades has been irrevocably shattered by “peak oil” and the surging demand by developing economies. Improvement of living standards in those developing countries has caused, and will continue to cause, increasing demand for calories, and final demand for food will outstrip supply. Additionally, the cost of basic materials is lifting production costs, and the cycle of higher food and fuel costs means that the prices of all imported goods to the United States will continue to rise...

Our conclusion is that deflation, not inflation, is, and will continue to be, the essential problem for the U.S. economy and that the optimum fixed income portfolio should consist of treasuries with the longest possible maturities...

The unemployment rate has risen to 5.5%, the highest level since October 2004, while the manufacturing capacity use rate has fallen to 77.5%, the lowest since November 2004. Since 1949, manufacturing capacity utilization has averaged 8.%. As such, there is an additional 3.6 % of excess capacity. The output gap, which is real GDP less potential GDP as a percent of real GDP, was an estimated -2% in the second quarter, the largest amount of economy wide excess capacity in five years (Chart 4).

These measures also confirm our prognosis for aggregate prices. The higher unemployment rate points to downward pressure on wages and benefits. This is clearly happening since wage gains have fallen to 3.4%, down 0.9% from their cyclical peak. The low rate of manufacturing plant use indicates that firms do not have pricing power. As such they are unable to pass through higher fuel and raw material costs, thus squeezing their profit margins. The negative output gap confirms the excess supply in the labor and production markets and also points to lower inflation

Posted by Jay Hancock at 11:53 AM | Permalink | Comments (0)
        

Who you gonna believe? The Renewable Fuels Association, which is bought and paid for by the ethanol industry?

Numerous statistical analyses have demonstrated that the price of oil - not corn prices or ethanol production - has the greatest impact on consumer food prices because is integral to virtually every phase of food production, from processing to packaging to transportation.

Or the independent economists at the World Bank?

The combination of higher energy prices and related increases in fertilizer prices and transport costs, and dollar weakness caused food prices to rise by about 35-40 percentage points from January 2002 until June 2008. These factors explain 25-30 percent of the total price increase, and most of the remaining 70-75 percent increase in food commodities prices was due to biofuels and the related consequences of low grain stocks, large land use shifts, speculative activity and export bans.

Posted by Jay Hancock at 11:35 AM | Permalink | Comments (0)
        

In October, expressing frustration over plunging mortgage-bond values and an inability to value the complex securities, Fed boss Ben Bernanke said: ''I'd like to know what those damn things are worth."

Well, now we know. Late yesterday Merrill Lynch announced it would sell $30 billion in radioactive mortgage paper at 22 cents on the dollar and take another huge, huge writedown on its balance sheet. According to the Wall Street Journal, Merrill has lost more than $46 billion -- billion! -- on bad mortgage securities in the last 13 months. And it still owns $9 billion of the stuff.

This fire sale will put pressure on everybody else who owns this junk to take their own lumps and swallow their own massive writedowns.

Posted by Jay Hancock at 10:09 AM | Permalink | Comments (0)
        

Americans drove 3.7 percent fewer vehicle miles in May 2008 than in 2007, says the Department of Transportation. Naturally this depressed the collection of gas taxes.

"By driving less and using more fuel-efficient vehicles, Americans are showing us that the highways of tomorrow cannot be supported solely by the federal gas tax," Secretary Peters said. "We must embrace more sustainable funding sources for highways and bridges through more sustainable and effective ways such as congestion pricing and private activity bonds."

Secretary Peters said that Americans drove 9.6 billion fewer vehicle-miles traveled (VMT) in May 2008 than in May 2007, according to the Federal Highway Administration data. This is the largest drop in VMT for any May, which typically reflects increased traffic due to Memorial Day vacations and the beginning of summer, and is the third-largest monthly drop in the 66 years such data have been recorded. Three of the largest single-month declines - each topping 9 billion miles - have occurred since December.

Posted by Jay Hancock at 11:33 AM | Permalink | Comments (3)
        

A reader asks an interesting question:

Is it possible to buy real, 100% gasoline (not that ethanol junk) in Maryland or any surrounding state? Are stations in MD required to label the pump if the gas contains ethanol? If not, where do people find gas for their lawn mowers, boats, and older model cars? Ethanol ruins those engines. Just wondering....

