Happier Holidays

With an Old Cuban:

• 3/4 ounce fresh lime juice
• 1 ounce simple syrup
  
• 1 1/2 ounce aged rum (Bacardi 8 Anejo)
• 2 dashes Angostura bitters
• 6 mint leaves
• 2 ounces champagne

Muddle 6 mint leaves in freshly squeezed lime juice and simple syrup. Add rum and bitters. Shake with ice. Strain (double-strain if you don't want bits of mint in the drink) into chilled and sugar-rimmed cocktail glass (champagne, martini, or sour glass). Top with champagne, garnish with mint leaf or a sugar-coated vanilla bean.

Created by Audrey Saunders from Pegu Club days

Levi Johnston's Mother Hit With Drug Charges

Sherry L. Johnston was arrested by Alaska State Troopers at her Wasilla home Thursday December 18, 2008 and charged with six felony counts of misconduct involving a controlled substance. Johnston is the mother of Levi Johnston, the Wasilla 18-year-old who received international attention in September when Gov. Sarah Palin and her husband, Todd, announced their teenage daughter was pregnant and he was the father.

ADN.com reports:

A 42-year-old Wasilla woman was arrested Thursday at her home by Alaska State Troopers with a search warrant in an undercover drug investigation. Sherry L. Johnston was charged with six felony counts of misconduct involving a controlled substance.

Johnston is the mother of Levi Johnston, the Wasilla 18-year-old who received international attention in September when Gov. Sarah Palin and her husband, Todd, announced their teenage daughter was pregnant and he was the father. Bristol Palin, 18, is due on Saturday, according to a recent interview with the governor's father, Chuck Heath.

Troopers served the warrant at Johnston's home at the "conclusion of an undercover narcotics investigation," said a statement issued Thursday by the troopers as part of the normal daily summary of activity around the state.

Troopers charged Johnston with second-degree misconduct involving a controlled substance -- generally manufacturing or delivering drugs -- as well as fourth-degree misconduct involving controlled substances, or possession.

Troopers released no other information, including the kind or amount of drugs, because details could jeopardize an ongoing investigation, spokeswoman Megan Peters said.

Asked how long the investigation had proceeded before Johnston's arrest, Peters would only say "a while."

The Palmer District Attorney's office had no comment.

Sherry Johnston was arrested around noon and booked at Mat-Su Pretrial Facility, according to a booking officer there. She was released on a $5,000 unsecured bond just after 2 p.m.

No charging documents had been filed at Palmer courthouse by the end of the day, a clerk said.

Levi Johnston sat with Bristol and the rest of the Palin family in St. Paul, Minn., during Gov. Palin's speech to the Republican National Convention, and he joined the family on the stage afterwards.

When asked about the arrest, Palin's spokesman, Bill McAllister, issued the following statement by e-mail: "This is not a state government matter. Therefore the governor's communications staff will not be providing comment or scheduling interview opportunities."

Johnston didn't come to the door of her home on Caribou Loop Road outside Wasilla on Thursday afternoon. A teenage boy who answered the door said he couldn't provide any information.

To Build Confidence, Aim for Full Employment

In the NY Times, :

In the current crisis, discussions of economic policy have often centered on uninspiring, short-term goals. To restore confidence in our economic future, we need appropriate, firm targets that will clearly put us where we want to be.

For example, President-elect Barack Obama has framed his economic stimulus package in terms of the number of jobs he will create. The goal is to add 2.5 million jobs, he says, by hiring people to improve our highways, fix up our schools and do other infrastructure work around the country. All of that is fine, but it does not represent a commitment to full employment — providing a job for everyone who is willing to work. As a result, confidence remains abysmal.

If the new president had a target of full employment, and if Americans believed that he could reach it, the confidence problem could be quickly solved.

The Great Depression provides an analogy. Presidents Herbert Hoover and Franklin D. Roosevelt had at least a vague idea that economic stimulus would help the situation, but even Roosevelt lacked clear targets for such policies during the New Deal. The economic stimulus applied was inconsistent and inadequate. Confidence waned, and the depression was longer and deeper than it needed to be.

