Friday, October 31, 2008

The “Turning Out” Of America

So when you go to buy a new car, what is the first thing the salesman asks you? It is not, “what price are you looking to buy at?” It is, “What do you want your monthly payment to be?” We will let you sign and drive today. It resembles a crack dealer giving away the first rocks. We have stopped structuring our finances around what we earn weekly, and instead started structuring it around what minimum payments we can make monthly. Making monthly payments on “happiness” is fine. That is as long as you have a job that will let you make them. The problem is what happens if you no longer have a job? I don’t care how you renegotiate that house loan. If you have no job, you aren’t going to be able to pay anything.

McCain: Those Jobs Aren’t Coming Back. “I’ve got to give you some straight
talk—I can’t turn that around,” McCain said. “I can’t look you in the eye and
tell you I believe those jobs are coming back.” (Grand Rapids Press, 4/23/08)

Well with that attitude we won’t. What he is essentially saying is that we are destined to be a third world country cleaning the toilet bowls of the emerging economies. This is the kind of talk a pimp might use to groom his latest project. “look, I love you so I am going to tell you the truth. Your future is hopeless, but IF you do a few things for me, listen to me, I can make it at least profitable. I love you.”

On one side we are given credit. We get hooked on it like a drug. We believe we need it to survive. To get the same fix we keep “needing more”. On the other side we have our own government beating us down with their “trickle down economics” that keeps us just rich enough to satisfy our fix. In the mean time we don’t notice that our good paying jobs are going over seas. The next thing we know, we are doing whatever it takes to get that American dream. Financing education, housing, transportation, food, clothing, and even insurance for the whole thing. (Insurance with is really building credit for a mishap that might happen.) This is burning the candle at both ends and in the middle. Less job s for lower income with money that we already have spent.

The credit concept works great until the time comes that we have domestic policy leaders that lead us from our upper middle class paying unskilled jobs at the Ford Plant to the unemployment line and/ or to the stocking shelves of Wal-Mart. When policies are made to allow good paying jobs to leave the US economy and enrich a poorer economy, we are then doomed to the crisis we are in now. With monthly obligations to pay for the stuff we already “bought” we “owe” our keepers. John McCain has said time and time again, he doesn’t believe that “good industrial jobs are coming back.”

Not all of us are smart enough to be doctors, lawyers, or beauty pageant queens from Alaska. Not all of us are built for high paying secure educational jobs. Some of us are fantastic at using our backs, blood, sweat, and even tears to make our salt. That doesn’t mean we deserver to work 180 hours to get the same compensation the CEO that has sold us down the river makes in 40 hours. We have factory jobs to produce electronics, plastic dishes, toys, and automobiles being done over seas. The jobs that are done here we are learning to use robots and computers to do the work of 10 men. We no longer can afford to have one parent stay home and educate the children functionally enough to succeed in higher education. At the same time everything cost so much that a weeks pay isn’t cutting it for basic and extended basic needs. IF that wasn’t bad enough, competition for the jobs and the goods has accelerated. We now have twice as many people on earth as we did when JFK was president. Now if the jobs are going away and/ or being done more efficiently ad there are more of us looking for them, how id giving up on the ones that we do have and need going to get us out of the mess? There surely must be something that we can do that is always in demand wherever there are people.

The people who tell you that “the production jobs are gone”, are trying to get you to accept a life of prostitution. Don’t believe them. Listen to anybody who says they are willing to try to keep those jobs at home.

Sunday, October 19, 2008

The Economy Needs Cures And Not More Remedies

The current crisis will never be solved by anything more then remedies until somebody calls a duck a duck. Credit is unhealthy, even cancerous to a free market economy. In the US we have laws against making counterfeit money. Why? Because adding money without adding actual wealth to the system weakens the integrity, allows stagnation to occur, and causes inflation as “bidders” in the auction known as the “free markets” are able to bolster the price of goods and services using money they don’t securely have. If everybody had to pay cash at time of delivery for every house bought, the average price of a house would be about $20,000 in the current environment. In reality, the cost of living would be somewhere around 1950’s levels.