You MAY be able to find 100 percent gas in rural areas such as the Eastern Shore or Garrett County. But at least in the summer time, stations in Central Maryland carry 10-percent ethanol blends because they cut air pollution. Given how much ethanol is being produced and how hard the federal government pushes it, I think you'd have a hard time getting it anywhere. Anybody know where you can buy pure gasoline?

Posted by Jay Hancock at 5:45 PM | Permalink | Comments (0)
        

In his latest column for Forbes, Hopkins Professor of Applied Economics Steve Hanke says the Fed is playing with fire by delivering measly returns to Treasury investors and implying that China, Saudia Arabia and other nations with dollar-linked currencies should loosen their links to the greenback.

But by pushing the onus for high commodity prices onto countries that link their currencies to the dollar, the Fed is playing a dangerous game. If those countries abandon their links to our money, they will have much less reason to purchase dollar reserves and U.S. Treasurys. The dollar and U.S. government bonds will tumble, unleashing higher inflation at home and abroad.

Posted by Jay Hancock at 1:58 PM | Permalink | Comments (0)
        

A few months ago I wrote in The Sun about a home exchange my family was planning to make with a Parisian couple and their two young children. Home exchanges are a fast-growing way to save thousands on lodging costs, live like a local and get to know (if only over the Web) a family in the country you're visiting.

The idea of letting strangers live in your house for an extended period is off-putting for some, but our exchange, completed a few days ago, could not have gone better. The French family took perfect care of our house and gave us frequent email updates on how they were enjoying Baltimore and Washington. (July 4 fireworks at the Inner Harbor, then Port Discovery, then the Baltimore Science Museum, then some Washington sights and some shopping for merchandise priced in cheap American dollars.)

On the other side of the ocean, the Parisian apartment that we lived in for 17 days was even better than we had expected. In a newer building near the Place de la Republique, it was quiet, set back from the street and overlooking a little courtyard. Long-term metro passes made all of Paris instantly accessible, and we used their car to make a couple day trips outside Paris. We saved at least $3,500 on hotel bills, and by eating in the apartment much of the time we also saved hundreds on eating costs. The fact that our hosts had stocked the fridge with foie gras, champagne and wine didn’t hurt.

We used HomeExchange.com. Other services include Digsville.com, Intervac International and HomeLink International. All charge modest fees for membership, but people in Paris told us that many home exchangers have started using Craigslist, which is free.

Posted by Jay Hancock at 1:29 PM | Permalink | Comments (1)
        

Today's column:

In 1993, Defense Secretary Les Aspin invited more than a dozen CEOs of big weapons and aerospace companies to dinner at the Pentagon. In what has become known as the Last Supper, he shocked them by saying that, with the end of the Cold War, America had too many defense contractors and that the companies needed to merge or die.

Merge they did. But 15 years later, as the fiasco with the Air Force's tanker contract and widespread Pentagon procurement dysfunction demonstrate, it's not clear that fewer contractors is better. Monopoly-like power exercised by a few dominant vendors is no better, it turns out, in the defense industry than it is in software, electricity or cable TV.

The next president ought to consider undoing what Aspin wrought and spurring a Ma Bell-like breakup of dominant defense companies.

Read the whole thing here.

Posted by Jay Hancock at 10:15 AM | Permalink | Comments (0)
        

Here in Paris, Coca-Cola is five dollars a glass. A grilled cheese sandwich is ten dollars. And gas is ten dollars a gallon. But France still offers one good deal to Americans -- and the French and everybody else. A decent bottle of wine can be had for two or three euros -- three or six dollars. A great bottle can be had for ten or fifteen dollars. (I'm violating Sun style by spelling out monetary amouts, but my French keyboard doesn't have a dollar sign! At least not that I can find. It also has the letters 'w' and 'm' and 'a' and a bunch of other stuff in the 'wrong' places.)

The reasons, of course, are subsidies and taxes and the fact that wine is France's holiest agriculture product. Government subsidies keep wine cheap in the production process. And when it gets to the store wine carries virtually no tax. French wine purchased in France carries no European tax. And the French national levy is only around three cents per bottle. Of course this is in great contrast to the situation in Maryland, the U.S. and many other nations, where alcohol is taxed at penalty rates accompanied by lectures on temperance.

Not everybody is happy about bargain French wine. Scandanavian nations, especially, tax alcohol at high rates and want wine-producing nations such as France and Italy to catch up. Every few years some French policymaker will propose increasing the wine tax by a few pennies to underwrite the country's expensive health system or some other worthy cause. But then the wine industry -- and, indeed, France itself -- goes nuts.

'It’s a scandal,' Jean-François Délorme, president of the Burgundy Wine Interprofessional Bureau, was quoted as saying a few years ago, when politicians had proposed a modest increase. 'They are trying to assassinate wine at a time that consumption is already falling in France.'

France is very unhappy with the high fuel taxes here, which make gas so expensive. But better that than higher wine taxes.

Posted by Jay Hancock at 11:20 AM | Permalink | Comments (2)
        

What we could have been doing in Paris last weekend instead of recovering from jet lag: attending the 3ème Conference Internationale Zappalogie. Right down the street!

Presentation topics included: 'Why I Love Frank Zappa,' 'Take Your Clothes Off When You Speculate' and 'May You Never Hear Wampadoo Wap-Wah Again: Zappa et le Doo Wop.'

For Zappa's Baltimore roots, see Jonathan Pitts' great story on the Baltimore Zappa statue donated by Lithuanians. Zappa is huge in Lithuania. And France.

Most Baltimoreans are aware of their hometown's claim on Edgar Allan Poe, H.L. Mencken and John Waters, but fewer know that Zappa, who made more than 50 records between the late 1950s and his death in 1993, was born in Baltimore, the son of immigrants from Sicily.

His family lived in the 4600 block of Park Heights Ave., then moved to Edgewood in Harford County. Zappa's father, a chemist and mathematician, had a job nearby at Aberdeen Proving Ground. They moved to California when Frank was 10.

Posted by Jay Hancock at 3:28 AM | Permalink | Comments (0)
        

Near our Paris apartment this afternoon was a decent-sized anti-nuke demonstration. (L'Express said several thousand people, which sounds about right.)

This kind of sentiment seems much stronger in Europe than in the U.S. Greenpeace co-founder Patrick Moore has decided that the risks of nuclear energy are lower than the risks of continuing to use carbon energy. Nuclear reactors emit no carbon dioxide. As this comment from the blog Canadian Energy Issues says, there are more than a few greenies also changing their minds about nukes.

Don’t fool yourself into thinking Patrick Moore is the only apostate anti-nuclear green. Don’t forget James Lovelock or Stuart Brand. Above all, watch the tortuous internal debate inside the German Social Democratic Party over Germany’s legislated nuclear phaseout. This debate rages as Germany grapples with the impossible problem of meeting its own emission reduction targets without massive imports of Russian natural gas.

Posted by Jay Hancock at 12:16 PM | Permalink | Comments (3)
        

Paris has the best subway system I've ever used. Trains go anywhere you want. (Even the snooty 8th arrondisement. No black holes for rich neighborhoods, such as for Georgetown in the D.C. metro system.) And they run frequently. We haven't waited more than 4 minutes for a subway all week.

Even better: the Velib system for bike rentals. All around the city are racks of bikes that anybody can rent anytime. You can even turn in the bike at a different rack, and it's all recorded and paid for automatically. This is how to do mass transit correctly. Of course, gas at 10 a gallon is an incentive.

Posted by Jay Hancock at 7:35 AM | Permalink | Comments (2)
        

Today's column:

The business press paints the Federal Reserve as omnipotent. Maybe once it was. But events are likely to prove it has lost some of its mojo.

The nation's central bank controls a smaller piece of the global economy than in the last severe recession, in the early 1980s. And it no longer influences the price of oil as it once did.

Those seldom-acknowledged facts make its job more difficult, and the outcome of its efforts to fight inflation or keep the country out of a bad recession more uncertain.

Read the whole thing here.

The point is reinforced by former Fed Chairman Paul Volcker, who in an interview with the Dutch magazine FEM Business said this, in response to the question: What is fundamentally different now in comparison with the 70s?

“The old fashioned commercial bank function has been minimized and the market functions are more dominant. Trading has exploded since the 70s. In the US, bank credit used to be the large portion of the total credit business which is no longer the true. Those changes underlie the recent actions by the Fed. The old theory was that of you protect and stabilize the banking system, you do not have to worry about the rest, that can take care of itself without harming the economy. That is no longer true and that is why the downside seemed so big when Bear Stearns was in trouble.”

