Feeds:
Posts
Comments

Archive for October, 2009

One year ago, the entire American banking system was on life support.  It was only through the intervention of the Federal government, using the promise of a semi-infinite supply of tax dollars that some of the banks survived.  If this infusion of billions and billions of dollars of cash had not been made our entire banking system would certainly have collapsed. The question we need to ask – but we haven’t – is this: is there a message here?

Thanks to the extreme measures the Federal Government took with the TARP program we still have some functioning banks, but a more important thing to consider is this: do we have a functioning economy?  The answer to that question is to be found in the history of the Dow Jones Industrials average for the past forty years.  The thing to note is the behavior of the Dow before the year 2000 and after the year 2000.  Notice anything? How about those two massive bumps?  I mean the one about ten years ago and the one a year ago. You know what those are? Those are bubbles, the signs of an economy that is being artificially and irrationally stimulated – an economy on drugs.

The other thing to note is that Bump #1 didn’t start in the year 2000, it started long before, its roots were in the 1980’s. Until then the Dow had been pretty tame, slowly inching upward ever since World War II. So what happened in the 80’s? The government created 401k plans and artificially stimulated massive investment in the stock market by average people who would have otherwise never invested in the market.  The same thing happened again with the 529 plans.

However, for the people who run our government that wasn’t enough. So they changed the tax laws again to provide a massive income tax credit for anyone who sold their house – and they made a provision so that you could do that every two years. That artificially fired up the housing market.  Then we had also the tech boom – a boom that the Fed actually opposed.  They didn’t like all these upstart companies on the NASDAQ sucking up all the investment money from the old money firms that made up the DOW.  So, the Fed killed Tech by ratcheting up interest rates until Tech collapsed.  After Tech was a smoking ruin, the Fed drastically cut interest rates and thereby fueled the housing bubble even more.

The thing to realize is that our economy, for the past twenty or thirty years has been a dying economy, kept alive by infusions of money from unsuspecting citizens contributing to their 401k plans and their 529 plans. It has been kept alive by people buying and flipping houses every two years.  It has been kept alive by one scheme or another while the true engine of our economy, manufacturing, was exported to China.  But nobody cared because you could buy Chinese stuff cheap at Wal-Mart and everyone was doing well in the stock market or the housing market.

Well, the party’s over, isn’t it?  True, the banks are alive again, having dined on the lifeblood of the taxpayers.  However, there are very few green shoots out there. Does anyone have an idea where our new economic engine will come from? Is it possible for our government to think of another economic scam that will power the country for another ten years? Or, are they running out of ideas?  Does anyone really think we can get by on our American manufacturing capability?  Let’s face it we just don’t make enough stuff anymore.  The future of manufacturing, at least for the next twenty years or so is in Asia, not North America. So what is our government thinking? Well, since the only thing they saved is the banks, one must assume that they figure that’s where the money will come from – i.e. lending at interest. But, let’s face it, the lendees are unlikely to be Americans, are they? No, the money (that’s your tax dollars that you gave them as TARP rescue money) will go to developing countries so they can develop their businesses and then pay back the banks at high interest rates.

Meanwhile, back at the ranch, what can we expect?  The truth is: not much. Our Capitalist engine doesn’t have a transmission anymore. In fact we lost it a long time ago.  We’ve just been coasting along.  The thing we don’t want to…don’t like to…admit, is that we are witnessing the failure of Capitalism.  Unregulated Capitalism – something we have had from many years – soon morphs into Predation: the strong preying on the weak. We have witnessed that. The Predators in our society, i.e. the financial community, have feasted on us.  There’s not much blood left to drink anymore.  They’ll move on, looking for victims in other countries – still propped up by our government.

