The following was a response to Mitt Romney flip flopping letter to the editor. However if you read into it you realize the real message is "the Republicans platform will destroy the country."
Mitt is the real flip-flopper
Republican presidential front-runner Mitt Romney, has the audacity to say fellow Republican Rick Perry has flip-flopped on Social Security. Romney will probably win the Republican presidential nomination, but in order to do so, he's lost most of his principles. Mitt has shamelessly renounced his former positions on abortion, gay rights and immigration, making himself indistinguishable from the tea party crowd. Now Mr. Romney is telling us how he will tackle spending and debt. He will abolish Obama's health program on his first day in office by executive order leaving 40 million Americans in a lurch and once again uninsured. Mitt Romney, as president, will eliminate subsidies for Amtrak, leaving millions of rail passengers stranded. Mitt will enact deep reductions in the subsidies for the National Endowment of the Arts, the National Endowment for the Humanities and the Corporation for Public Broadcasting. And this man wants to be president.
Ron Lowe, Santa Cruz
My Response: I'm no great fan of Mitt Romney, but Ron Lowes letter is typical of the left espousing that if the Federal Government doesn't pay for it, it will never be funded. First of all California pays $90 million a year subsidizing Amtrak. Perhaps the Federal Government can take less from the states and let them use their money as they want to. Ron Lowes Health Insurance rant is a total fallacy. First, even if you want ObamaCare it has yet to be implemented, so those 40 million people don't have any insurance yet to be "lurched" away. Further there have never been 40 million people in the US without health insurance. This again is where the left likes to create numbers to suit their argument. The real number of American citizens that are uninsured is 10-12 million. Yes that's a lot of people, but you don't have to re-create government to insure them. The real issue are the illegal aliens that account for about 10 million more uninsured. But when discussing the drain illegal aliens have on the US economy, the left will claim there are only 10 million, but when they estimate those uninsured, it grows to 30 million.
As far as defunding NPR and the NEA, this is the price they pay for ignoring their mandate to be politically neutral and propagandizing for the left.
Then from under a rock comes the typical blame bush diatribe.
Ca pays more into fed than it receives. The states that receive more than they send to the fed are red states. I am not a fan of illegals being here. Radical right starting wars for PNAC agenda, spending trillions, loaning 14 trillion to foreign banks, death of literally thousands of American soldiers, and running deficits to subsidies family friends needs to be balanced by centrists. The centrists you call lefties, are more conservative than republicans of 20 years ago. Romney s staff is largely radical extremist members of the PNAC authors. Look at what destruction that has done to America. History is false promises like the GOPs unfulfilled Contract with America are just hot air talking points. How about you pay your debts to America for previous fabrications before you get any seats anywhere.
International studies on productivity showed the most productive countries spent less on health care by providing universal coverage. If a job made you crazy hateful of fellow human beings, you could change jobs. Doing something enjoyed raises productivity. Californians spend billions more on health care annually because costs of uninsured is passed onto ratepayers. You would save money by providing universal coverage. So some uninsured patient does not go untreated for TB, and you interact with them making you sick. Deep subject.
Kris Miller
My response: Kris Miller If you paid attention you would know that the Bush TARP money was only $700 billion of which only $432 billion was disbursed and all but $19 billion has been returned with interest. It was the Fed, headed by Chairman Ben S. Bernanke under the Obama administration that opened the flood gates of $1.2 trillion to investment bankers all over the world, mainly through AIG. At the Tim Geithner, was transitioning from the head of the New York Federal Reserve Bank to President Obama's Treasury Secretary; Giethner tried to insulate himself by saying he was in limbo at the time (between jobs) and was not involved or aware of the trillion dollars that was distributed by AIG, but emails from lawyers at the New York Fed at the time, instructed AIG not to discuss how the funds were distributed. When congress wanted to know exactly were the money went, Bernanke told our elected officials he did have to tell them how the funds were distributed, so wasn't going to tell them. Further, no party is immune from war causalities; the Democrats overwhelmingly endorsed the invasion of Iraq, and over a thousand US soldiers have died in Afghanistan since Obama became commander and chief.
What history tells us is the method of implementing socialism is to promise much more than any country can ever deliver and then "reluctantly" impose austerity measures. This is the same for socialized medicine. The US has the most advanced medical care in the world, but when the WHO rates medical care they rate all those with socialized medical care over the US; regardless of the true care delivered and the other systems that ranks the US poor such as Infant mortality are equally as flawed. Socialized medicine is now bankrupting every first world country where it exists;. In the US medical procedures such as MRI's and surgeries are determined by the patient's needs, in countries such as Canada and Britain they ration these medical and surgical procedures; in Britain they have NICE to determine if you will live long enough to justify the expense of any medical procedures.
You also seem to have quite a problem with history, such as the GOPs Contract with America; every aspect of the contract was approved by the House and forwarded to the Senate and President Clinton, where it died. I also will take you to task on the false belief that somehow the country has moved extremely to the right. The reality is the US has been moving left for decades and the recent Tea Party movement of putting the people back in charge of the government and following the Constitution (of all things) has caused a re-aliment to the center, reveling the media and educators as the progressive ideologues that they are.
