Archive for Opinion
Lesson From Greece: Government Handouts Are “Sticky” in a Downward Direction
Posted by: | Comments3.11.2010
John Maynard Keynes argued that the problem with a free market was that certain parts of the economic world, such as wages, did not correct down when the overall economy corrected. Therefore, it was better to stimulate the economy to keep the effects of a downturn minimal. Though I prefer a freer market, I do understand Keynes’ point.
If wages were the only thing that was “sticky” (as Keynes said) in the downward direction, perhaps we could plan for that; but unfortunately, it looks like handouts, requiring people to pay taxes, and paying people not to work are also sticky in a downward direction. Case in point: Greece.
As we see people rioting over having to pay their bills, tipping cars and smashing windows because they have to take a paycut, and general lack of civility among what I would call in some cases, “rioters,” we can begin to see what may happen all over the world if governments lose the ability to paper over problems. I have mentioned in past articles, especially when I commented on Hugo Chavez’s efforts to make his people adult dependents (such a sad thing to be a CAPABLE ADULT DEPENDENT), and I mentioned this at the end of my article on Tuesday of this week, that it is quite sad to see adults, especially adults in a country where they are free, be reduced to dependent leaches (or turn into complete losers) that riot whenever their government “benefits” are reduced.
As I said before, Greece is merely the contractions in the process. Eventually the real pains will come as there will be less capability to satiate an angry population when price increases take hold. As Marc Faber says, we will likely then go to war to take the population’s mind off of our problems and project them on someone else. Remember, Greece faces problems because they don’t have Helicopter Ben and his printing press. Imagine a time when we can not print money at will – it is quite a scary picture…
If You Had to Cut a Check, You Would Vote for Lower Taxes
Posted by: | Comments3.9.10
I am absolutely convinced that if you had to physically write a check for your taxes, like many self employed people do, you would vote for lower taxes.
This article on rising levels of sales taxes nationwide: Forbes Rising Sales Taxes
Think about it – it would be the biggest check you write out – if you had to write a quarterly check that is. Not only that, just like most people pay no attention to the cost of medical services (because all they see is the 5-15 dollar copay so there is no reason to bargain), most people don’t really feel their tax burden because it is painlessly (relatively) taken from their paycheck. Government is not stupid in one area (they’re pretty bad in quite a few) – they are smart about how to take your money. When they required that payroll taxes and income taxes be withheld from paychecks they knew that many would not be disciplined about paying taxes when times got tight (just as many don’t pay mortgages now that times are tight – mortgage providers lament the fact that they can not withhold their payments from your paycheck!). The IRS would be chasing millions for non-payment! No they would not do that – withholding works so much better – in fact let’s take extra, use it all year and then refund the extra to you at no interest and make you feel good about getting your own money back – that’s exactly how government would love you to feel about it – HAPPY TO GET YOUR OWN MONEY BACK.
So let’s figure out this hypothetical check you would cut. Let’s assume you make $15,000 per quarter ($60,000 per year). First off, you pay 7.65% in FICA tax (almost sounds like a swear doesn’t it? Just add a “U” on the end. But let’s also count the 7.65% that your employer pays for you – since it could theoretically go to you if not to the government. That makes 15.3% or $9,180. Next, let’s assume that after your exemptions and deductions (mortgage interest, property taxes, FICA deduction, 401k), your adjusted gross income is $45,000. Your federal income taxes on this according to the 2009 schedule would be $7,437.50. if you lived in Massachusetts like I do, your state income tax (flat 5.3%) would be $2,385. If you owned an average one family in Medford, MA, my home town, your property tax would be roughly $3,500 (depends on valuation of course – oh and this is another tax “painlessly” removed from your bank as a part of your mortgage payment).
Furthermore, in regards to the article linked about – supposedly 70% of Americans’ income is spent on consumption. Let’s take 70% of $60,000 = $42,000 – and since Americans just recently started to save money again, the idea that almost 100% of adjusted gross income would go to consumption shouldn’t surprise any of us. If the average sales tax nationwide, according to that article is 8.629%, let’s assume 8.629% of 80% of consumption is taxed (exclude cost of food which in some states, like MA is not taxed but in California where you get especially fleeced, is taxed), so 80% of $42,000 = $33,600 x sales tax of 8.629% = $2,899.34.
So let’s add up this tax burden:
$9,180 + $7,437.50 + $2,385 + $3,500 + $2,899.34 = = $25,401.84
Quarterly would be = $6,350.46
Now, what do you think the average person, earning $60,000/year would do if he had to WRITE that check every quarter? $6,350.46!!! he would vote out the gasbags trying to tell him he needs to bail out Government Sachs, or Government Motors, or the State of California (coming soon to a theater near you!). But since he is numbed like a good anesthetic, through piecemeal siphoning of his paycheck, or through his mortgage payment, or when he goes to the gas station, he never really pays attention.