Here, in the USA, we won’t admit Capitalism has failed – we can’t – it’s like denying religion or something. It’s like being unpatriotic.  It’s like stepping on the flag.  Capitalism is sacred in America – beyond criticism. It’s hard to figure why – after all, can’t we all see that it doesn’t work?  We can’t we simply acknowledge that it is an economic theory and system that just doesn’t work?  I know, I know ,we’re all afraid of the other two “isms”, Socialism and Communism. So we stick with our belief in Capitalism, even though the wheels have come off and we no longer have an engine for our economy – we still believe. We believe. We believe even though we are in a screaming nose dive.

If the past twenty or thirty years have proved anything, they have proved that unfettered Capitalism is a disaster. For proof just look at your bank account.  If we can’t bear to consider Socialism or Communism, then there is only one solution.  We need a new “ism”.  Call it Americanism if you like.  We need a new approach to economics. We need creative minds in our government who can see beyond the payoffs from lobbyists and the pressures of the fat cat bankers.  We need a new voice in economics, a voice of intelligence who can lead our economic recovery with a sound understanding of what went wrong. We don’t need idealogues, whether they are Capitalists, Socialists, or Communists; we need realists: practical, intelligent people who can understand what is broken and fix it. We simply need a new way of running our economy, a new economic theory for the 21st Century.

The question is this: do we have the intelligence and the courage to change the way we do business? Because if we don’t, it won’t be long before we don’t have any business.

Read Full Post »

It had to happen sometime.  A business can only pose as a news agency for so long until someone says the equivalent of, “Hey, the Emperor’s not wearing any clothes!”  Today the bees are buzzing around the hive at Fox pretending to be caught off guard by a slam from the White House that simply says that Fox News is not really a news organization at all.  The fake outrage at Fox, the fake consternation, the fake “Who me?” attitude certainly is no surprise – it is what people like Glenn Beck do best.  The real question we should be asking is this: How long will the true believers, the people who have swallowed Fox’s aberration that poses as factual news, take before they awaken from their trance and recognize they have been badly misled by a bunch of paid carnival barkers?

Once upon a time, as I recall, Fox was a legitimate news organization.  That was a long time ago, but as I recall they were pretty good. They were certainly providing good competition to CNN.  However, somewhere along the line they made a right turn and veered off the highway into the swampland of Glennbeckia.  In Glennbeckia nothing is quite as it seems.  There are monsters under the sofa and vampires lurking in your bedroom.  In Glennbeckia everything that used to be true is now false and everything that was false is true. It’s like some awful inebriated dream from which you want to awaken but you are afraid to because you might miss some news about an even more virulent threat to the planet.

The minions of Lord Murdoch are not complete lunatics though.  Though they are now misshapen wraiths of their former selves – having been exposed for too long to the evils of the massive, groaning, hissing organs of the bloated propaganda machine housed in the bowels of Fox News, they still retain a clever cunning.  They know that even their most moronic, soporific victims will quickly awaken to reality if all they spew onto the airwaves is the stench of fetid corruption.  Clever in their deviousness, they deliberately mix in real news with their diabolical distortions of reality. “Here, my little dearies, they cackle.  Drink this, you’ll like it!”

And so they do every day. Mixing a toxic witches brew of information and misinformation, straight talking extreme right-wing radicals along with the confused, moronic babbling that bubbles forth from the darkness of Glennbeckia.  Fox News, or should I call it Foxy News, formerly a proud name in the news business, is now but now a lowly, slinking inhabitant of the shadows, held in thrall in the halls of Lord Murdoch.  Today they have been scratched by the sword of the White House, today the pure bright light of logic and reason illuminates the horror that lies in the basement of Fox News.  Hidden from view, the gargantuan propaganda machine hisses and steams, while boiling liquids of greenish ooze slop from a giant stinking cauldron of mucosal detritus which is then distilled into Essence of Vile Reporting and Vapor of Vapid Opinions.