Showing posts with label TARP. Show all posts
Showing posts with label TARP. Show all posts
Tuesday, November 15, 2011
Sunday, August 29, 2010
It Wasn't All Bush
Obama is the first President in memory that has refused to take ownership of the economy he inherited. Because of this, our current President has presided over a US economy were the American people continue to be unsure who is responsible and what is being done. Once they took power, FDR did not blame Hoover, nor did Reagan blame Carter; both took ownership and responsibility for economy from their inauguration forward. This inspires confidence and allows the President to define the present economy and his strategy for creating growth. Obama has done neither, except to blame the previous administration. We therefore are left up in the air wondering what it is exactly that we are supposed to "Blame Bush" for and what strategy Obama is using, besides increasing public dept and expanding entitlements. So lets take a moment to review exactly what we are "Blaming Bush" for and what Obama could be doing if he were to finally take ownership of the economy.
Most have heard something about the repeal of Glass-Steagall, a post Great Depression law that was passed in hopes of preventing another depression, and in many ways what also lead to our current problems. The repeal started as a Republican bill during the Clinton Administration in 1999. The proponents of the bill were Sen. Phil Gram(R-TX) and Rep. Jim Leach(R-IO), but by the time it emerged from it's conference committee it was very bi-partisan bill and Clinton signed it into law.
What really started the ball rolling on the mortgage bubble was Clinton's ex-Director of Management and Budget Franklin Raines. Raines took control of Fannie Mae in 1999 and instituted the American Dream Commitment program which started the pilot program of increasing sub-prime loans to get previously un-qualified and more minorities home loans. By 2004 Raines was raking in the dough but the numbers were not adding up. After Raines resigned in Dec 2004, it was determined he mis-stated over $6 billion in profits adding about $90 million to his bonuses. His penalty was to return about $7 million, but the sub-prime program started by Raines exploded after he left and the rest is history. Raines is now involved in an carbon trading Investment Company waiting for cap and trade to be voted in. Neither the Republicans or Democrats did much to stop the coming melt-down, but it was Democrats such as Barney Frank and Chris Dodd that were the most vocal defenders.
Our crisis however was one of credit. The basis of the credit crunch can be traced in my opinion to Ronald Reagan. The result of Carter Stagflation (a recession with high interest rates; not believed possible till then) caused lower debt and higher savings in the private sector. As interest rates fell and the economy boomed, but the effect was misapplied supply side economics. Now this was not President Reagan's intention. Reagan cut taxes across the board, but also raised the employer tax (ie Social Security) so the Social Security fund would be solvent in the future. When there was a significant budget deficit, Reagan made a deal with the Democrts that he would raise some taxes and they would reduce spending; Reagan did his part, but the Demicrats did not. The effect on the national psyche, was actually Keynesian in nature, that with cheap money (low interest rates) the private sector could borrow their way to prosperity. This reduction in savings and excessive private debt help fuel the economy through the Bush 41 , Clinton and Bush 43 years. Much has been said of the Clinton budget surpluses, which right or wrong are mainly attributed to a lack of major military conflict during his presidency and a markedly reduced GDP, probably a result of increased taxes. The end result was an economy based on credit.
A simplistic definition of Keynesian theory: Keynes explanations of slumps ran something like this: in a normal economy, there is a high level of employment, and everyone is spending their earnings as usual. This means there is a circular flow of money in the economy, as my spending becomes part of your earnings, and your spending becomes part of my earnings. But suppose something happens to shake consumer confidence in the economy. Worried consumers may then try to weather the coming economic hardship by saving their money. But because my spending is part of your earnings, my decision to hoard money makes things worse for you. And you, responding to your own difficult times, will start hoarding money too, making things even worse for me. So there's a vicious circle at work here: people hoard money in difficult times, but times become more difficult when people hoard money. The cure for this, Keynes said, was for the central bank to expand the money supply. By putting more bills in people's hands, consumer confidence would return, people would spend, and the circular flow of money would be reestablished. (www.huppi.com). You will notice not once was there a mention of reducing unemployment, that's because Keynesian economics does not key into unemployment, only increasing the money flow. But no time in the history of economics has a private economy been so indebted. The Keynesians have no plan to stop people from paying off debt, rather than re-circulating money.
Another inherent flaw in Keynesian theory is the belief in cheap money; that it doesn't matter if you can't repay a loan as long as you can afford the interest payments. Sound familiar? When Keynesians say "expanding the money supply", they mean low interest loans and subsidizing private industry usually with large construction projects. The problem is there is no mechanism in Keynesian theory to ever actually pay back the loans and when the construction jobs ends, so does the temporary employment. As long as the Federal reserve keeps interest rates low, there will also be no incentive to save money. This reliance on borrowing cheap money has led to our current situation where business must borrow to stay in business. It is like you needing to borrow rent money, knowing you will have the money next month. You pay the rent with the borrowed money but when the next month's rent comes due, you must use what ever money has come in to pay off last months loan and then take out another loan for this month; you can never get ahead and if the bank stops loaning you're dead in the water. Government on the other hand, just keeps taking out interest only loans.