The last point I will make – if we have been running deficits forever and this year the deficit is ENORMOUS, and we can’t even come close to balancing budgets, what do you think DC would do with more of your tax money? Do you REALLY think we would be balanced? If taking $25,000 from the man making $60,000/year isn’t enough, what is? $50,000??? Likely they will answer “just a little bit more.” They will nick you a thousand times until you have bled out. And soon you won’t be able to do anything about it. According to statistics, something like 40% of the people pay no tax – government has almost built the majority of government-dependent people that will ensure government will grow forever (people who depend on government will vote for more and more government – why not you’re paying! Don’t you do the same when you have hold of the company credit card?).
It is a shame that government would destroy the dignity of individuals by encouraging government dependency. We never hear talk of innovation, human growth, and entrepreneurial development from government people – and why not? How many true entrepreneurs serve in Congress? Are people inspired to make it happen or are people encouraged to depend on more government? The language I hear does not inspire people to “make it happen.” This is something that, being American, saddens me. bringing adult Americans to the point of dependency in such large numbers is something that our country should be most ashamed of considering our unlimited opportunities for education, for lifestyle, for careers/vocations. We have the most opportunity of any country in the world and the failure of many, which I think is a failure of ATTITUDE, not education or economic background (though those things can help greatly), should be what we most focus on fixing. A proper attitude can accomplish great things; and it’s about time that not only children in school but ALSO dispirited adults hear this message.
Housing Price Declines Are A RESULT Not Cause of Poor Fundamentals
Posted by: | Comments3.8.10
Rash-like skin reactions can be an early warning sign to stroke or heart attack – and treating the skin problems without knowing the underlying issue (the heart problem) would be a waste of time and likely not end in a favorable result. I know this well having lost my godmother under this scenario.
So when I see the President and Congress still trying to ‘resurrect’ the housing market thinking that this would be a catalyst for the economy, I get the feeling that we are treating the rash, not the pending stroke that many of these underwater homeowners fundamentally can’t afford to own ANY house, not just the one they are in.
Job losses, higher savings rates, and moral hazard are fundamentally shifting the credit market. Everyone who sells credit (banks, credit cards, etc) is rethinking how their customers will qualify for credit in the future. If more people foreclose and avoid paying debts, then it stands to reason that credit will be much more difficult to obtain (and is now so) in the future. The WSJ article linked above discusses a new program that would pay homeowners and lenders to short-sale their homes. Sounds neat doesn’t it? However, the reason this could be a disaster is that according to the article, there is over $1 trillion in equity loans and second mortgages. If banks had to actually REALIZE these losses on their balance sheets, we would potentially see many more underwater banks (they are actually currently underwater but they maintain their zombie status because they are delaying recognition of loan losses – ever notice how long it takes some banks to foreclose these days?).
In summary, economic weakness will continue to hit the housing market – simply a result, not a cause of retracting consumer free cash flow.
- In 2008-2009 the major credit card companies took back $1 trillion of available credit from consumers
- Unemployment currently is running at over 20% if you use real analysis (see www.shadowstats.com)
- Credit standards are tighter – A credit lending rates are for credit scores of 740 or above whereas in the past, lower scores got A rates – according to my sources
- Housing prices were historically too high – in a great article in 2006, Jeremy Grantham of GMO in Boston said that housing prices were riding at 6.3 times annual income on average where the long term average was closer to 4 – a trend he called “unsustainable.”
- Savings rates which were negative, are now running at about 4-5% according to research done by the major business newspapers.
Add all of these together – assuming consumption was about 70% of our economy, subtract 4% that is no longer being consumed by saved, subtract 3-4% for the loss of available credit card credit, subtract all of the home equity/2nd mortgage spending done on $50,000 kitchens and such which is now non existent, and add all of the other factors, and you can see why the economy is contracting, spending is down, jobs are lost and homes are foreclosing.
Instead of taking our lumps and telling people like it is so that we could get through this painful correction quickly (it would be quite painful) , policymakers have chosen to print and spend our way through this. As a result we may feel a nagging but not crippling pain for a much longer period of time – our own version of Japan so to say – of which we’ve already gone through 10 years of – we have already HAD OUR LOST DECADE. We are now on Lost Decade 2 – and like most sequels, this could be worse than the first.
Monday Thoughts – Interesting “On the Other Hand” Analysis of Toyota’s Problems
Posted by: | Comments3.1.10
Granted I don’t know much about auto engineering or the current investigations, but I figured there was more to the story than what we are seeing in regards to Toyota. Here is an interesting, concise counterpoint to the headlines that we are reading to think about on this issue:
The author analyzes the number of claims based on total miles driven by Toyotas (which is very high as they are a top selling brand). The incidents/miles ratio is rather low. Also, something I noticed before – the brake components are manufactured by CTS (Yahoo Finance – CTS) – an American company (based in Indiana). We haven’t heard much from them nor have they been dragged in front of the cameras.