It isn’t too late Fox.  Go back.  Turn away from the darkness and look to the light!  Save your immortal soul from the certain damnation that awaits those who deliberately lead the Children of the Light astray! Even Glenn Beck can be saved!  No…no…wait a minute.  I’m not so sure of that. Let me check….  Yes. No, sorry Glenn, it’s the fire for you.  Can’t be helped, you know.  But the rest of you at Fox – you who have been so deceived and are now a part of an even greater deception.  Can’t you see?  You have been outed!  The whole world knows now! Your denials mean nothing, nothing!  Leave the cursed land of Glennbeckia, come back to your senses, regain your pride in presenting the truth!  Turn away from the darkness and follow the light!

All except you Glenn, you and your Lord Murdoch are beyond redemption.

Read Full Post »

I suppose it might be difficult for some members of the extreme right wing to accept, but God did not invent Capitalism.  Another fact, equally hard to accept for the extreme right wing is that Jesus did not condemn Communism.  I know.  It’s hard to believe. After all, if Jesus was alive today, wouldn’t he be a Capitalist?

Of course there is the difficulty of some of the things Jesus is quoted as saying.  I am referring to expressions like, “It is easier for a camel to go through the eye of a needle than it is for a rich man to enter the Kingdom of Heaven”. Or, “Sell all you have and follow me.”  I wish I could find a Republican extreme right wing Christian who could explain these discrepancies to me, because I just can’t figure it out. And, since the Christian right wing seems to be exclusively Republican, I figure they must know the truth about this.  Please feel free to explain this to me.

Meanwhile, I’ve been wondering.  Have you noticed in our Capitalist economic system, where everybody supposedly has an equal chance to be a millionaire, how it seems sort of like the system is sort of rigged in favor of the people who already have a lot of money?  For example, take a look at our laws on taxing estates – that’s what is left over when you die.  Under the administration of President Bush the tax on estates of less than $3.5 million was reduced to zero. Yes, zero dollars.  The wealthy can pass on their gains to their heirs and pay absolutely no tax on anything under three and a half million dollars.

What about income tax?  Surely the wealthy pay their fair share there, don’t they? Well, under President Bush’s “tax cuts” the tax on the wealthiest Americans dropped by almost 40% while the tax on the poorest Americans dropped less than 1%. Our American tax system favors the wealthy. Why? Well, for one thing who do you think writes the tax code? It surely isn’t the poor people. Senator Kerry is the richest man in the Senate, worth close to a billion dollars.  A lot of the Senators are worth many, many millions of dollars. Overall the median (not the average) net worth of U.S. Senators was $1,700,000 in 2007. For Congressmen it was $684,000.

President Obama has talked in the past about restoring the tax rates to be the same as they were under President Clinton.  At that time the wealthy paid a larger share of the country’s tax burden.  However, since his election there hasn’t been much talk about tax reform, even though one might think that recirculating some of that tax money might help to stimulate the economy.  I get the impression that Congress is not too eager to vote for a tax increase on their own pay. So the money of the wealthy just continues to sort of clot up in their bank accounts.

Here’s something to consider: the bonuses for the bankers on Wall Street are growing astronomically while everyone else’s salary is just sort of keeping up with inflation. Goldman Sachs employees will receive bonuses of about $700,000 apiece this year. How fortunate for them!  And even more so because of George Bush’s tax cuts:  they will have to pay very little tax on their bonuses. Aren’t you glad for them?

Meanwhile, average Americans are continuing to lose their homes to foreclosure.  Millions are out of work and can’t find a job.  One can only ask one question: is this right? I don’t mean in a legal sense – of course it’s legally right – the laws of our country have enabled this. The question is this: in a moral sense, is it right? The thing I find it hard to understand is how the “Christian” right – those diehard Republicans who claim to be true Christians and just love the George Bush style of government – reconcile this with the teachings of Jesus. Are we reading the same Bible here?

It’s a simple question. Are the Capitalist values of America and the resulting coagulation of wealth for a very small number of people in America, at the expense of the vast majority of people, compatible with the teachings of Jesus? A simple yes or no will do, but if anyone can explain how they truly are compatible I would love to hear the explanation.