However bad the sub-prime meltdown was, and it was bad, was made ten times worse by side bets (or Credit Default Swaps) made by the investment banks like Leman Bros, AIG and of course Goldman Sachs. For every sub-prime mortgage that was loaned out, there were about 40-50 of these made up side bets made. After the meltdown, US Banks had assets, originally valued at about $1 trillion, who's value could not be determined (i.e. toxic), which basically meant they couldn't lend any money and businesses almost came to a stand still. The government first decided to just buy (or insure these toxic assets, because unlike the banks, the Fed can just hold onto them until their value can be established later. This was done during the Saving and Loan crisis of the 1980's and the Federal Government actually made money when the S&L assets were eventually sold. Unfortunately the players in all this, Henry (Hank) Paulson, Ben Bernanke, Timothy Geithner, all alumni from Goldman Sachs, knew the real danger to the banks was from the outstanding Credit Default Swaps, whose outstanding debt to the banks could be as high as $40 trillion. Therefore the expanded Troubled Asset Relief Program (TARP) money, ($1.2 Billion) ended up being distributed via AIG to US (including Goldman Sachs) and European banks to cover some of these outstanding derivatives. So instead of loosing up money to make more loans, the banks just made good with themselves.
The recession we are seeing now is the result of business holding back until they can once again run their business month to month without having to borrow money. This process is pretty much complete, but before they start hiring again, and borrowing to expand, they want to know what the new government programs and taxes are going to cost them. The only offering the Obama economists are offering is to make it easier to borrow money, this is the Keynesians concept of expanding the money supply. But until business knows what is coming down the pike, they are going to wait. Add to this Obama wanting to raise taxes by letting the Bush tax cuts expire and we are so stuck.
As a final caveat, one should look at Bush's spending compared to Obama. It is difficult to understand exactly how much $700 billion or $800 billion really is. The CBO recently released a study, that shows that Obamas stimulus @ $862 billion, cost more than 8 years of the Iraqi war under Bush. Further, although Bush created a new high in deficit spending adding $2.5 billion of debt in eight years. In 2009 Bush submitted a budget with a $487 billion deficit, but Obama added another $700 billion resulting in a $1.2 trillion deficit (the left wing media usually charges Bush with the entire amount). TARP was a two part process. Bush distributed $267 billion in 2008 and the Obama Administration distributed some $151 billion in 2009. Then, because banks and Wall Street firms repaid a net $110 billion in TARP funds in 2010, Obama claimed credit for cutting spending by that much.The combination of TARP lending in one year and much of that money being paid back in the next makes Obama's spending record for 2010 look $261 billion thriftier than it really was. This also means of the $700 billion TARP loans guarantees that were added to the 2009 Bush deficit, only $418 billion were ever disbursed of which $405 billion was repaid, but because the repaid Bush TARP money was claimed by Obama as cost saving, rather than returned to the Treasury, it continued to be counted as Bush deficit spending. Add the 2010 deficit of an estimated $1.3-1.4 trillion and Obama will have raised the national debt by over $2.5 trillion, matching Bush's 8 year debt in only 2 years. Obama and the left say these deficits are necessary to reverse to damage done by Bush, but if that is so, why don't they actually change the policies as well?
While Bush claimed to believe in supply side economics (lower taxes and cut spending), with the exception of his tax cuts, he was really a Keynesian with his spending and $152 million stimulus. While Bush was the President of note as the sub-prime bubble became critical, the seeds sewn for this recession and were planted at least as far back as the Clinton Administration. Bush even did try to regulate Fannie Mae and the other mortgage GSEs in 2003 New Agency To Oversee Freddie Mac and Fannie May, which failed. But now we see the new Financial Reform Law, still does nothing to reform the regulations of Fannie and Freddie. As usual the politicians that created the problem tell us they are the only ones that can fix it. There is also the reminder discussed by Thomas Sowell, "No President of the United States can create either a budget deficit or a budget surplus. All spending bills originate in the House of Representatives and all taxes are voted into law by Congress. Democrats controlled both houses of Congress before Barack Obama became president. The deficit he inherited was created by the Congressional Democrats, including Senator Barack Obama, who did absolutely nothing to oppose the runaway spending. He was one of the biggest of the big spenders. The last time the federal government had a budget surplus, Bill Clinton was president, so it was called 'the Clinton surplus.' But Republicans controlled the House of Representatives, where all spending bills originate, for the first time in 40 years. It was also the first budget surplus in more than a quarter of a century."
The direction I believe we need to go is what Germany is doing; read this Op-Ed piece by David Brooks and see if you don't agree The Parent Model . If any of what I have tried to explain in the article runs true, then hopefully you will realize that it's doesn't matter if you blame Bush43 as the President of record when the economy collapsed, as long as we change they way we are doing business and that is not happening.
Most have heard something about the repeal of Glass-Steagall, a post Great Depression law that was passed in hopes of preventing another depression, and in many ways what also lead to our current problems. The repeal started as a Republican bill during the Clinton Administration in 1999. The proponents of the bill were Sen. Phil Gram(R-TX) and Rep. Jim Leach(R-IO), but by the time it emerged from it's conference committee it was very bi-partisan bill and Clinton signed it into law.
What really started the ball rolling on the mortgage bubble was Clinton's ex-Director of Management and Budget Franklin Raines. Raines took control of Fannie Mae in 1999 and instituted the American Dream Commitment program which started the pilot program of increasing sub-prime loans to get previously un-qualified and more minorities home loans. By 2004 Raines was raking in the dough but the numbers were not adding up. After Raines resigned in Dec 2004, it was determined he mis-stated over $6 billion in profits adding about $90 million to his bonuses. His penalty was to return about $7 million, but the sub-prime program started by Raines exploded after he left and the rest is history. Raines is now involved in an carbon trading Investment Company waiting for cap and trade to be voted in. Neither the Republicans or Democrats did much to stop the coming melt-down, but it was Democrats such as Barney Frank and Chris Dodd that were the most vocal defenders.