Considering the track record of politicians, it would not surprise me if they were trying to help boost sales at Government Motors (GM) and it wouldn’t surprise me if GM were whispering in the ear of certain Congressmen. Treasury did hand GM $60 billion and interfered with the legal bankruptcy claims of many bond holders – and certainly it would not look good if that $60 billion truly did go down the drain when the government put money into that cadaver of a company.
Again, I don’t know much about engineering nor do I have details of the investigations so I present this article and information only for your further discussion – but it never hurts to hear a counter-argument.Read the article and see what you think…
79% Credit Card – May Be a Good Idea…
Posted by: | Comments2.13.2010
- If you’re terrible with credit and need to rebuild it.
Premier Bankcard is offering a credit card with not only a 79.9% APR, but also a $75 fee on a $300 limit card. Usury? Perhaps but is anyone forcing you to take it?
For many of the large number of people responding to this offer, their credit wouldn’t qualify them for any other card. And if Daddy Government (good ole “Daddy O”) institutes maximum rates on cards, then these people won’t get any credit. At least this is an opportunity to rebuild. This rate likely reflects how bad people are today at repaying.
There is a definite shift in our culture with many people feeling absolutely comfortable punting on debt obligations. This attitude certainly contributes to situations such as this. I am sure if you were lending your money, there are many people that you would not lend to at less that 79% either! (that’s the best way to cut through the politically correct BS – ask yourself when you see this rate if it were your money, would you lend it out at 8% to people with 500 credit scores?).
In one of my earliest articles on this site (to read click HERE), I wrote about this – and the faux indignation that gas bag politicians show at the credit card industry. I agree that their practices can be predatory at times (on people with good credit no less!) but let’s be honest in this debate. There are a lot of people out there with a poor level of personal responsibility and their credit score reflects it.
For a list of the articles I have written that have mentioned credit cards, click HERE.
The Taxpayer is Paying IndyMac Bank to Foreclose on You?
Posted by: | Comments2.12.10
The following I am still investigating and will run by some attorneys and real estate agents I know. For now, I will present this info and let you make your own judgment. Also I’d like to thank one of Bill Fleckenstein’s readers for passing on the following important information:
Potentially a disturbing bit of investigative work done by AZ real estate agent Robert Hertzog in his article “Is the FDIC Killing Short Sales” – according to him, and with a document from the FDIC to back it up, OneWest bank, which took over the portfolio of the failed IndyMac bank, has a deal with FDIC that states that the FDIC will cover 80%-95% of OneWest’s loan losses, making it more profitable for them to foreclose than to sell the house on a short sale – and to effectively TRANSFER MORE LOSSES FROM THE BANKS TO THE TAXPAYER. Apparently, increasing voter angst is accomplishing little and therefore, perhaps the heat needs to be turned up. Here is a tidbit in his words:
“Now, listen to the deal they got from the FDIC….
Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts). They purchased all current HELOCS at 58% of Par Value!!!
Next, in order to “sweeten the pot”, the FDIC stepped in and guaranteed the following: For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss. The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan. Let’s use my clients situation as an example:
Loan Amount is $478,000, plus 6 months of missed payments, for a grand total of $485,200
OneWest pays $334,600 for the loan
We have an all cash offer of $241,000, net to OneWest.
So, let’s do the math, shall we? The net loss, according to the FDIC formula is the ORIGINAL LOAN AMOUNT minus the amount of the offer. In this case, $485,200-$241,000, or $244,200. Next, the FDIC, according to their Loss Share Agreement, writes a check to OneWest for 80% of the so-called “net loss”. So, in this case, OneWest gets a check from Uncle Sam for $195,360 (.80 X $244,200).
Add the $195,360 to the sales price of $241,000, and you get a grand total of $436,360. Remember, OneWest paid $334,600 for the loan. So, OneWest puts $101,760 in their pocket, thanks to the FDIC. Folks, that is over $100k of our hard-earned tax dollars!”
There is more to this including the intriguing group of investors behind OneWest. To read more, see Robert’s article here:
I am digesting the FDIC document linked in the article so I can not say for sure exactly how this works due to my limited legal background:). I will offer it here to you to investigate yourself. Either way, however you interpret this, since this is an FDIC program, this meets the implied approval of the President and likely many in Congress. If , therefore, you don’t like it, speak up – please.
Monday Thoughts – You’re Supposed to Go For It!
Posted by: | Comments1.25.10
I have a video for you to watch (below), but before we get to that, I want to share a thought with you. It’s 2010 – and when a new year rolls around, some people think of resolutions, but I know many people think of past failures. The feelings vary widely but often come down to “woulda, shoulda & coulda.”
I should’ve done….I would’ve done …. if I had…. or I could’ve done this if I got the chance to…
And now, in 2010, with a bad economy, many people are looking to Washington for help. Many people are hoping that someone ELSE could come in and save them. But I’m here to tell you that it’s time for YOU to go for it. It’s time for you to put aside the woulda-shoulda-couldas, and the hopin’ & prayin’ for a personal “bailout” and it’s time to go for it! You live in the most free country in the world; you have the ability to start a business, any business – many with very little investment. You have the freedom to work 2 jobs or even 3 to save money and do what you want (yes the freedom to work 2 or 3 jobs is an opportunity – many of us worked 2 jobs when one wouldn’t cut it – we could use our time if we yet didn’t have the skills to increase income).
There are many countries where you can’t start a business; there are many countries where you can’t decide what jobs you can apply for; there are many countries where the money in people’s pockets was devalued overnight by the government (North Korea, and Venezuela in the last month for example).
And even worse – many people don’t have enough food and water just to function and work. It amazes me that people in the US, with perfect health, eyesight, hearing, ability to read and write etc. make excuses. What would you rather make - a life for yourself or excuses? Which sounds better? And if at this point you are still feeling sorry for yourself, watch this video of Patrick Henry Hughes (great name) – and after you watch it, stop making excuses and GO FOR IT:
Health Epidemics Found Only in the US
Posted by: | Comments1.21.10
I saw this headline on Bloomberg today:
Heart Risk in One-Fifth of U.S. Teenagers Found by Lipid Tests
Bottom line – American kids are too fat. And this will have sweeping consequences not only for our nation’s overall health, but also the future (and current) cost of medically treating all of the symptoms (my favorite analogy is the guy who pops cholesterol-lowering medication as he heats eggs and bacon for breakfast – you all must know someone who does that!). That being said, one of the factors that significantly drives up our health care costs today is the percentage of ’self-inflicted’ wounds incurred by Americans of all ages. What are these “self-inflicted” wounds?
1. heart disease
2. type 2 diabetes-related disorders and health problems
3. stroke
4. obesity-related health issues
I occasionally will discuss the work of Dr. John McDougall on this site. He is one of those experts that is often mocked by establishment because he speaks of what is obviously true – our western high-fat diet causes many of our help problems. We have health problems here in the US that would shock people in other parts of the world. Do you think people in Japan have as high a rate of type 2 diabetes as people in the US? many of our health issues are nearly non-existent in most countries.
A Current Issue
This is also an issue that few want to bring up in the health care debate because elected officials would never want to force people to be more responsible for their own health care – but it is the truth. If we changed our primarily western diet to a lower fat, more natural, grains/vegetables/legumes-based plan, then we would experience much lower rates of obesity, high cholesterol, and type 2 diabetes.At least health plans could offer discounts for people who take care of themselves. It seems that the only poor health choice that is politically ok to punish is smoking – eating chocolate bars and fried food 7 days a week is not to be discussed…
References:
Dr John McDougall discusses Diabetes – see site for more topics discussed such as obesity, high cholesterol, etc and a list of further references.
I’m Voting for Gridlock Tomorrow
Posted by: | Comments1.18.10
I’m scared.
Recently, while watching the speed at which I have been losing personal freedoms due to the actions and proposed actions of Congress I have gotten sick to my stomach – and it made me decide that, even if I could not find a solid Constitution-supporting candidate, I would support slowing Congress down in any way possible – that’s right: good ole GRIDLOCK. I love gridlock; I love it because oftentimes, the more government does, the worse they make things, often responding too late, to the wrong target with the wrong answer. Therefore, I prefer they do nothing! With that said, let’s review some of the developments over the past year:
The biggie - Health Insurance
Seriously, do you think the cost of this is not going to bury us? Do you really think that? Not only that, you will be FORCED into certain choices by government orders. Adding 31 million insurees is wonderful for HMO companies – more customers – and who will pay for all this? You can answer that. Do you realize that we can no longer use the political catch phrase “your grandchildren will pay for this” anymore? You know why? Because it’s been bumped up to YOU – you will pay for this either through higher taxes, lower social security increases, higher Medicare premiums, taxes on social security or our old favorite, the one that every economic layman gets destroyed with without knowing it – inflation! (printing the money to solve – we will have to create a new phrase: Borrow and Print!).
I want to control my health care – I don’t want some career politician deciding that for me (I have my own small business; i doubt if many of these reps ever even had a paper route). And I can make my own best economic decisions, how about you? And the worst part is, this health insurance bill is an amalgamation of proposals that have been around for years. How much thought was really put into this, and furthermore, isn’t it true that most of Congress NEVER EVEN READ the bill? never read something that will control 15% of our economy? Hello? As an aside, perhaps we should create a 51st state and fill it with paternal politicians and “adult” Americans who want more daddies to make decisions for them – then they won’t bother me. The best solution for me – and maybe you too if you agree? Gridlock – vote for the party out of power.
Increasing Undeclared Wars
Our Nobel Peace Prize winning President just increased the troop presence in Afghanistan. Let me ask you something, do you think that putting more of our men in the Middle East, often on Muslim holy ground, incites more young unemployed Muslim men to take extreme actions, or do you think they’re all happy we’re over there? And do you think we’ll see more or fewer military deaths due to our actions? If we carpet bomb a village in Pakistan and kill 500 civilians while trying to kill one suspected Al Queda leader, does that help or hurt our cause? I sympathized with people who voted with Obama because they felt he would end our drive to build an American “Empire” (which is bankrupting us as China secures economic relations with many African and South American countries – and we’re not developing our massive natural gas reserves for export – duh might be a better use of the billion$ we blow overseas), but as you can see, they’re still trying to expand our empire and persuade with guns.
[As a sadly humorous aside, I saw Rambo III a few weeks ago - I had never seen it but since it was based in Afghanistan, I had to watch - super weird: what characters were saying about the Soviets sounded like it applied to us today.]
I want less spending on empire and more internal investment – someone needs to slow Congress down – yes! Gridlock.
Wall Street Bailouts and Fed Moneyprinting
Yes GW’s man Hank Paulson asked for the original big bailout, but developments since then have shown me nothing has changed. Recent news has revealed that Mr. Geither, our Treasury Secretary, might have had a hand in funneling taxpayer bailout money to his buddies at Goldman Sachs. He is an Obama appointee. Ben Bernanke, perhaps the biggest reason why you earn nothing in your bank account, and why endowments and charitable funds are making nothing is up for reconfirmation by the Senate. He and his predecessor, Alan Greenspan, because they set interest rates so low, and required financial institutions to keep so little in reserves, allowed and encouraged rampant speculation on Wall Street.
I have always said, the average person should not be investing – they should be able to buy bonds and earn 5-7% more safely. However, since the system is distorted by government spending, and especially by Federal Reserve interest rate policy, the average person is forced into the stock market to find decent returns. And furthermore, the average person’s costs rise every year, even though the government says they do not (see the Shadowstats link to the left for more info on real inflation figures). You can thank Ben Bernanke for that – money printing and low rates, coupled with huge government borrowing (borrow and print!) will cause, if let go, our dollar to depreciate at a much accelerated level. And in the future, when the dollar buys even less, and gas cost $6/gallon, some Congressional gasbag will get up on TV and blame “big oil,” and you will fall for it – even though you should be blaming Congress and “Big Ben.” And who renominated Mr Bernanke for another term at the Fed full of money printing? You guessed it – Daddy O!
SUPER IMPORTANT – Oh and lesson time here – you do understand don’t you, that not only were big financials bailed out with TARP from Treasury, but also keeping rates low so that banks can borrow from the Fed at 0.25% and lend out/buy investments that yield 5-10% is another BAILOUT that costs you? You are subsidizing “Government” Sachs, Bank of America, AIG, Wells Fargo, etc with your no-interest-earning savings accounts – thanks to Uncle Ben Bernanke. You do understand that don’t you? You are PAYING TWICE for the bailouts (3 times if you include 5+% inflation).
I need government spending to stop – and I need some gridlock to make this happen – so I am voting for gridlock tomorrow and voting for the party out of power.
Just a note: I would prefer Bernanke not get renominated. A better candidate for Federal Reserve Chairman might be former Chairman Paul Volcker – a democrat chosen by Obama to be on his economic team. But I think they keep Volcker on the team yet in the background so they can appear to be listening to sound advice when really they probably don’t follow much of his advice (his first move would likely be to jack rates to 4% – good for savers, bad for debtors and Wall Street; Obama prefers Bernanke and likely his vain attempts to re-inflate the housing bubble).
Interesting Analysis for Poli-Sci Junkies:
I can’t believe it but I think the democrats might upstage the republicans of 2008 in sheer stupidity. You remember in 2008, voters were telling candidates that they wanted out of Iraq – they wanted less “Empire.” McCain said as president, he would expand our presence in Iraq. Obama said he’d bring the soldiers home. I have to think that for 4-7% of the country, the war-making was their biggest issue and they voted for Obama to end it – unfortunately, he won’t deliver as the Military Industrial Complex drags Obama in (20k more troops). Take away that swing, and maybe McCain wins. The republicans didn’t listen to the people and lost badly in 2008. They listened to George Bush, who though winning an election by 70,000 was a “mandate.”
Now the democrats are repeating this script – thinking Obama won on a “mandate.” They are not listening to the people with health care, civil liberties, war-making. Many are waking up to see that they don’t want a paternalistic government (nor do many want control from Europe as those Copenhagen documents would have ceded US sovereignty to foreign powers). Most of the time, it is better that government do nothing. For example, if we didn’t bail out AIG, Government Sachs, GM etc, and let them fail (yes fail – it’s ok to fail in the US) we wouldn’t have to complain about bonuses right? And you wouldn’t be more in debt.
We need more gridlock and government inaction. The US Constitution, the document that amazed me as a schoolboy, and was part of the reason I studied history at Tufts University, is a wonderful foundation to stand on – greater than any personality that ever crossed our political stage. We’ll be all right without all these laws, restrictions, controls…
Help SLOW CONGRESS DOWN. So no to government “paternalism”, no to “Empire,” no to “borrow and print,” and if you don’t have a solid, constitution-supporting candidate to vote for, vote for gridlock both tomorrow in Massachusetts and wherever you are in the Fall elections.
Another $3.5 Billion – “How We Doin’?”
Posted by: | Comments12.31.09
I read the headlines yesterday morning and saw this article:
It made me think of (keeping with a theme this week) Howard Davidowitz’s response when asked his thoughts on the bailouts – to paraphrase: “we gave AIG 180 Billion – HOW WE DOIN’? Ehh? How we doin’?”
You see, government leaders don’t represent you (most of the time), they do what they think will 1. appease you, 2. keep their contributions coming, 3. take care of their friends, and/or 4. take care of themselves – but not you.
In light of that, I want you to try something:
On this New Year’s Eve, I wanted to take your attention to something that should be on your NY Resolutions list:
Get more knowledgeable! - of not only what your government is doing (they are doing so much that the average working person can’t keep up – even Congress doesn’t have time to read all the crap they’re putting out), but also how these things work – don’t be an outsider to how your country runs – make a resolution to get more educated on how stuff works – how legislations gets introduced and passed, how the Federal Reserve operates and the effect of monetary policy, or check out government run health care or government coordinated health care in various countries (Canada or UK) or states (MA) just to see for yourself how they’re actually doing rather than relying on the soundbite from the newsman or some opinionated blog (like mine:).
Monday Thoughts – Find Out Who Makes Those Gifts You’re Buying
Posted by: | Comments12.20.09
I’m sure many of you are out buying gifts for Christmas and such and in the haste of the season, I want to ask you to pay attention to something:
Find out who makes those gifts you are buying.
What do I mean? I mean that currently, around the world, many of the supplies and resources used for many of the products we buy and own, come from the labor of people who are treated absolutely horribly. For example, coltan (niobium-tantalum combination) is a metal that is instrumental in the manufacture of mobile phones/smartphones – and its primary source is the Democratic Republic of the Congo (see Wikipedia HERE for more info). The demand for this metal has caused much strife including poor working standards and the smuggling of the metal out of the country by militias to be sold to fund armed conflict (see more recent background and potential progress in THIS Bloomberg article). This problem came to a public head in 2000 when Sony’s PS2 shipments were held up due to this strange metal that few were familiar with.
Some mobile phone companies refuse to answer when asked where their coltan comes from – some say they do not buy from the Congo – but it is important that you know and just in case you don’t want to support the exploitation of our fellow human beings, you should consider how you purchase consumer goods.
This problem is not only with cell phones – it exists in clothing (remember Nike’s sweat shops?), food, almost anything we could buy. These problems still exist in a large way. American consumerism is much to blame – we don’t buy an article of clothing and take care of it – we buy “disposable clothing” over and over again.
Why would I bring up this point when I often write about free markets, low taxes, freedom, and limited government? Because this is right in line with such noble ideas. I believe everyone should have freedom of self determination and a low overall government burden. If our cost of bureaucracy weren’t so high, perhaps we could afford to pay twice as much for clothes and items (which would ensure decent wages for the producers).
It is right in line with my thinking that big government not control us here in the US and take our rights, just as I don’t support the idea of government leaders in other countries abusing their people’s rights and freedoms in order to enrich a few at the top. I sincerely believe that economic freedom is sine qua non for personal liberties. Think about it – if you lived in a socialist/statist type of country, and someone in government could likely control your income (and continuation thereof!), then you and your thoughts/speech could theoretically be controlled by the government. It’s only when you are YOUR OWN MAN or YOUR OWN WOMAN that you have true freedom (and at this point you are also most responsible for your choices in life since you can’t claim manipulation).
With that said, if you agree that our purchases can affect others’ freedom & liberty, what can you do? Quite simple – find out who makes what you want to buy and see if the product’s manufacture is consistent with respecting the dignity and opposing the exploitation of those of who manufacture it.
FYI: Here are some sites that point out the poor treatment of humans:
Human Rights Watch – obvious what they do – most people know this org
Make it Fair – European based site that encourages companies to use good labor practices and creates write in campaigns to change behavior
International Catholic Migration Commission – I support this org because beyond poor labor practices, I abhor human trafficking and slavery. ICMC works to stop that. Imagine one night living in slavery – how would it feel?
Have a great week before Christmas and try to limit the consumerism!
Chris G
ps – an idea that you may want to consider – instead of buying gifts that people likely won’t use/enjoy, consider giving to good charities this year in the name of your family/friends. The charities likely could use the money and your friends probably don’t need whatever you were going to get them!
An Inconvenient Summary of Global Warming & George Carlin’s Take
Posted by: | Comments12.17.09
I just read this summary and it pointed out a few interesting things:
Interestingly, it reaffirms my view of global warming – I would prefer less pollutants just because I like to breathe and would welcome technologies for cleaner air and water but the alarm over the glaciers melting and global warming caused mostly by humans vs mostly by natural causes is likely BS. Here is the full homepage of the data source:
Here is an interesting take from Casey’s Daily Dispatch:
At Casey’s, check out how the chart (by Mann) used by global warming “televangelist” Al Gore in his Inconvenient Truth shows the last thousand years of temperature data compared to the last 5,000 years on the fuller chart that they DON’T use (shown above) – global temps according to that chart are still much below historical levels and this could again, be completely natural. Why doesn’t Gore use the longer chart? I guess showing 5,000 years of data vs the 1,000 years would have been too much of an “inconvenient truth“ for Al Gore to use.
I admit that I don’t know much about this stuff but I’m sure ‘experts” like Al Gore don’t either(here’s a Times Online article questioning some of his incongruent statements). So let’s stop pretending we all know ‘for sure” what’s going to happen and look at the hard science. Personal theses by a few people should not be taken as laws.
And if people want to focus on clean water/air I’m all for that. But don’t preach end of the world if well-respected scientists can’t even agree on what will happen – because admittedly, they use computer models to figure out what might happen and let me tell you something about computer models from my field of finance (and for any model for that matter) – it depends on the data inputs and if some loon is putting in the inputs, or even if a non-loon puts in incorrect inputs, the data will vary widely – just as it did when financial modelers put together models on default rates for mortgages before the financial crash (fyi – they used inconveniently incorrect input data). My lesson from that is, don’t rely on models as a certainty.
And before some fool takes down our entire economy, let’s focus a good 2-5 years on this and rely on science – not on who can yell the loudest outside of UN offices. And certainly, if governments want to fund this research, I’m fine with that but let’s not fund it and be cheerleaders hoping “our side” is correct. Let’s approach it with an open mind and not do anything rash.
CG
PS here’s George Carlin on this issue:
Monday Thoughts – Fantastic Marc Faber Lecture
Posted by: | Comments12.7.09
(please note that the Faber lecture below has 7 parts – go to Youtube to see the 6 following; and down below, the Faber/Rogers interview has 5 parts – for both, only part 1 is on my website -you have to click through to Youtube to get the rest)
Dr Marc Faber addresses the cause of the current economic crisis and discusses the various government policy responses implemented over the past few years in this excellent series of videos from YouTube of a lecture he recently gave in Slovakia. He also covers global interaction of balance of trade issues, energy needs, and geopolitical issues resulting from the need for resources.
Why listen to Dr Faber? As opposed to some of the economists/government policymakers that you might see quoted in your local newspaper or TV news show such as Fed Chairman Ben Bernanke, Treasury Secretary Tim Geithner, Harvard economist Paul Krugman (& Greg Mankiw), or even NYU Professor Nouriel Roubini, he has been right for a LONG time with a consistent track record and undogmatic analysis of economics.
Furthermore, having lived in Asia for the last 30 years (he is a Swiss native), Faber has a real global perspective and has seen economic development first-hand for a long period of time. In addition, real asset/investment managers rely on his analysis to protect capital and make money – his advice is used in the real world – many of the others quoted above have been mainly academic or government types for most of their careers (Roubini does have a consulting company).
Also, you can easily find many of the others mentioned above, on record, despite their Nobel Prize or other awards, being unbelievably wrong about their economic analysis. Let me give you a sample of the thinking of some of those mentioned above:
Here is a transcript of a speech by Bernanke where he discusses the idea of the US issuing more debt and having the Fed PRINT MONEY to buy the debt (a policy right out of Robert Mugabe’s playbook) – FRB
Here’s Geithner helping to turn the US debt into an ARM – adjustable rate mortgage – since according to the Treasury in this CNN article, FORTY PERCENT of US debt will need to be refinanced in a year (sound like an ARM?) and it’s Geither’s responsibility to set what kind of borrowing the US does – if rates were to rise, interest payments would become an UNSUSTAINABLE portion of our annual expenditures – CNN
Here is an article from Bloomberg where both Roubini and Krugman voice their support for “money printer extraordinaire”, Ben Bernanke – Bloomberg
Here’s an interesting reflection on Krugman discussing his denial in advocating the housing bubble and super low Fed Funds rates – Mises
Another article from Mises examining the time in 2002 when Krugman specifically ASKED for a housing bubble (good one Paul) – Mises
Here is a financial writer commenting on the times Roubini was wrong – Roubini may do some good analysis but perhaps he speaks so surely when he really should be less certain because his timing can be way off (and cost people money) – Roubini – on EricTyson.com
Here is Professor Gregory Mankiw describing how one of grad students at Harvard gave him the idea to make paper money worthless so people would get scared and spend it (for the greater good of the economy of course) but I think he just settled on the idea of monetary policy encouraging inflation ( think about the cost of food, utilities, fuel, taxes, and insurance premiums doubling in 12 years or sooner with 6% inflation annualized - who’s to say they’ll get the number right) – Mankiw Blog – what they should be advocating is savings and investment which may induce slower growth, but it will be REAL growth that encourages investment in technology and manufacturing and creates long term jobs – not spending growth that creates part time retail jobs or public service jobs that would end and leave the workers just as unemployed as before (unless we get someone like Ted Stevens to run the program to come up with endless “bridges to nowhere” with funding from Helicopter Ben)
As you can see, many of these people, their thinking got us into this mess of bubble creation, overconsumption, bubble bursting, economic pain cycles. We had the stock market bubble, then the real estate bubble and now we will have the government spending bubble – the previous 2 ended badly but just watch how this last one ends. Here’s a one minute video of Dr Faber explaining how this will be exacerbated by our current Fed Chairman:
What is the solution to all of this mess? Get government out of economic manipulation – encourage savings, investment, and employment by decreasing taxes, making it easier to have employees, and increasing rates so that conservative savings earn interest. We may have to increase income taxes (not taxes on savings and investment) on EVERYONE to get out of this – everyone should pay because everyone was complicit in this mess. Though I am a fan of very low taxes and limited involvement in the economy by government and other “smart” people.
if you want to see how Marc Faber can be eerily correct, here is a video interview series that he did (along with friend Jim Rogers) with Dutch TV I believe in 2005 which I have permanently placed on my front page (wait through the first 2 minutes of various shots of GW Bush, Dutch talk and other stuff to get to the good stuff):
Chris Grande
Monday Thoughts: Your New Business “Partner” (Great Rant)
Posted by: | Comments11.30.09
Today I am not going to write anything – I am simply going to direct you to a rant that epitomizes almost 100% how I feel about being in business in this country. It is written by a fellow named Porter Stansberry who himself, has built quite a successful investment newsletter business which offers free daily communiques (of which I am quite certain that 98% of Florida retirees – and me – subscribe to one or more) and several paid subscription newsletters.
Here is the beginning then a link to the rest:
I’d like to make you a business offer. Seriously. This is a real offer. In fact, you really can’t turn me down, as you’ll come to understand in a moment…
Here’s the deal. You’re going to start a business or expand the one you’ve got now. It doesn’t really matter what you do or what you’re going to do. I’ll partner with you no matter what business you’re in – as long as it’s legal. But I can’t give you any capital – you have to come up with that on your own. I won’t give you any labor – that’s definitely up to you. What I will do, however, is demand you follow all sorts of rules about what products and services you can offer, how much (and how often) you pay your employees, and where and when you’re allowed to operate your business. That’s my role in the affair: to tell you what to do.
Now in return for my rules, I’m going to take Click here for LINK…
Source: blog.couponmountain.com
Monday Thoughts – Confiscation of Inflation
Posted by: | Comments11.23.09
Today is a bit of a busy day since I must leave the office and travel to Providence. However, I was thinking this morning about inflation. Yeah I know, everyone wakes up and daydreams in bed about inflation. But what I thought about was just the pervasiveness of that devil called inflation, and how it is used as part of economic policy to fool the people then steal from them without them knowing it – or more insidiously, with their uneducated approval.
I keep thinking about things like the racket which goes something like this:
1. Every year your costs increase officially about 4% on average (30+ year average) and unofficially about 6.5-7% (compare appreciation in gold to the dollar since 1971).
2. Every year you get a “cost of living adjustment that may be equal to or slightly under the official number which makes you feel ok, even perhaps getting your implicit approval because your pay adjusted somewhat to costs
3. And every year, you get poorer because real costs are COMPOUNDING at a much higher rate than your pay increases (and what about people in jobs who don’t get pay raises regularly?).
A liberal’s answer would be to pass legislation to give everyone a pay raise. The correct answer would be to first, correct this notion that inflation is good and deflation is bad (is it bad if things cost less???), and secondly, to control inflation with sound money. (I am using the layman’s definition of inflation here – inflation actually refers to inflation of the money supply – price level increases are often subsequent but not inflation. lately it seems that inflation has come to define price level increases – not sure how that happened but that is the definition I am using here)
Saving and investing would be much simpler without the manipulative Federal Reserve. if there were truly low to no price increases, an average person with little knowledge of stocks, currencies and such, could potentially Read More→