This self defeating activities are not limited to credit. We have immigration laws. Why? Because illegal immigrants do the same to our labor pool as counterfeit money and credit do to our wealth. Drugs are legal that are worse for our health then the ones that are illegal are encouraged and fined at the same time. On and on the paradoxes continue.

To cure our economy, instead of just remedy, and the current crises two things must happen. First, the legislators must realize controlling who gets credit and how freely it is distributed is as much a part of their job as it is to control the Fed’s printing presses. In reality, that is what credit distributing companies are doing, allowing counterfeit money to enter the system. There is a reason every dollar bill has, “property of the US government” written in it. Because money is a function of the system. It is not a right of the citizens as many conservative minded people seem to think.

The second is that the legislators need to stop indirectly trying to influence wages in the system and take a more direct, but free market, approach to minimum wage. The current static number needs to be replaced with a dynamic “minimum percentage”. This free market symbiotic method of setting a wage floor would be more effective. If the economy needs to increase circulation, the legislators could simply increase the minimum percentage. That would hold the top in check, while delivering market stimulation to the bottom and most immediate participants in the economy.

Credit should be a tool, like printing more money, in order to influence and tweak the system. Want to stimulate the economy? Release a few billion in credit to the financial institutions. They can "bid" on the credit by offering the terms in which they will be extending the credit. The best terms for the public will be allotted their desired amount of credit. If the prices are getting out of hand, a recall could be issued to the financial companies to reduce their credit lines. This would inherently force financial companies to consider the risk they are getting involved with.

The US economy doesn’t need more remedies. It needs cures. Those cures are going to require that the American people give up on these ideals of entitlements that were never part of the original promises.

A Spineless Traitor And His Endorsement

So Powell endorsed Obama with three weeks to go until the general election. Whooptee-doo. Mr. Powell. I know some in the media with short memories and in search of liberal based drama are happy to hear about the once respected Republican general who was George Bush’s main advisor in the lead up to the Iraq invasion. They are happy to hear him turn traitor to his own part. They easily forgive that he tuned his tricks on against the American people in 2002.

Colin Powell could very well have been the first African American president. He had the respect and ear of the full spectrum of the political arena. His silence and reluctance spoke volumes about what he believe during the run up to the war. He was the one person that could have swayed enough of the right people to change their minds about the necessity to go into Iraq. He was known for being cautious and reserved about using force. Many of the cheerleader around Bush were know as “War Hawks”. If Powell had spoken out or even threatened to and followed through with a resignation, this unjust war of choice at the expense of the poor and ignorant might not have been approved. The US diplomatic and economic security might not have suffered the reprehensible damage that we are currently experiencing. North Korea and Iran wouldn’t be laughing in our face about our threats. Al Qaeda would not exist any longer.

But no, in spite of the intelligence being delivered to Colin by his own office’s intelligence service, Colin fell in line and supported information that he never appeared comfortable endorsing. He admits that he pressured the Administration to reconsider it’s decision to engage in the Iraq war. That means one of two things when you read between the lines. He either A) didn’t believe the intelligence being presented by the CIA, or B) he didn’t believe Iraq having a nuclear weapon was a threat to the security of the US or its allies. Yet there he was in front of the UN with a pointer showing some RVs that they had “confirmed held elements of a nuclear weapons program. It turned out not only to be false, but many knew it was false even as Colin was delivering his speech.

So “thank”, but “no thanks” for the endorsement Mr. Powell. Your timing coming after the primary, three weeks before the general election, and after it is obvious that Obama has the presidency wrapped up is only a further demonstration of your spinelessness. You had a real chance to change the destiny of this country. To move us into a new realm and demonstrate that we had learned the lessons of wars and years past. But you didn’t. So take your endorsement and shove it . You are ultimately a disgrace to you country, you service, the soldiers, and even your race. Go fade into obscurity and let history for get you ever existed.

Saturday, October 18, 2008

Housing And The Mutually Accepted Lie

Before I get into this post too far, I would like to apologize to all my friends that I convinced buying a house was a good idea. So here is goes. John, I am sorry. I am an idiot. There that feels better. At least I don’t have many friends and the few I do have are more sensible then to listen to me. Poor John. Wait till I tell him the truth about getting married. Then there is having a kid.