Our crisis however was one of credit. The basis of the credit crunch can be traced in my opinion to Ronald Reagan. The result of Carter Stagflation (a recession with high interest rates; not believed possible till then) caused lower debt and higher savings in the private sector. As interest rates fell and the economy boomed, but the effect was misapplied supply side economics. Now this was not President Reagan's intention. Reagan cut taxes across the board, but also raised the employer tax (ie Social Security) so the Social Security fund would be solvent in the future. When there was a significant budget deficit, Reagan made a deal with the Democrts that he would raise some taxes and they would reduce spending; Reagan did his part, but the Demicrats did not. The effect on the national psyche, was actually Keynesian in nature, that with cheap money (low interest rates) the private sector could borrow their way to prosperity. This reduction in savings and excessive private debt help fuel the economy through the Bush 41 , Clinton and Bush 43 years. Much has been said of the Clinton budget surpluses, which right or wrong are mainly attributed to a lack of major military conflict during his presidency and a markedly reduced GDP, probably a result of increased taxes. The end result was an economy based on credit.
A simplistic definition of Keynesian theory: Keynes explanations of slumps ran something like this: in a normal economy, there is a high level of employment, and everyone is spending their earnings as usual. This means there is a circular flow of money in the economy, as my spending becomes part of your earnings, and your spending becomes part of my earnings. But suppose something happens to shake consumer confidence in the economy. Worried consumers may then try to weather the coming economic hardship by saving their money. But because my spending is part of your earnings, my decision to hoard money makes things worse for you. And you, responding to your own difficult times, will start hoarding money too, making things even worse for me. So there's a vicious circle at work here: people hoard money in difficult times, but times become more difficult when people hoard money. The cure for this, Keynes said, was for the central bank to expand the money supply. By putting more bills in people's hands, consumer confidence would return, people would spend, and the circular flow of money would be reestablished. (www.huppi.com). You will notice not once was there a mention of reducing unemployment, that's because Keynesian economics does not key into unemployment, only increasing the money flow. But no time in the history of economics has a private economy been so indebted. The Keynesians have no plan to stop people from paying off debt, rather than re-circulating money.
Another inherent flaw in Keynesian theory is the belief in cheap money; that it doesn't matter if you can't repay a loan as long as you can afford the interest payments. Sound familiar? When Keynesians say "expanding the money supply", they mean low interest loans and subsidizing private industry usually with large construction projects. The problem is there is no mechanism in Keynesian theory to ever actually pay back the loans and when the construction jobs ends, so does the temporary employment. As long as the Federal reserve keeps interest rates low, there will also be no incentive to save money. This reliance on borrowing cheap money has led to our current situation where business must borrow to stay in business. It is like you needing to borrow rent money, knowing you will have the money next month. You pay the rent with the borrowed money but when the next month's rent comes due, you must use what ever money has come in to pay off last months loan and then take out another loan for this month; you can never get ahead and if the bank stops loaning you're dead in the water. Government on the other hand, just keeps taking out interest only loans.
However bad the sub-prime meltdown was, and it was bad, was made ten times worse by side bets (or Credit Default Swaps) made by the investment banks like Leman Bros, AIG and of course Goldman Sachs. For every sub-prime mortgage that was loaned out, there were about 40-50 of these made up side bets made. After the meltdown, US Banks had assets, originally valued at about $1 trillion, who's value could not be determined (i.e. toxic), which basically meant they couldn't lend any money and businesses almost came to a stand still. The government first decided to just buy (or insure these toxic assets, because unlike the banks, the Fed can just hold onto them until their value can be established later. This was done during the Saving and Loan crisis of the 1980's and the Federal Government actually made money when the S&L assets were eventually sold. Unfortunately the players in all this, Henry (Hank) Paulson, Ben Bernanke, Timothy Geithner, all alumni from Goldman Sachs, knew the real danger to the banks was from the outstanding Credit Default Swaps, whose outstanding debt to the banks could be as high as $40 trillion. Therefore the expanded Troubled Asset Relief Program (TARP) money, ($1.2 Billion) ended up being distributed via AIG to US (including Goldman Sachs) and European banks to cover some of these outstanding derivatives. So instead of loosing up money to make more loans, the banks just made good with themselves.
The recession we are seeing now is the result of business holding back until they can once again run their business month to month without having to borrow money. This process is pretty much complete, but before they start hiring again, and borrowing to expand, they want to know what the new government programs and taxes are going to cost them. The only offering the Obama economists are offering is to make it easier to borrow money, this is the Keynesians concept of expanding the money supply. But until business knows what is coming down the pike, they are going to wait. Add to this Obama wanting to raise taxes by letting the Bush tax cuts expire and we are so stuck.