People still remember aspects of that depression history. The Works Progress Administration and the Civilian Conservation Corps tackled infrastructure projects, much as Mr. Obama proposes — but these New Deal programs were not enough to restore full employment. That history reduces the current credibility of Mr. Obama’s target of 2.5 million jobs.

On the other hand, there have been some worthwhile targets in monetary policy in recent years. A number of central banks have adopted firm inflation targets, which has helped to contain inflation expectations. Those expectations have tended to coincide roughly with the targets.

At the moment, of course, inflation is no longer the fundamental risk. Our current problems are deflation and recession — possibly even depression — and so we must rethink our targets.

An immediate shift to a full employment target may not be possible, simply because there is no confidence right now that we can hit it. While people seem to believe that central banks can control inflation, there is little consensus that central banks can prevent a depression under circumstances like this.

In a forthcoming book I’ve written with Professor George A. Akerlof of the University of California, Berkeley, we argue that current circumstances call for a couple of intermediate targets. If we can hit them, we may credibly be expected to hit the ultimate target of full employment — and keep inflation at bay. The intermediate targets should be announced forcefully, with an immediate effort to achieve them.

First, there should be an intermediate target for conventional fiscal and monetary policy, one ambitious enough to restore full employment in a typical recession. (Fiscal policy is the taxation and expenditure proposed by the president and voted by Congress; monetary policy is the province of the Federal Reserve Board.)

This target may be inadequate, however, because we are not in a typical recession. Conventional fiscal and monetary methods may fizzle, as they did in the 1990s in post-bubble Japan. After its stock market and real estate debacle early in the decade, the government of Japan moved its budget into deficit and brought interest rates down to zero. But the economy never entirely recovered, and in due course the government debt rose to 1.71 times the annual gross domestic product, versus a current multiple of 0.74 in the United States.

Similarly, we just do not know whether these measures will work in this country. That is why we also need a second intermediate target, for credit. The ability to borrow should be restored to an appropriate level for a normal economy at full employment.

This is crucial because the most salient problem in our institutions is the drying up of credit. Without credit, companies that count on outside finance will go bankrupt, requiring an impossibly large fiscal and monetary policy stimulus to achieve full employment.

Furthermore, as long as the credit crisis continues, the economy’s response to conventional fiscal and monetary policy may be drastically reduced. A person who cannot borrow, for example, is unlikely to buy a car, even if a generous fiscal policy has provided him with the needed down payment. Under the current circumstances, the Keynesian “multiplier,” the economy’s response to fiscal policy, may be unusually low. Our best econometric models just won’t tell us how low.

FOR months, the Fed has been working to expand credit, and has invented some good methods for doing so. On Nov. 25, it announced a smart method to jump-start credit, called the Term Asset-Backed Securities Loan Facility, which would issue loans, using securities backed by newly issued consumer and small-business loans as collateral. The Fed has started paying interest on reserves to control the inflationary impact of such a policy.

This plan and others like it are promising. But all the government loan programs announced so far represent only a tiny fraction of the $52 trillion of total credit market instruments outstanding. We will need to go much further and extend credit to households and businesses that would otherwise be ignored.

Along with fiscal and monetary policy, credit needs to be targeted on a scale that would get us out of our current economic mess. That’s what Washington should do now.

Robert J. Shiller is professor of economics and finance at Yale and co-founder and chief economist of MacroMarkets LLC.

Elsewhere Around The World . . . .

. . . . Life goes on as usual

The inmarch to the Nobel Banquet, 2008:

Princess Madeleine and Paul Krugman [2:24-2:37]

Van Johnson

August 25, 1916 - December 12, 2008

What Does $700 Billion Buy Taxpayers?

On NPR, bankruptcy and commercial law expert Elizabeth Warren explains how taxpayer money is being spent in the financial bailout program. A professor at Harvard Law School, Warren chairs the oversight panel appointed by Congress to monitor the spending of the $700 billion bailout money. The committee issues its first report on Dec. 10.

Are We A Nation Of Outlaws?

Is deregulation behind the economic meltdown, or have there been prosecutable crimes?

Reuters reports:

A failure to prosecute the "villains" responsible for the financial crisis that brought the United States to its knees will leave the country without the moral compass needed to avert future crises, a Wall Street luminary said.

Pioneer hedge fund manager Michael Steinhardt is angry that the bailout of America is eroding the nation's capitalist ethos while those whose deeds crippled the U.S. economy suffer scant opprobrium, their names still untarnished.

"Something really went wrong here. We're about to enter a period where our budget deficit will dwarf anything we've seen before," Steinhardt told the Reuters Investment Outlook Summit in New York.

"What we really needed a long time ago was a recognition that there were villains apace. The evils of the financial system should have been recognized long before this," said Steinhardt, who no longer manages billions of dollars but whose counsel is sought on Wall Street and among select politicians.

While scornful of the financial executives who should have known better, he also belittled Washington for its lack of leadership and for not spelling out what the future beholds.

The current and former Federal Reserve chairmen have proved ill-prepared for the job, said Steinhardt, a former chairman of the Democratic Leadership Council, where he helped promote the career of Bill Clinton before he became president.

Of former Fed Chairman Alan Greenspan, often criticized for keeping interest rates so low that they sparked the housing bubble, Steinhardt said he may have been stupid for a long time, "but he wasn't pernicious."

Current Fed chief Ben Bernanke is little better.

"When you see what Bernanke said five, four months ago, it's laughable," he said. "So Bernanke is not a villain but was he prepared for what has happened here? Not in the slightest."

Steinhardt, however, said Americans themselves must share the blame for running away from the debacle and for not questioning the enormous public debt the U.S. government is about to assume.

"If you cannot accept short-term pain, then you do all sorts of things to coat reality, to pretend, to fabricate, to lie. That is what has happened in American business in the last 10 years," he said.

Steinhardt, who now dedicates his time to philanthropy, still hues to the almost impossible standards that made him a legend. His Steinhardt Partners hedge fund returned an annual 24.5 percent after fees over 28 years before he shut the fund in 1995.

Steinhardt is aware of scandal and reputation. His firm was stung by a federal investigation into allegations he and others, including Salomon Brothers, tried to corner the two-year U.S. Treasury market in the early 1990s.

Steinhardt denied any wrongdoing, and paid a fine and fees of more than $70 million to settle the case.

Steinhardt asked that if the government and Americans are unwilling to prosecute by law, what are the consequences of not being responsible and holding the culprits up for contempt?

"The question is, What's going to come of this, if there are going to be no villains?" he said.

"Is Hank Greenberg a villain?" Steinhardt said, referring to the former chief executive of insurer American International Group (AIG.N: Quote, Profile, Research, Stock Buzz), recipient of a $152 billion federal bailout after it suffered massive losses mainly on complex securities tied to mortgages that had declined in value.

He rattled off other names: James "Jimmy" Cayne, former CEO and chairman of defunct investment bank Bear Stearns Cos, whose unsustainable leverage in two failed hedge funds sparked the crisis in summer 2007.

And Richard Fuld, ex CEO of failed investment bank Lehman Brothers Holdings Inc. (LEHMQ.PK: Quote, Profile, Research, Stock Buzz), whom Steinhardt said he saw last week in a restaurant "happy as a hero, blowing kisses."

Finally, he asked, referring to the senior counselor of Citigroup (C.N: Quote, Profile, Research, Stock Buzz) and a former Treasury secretary under Clinton. "Is Bob Rubin a villain? Still at Citibank? Is he a villain? You can't name a villain? Is this a villain-less debacle?"

Although a friend of Clinton, Steinhardt knocked Barack Obama's pick of ex-Clinton officials for key positions in his administration. The choices reveal a deep lack of substance on the president-elect's part, he said.

"We have a new president who I find to be an absolute tabula rasa in terms of his knowledge of anything," he said, referring to Obama as a blank slate.

"Pay attention to what Obama says and you will find he hardly ever says anything of consequence."

Steinhardt also railed against Congress, where the quality of intellect "is not exactly awing."

"It seems to me that the intellectual level that we are surrounded with both in government and in the industry is exceptionally low at the moment, it makes me angry."