Thanks to author Edin Mujagic for the link.

Posted by Jay Hancock at 12:38 PM | Permalink | Comments (0)
        

The Hancock family is off to France for a couple weeks. As chronicled in The Sun, we're exchanging homes with a Parisian family. Blog posts will be light for a few days, but I hope to check out the French economy and post some stuff once we're settled.

Here's the piece that ran in the paper a couple months ago:

With dumpy Left Bank hotels going for $250 a night, the only way my family was getting to Paris this summer was if some French family agreed to clear out and let us sleep in their beds, eat off their plates and use their bathroom for free.

Fortunately, a nice couple in the 11th arrondissement - an advertising manager and a travel executive - said that was fine with them. Of course, while we're watching Les Guignols de L'Info on their TV, they'll be watching Denise Koch or Deal or No Deal on mine.Thanks to a weak economy and a Cameron Diaz movie, swapping homes is the way to vacation this year. Internet home-exchange services report big increases in people trying to stretch travel dollars with free, reciprocal housing arrangements.

"The single most costly item of any trip is accommodations," says Helen Coyle Bergstein, who founded home-trade site Digs ville.com in the 1990s. "If you eliminate that line item, that allows you to travel more often. To travel farther. Or to have a richer experience. Eat out more often. Do a side trip."

Or afford a trip you wouldn't have even contemplated if it came with a hotel bill.

"With an uncertain economy and rising fuel prices and a dropping dollar value, people wanting to take vacation are going to look at any way they can to save money," says Justin Bergman, senior editor at Budget Travel magazine.

The first question every home exchanger gets is: Will you really trust complete strangers to live in your house and drive your car?

It takes a certain faith. But I have yet to hear about a home swap that involved anything more negative than unreplenished toilet paper or divergent housekeeping standards.

Exchangers usually spend weeks or months communicating before the event, which builds trust and a mutual sense of responsibility.

The Parisians and I have shared a phone call and dozens of e-mails. We're shopping garage sales for car seats for their two little kids. They offered to find us cheap airplane tickets using their travel-industry connections. We traded family pictures.

Paul Larner and Rosita McKee of Catonsville got so chummy with a Texan they met through Home Exchange.com that the man offered to let them use his vacation condo for free, without any swap.

The couple and their children have exchanged in Paris, Telluride, Colo., and Limerick, Ireland.

A home trade "is a less-expensive way to spend an extended period in a different location," Larner said. "But equally if not more important, it's a different and more authentic experience - an opportunity to get to know another family. And all three exchange families that we've been involved with have been absolutely delightful."

Budget Travel recently commissioned six people to trade homes and report back. Presumably, the editors hoped to find a mixture of good and bad exchanges and dispense advice on how to avoid the latter.

But "their experiences were all so similar and positive, it didn't turn out to be a really compelling article," Bergman said.

Maybe the biggest potential headache is car trouble. Auto insurance companies usually cover exchangers as guests in your home, but check to make sure. And of course, says Bergman, lock up valuables or store them somewhere else.

Home exchanges were accomplished first via catalog and now on the Web. Intervac International and HomeLink International were founded in the 1950s and are still going strong. The Holiday, a 2006 movie in which the Cameron Diaz character swaps a Los Angeles house for one in the English countryside, popularized the concept.

You can browse home-swap Web sites for free, but most require membership to get contact information for would-be exchangers. (Digsville.com supplies the information to nonmembers and members alike.)

Memberships and listing your house online usually cost $50 or $100 a year, and many sites promise extended free listings if you don't score an exchange the first year. For the best response, you'll have to upload pictures of your house, but it's not difficult.

Swapping homes makes particular sense for European vacations this year. The weak dollar has made European hotels unaffordable for many Americans. Restaurants are problematic, too, and home stays let you save on food.

Fortunately, the cheap dollar is attracting hordes of Europeans. HomeLink.org lists 150 German houses and apartments whose residents want to switch with Americans. HomeExchange.com lists 35 Roman apartments and more than 200 homes in Paris, all occupied by people dying to exchange in the United States.

But not necessarily in Baltimore. "Baltimore is a bit of a challenge," says Larner.

It's more competitive than you might think, however. While most Europeans want to go to New York City, Florida or California, many are interested in Washington and the Maryland beaches. Baltimore and its suburbs - which of course have their own charms - are convenient to both.