Now for the rest of you. If you have bought a house, then I am sorry I didn’t get to you sooner. If you have not, you can send me any portion of your windfall I have saved you that you want to help with my monthly sentence.

We have all heard the statement, “buying a home is an investment. It is investing in your future.” People are still saying it today even in the face of the current crisis. Do me a favor. The next time somebody says that in your presence, dope slap them and send them this post.

Here is a story that is actually a combination of stories that could easily been one couple. It will illustrate with real numbers the hazards of believing that lie.

In the late 90’s a young couple had been living in a beautiful apartment overlooking the lake. It had an in-ground swimming pool, workout room, sauna, and free utilities. The whole package cost $550 for the first couple of years, drifted up to $650, and now had they been there 10 years later it would have cost $850 a month. If you averaged the 10 year period it comes out to be around $700 a month.

But did our young couple stay in their cozy apartment? Nooo. They bought into the lie. They went out and bought a cheap house for their area. Out the door after tax and titling they financed $100,000. Luckily for them the “American Dream Act” allowed them to put no money down and get a 6.1% rate. That ends up being a $606 a month mortgage payment. But wait!! There’s more!! This payment estimate doesn’t include property taxes, insurance, and maintenance costs. Remember how I told you that their rent included utilities? These first two, are often rolled into the monthly payment and make it vary from $850 to $950 depending on various confusing banker math calculations. For sake of argument we will say the average was $900 a month total payment. Just in that alone there is a $2,400 savings if they had stayed in their apartment. That alone is a $24,000 over the course of 10 years.

Then there were those “maintenance costs”. Plumbing problems, lawns mowing, leaf blowing, flowerbed planting, snow plowing, and appliance repairing are all part of this category. Over the course of that ten years, the couple spends $30,000 on these things that would have been included in their rent. (Did I mention that apartment overlooked the lake and had a nice place to shore up a 25’ O’Day sailboat with a cabin and nice sails.) This maintenance did include siding. A roofing job is on the horizon for the next 10 years. So 10 years into this they are down $54,000.

But wait there is more. When they moved from that apartment, did they just move in and accept the house the way it was with the furniture they already had? Noooo. They needed to fill the new place up. It needed a refrigerator, washer and dryer, and a couch to fill up the new bigger living room. All the sudden that 19” TV ain’t cuttin’ the mustard either. Since the happy couple spent all of their money just getting into the house, they will have to put all these new “investments” on their 16% APR credit cards. Of course before any of that can be moved in, the carpet had to be replaced, the walls had to be painted, and ceiling need retextured. So go ahead and add another $10,000 to the first 10 year period. The now not so young couple are down $64,000 over where they would have been if they had stayed in the apartment.

So I bet you are saying, but look how much they have paid off towards their future. At the 120 payment mark. You’ll be shocked to know the happy couple still owes $86,134. As a matter of fact, they will not even cross the half way point until the middle of 21st year. Of course that assumes they didn’t take out a second mortgage or refinance. If they put that $64,000 (not including any interest they might have earned) as a down payment only 10 years later, their monthly payments would be $218 plus tax and insurance. Of course I recommend doubling up on payments, raising that total to $306 per month. All tolled a $100,000 loan at a rate of 6.1% for 30 years costs $218,000. oops. Market value of a 60 year old house when it is paid off? $200,000. Provided the area didn’t get worse or the housing market didn’t collapse.

No “investment” should cost you more then double the market price you agreed to pay for it. You shouldn’t have to work your whole life to pay for it. And it should be yours to keep or get rid of at will.

But wait there is more!! There were other things that are not so tangible. Let’s say that shortly after getting this new home one of them lost their job. With the reduction of income, they starts running up credit debt. They fall behind on a payments. The price of the house just rose up. Or, the government taps one of our fine examples to go be employed in a tropical environment. The bad news, the pay is pretty low. The good news, the locality will be at a residence with jumping dolphins in a clear blue ocean creek just beyond the in ground pool. Room and board is covered. The work is fulfilling and outside of work is even more fulfilling. But our couple can’t accept the job because they have that “investment” hanging around their neck. They could not have paid for it with the new arrangements. Yet another scenario might be that the unemployed member gets offered a job 30 miles further away. With gas prices on the rise, it was hardly worth the trip. But, the choices are limited since moving before the house is sold is out of the question. In this market? Good luck.

