Tip for today: Making Money Program

It was supposed to come up with antidotes for pathogens that terrorists might use for a mass-casualty bio-attack. But after spending over $1 billion during the last five years, the Pentagon’s Transformational Medical Technology initiative can barely develop drugs ready for a clinical trial. That’s why the officials tasked with running it are setting their research-subsidy targets much lower.

In a shift, the Defense Threat Reduction Agency’s science and technology chief tells the Boston Globe that the bio-initiative will now invest money on early detection of new pathogens. That puts about another $1 billion worth of Pentagon cash closer to where science is, rather than throwing money at crash programs for undeveloped antidotes. Ultimately, the Pentagon wants to develop multi-pronged vaccines that can resist a variety of biological agents — what it calls “One Drug, Many Bugs.” But that’s a long way off: step one is understanding how those sicknesses develop.

The Globe reports that the program has hit one snag after another. Out of nearly 50 research programs, only two (unspecified) efforts to neutralize pathogens like Ebola and Marburg have shown promise, and they’re not ready for clinical trial. Making matters worse for the program, the Food and Drug Administration doesn’t allow experimenting on people, so Transformational Medical Technology would have to make do with animal surrogates.

It’s also become something of an object of fun within the military’s chem-bio community. Our pal Jason Sigger lamented the program’s inability to come up with a lightweight, portable Tricorder-like bio-detection device. The office tasked with coming up with one still sought to buy a Cadillac, one networked into troops’ communications system and that can also detect chemical weapons. “All they need to do is warn the individual that there’s a bad bug nearby,” Sigger wrote.

But don’t expect the Pentagon to steer away from far-out bio-medical research. In 2009, Darpa wanted to create a bank of “universal immunity donor cells” to head bio-outbreaks off at the pass. More recently, in September, it doled out over $5 million so Arizona State University could experiment with growing vaccines with the aid of tobacco plants. “I don’t know if we can pull this off, but I think this basic idea might work,” one of the ASU researchers shrugged when the grant was announced.

Still, according to the Globe, if the military wants to speed up the day when it can deliver mass antidotes for a host of bio-threats, it’s got to subsidize pharma companies’ research in areas that won’t yield the next generation of lucrative “blockbuster drugs.” Bio-defense expert Crystal Franco of the Center for Biosecurity tells the paper, “It is different when the government is your only market. There needs to be incentives for companies to participate, to take it on for the public good.” That is, until someone figures out how to make Viagra stop anthrax.

Photo: Texas Army National Guard

See Also:

I Want My Tricorder!

Army Seeks Super-Sniffer to Detect Explosives, Bio-Agents

Darpa-funded Researchers: Tobacco vs. Viral Terror

Pentagon Plots Insta-Vaccines for Mystery Bugs

Products of the past…doomed…

Chinese President Hu Jintao: the US dollar-based monetary system is a “product of the past.”

He is right about that. And last week two major US credit agencies – Moody’s and Standard and Poor’s – underlined the point. They said America’s triple A credit rating would be lost if the nation continues to borrow so much money.

Amen to that, brother…

But how can the US borrow less?

Ben Bernanke says the US economy will probably grow between 3% and 4% this year.

Pretty good, huh? We can stop worrying, huh?

Wait a minute. We don’t know if the US economy will grow this year…and neither does Ben Bernanke. But even if it were to grow at 3% to 4%…would that mean we were enjoying a genuine recovery? Could the US dollar-based monetary system hold up after all? Could it surprise the Chinese and be a product of the future as well as of the past?

Let’s see how the present economic model works. You spend $10 trillion on bailouts and stimulus. This puts the whole country on course for bankruptcy…where the Chinese are telling you that your money is history…and the rating agencies are threatening to take you down a notch or two. But for your trouble you get, say, 4% growth.

Hmmmm…4% growth is equal to about $560 billion more GDP. But don’t look too closely. Much of this extra GDP is debt-fueled government boondoggling which adds nothing real to the nation’s wealth.

But in order to keep this “growth” going, you have to continue to run deficits – of about a trillion dollars a year. Hold on…what kind of business is Ben Bernanke running?

It costs more in deficit spending than you get in positive GDP growth.

Well, maybe you lose money every year…but you can make it up in the long run!

Hold on… The deficits are expected to run 5% to 10% of GDP for years. Maybe forever. If the growth rate is only in the 3%-4% range, it will mean that debt always outgrows growth. In fact, that is exactly what almost every economist projects.

Then, what’s the point? Well, maybe deficits can be cut…and the growth rate will pick up? Hey, anything is possible. And since we’re starting out in 2011 with a positive attitude…we’re ready to believe anything.

And maybe that’s what gold speculators were thinking on Friday. They sold gold – taking the price down $26 an ounce. Gold rises as confidence in the financial system falls. If gold is falling, it must mean the confidence in the Bernanke, Geithner team is increasing.

Based on the evidence so far, we’d have to take the other side of that bet. If Bernanke & Co. have any idea what they are doing it is not apparent from the public record. Even now, in the 5th year of the Great Correction, they still seem unable to see what is going on.

Bernanke:

“We got in trouble in the first place by making too many bad loans, right. So you’ve got to make good loans. We’ve got to have credit worthy borrowers.”

It may be that, in private, Bernanke has a clearer view of things. But we cannot tap his phone or channel his dreams. All we have to go on is what he says…and does. So far, he has said or done nothing that gives us confidence in the man.

He’s right: we got into trouble by making too many bad loans. But why did “we” do that? Because the Fed lent money too cheaply! It encouraged speculation and risk taking – especially by the banks, who must have known that they would be bailed out if they got into trouble.

And how could the Fed remedy the situation? Easy. It could raise rates – just as Paul Volcker did. It could put the squeeze on speculators. It could raise reserve requirements. It could allow the banks to go bust…send them a message they wouldn’t forget.

But what has Bernanke done? Just the opposite. He has rewarded the reckless speculators by buying up their bad bets (adding $1.7 trillion in trashy mortgage backed securities to the Fed’s core holdings). He has cut rates even more…bringing the effective rate down to zero for privileged borrowers. And he has created the illusion of “recovery” – by goosing up prices of stocks and commodities.

Bad policies. Bad in the short run. Worse in the long run.

Bill Bonner

for The Daily Reckoning

The US Deficit Recovery Program and Other Fallacies originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."

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Monday, January 24, 2011

Making Money Program

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