Home trading is like dating. Good presentation and flirting raise the odds if you don't look like George Clooney - or own a four-bedroom loft in Greenwich Village. Larner gets three or four unsolicited exchange offers a year, he said.

We got a half-dozen proposals from Belgium, Holland and the French hinterland after listing our Howard County place on HomeExchange in October. I made five or six offers to places in central Paris before one young family said yes.

"What on earth were they thinking?" more than one person has asked me. Paris and Ellicott City aren't exactly peers in culture, cuisine, architecture and coolness. (Ellicott City does have one of the world's most popular Outback Steakhouses, however.) But the French couple worry that we're the ones getting the short end of the deal.

"I would like you to note that our apartment is very small," wrote Laurence, my Parisian interlocutor. "I wanted to emphasize this point because I know that houses are usually big in the U.S. I do not want you to be disappointed."

Ca ne fait rien, madame. Two bedrooms and a bathroom in Paris are a palace anywhere else. And the price is right.

Posted by Jay Hancock at 10:53 AM | Permalink | Comments (2)
        

A couple weeks ago I wrote that Illinois Attorney General Lisa Madigan had accused Edison MIssion Energy of continuing a suspicious bidding pattern that it had promised to stop. Edison Mission had admitted to a troublesome "high offer" strategy that kept electricity off the Mid-Atlantic grid and might have driven up wholesale prices.

Two weeks ago Madigan identified plants she said looked like Edison's that were continuing "high offer" shenanigans. She asked federal regulators to reopen the Edison case and look into it. Now, based on information from PJM Interconnection, which manages the grid from here to Illinois, she has withdrawn the allegation that the identified plants have continued the strategy. But she still contends that Edision still may be withholding power from the grid in some other fashion in an effort to influence prices.

UPDATE: Edison Mission spokesman Doug McFarlan denies this, saying; "We stand by our prior statements that we act in compliance with PJM bidding rules."

And Madigan still wants the Federal Energy Regulatory Commission to reopen the case.

From the new filing:

As discussed below, this new information indicates that the evidence proffered in the Initial Filing does not show that Edison continued to use the High Offer Strategy after April 2006. At the same time, the People renew their request to reopen the record in this docket to investigate the other evidence presented in the Initial Filing, which indicates that Edison Mission is withholding capacity resources owned and operated by its subsidiary, Midwest Generation, from the PJM day ahead market.

PJM has now disclosed new information which shows that certain generating units listed in the Affidavit are not owned by Edison Mission.

AND:

FERC should investigate the other evidence of economic withholding. While the new information provided by PJM resolves questions raised by bidding data that resembled Edison Mission’s High Offer Strategy, there are still significant questions about Edison Mission’s bidding behavior that remain to be addressed.

Posted by Jay Hancock at 2:35 PM | Permalink | Comments (1)
        

ABC News is quoting a Pentagon official says that Israel is increasingly likely to attack Iran this year. Saber rattling by the U.S.? White-House approved leak to pave the way for an actual attack? Defense official speaking out of school to draw attention to impending war? Whatever the case, oil market participants are increasingly blaming oil's seemingly unstoppable ascent on worries about war between Israel/United States and Iran.

Ed Yardeni's note to clients this morning is typical.

Jay called me yesterday. We have been friends for many years. He is very plugged into what’s happening in the Middle East. He is very close to the top leadership of the opposition party in Israel. Jay expects that Israel will attack Iran with tactical support from the US before the end of the year. He says this is why the price of oil is over $140. Speculators may be behind the latest spike, but that’s because they are speculating that with the balance between supply and demand so tight, there is no room for any geopolitical flare-up let alone an attack on Iran. To buttress his thesis, he observes that the US isn’t even considering releasing some oil from the Strategic Petroleum Reserve in an effort to drop some barrels on the heads of the speculators. Bloomberg reports this morning that “Israel is increasingly likely to attack Iran's nuclear facilities this year, ABC News reported, citing an unidentified Pentagon official.” Furthermore, Admiral Mike Mullen, chairman of the US Joint Chiefs of Staff, was in Israel last weekend for meetings with Israeli military leaders, ABC said.

Posted by Jay Hancock at 11:01 AM | Permalink | Comments (2)