Through all this stress, as more then 50% of young couples do, they divorce. They sell the place at a loss, and his credit is screwed up for 10 years. They got along great when there weren’t money problems to argue about. Makes one wonder if they would have made it if they had stayed in the apartment.

So how do you feel about “investing” in a home now? Amass a large of a down payment as you can and then never take more then 15 years to pay off the house. Again, I am sorry John. Whatever you do, don’t get your new wife pregnant.

Thursday, October 16, 2008

Joe Plumber: What he Doesn’t Understand

Meet Joe. He is a plumber whose business is earning $250,000 “taxable income”. (remember that. We will come back to it.) Now without actually seeing the change to the code proposed it would be hard to tell how much that is going to affect “Joe”. But when Joes says, “Why aren’t people calling my plumbing service anymore?’ Because they are broke Joe. Their houses sit vacant, and they have plenty of time, since they are unemployed, to snake their own drain.

As I had mentioned in earlier post, no business considers tax cuts as reasoning to hire new employees. The Feds might give you a 2% cut, but the local and state government might raise it 3%. No Joe hires because he has so much work that he and his current employees can’t cover it with overtime. But is people don’t have jobs or money they can use to hire a plumber, all the tax cuts for big business in the world won’t help Joe.

Joe, Joe, now look at me Joe. Look me in the eyes. I don’t want you to miss this. You are a dammed liar. You call that “your money”. You know what your tax rate is before you bill. You figure that expense into your bill. That money was never yours. When you fill out your bill at the end of the day, why do you take the money of your poor customer? Money that you figured taxes into when you generated the bill. So don’t tell me that the government is taking your money.

Here is what Joe didn’t tell you. He is driving a brand new $75,000 fully decked out Silverado that you the tax payer paid for. See when he did the taxes at the end of the year he pulled a trick that George Bush allowed by expanding a loophole. (My Uncle who is a plumber did this after I told him about it.) Tax Code 179 "the rapid depreciation break" allows people to completely right off the cost of a utility vehicle over a certain tonnage. Of course, he can only use it as a "business vehicle." I got $3000 for my hybrid. Joe also didn’t tell you that he has 2 employees working under him in a 1099 environment so he doesn’t have to pay vacation, health benefits, payroll taxes, and contractors insurance. He also doesn’t mention the “illegals” he has hired from time to time when the need suited him. That all comes out of his “Taxable income”. So in reality he doesn’t pay for many of the things we have to in day to day life. He writes them off. That means us little guys have to pick up the slack.

What I would like to know is if Joe would mind parting with his “hard earned money” if he know it was going to hire more teachers for his kids school, test more food that his family consumes, paves the roads in front of his house and business, ensure the drugs his doctor prescribes are safe, ensures the planes he fly to Disney land with his family are safe, and pays for a veteran to go to a decent hospital? These are the things taxes pay for. Obama missed an opportunity when “Joe” asked him that question.

Thursday, October 9, 2008

Taxing Cuts For Jobs And Borrowing To Pay Salaries

I like to think I am a logical fellow. Here is something I am having a hard time rectifying. I hear conservatives, including the republican candidate John McCain say that, “cutting taxes will encourage business to hire more people.” However, in June of 2001 the biggest tax cut in 20 years was signed into law. The problem is every year since it was enacted we have seen a reduction in good paying jobs such as auto, steel, and tech industry. According to the Bureau of labor statistics linked here, in 2001 the unemployment rate skyrocketed until it finally peeked mid 2003. So exactly again what is supposed to happen once these tax cuts are made?

Oddly enough, that is about 24 months (about the length of unemployment compensation) after the trend began. These statistics only tell half of the truth. If you fall off the unemployment wagon, they assume that you must have found a job. The graph also can’t tell you how many people went from putting the tires on the new vans at the Ford Plant to putting on new tires at the Wal-Mart. They also went from making $60 to $80 thousand a year plus really good benefits to making $20 to $40 thousand a year and being showed how to use public services to get medical help. However, as far as these raw statistics are concerned both groups are employed. I was really part of both of them at that time.