As a final caveat, one should look at Bush's spending compared to Obama. It is difficult to understand exactly how much $700 billion or $800 billion really is. The CBO recently released a study, that shows that Obamas stimulus @ $862 billion, cost more than 8 years of the Iraqi war under Bush. Further, although Bush created a new high in deficit spending adding $2.5 billion of debt in eight years. In 2009 Bush submitted a budget with a $487 billion deficit, but Obama added another $700 billion resulting in a $1.2 trillion deficit (the left wing media usually charges Bush with the entire amount). TARP was a two part process. Bush distributed $267 billion in 2008 and the Obama Administration distributed some $151 billion in 2009. Then, because banks and Wall Street firms repaid a net $110 billion in TARP funds in 2010, Obama claimed credit for cutting spending by that much.The combination of TARP lending in one year and much of that money being paid back in the next makes Obama's spending record for 2010 look $261 billion thriftier than it really was. This also means of the $700 billion TARP loans guarantees that were added to the 2009 Bush deficit, only $418 billion were ever disbursed of which $405 billion was repaid, but because the repaid Bush TARP money was claimed by Obama as cost saving, rather than returned to the Treasury, it continued to be counted as Bush deficit spending. Add the 2010 deficit of an estimated $1.3-1.4 trillion and Obama will have raised the national debt by over $2.5 trillion, matching Bush's 8 year debt in only 2 years. Obama and the left say these deficits are necessary to reverse to damage done by Bush, but if that is so, why don't they actually change the policies as well?
While Bush claimed to believe in supply side economics (lower taxes and cut spending), with the exception of his tax cuts, he was really a Keynesian with his spending and $152 million stimulus. While Bush was the President of note as the sub-prime bubble became critical, the seeds sewn for this recession and were planted at least as far back as the Clinton Administration. Bush even did try to regulate Fannie Mae and the other mortgage GSEs in 2003 New Agency To Oversee Freddie Mac and Fannie May, which failed. But now we see the new Financial Reform Law, still does nothing to reform the regulations of Fannie and Freddie. As usual the politicians that created the problem tell us they are the only ones that can fix it. There is also the reminder discussed by Thomas Sowell, "No President of the United States can create either a budget deficit or a budget surplus. All spending bills originate in the House of Representatives and all taxes are voted into law by Congress. Democrats controlled both houses of Congress before Barack Obama became president. The deficit he inherited was created by the Congressional Democrats, including Senator Barack Obama, who did absolutely nothing to oppose the runaway spending. He was one of the biggest of the big spenders. The last time the federal government had a budget surplus, Bill Clinton was president, so it was called 'the Clinton surplus.' But Republicans controlled the House of Representatives, where all spending bills originate, for the first time in 40 years. It was also the first budget surplus in more than a quarter of a century."
The direction I believe we need to go is what Germany is doing; read this Op-Ed piece by David Brooks and see if you don't agree The Parent Model . If any of what I have tried to explain in the article runs true, then hopefully you will realize that it's doesn't matter if you blame Bush43 as the President of record when the economy collapsed, as long as we change they way we are doing business and that is not happening.
Tuesday, February 2, 2010
The Myth of Carbon Credits Part 2; The Derivatives Market
As I mentioned in my last article, The Myth Of Carbon Credits , the whole idea behind Man Made Climate Change is to create a new financial market for Cap and Trade; to trade Carbon Credit Derivatives (CCD). There is no way to discuss Man Made Climate Change without mentioning Al Gore and the United Nations, Intergovernmental Panel on Climate Change (IPCC). Since it's inception the United Nations stated purpose was to regulate the industrial countries of the world and redistribute their wealth to poorer countries. This can not be done, unless an organization, such as the IPCC, has regulatory authority that overrides sovereignty; this has already been accomplished by EU directives, which have the authority of law over EU member nations. In essence the United Nations intent is to use the discredited concept of Man Made Global Warming to create a world regulatory authority using carbon credits as a Global currency. The idea of carbon credits is simple enough, if you are a big oil company, like Shell Oil, you simply need to shut down a couple of poorly producing oil fields and you will be flush with carbon credits. If you are a big industry polluter, you will buy these credits and simply pass the cost on to the consumer; referred to as "pay to pollute". What is hoped is there will be companies investing in low C02 producing technology, that will be offset by the resulting carbon credits (low C02 producing technology has been referred to as “Green Technology”, however there is nothing “Green” about reducing C02, since C02 is what is used by plants for photosynthesis, which makes them green; the theory of Man Made Climate Change and carbon credits, will have no effect on reducing any pollution, as it is again, a method for the re-distribution of wealth).
The CCD market will, by definition become as complicated as the Sub-prime financial market of old. As investors in CCD market, speculators have no need for carbon credits, they are simply buying CCD, to drive up the price and make a profit; that's what speculators do. Further there is another derivative called a Credit Default Swap (CDS), which is an unregulated insurance policy on investments. A CDS is unregulated because 1) the insurer does not have to hold funds in reserve in the event the insured investment losses money, and 2) anyone can buy one of these insurance policies, regardless if they own the insured investment; this has been compared to going into a retirement home and buying life insurance on the residents. What eventually happened with the sub-prime meltdown was, the banks sold 10 times more CDS insurance policies than Mortgage Derivatives, and when housing tanked and the mortgage securities value was suspect (i.e. toxic), the banks could not pay the the CDS and had to be propped up by the US Tax Payers. This is how a bubble forms and explodes and there is no reason why this will not happen again. If the CCD tank, as the well intentioned company is converting to low C02 technology, the CCD will be worthless and the company will have no compensation.
