Candice Lanier – Legendary reporter, Bob Woodward, recently revealed he doesn’t think the IRS scandal rises to the height of the Watergate scandal he was key in uncovering. Rather, Woodward believes it is the circumstances surrounding the September 2012 terrorist attack on the U.S. consulate in Benghazi and the subsequent response from the federal government that should be closely monitored by the public. “You’re talking about government not working, but who’s in charge of the executive branch. You go to the Constitution, and the president has sole responsibility for the executive branch,” he said in an appearance on MSNBC’s “Morning Joe.” “This rests on him. You were talking earlier about kind of dismissing the Benghazi issue as one that’s just political and the president recently said it’s a sideshow, but if you read through all these emails, you see that everyone in the government is saying, ‘Oh, let’s not tell the public that terrorists were involved, people connected to al-Qaida. Let’s not tell the public that there were warnings.’”

Officials in the Obama administration admit that mistakes were made but attribute it to incompetence as opposed to “malice or cover up.” One Obama administration official is quoted as saying: “We’re portrayed by Republicans as either being lying or idiots.” The official added that, “it’s actually closer to us being idiots.”

The administration’s explanation failed to convince the Federal Law Enforcement Officers Association (FLEOA), an organization which supports the implementation of a Watergate-style investigatory committee that would oversee a fact-finding mission on the Benghazi attack. The FLEOA is the largest association of federal officers in America. Last Friday, the FLEOA sent a letter of support to Rep. Frank Wolf (R-VA), the chief architect of a bill that would establish the select committee, and to the investigatory committee itself.      More

Unfortunately, developments abroad are not cooperating. Ben Bernanke, chairman of the U.S. Federal Reserve, has been signaling his willingness to ease up on quantitative easing, with those opaque and hedged statements that are the maddening hallmark of the Fed’s regime of sending signals to the outside world. The perception of a rise in U.S. rates spooked the Japanese bond markets. Interest rates moved upwards and the yen strengthened, which are negatives for Japan’s export-focused economy in general and Tokyo’s stock market in particular. Closer to home, evidence suggests that manufacturing activity in China is contracting. The HSBC China Manufacturing Purchasing Managers’ Index fell to 49.6 for May, just below the psychologically important threshold level of 50.

So far the steep decline in Japanese stocks has not spread to other markets. US stocks closed relatively flat today. But the episode does illustrate the risks inherent in a market buoyed by perceptions of easy money. Perceptions can turn, on, well, a dime, and markets may react intensely to relatively modest monetary shifts. Recall the granddaddy of modern corrections, the 25% plunge in US stock prices on a single day in October 1987, which occurred after an uptick in interest rates during the preceding summer.

Then there is the long term dynamic. Japan’s recent effort to combine monetary easing and demand stimulation via government spending is just another chapter in a very long history. Its government has been doing this for over twenty years, ever since the “bubble economy” burst at the end of the 1980’s. The country has one of the highest government indebtedness ratios on the planet. But the Nikkei was close to 40,000 when the government started; it is less than 15,000 now. On a long term basis, it’s hard to argue that “the trend is your friend”!

Image credit: Monaneko via Wikipedia

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At the National Defense University, President Obama reiterated that it would be unconstitutional for the U.S. government to use drones to target and kill any American citizen without due process, or to use drones on U.S. soil.

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