And here’s a second question for the Republican “Christian” right: if you cannot answer my first question then why do you call yourselves Christians?  I would love to hear that answer too.

Read Full Post »

It seems like such an easy question: how much is my house worth? The problem is that this is not an easy question – and that fact that that is a problem is the real problem.  Let me explain…

A long time ago, when Tricky Dick Nixon was President of the United States, our country was running up a huge bill trying to pay for the Vietnam war.  There was only so much money coming in from taxes so we had to borrow money by selling treasury securities to other countries and Americans too.  Treasuries were a pretty safe bet – as good as the dollar, which in those days had its value fixed in relationship to gold.  At one time you could redeem your paper dollar for its equivalent in gold. Later, the paper dollar could be redeemed in silver, if you felt like carrying around bags of silver with you. The point was that a dollar was nothing more than a proxy for your ownership of some precious metals that were stored at Fort Knox or somewhere else.  Nixon’s problem was that there was only so much gold and silver in our vaults – so we could only print so much money.

At some point Nixon or his advisers came up with the perfect solution, disconnect the dollar from any relationship at all to any precious metal – in fact detach it from anything physical. The dollar became a Federal Reserve Note, not redeemable for anything.  This allowed Dick Nixon to print as many dollars as he liked so when it came time for people to cash in their Treasury securities they would be paid back in dollars that were worth much less than if they had been backed by a certain amount of gold. The value of the dollar had dropped – or, another way of looking at it is that the value of gold went up a whole lot.

Which brings us to houses – almost anyway.  There is little doubt that the increase in house prices and lots of other stuff since Dick Nixon inflated his way out of Vietnam War debts was not the same thing as an increase in value. The value of things didn’t change much, just the price because the dollar was losing its purchasing power. OK. So that’s it? No. Not exactly.

If we are talking about the value of a house, and not the price – which we can now see is not the same thing – how do we actually determine its value?  Well, the common sense way of determining the value of something ought to take into account the value of the things that went into it, like wood, stone, paint, drywall, and so forth.  Then there is the cost of labor – a bunch of carpenters, electricians, plumbers and so forth had to be paid for the value of their labor. So we have to figure in that value too. Then there is the value of the land.  How large is the lot? Is it swampland? Is it next to a superhighway? Is it level? Is it cleared?  Some of these items are easy to value, for example, if the lot isn’t level we need to pay for a bulldozer to level it.  And so forth. On the other hand, there are some items that are sort of intangibles, like the proximity to a superhighway.  How do you value that?  This is where things get a little difficult.

The issue we are faced with is trying to place a value on something that has no intrinsic value. It doesn’t cost anything more to build a house next to a superhighway than it does to build it far away.  However, it does make it less desirable.  So, we enter the world of supply and demand, where the value of things is not related to tangible things but to emotional things like desire.  This is where the trouble begins too.

Several years ago we entered a fantasy world of house prices.  The price of houses was going up because…because…well, because the price of houses was going up.  It was a fabulous game anyone could play.  Buy a house, flip it, and make a lot of money.  Except there was nothing tangible supporting the price of houses.  Sort of like the Emperor’s New Clothes, only with houses.  For the past couple of years house prices have been in a near free fall in some parts of the country and they are expected to continue falling. So how far will they go?

Now that the balloon has popped it seems that house prices will have to fall until the “irrational exuberance” of home buyers and the equally exuberant lending banks is completely dead. House prices have to fall to the point where they reflect the actual construction costs of the house, i.e. materials, labor, and land, plus some sort of adjustment for the desirability of its location as determined by the local market.  But all the price inflation due to the irrational exuberance of flipping houses has to go.

Oh. There is one other thing. The dollar isn’t what it used to be either. You need to account for the inflation of the dollar since you bought your house. Figure somewhere between 5% and 10% per year – roughly. It’s a cumulative effect so you need to calculate each year of ownership separately – a computer program might help a lot.  Then there is depreciation. Things wear out. Houses get old and start to fall apart, so unless everything is fixed up like new you need to deduct the loss in value from normal wear and tear, plus the natural aging and decay of things.