The use of Credit Default Swaps and other derivatives has a negative effect far worse that the occasional bubble. The real problem is the Fed gave an “implicit guarantee” with these banks, that they are too big to fail. Even after TARP expires Oct, 2010, the government will still guarantee the banks to the tune of over $23 trillion (that's trillion with a “t”). This means the banks can continue to keep the casino going, gambling with these financial instruments, rather than investing in American businesses. It is a recipe for national failure; and if they create another bubble and it blows up, the Fed will continue to pay. But it doesn't have to be this way. With the stroke of a pin, Congress can regulate Credit Default Swaps, and restrict derivatives to individual contracts, based on articulated needs, such as commodities and Interest Swaps; not just profit for profit sake. The message to the banks should have been, “You gambled all your money away, now you need to get back to the work of investing in America”; the casino is CLOSED.
Thursday, October 22, 2009
Part 2; Obama's America Becomes a Corporation
There is lot in the American free market system that has recently failed. In the first part of this series, I talked about the possible advantages of fascism, why some might except the trade offs of personal liberty for economic security, and how such a change might happen. Before we go any farther I want reiterate that I am no fan of fascism, but it is my fear that if one does not understand how benevolent fascism appears on the surface, it will not be recognized as it creeps into the American society. Under Presidents Bush (43) and Obama, we are already seeing the seeds of fascism being planted. After the sub-prime mortgage meltdown. Washington feared that credit that is the life blood of today's industry would dry up. There original plan for the $700 billion TARP fund (Troubled Asset Relief Program) was to buy up all the toxic assets that resulted from the sub-prime mortgage meltdown (hence the name), giving the banks back assets of known value and allowing them sufficient reserves to continue lending money. This was the same solution used during the Savings and Loan scandal of the 1980s. Interestingly enough, Washington actually made money when they later sold the these assets when a more favorable market returned. This plan however was shelved, apparently because Washington believed it did not give them enough control of the banking industry. As a result the banks were simply loaned the money, but the strings attached that has resulted in the Nationalization of the banks, and as the Banks started paying off the loans, Washington has refused to release their control. The Obama Administration followed this up by Nationalizing GM and Chrysler after their bankruptcy. In a twist right out of the fascism playbook, the Auto Worker Union, UAW was given majority ownership in Chrysler and 17.5% ownership in GM, therefore guaranteeing the UAW would not interfere with production. The next fight will be for Nationalized Health Care.
America as a corporation does not compete against itself. GM and Chrysler are no longer competitors, they are now different products made by the same company. As with most corporations, America will be highly compartmentalized. In Italian fascism these were referred to as Syndicates. One thing I have yet mention is Isolationism. A corporation can not control all facets of production if it has to constantly contend with outside influences. For that sake, America as a Corporation will close down it's borders and become less of an international player. On the other hand, the US would extend it's hegemony in a more direct fashion over those areas that contain the resources it needs. In these areas, the governments that control these resources will understand they control these resources in name only and if necessary, America as a Corporation will have no compunction to extend it's borders if necessary for it's security. Right now, illegal immigration is used as a form of slave labor for US industry and agriculture; that will have to stop. In it's place will be a change in the Criminal Justice system where prisons and jails will become Rehabilitation Institutions. It is estimated there are 11 million illegal aliens in the US; half are unemployed; this includes mothers, children and criminals. Of the 5.5 working illegal aliens, only about a third work in agriculture, the balance work in construction jobs such as roofing and insulation. There are also about 2.5 million incarcerated Americans with an additional 3.5 million on probation and parole. It would not take that much to assign parole and probationers one years of paid service in agriculture as a condition of their release. Further, low level prisoners could also be used as labor. In regards to the hard core criminals that remain, one could imagine a more Draconian solution in the vain of a hydraulic system. The state would determine it could incarcerate so many dangerous criminal. Once that number had been achieved, the criminals that have been in the system the longest, would be executed. With this system rehabilitation would take on a new sense of urgency.
The life of the average citizen would not change much with America as a corporation. As a matter of fact, the average Joe will see a steady paycheck, very affordable health care, 3 weeks paid vacations a week and 12 paid sick days a year. It will be management's job to keep production humming along; to reward hard work and give the slackers a kick in the pants when needed. Private ownership and even the control of small business is allowed under fascism. This of course will be in the good times. In fascism, the government is an objective determinate between workers and industry. However, since the governments decisions are always looking toward increased production, wages and benefits tend to be tied to the preceived health of industry. The free market as we know it would disappear. A small amount of competition is allowed to encourage innovation, but not to the point that it would effect the health and growth of the controlled economy. Unlike Communism, fascism usually does not take direct control of a company; Nationalization is accomplished by oversight and regulations. What this accomplishes is accountability to the state. What has come to the attention to the American people is a total lack of accountability by the corporations; especially in the Investment Bankers. The cause of the sub prime meltdown was not so much as a lack of regulations, but a total lack of accountability. CEO's of companies that have lost millions of it's investors money are still getting bonuses in the tens of millions of dollars. Now that the Obama Administration has bailed out these investment banks, they have started to pull the strings to cap salaries in these institutions. This is another page from the fascist playbook. You have a compartmentalized government pay Czar, that now has the power to determine how much the employee of a private company can make.
While there will be a stock market with America as a Corporation, it will look nothing like what it looks like today. It will a slimmed down version designed to invest in companies to help then grow. There will be no derivatives, commodities or unregulated markets, since these markets are impossible to control with little or no accountability. The Federal reserve will be abolished and the Dept of the treasury will have unfettered control of the money supply. Oh, and the trillions of dollars invested in America by countries like China and Saudi Arabia; sorry, in the name of National Security, there will be no foreign ownership of any US Property.
Fascism is also known as being non-intellectual. While this might sound counter to the Obama Administration, there is many areas where sudo-science is presented as fact. Nothing could be truer than climate change and the current Cap and Trade Bill. Without arguing the merits of want is now being called Climate Change, lets just look at what happened to the original studies done in the phenomena called “The Greenhouse Effect”. The term was actually coined in the late 1800's. It is the study of why the climate of earth is stable enough to sustain life. Without the Greenhouse Effect, our planet could not sustain life. Atmospheric scientist have studied the Greenhouse effect to explore what forces cause changes in climates on our planet. At the time forest fires and volcanoes were believed to have the greatest affect. In the 1960s , with the aid of increasingly more powerful computers, Meterologists began experimenting with computer models, in attempt to predict the weather. The result was a rift in scientific thought, that shook the world of Newtonian Physics. From "Chaos, Making A New Science" by James Gleck.
“Scientists marching under Newton's banner actually waved another flag that said something like this: Given an approximate knowledge of a system's initial conditions and an understanding of natural law, one can calculate approximate behaviour of the system.” In other words, when figuring the nature of systems, “Very small influences can be neglected”. Newton believed that if you you had enough information about the past, that information could be reduced to a mathematical equation and reproduced; and if you can reproduce the past you can forecast the future. Edward Lorenz was a weather scientist working with computers at MIT in the 1960's. “One day in the winter of 1961”, Lorenz was running a simple weather model through his computer; ”wanting to examine one sequence at greater length, Lorenz took a shortcut. Instead of starting the whole thing over, he started midway through. To give the machine it's initial conditions, he typed the numbers straight from the earlier printout. Then he walked down the hall to get away from the noise and get a cup of coffee. When he returned an hour later, he saw something unexpected, something that planted a seed for a new science.”
The new science Gleck was eluding to was Chaos Theory. What had happened was the computer model returned with a completely different forecast as before. It turns out the reason was Gleck had rounded off his numbers from six decimal places to three; .506127 had been typed in as .506; according to the current Newtonian thought, this small difference should have been inconsequential. Lorenz had discovered that small changes in initial conditions produced large changes in the long-term outcome. Gleck explained this by comparing predicting tides to predicting the weather. “The average person, seeing that we can predict tides pretty well a few months ahead would say, why can't we do the same thing with the atmosphere, it's just a fluid system , the laws are about as complicated. But I realized that any physical system that behave non-periodically would be unpredictable”. In other words the reason we can predict tides is because they are periodical; like a newspaper being delivered to your house every day. Even though we no nothing about the complicated life of the human being that delivers the paper, the fact that it shows up every morning between 5-6 AM, allows us to predict the same will happen tomorrow. However, if you subscribe to a “zine”, or internet blog that shows up only when the writer has something to say, there is no way to predict when you will see the next issue. This may sound like common sense, but before Chaos Theory scientist believed there was some inherent pattern to the world that would allow you to make such a prediction.
Okay, why have I spent all this time on Chaos Theory. The reason is simple. The study of understanding and predicting the weather is very difficult; so difficult in fact that it gave us a new understanding of the true complexity of the universe we live in. When Lorenz went searching for a way to predict the weather, he was as if in a boat made by Newton; much like Rory Shiver looking for the shark in Jaws. What he discovered, when he saw the scope of the problem, was he was going to need a bigger boat. Science is a process, it is not supposed to be a tool to control the citizenry of a country; but it is another page from the fascist playbook.
America as a corporation does not compete against itself. GM and Chrysler are no longer competitors, they are now different products made by the same company. As with most corporations, America will be highly compartmentalized. In Italian fascism these were referred to as Syndicates. One thing I have yet mention is Isolationism. A corporation can not control all facets of production if it has to constantly contend with outside influences. For that sake, America as a Corporation will close down it's borders and become less of an international player. On the other hand, the US would extend it's hegemony in a more direct fashion over those areas that contain the resources it needs. In these areas, the governments that control these resources will understand they control these resources in name only and if necessary, America as a Corporation will have no compunction to extend it's borders if necessary for it's security. Right now, illegal immigration is used as a form of slave labor for US industry and agriculture; that will have to stop. In it's place will be a change in the Criminal Justice system where prisons and jails will become Rehabilitation Institutions. It is estimated there are 11 million illegal aliens in the US; half are unemployed; this includes mothers, children and criminals. Of the 5.5 working illegal aliens, only about a third work in agriculture, the balance work in construction jobs such as roofing and insulation. There are also about 2.5 million incarcerated Americans with an additional 3.5 million on probation and parole. It would not take that much to assign parole and probationers one years of paid service in agriculture as a condition of their release. Further, low level prisoners could also be used as labor. In regards to the hard core criminals that remain, one could imagine a more Draconian solution in the vain of a hydraulic system. The state would determine it could incarcerate so many dangerous criminal. Once that number had been achieved, the criminals that have been in the system the longest, would be executed. With this system rehabilitation would take on a new sense of urgency.
The life of the average citizen would not change much with America as a corporation. As a matter of fact, the average Joe will see a steady paycheck, very affordable health care, 3 weeks paid vacations a week and 12 paid sick days a year. It will be management's job to keep production humming along; to reward hard work and give the slackers a kick in the pants when needed. Private ownership and even the control of small business is allowed under fascism. This of course will be in the good times. In fascism, the government is an objective determinate between workers and industry. However, since the governments decisions are always looking toward increased production, wages and benefits tend to be tied to the preceived health of industry. The free market as we know it would disappear. A small amount of competition is allowed to encourage innovation, but not to the point that it would effect the health and growth of the controlled economy. Unlike Communism, fascism usually does not take direct control of a company; Nationalization is accomplished by oversight and regulations. What this accomplishes is accountability to the state. What has come to the attention to the American people is a total lack of accountability by the corporations; especially in the Investment Bankers. The cause of the sub prime meltdown was not so much as a lack of regulations, but a total lack of accountability. CEO's of companies that have lost millions of it's investors money are still getting bonuses in the tens of millions of dollars. Now that the Obama Administration has bailed out these investment banks, they have started to pull the strings to cap salaries in these institutions. This is another page from the fascist playbook. You have a compartmentalized government pay Czar, that now has the power to determine how much the employee of a private company can make.
While there will be a stock market with America as a Corporation, it will look nothing like what it looks like today. It will a slimmed down version designed to invest in companies to help then grow. There will be no derivatives, commodities or unregulated markets, since these markets are impossible to control with little or no accountability. The Federal reserve will be abolished and the Dept of the treasury will have unfettered control of the money supply. Oh, and the trillions of dollars invested in America by countries like China and Saudi Arabia; sorry, in the name of National Security, there will be no foreign ownership of any US Property.
Fascism is also known as being non-intellectual. While this might sound counter to the Obama Administration, there is many areas where sudo-science is presented as fact. Nothing could be truer than climate change and the current Cap and Trade Bill. Without arguing the merits of want is now being called Climate Change, lets just look at what happened to the original studies done in the phenomena called “The Greenhouse Effect”. The term was actually coined in the late 1800's. It is the study of why the climate of earth is stable enough to sustain life. Without the Greenhouse Effect, our planet could not sustain life. Atmospheric scientist have studied the Greenhouse effect to explore what forces cause changes in climates on our planet. At the time forest fires and volcanoes were believed to have the greatest affect. In the 1960s , with the aid of increasingly more powerful computers, Meterologists began experimenting with computer models, in attempt to predict the weather. The result was a rift in scientific thought, that shook the world of Newtonian Physics. From "Chaos, Making A New Science" by James Gleck.
“Scientists marching under Newton's banner actually waved another flag that said something like this: Given an approximate knowledge of a system's initial conditions and an understanding of natural law, one can calculate approximate behaviour of the system.” In other words, when figuring the nature of systems, “Very small influences can be neglected”. Newton believed that if you you had enough information about the past, that information could be reduced to a mathematical equation and reproduced; and if you can reproduce the past you can forecast the future. Edward Lorenz was a weather scientist working with computers at MIT in the 1960's. “One day in the winter of 1961”, Lorenz was running a simple weather model through his computer; ”wanting to examine one sequence at greater length, Lorenz took a shortcut. Instead of starting the whole thing over, he started midway through. To give the machine it's initial conditions, he typed the numbers straight from the earlier printout. Then he walked down the hall to get away from the noise and get a cup of coffee. When he returned an hour later, he saw something unexpected, something that planted a seed for a new science.”
The new science Gleck was eluding to was Chaos Theory. What had happened was the computer model returned with a completely different forecast as before. It turns out the reason was Gleck had rounded off his numbers from six decimal places to three; .506127 had been typed in as .506; according to the current Newtonian thought, this small difference should have been inconsequential. Lorenz had discovered that small changes in initial conditions produced large changes in the long-term outcome. Gleck explained this by comparing predicting tides to predicting the weather. “The average person, seeing that we can predict tides pretty well a few months ahead would say, why can't we do the same thing with the atmosphere, it's just a fluid system , the laws are about as complicated. But I realized that any physical system that behave non-periodically would be unpredictable”. In other words the reason we can predict tides is because they are periodical; like a newspaper being delivered to your house every day. Even though we no nothing about the complicated life of the human being that delivers the paper, the fact that it shows up every morning between 5-6 AM, allows us to predict the same will happen tomorrow. However, if you subscribe to a “zine”, or internet blog that shows up only when the writer has something to say, there is no way to predict when you will see the next issue. This may sound like common sense, but before Chaos Theory scientist believed there was some inherent pattern to the world that would allow you to make such a prediction.
Okay, why have I spent all this time on Chaos Theory. The reason is simple. The study of understanding and predicting the weather is very difficult; so difficult in fact that it gave us a new understanding of the true complexity of the universe we live in. When Lorenz went searching for a way to predict the weather, he was as if in a boat made by Newton; much like Rory Shiver looking for the shark in Jaws. What he discovered, when he saw the scope of the problem, was he was going to need a bigger boat. Science is a process, it is not supposed to be a tool to control the citizenry of a country; but it is another page from the fascist playbook.
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