Now I am not agreeing whole heartedly that tax decreases don’t create jobs. There is evidence that they do. A common sediment can be found in this article about the Auto industry.

"Another problem since 2001 has been auto parts supplier pressure, which is
coming from China. Even though the local industries are able to manage the
pressure from suppliers from China, but the impact of it is enormous. For
example Crysler automaker has responded by lowering profits and asked supplier
to reduce price by 5 percent in 2001."

You want to talk about trickle down, no make that stream down, economics. When one of these good paying industries moves out of town, people stop participating in the economy and everybody starts feeling under employed.

It seems that job creation in China has run rabid. It is amazing how much cheaper you can produce goods if you don’t have to worry about safety, health, toxicity, mandatory wages, or the environment. But at that point you are playing a game of Jenga and we know how every game of Jenga turns out.

More illogical kinks in the “reduce taxes to spur employment” argument is one of math. Let us say that the average business has a ridicules amount of tax liability of 25% of net profit. That means after you deduct for cost of doing business including employee salary, this means you have a net profit that you pay taxes on. For every $100,000 your company makes after expenses, you will only save $25,000 on taxes. They are not talking about eliminating business tax. Let us say you just 1/2 it. That means just to hire somebody at a decent wage of oh, $35,000 p/y. Don’t forget the business must pay their wage, payroll tax, and health benefits. In order to do that the company will have to make $300,000 net profit just to pay for one new employee. And then for how long?

Then there is the “bailout”. I keep hearing that if we don’t bailout the economy, employers won’t be able to pay their employees. I don’t know how much you understand about business. But as far as I can recon, if you have to borrow money every week to pay your employees, you need to rework your plan. If you are not making enough to pay your employees, then your business is on a solid road to failure. Either charge more for your product or service, or cancel your resort trip for your CEOs. Let us say that you have cornered the market on the production of Beta Max payers. You have a monopoly even. Yet you find your having to borrow money to pay your employees. You are going to need to look over your plan and find out why?

So if there is anybody out there who can explain to me how lowering taxes is supposed to increase employment, I would love to hear that one. I will buy the beer. Not the cheap stuff either.

Sunday, October 5, 2008

Raising Taxes vs. Reducing Wealth

I have heard many times over by conservatives that, “Democrats just want to raise our taxes. Take ‘my money’ and give it to people who don’t work.” The last part of the statement I won’t really address in this post, but I felt it was needed as it always follows. The first part is what I would like to pick apart.
First a little Humor. A rather overweight chap walks into a pizza shop and says, “I would like to order a large pizza and a side of breadsticks.” The kid behind the counter squeaks “Would you like that cut into 12 or 16 slices.” The fat man says, “Make it 12, I am on a diet.”

This joke clearly demonstrates a person who doesn’t understand the concept of the laws of conservation. Basically they state that “the sum of the parts can never be more than the whole.” Or in this case, can be “no less”. If a pizza has 2000 calories, it don’t matter how many pieces you cut it into, when you eat it, you are eating the same amount of calories. The same is true about the collective whole of the U.S. wealth.

The US has an amount of “wealth” that, like the pizza, has a definitive value. It is hard to put that value into terms that are easily understood. (It was way easier when we were on the gold standard. You are probably going to hear calls to return to that standard in the near future.) To simplify let us say you are the blissfully unaware governor of a state whose only source of wealth is oil. There is a finite amount of that resource in your ground. Let us say that there are 100 billion pieces of paper that represent 1/100 billionth of that total amount of oil. People are paid in these slips of paper every week. Some actually trade in their pieces of paper for oil to put in their car. Most people use them to barter for things like food, mukluks, and pudding for their hot tubs. So what happens if somebody in the states government decides they are tired of flying across a local river and that they should instead build a bridge? The government, being short on those slips of paper, and feeling they might not get re-elected if they (tax) take them away from their constituents, has a new idea. They decide to just print more. They say, what the heck, the logging industry can use the boost, so they print twice as many. Now instead of each slip being worth 1/100 billionth, they are not only worth 1/ 200 billionth of the total amount of oil under the ground. This is quickly noticed when the store owner selling Siberian made mukluks goes to purchase more and the mukluk maker says, “wait a second, this slip of paper will only get me 1/2 as much of your oil as it would the other day. You are going to have to give me two pieces of paper per pair of mukluk instead of just one.” From there the store owner has to pass on the bad news to his customers. Either they are going to have to pay double for their mukluks, or they will have to cut off a leg. (Hence the term “costing an arm and a leg.) The average voter didn’t see any money come out of their check directly from the government. So the pretty governor can’t be responsible. I mean, heck she sent them $3000 earlier in the year? Yah? You betcha. However, somehow they are not able to fill their hot tub as full as they used to because those darned pudding manufactures are charging more for their pudding.

There are a few ways to put money into the system other then flat out printing it. Thinking about it, just because the government prints the money, how do they get it into the system? Basically they use interest rates to entice banks to lend more money. I mean they are not going to just send every tax payer a check in the mail, right? That would be silly.

Republicans are notorious for wanting to lower interest rates to make it easier for business to borrow. Even if the business isn’t selling much product. They are also notorious for wanting to lower taxes on business so they can hire more mukluk makers. They seem to neglect the looming questions of, “what if everybody has all the mukluks they need?” and the more important question of, “what good is it going to do our economy if they hire more Siberians?”

So the next time a conservative Republican says to you, “but the democrats are going to just raise taxes and force businesses to go over seas.” Just look at them, wink, and smile. (They like that.) If you want you can try to explain it to them. Some of them you might have to explain the pizza joke slowly 5 times.

Obama’s Experience and McCain’s Skill Set

Saying that a person is “experienced” is only part of the equation. Saying that alone leaves a lot of questions unanswered. I have a friend that has been a plumber for 25 years. Nobody can snake shit out of a backed up drain better then he can. To be honest he is not the deepest thinker. He is pretty up front and straight forward in his demeanor. While I am glad to know him, and we have a great time watching sports, downing beers, and he is very insightful and many issues. I am glad to know if I have a blockage at 10 pm or when I am our of town away from my wife, that I can have him fix the problem. However, if I was getting audited by the IRS, I wouldn’t call him. If I were wrongly accused of bank robbery, I wouldn’t call him. If my brain was hemorrhaging I would not call him to do the operation. This is in spite all of his years of “experience”. So it can’t be just about a politician’s experience that matters. Oh and by the way, before he was a plumber he was a soldier. That experience doesn’t help him plumb or wouldn’t aid in any of the other listed tasks.

So if it isn’t simply experience, what else would make a good politician? Many have said, “McCain has been in Washington for a long time. He knows how it works.” But Washington is the job and not the task. For example, one of my occupational incarnations was as a draftsman. I can’t draw very well to be honest with you. However I was hired to replace a guy who had been at the company for 22 years. Why, because I was a computer draftsman. The other guy never learned to operate the computer drawing program. (Don’t feel too bad, he was also the architect and just had to do less work.) So while he was in the business for years, he didn’t have his finger on the skills needed to keep up the modern aspects of his business. Clients had begun to demand work be submitted in computer formatted files.

So just because you have been in a business for a long time doesn’t make you better at it. With the decline and end of the cold war, the rise of globalization, and the advent of the internet age the method and format Washington needs to has greatly changed. The fact that they haven’t changed their approach is why we are in the trouble we are in now.

Alright, if it isn’t just experience that makes a good politician, and there are thousands of people who have been in Washington for decades and they can’t get it right, what else is important? What made paying me to generate drawing a more beneficial then the old hand draftsman? The skill set is the most important part of the equation.

Ask yourself, “what is it that I want from my politician?” Many say I want them to “fight” for me. Well in case you are uniformed, they don’t hold cage matches on the Capital floor. By, fight you must mean argue for issues in your favor. So a president must be a persuasive speaker and a good debater. Some say they want a their representatives to make good decisions. Well behind every good decision which happens in a split second, come hours of research and sound logic. So what kind of person has a skill set where they learn to research topics their decisions and be a persuasive speaker in order to convince a group of people of their position? If you shouted out “a lawyer!!” you just passed the bar. That is why there are so many of them in Washington. A lawyer’s skill set is a natural fit to being a politician. Would it be nice to find somebody who was schooled in another discipline and had these other skill sets naturally? Sure, but that is a rarity, so we got to take what we can get.

One more thing before I conclude. You are probably thinking, but I also want an advocate for the issues that I believe in. That is what this whole blog is about. Many times our “common sense” view of the issues are not in par with the logic. What you have to come to terms with is that everybody in the political arena are Americans. It is the law. They have family and friends that have to live under the rules they create. Some are greedy, some are stupid, and some are stupid and greedy, but they are all acting in what they think is the best interest of their family and friends who make up America. When you vote on a single issue or a couple of issues and not the person, you are ignoring the fact that the person votes on all issues. Many of them you only don’t care about because they currently are acted upon favorably to your view. What happens when the person votes for something that changes that stance.

I think that the logic presented above seems conclusive. So who in this next election has the skill sets of a lawyer? Obama. If you have faith that this is the greatest country on earth and it is very much because of our civility and laws, then you must agree that one of the greatest law schools on earth is Harvard. Obama graduated top of his class from Harvard. McCain got average grades in the naval academy. Sure, he has been in Washington a long time. And we can see the results of the last 20 or 30 years of those rules and regulation. The skill sets of a soldier are not the one needed to fix a failing economy. And for god sakes the skill sets of a beauty pageant queen are certainly not. If you take these skills out of a politician, all you have left is a marketing ploy. Slogans, key phrases , and pretty smiles. You don’t have a person who can actually make the decision and persuade the juries.

Friday, October 3, 2008

Bailing Out Of A Boat That Still Has A Hole In It

A few months back I wrote a post titled “The New Poor” in which I warned and condemned the ills of the credit industry. Now, with the perspective of the credit institutions collapse and the pending bailout, I am going to revisit the issue.

Merriam- Webster defines “addiction” as “compulsive need for and use of a habit-forming substance (as heroin, nicotine, or alcohol) characterized by tolerance and by well-defined physiological symptoms upon withdrawal ; broadly : persistent compulsive use of a substance known by the user to be harmful.” I think “credit” fits that description to a tee. This country is fueled by a negative savings rate.

What that means is that shit creek is driving us towards the giant falls at a rate of 10 knots and we are paddling away from the fall at 9 knots. It is not a good equation for the American worker. Everything we do is on credit basis. That fact has driven up the cost of everything. How much do you think a car would cost if you had to go to the car lot and buy it outright? Do you think a doctor could charge you $1500 to walk into the patient room if he expected to get paid in cash? The cost of a big screen TV would be half the price if people couldn’t spread the payments out over 3 years. The fact that our credit addiction exists and has grown out of control, while our wages per hour has not even remotely kept pace.

So, in case you haven’t made the relation yet and are asking what does this have to do with the “$700 billion bailout”? The answer is I don’t see how this bailout is going to cure the root problem. I am not sure what progress we are going to make by bailing out the credit companies. The reason we need to bail them out is because they can’t supply more credit. That would be like freeing Afghanistan from the Taliban because the local poppy farmers are being repressed and can’t grow the crop they need to produce heroine. (Wait a second. Never mind.) So won’t that money go right back into the hands of people who can’t afford to pay them back? What will stop the situation from repeating itself?

The problem is that consumers buy stuff, when they buy stuff they employ people who become consumers. The problem is that “the employed” part of that circular equation is in a severe amount of relative trouble. For years Americans were will, but not able to buys stuff and services. The credit industry “enabled” us. So now we buy things we really don’t need, with money we really don’t have, counting on labor hours that are becoming less and less guaranteed.

Here is a novel idea. wouldn’t it be kind of cool is you could walk into a store, swipe a card that holds your employment information, and the price would be spit back at you not in dollars, but in hours. so, i.e. you make $10 p/h bring home pay. you go to buy a pair of shoes, swipe your card, and the computer spits out, “that will cost you 10 hours of work. Oh you are paying with a credit card? That will cost you 12 hours of work. Thank you for shopping. Have a nice day.”

Imagine, you go to buy a car and the salesman says to you, “You are going to work through Thursday on the first week of every month to pay for this new vehicle.”

Real Quick on the Palin Interview

In Case you had trouble following. Here is how Sarah's logic was planned


Well, crap. She didn't flop and make the whole thing a lot less stressful for the next to weeks as we meander towards the growing evidential end.

Palin was well instructed and applied a classic debate technique taught in high school and beauty pageants across the globe. Every politician uses the technique to answer questions outside their area of expertise’s. Palin used it to answer every question. That technique is to first repeat the question, and then craft the answer to talk about a topic you want to talk about. An example can be seen here.

Done right it can make you look insightful. The key word is "look". It worked last night, especially under reduced expectation. When done wrong it looks like the youtube video.

Her school girl "gotcha" tone that was intentionally trying to draw out the Joe bidden that puts his foot in his mouth often was annoying. I was relieved to see Joe didn't take the bait. It was also annoying to hear the unending “marketing slogans” and “catch phrases”. Furthermore, it looked as if they had taken the ques from what everybody had said about McCain’s failure last week and coached her on making sure she did them. Looking at her opponent, “talking to the American people”, and making sure she mentioned the middle class. Not that everybody doesn’t do it, or any of these techniques. She just looked like an amateur doing it. It seems people are actually starting to recognize this is the big leagues. She defiantly never answered a follow up question or question outside of her predetermined topics.

The bigger story is that McCain is giving up on Michigan. You will see the same thing happen in Florida as the Clinton Supporters wounds scab over.

Thursday, October 2, 2008

The Bailout Blame Game

Well I hate to get into it, but it seems every conservative is trying to lay this somehow in the lap of either Bill Clinton or the democrats of the last two years. The reality is far different. But to understand that, we have to take a quick walk through history and couple it with understanding business practices.

It was 1994 or so and I was looking to buy a house because I was sick of looking for a place for my band to practice. So I stopped by a realtor and asked what I needed to have to buy a house. I was told I needed at least 10% down. I needed to be employed by the same employer for two years. Last I was told that I needed to have an excellent credit rating. I had $400 to my name, had different employers every other month, and hadn’t really built any credit. So I left dejected. I was going to have to become a rock star if I ever wanted my own house it would seem.

Time went on and eventually we elected this president named George W. Bush. In an effort to maintain the popularity to ensure reelection, GW introduced a series of policies called the “ownership Society”.

The President believes that homeownership is the cornerstone of America 's
vibrant communities and benefits individual families by building stability and
long-term financial security. In June 2002, President Bush issued America's
Homeownership Challenge to the real estate and mortgage finance industries to
encourage them to join the effort to close the gap that exists between the
homeownership rates of minorities and non-minorities. The President also
announced the goal of increasing the number of minority homeowners by at least
5.5 million families before the end of the decade. Under his leadership, the
overall U.S. homeownership rate in the second quarter of 2004 was at an all time
high of 69.2 percent….

Various well named bills were part of this initiative. The American Dream act, the Affordable Housing, and the Helping Families Help Themselves act to name a few.

These policies paved the way for people with bad credit, the inability to save money, and the inability to hold a job to get houses. They didn’t even have to be rock stars or nuthin!! So they started sell houses like “Moons Over Mihammy” breakfast plates at 3am on a weekend. Of course once you get a house, you get a good credit rating. That is really useful because your new house is empty. So you are going to need credit to get new stuff for your new house.

The reality of the business practices is that prior to “The ownership Society” approach, some risky groups were already given loans to. The economy could handle people of medium low income and job security to have credit. There is a difference between “risky” and “downright dangerous”. People who only had 2 of the three mention criteria would be considered risky. Maybe they had lost their job, maybe their credit was wrecked by a divorce or health problem. Each one was reviewed on a case by case basis. Let us face it, no business would loan to somebody they felt were not going to pay them back. That is unless they had some kind of insurance. As I explained in the previous post, every business has a “theft and shortage” account. As long as that only eats away a few percentages of your profit, you accept it and write it off on your taxes. When your bad deals start taking up most of your profits, especially if you are paying your upper management obscene amounts, you will find your stock plummeting quickly. When you have GWB and his gang reeking havoc unchecked from 2000 until 2006, you can only place blame in their laps.

Well, let me take that back. You could always place the blame on the people who took money they had no way to pay back or exposed them to too much financial risk. Or you can blame it on the business we are now bailing out. Maybe they shouldn’t have given credit away so easily.

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