All things considered, your house is probably worth a lot less than you think it is – unless you happen to live in one of those parts of the country that, for some reason or other, never got caught up in all the irrational exuberance. For those areas out west like California and Arizona and in the east like Florida, homeowners face more pain to come in the great housing value reality check.

House values are a bit difficult to figure at anytime because of all the ingredients that go into their value like materials, labor, loss of value of the dollar, and so forth.  Irrational exuberance is not part of this equation. It doesn’t add value; it only increases the price.  The problem is that as the irrational exuberance of home buyers fades, so does the price.  Eventually, houses will return to their real value, but it looks like a lot of formerly exuberant, but many ordinary American citizens will continue to have an extremely painful reintroduction to reality.

Thank God the banks are OK.

Read Full Post »

Granted the 21st century is still fairly young, there is little doubt that the Balloon Boy Hoax will go down as one of the greatest hoaxes of the century, even by the time the year 2099 comes around.  Just think about it, for a couple of hours the entire world was watching television, the people were transfixed by what they saw and what they imagined. A little six year old boy was trapped in a high flying, saucer-shaped balloon, soaring across the United States. His fate was uncertain, and the mightiest nation on Earth was powerless to do anything to rescue the poor child.  All the king’s horses and all the king’s men…

The say that it is an ill wind that blows no one any good.  I wonder if perchance a bit of good might also come out of this escapade?  For example, has this incredible story told us anything about television?  No, I don’t mean about the capability of TV to cover live events; I mean the quality of what is on television.  Here was an incident that caused everyone to stop and watch.  People who would have been doing something else – certainly not watching the vast wasteland that we call daytime television – were glued to their sets, wondering what would happen to the poor child.  Yes, if there is one thing the Balloon Boy points out to us it is this: regular TV is awful.  Devoid of creativity, devoid  of interesting ideas and concepts, devoid of anything relevant to our daily lives, television generally sucks.

But, is there anything else we can learn from this episode?  After all, we already knew that daytime television was not great drama – that’s why nobody watches. Yes, there is something else we can learn. With all the outrage going on about how these people perpetrated a fraud on the entire world we have, at least for the moment overlooked one little fact: our multi-trillion dollar military, our police, fire, ambulance, emergency rescue teams – everyone who we would have thought, in some way, ought to be able to do something to rescue the boy before he floated away forever, couldn’t and didn’t.  Now there is something to think about.

All those tax dollars we spend on all that high-tech, high-priced equipment; all that specialized training, all those expensive radar tracking systems, fighter jets, helicopters, rapid response teams – you name it, and we can’t rescue a kid floating away in a balloon.  You have to admit, it was a grand deception.  The balloon, I mean.  You didn’t think I was talking about all of our gigantic expenditures on our extraordinary defense, security, and rescue capabilities, did you?

Just wait.  A year from now we will all look back and shake our heads when we think about this. Man, we were all fooled by a truly grand deception.  Meanwhile though, we must figure out an appropriate punishment for these nasty masters of tomfoolery.  So, what will it be? A half-million dollar fine?  Five to ten years in jail?  Put their children in foster care FOREVER?  Hmmm…just what is the appropriate punishment for foolishly fooling with the Masters of our State and making them look powerless?  What shall we meet out to those who have the audacity to point out that the Emperor has no clothes?

The simple truth is this: we’ve been punked.  Actually the whole world has been punked.  I can understand why the AUTHORITIES are unhappy.  After all, the whole affair made them look really bad and more or less completely incompetent – from the federal level all the way down to the local level.  But for the rest of us, well it was like watching a combination of Greek drama and P.T. Barnum.  It was a lot better than what is on TV this afternoon.

Maybe the guy should get his own TV show.

Read Full Post »

« Newer Posts - Older Posts »

%d bloggers like this: