Saturday, November 24, 2012
OK, I proudly admit it! I am a Constitutional conservative. However, I don’t listen to Rush Limbaugh; I don’t listen to Neal Boortz; I don’t watch Sean Hannity or Bill O’Reilly; and I listen to NPR and watch CNN and GPB as much as I watch Fox News. I actually watched Anderson Cooper until his giggles got the best of me. I am not a conservative because of the ranting and raving which is occasionally heard from conservative broadcast sources. No worse diatribe however, than that coming from Rachel Maddow and Keith Olbermann on the other side, whom I do not watch either.
In addition, I don’t hate gays, I don’t hate blacks, I don’t hate women, (I really love them to the extent my precious wife will allow me) I don’t hate minorities, I don’t hate illegal immigrants. I do have a problem with any citizen or non-citizen who breaks our laws, including immigration laws. I have a serious problem with slackers who want someone else to provide for them. I believe in charity to help those in real need, which happens; and I see it as the responsibility of religious institutions, not public governments.
I am a Constitutional conservative because I have so much respect for those men who pledged their very lives, their fortunes and their sacred honor to birth the United States of America. They then, with the blessing of God’s providence, provided us with a Constitution to protect us from ourselves, most especially the rights of the individual against the tyranny of the majority. I remember that it was they who first gave us those words, “All men are created equal, They are endowed by their Creator (My Sovereign God) with certain unalienable Rights; that among them are Life, Liberty, and the pursuit of Happiness,” but not Happiness itself. I regret they did not originally grant true liberty to all, but that has now been corrected constitutionally. I believe we are to use our God-given talents honestly to provide for ourselves and our loved ones, and then to give back to our community.
I must respond, therefore, to last week’s column asserting that all conservatives expected a resounding Romney victory, because conservative media told them to do so. I suspected he would lose, and if he did win, it would be a squeaker. The reason is that I paid especial attention to those few swing states which really controlled the election. Both candidates knew where they were and spent the majority of their time and money there, even though many who did not live there took little notice.
Obama, knowing he could not run on any accomplishments he had made, decided to thoroughly vilify Romney in those swing states with everything he could muster. Romney, in his own wisdom, decided to try to stay above the fray, and did not respond. His strategy failed. Those few states gave Obama a narrow victory. As a recovering politician myself, I congratulate Obama on running a successful campaign---he won. To him, the end justified any means. But I personally disagree and regret that our country has fallen so far in politics. And I do not see any real room for gloating by his side.
President Obama was the first President to be re-elected with less popular votes than his previous election since FDR in 1944, nearly 70 years ago. But even then FDR only lost 6% of his former support. President Obama lost a full 10% of his previous voters on November 6.The latest figures I have show Obama’s 2008 vote total was 69,498,516. His 2012 vote was only 62,611,250. And he certainly did all he could to get out his popular vote. Furthermore, his re-election electoral votes, 332 (the votes which really elect) were the absolute lowest since Georgia’s own Jimmy Carter in 1980, widely considered the biggest re-election loser of the 20th century. By contrast Richard Nixon won re-election with 520 electoral votes and Ronald Reagan won re-election with 525 electoral votes. Those are what most professionals call mandates. They happen when a nation feels their President has accomplished something. 332 electoral votes does not indicate that.
In a country which I controlled as benevolent dictator, there would be no ads even referring to an opponent; there would be a maximum amount of spending allowed to run for President or any other office; there would be a limit on how much a wealthy candidate could contribute to his or her own campaign; there would be no freedom of speech guaranteed to corporations; (only individuals) there would be statutory term limits for all offices; a President could serve only one 6 year term; and it would be a Federal crime to accept any remuneration whatsoever for lobbying efforts. Lobby as much as you want, as long as you don’t get paid. Within a generation, we might have a chance of saving this great republic.
Friday, December 23, 2011
HIGH US OIL EXPORTS MAINTAIN HIGH PRICES
Since President Jimmy Carter said in the 70s that we needed to become energy independent, we have been sold a bill of goods by the government and the US press that we are at the mercy of the middle east when it comes to petroleum. Would you be surprised to learn that for the first time since the big war ended, we are now a net exporter of petroleum?
Yes friends, this year we exported 753.4 million barrels of everything from gasoline to jet fuel, while we imported only 689.4 barrels, according to the US Energy Information Administration. How, you may ask, could this be, when gas has run over $3 per gallon most of this year? Well friends, it’s called the old law of supply and demand; and the gas producers have realized they can keep our prices high by selling to the ever growing third world markets and other countries across the globe, keeping our supply short.
In August of this year, US drivers burned 7.7% less gasoline than 4 years earlier; partly because of government mandates to the auto industry to improve mileage, and partly because we just plain could not afford to buy any more gasoline. Yet, did this reduction in demand bring down prices?
No-sirree, because the refiners knew they could sell it across the pond and keep prices up.
Furthermore, their insistence that we need to supplement our gasoline by adding up to10 per cent corn-based ethynol alcohol is specious, too. Look at what has happened to the price of corn-based food products as a result of the demand for corn. And yet we continue to give exorbitant tax credits for mixing gasoline and ethynol.
Now, don’t misunderstand me. I am a capitalist and I believe in free trade, but not at the expense of the citizens of this nation, for the benefit of China, et al. In September alone, we exported nearly 1 billion barrels of gasoline. Gasoline and low-sulfur diesel used by our truckers were the biggest lures for foreign customers, and look at the premium our truckers have to pay over gasoline for a product which requires much less refining. It’s insulting to us all.
According to the Wall Street Journal, Singapore’s petroleum imports from the US quadrupled in the last 5 years, while Mexico’s petroleum imports rose by two-thirds.
Growing domestic output means our refineries are producing more fuel than the US market demands, so they look overseas to keep demand up, and the prices high domestically. Corporate profits are rising for Royal Dutch Shell, Exxon, Valero and Marathon.
And the domestic petroleum industry continues to push for the Keystone XL pipeline carrying petroleum tar sands from Canada across our Midwest to refineries in Port Arthur, Texas. I am all for the pipeline, but I do not think we should see these sands refined, and then shipped across the world, so our $3 plus per gallon price can be retained. It is past time we all should join the occupy Wall Street movement and bombard Congress with the demand that restrictive tariffs be placed on US oil exports, and that all ethynol credits be ceased immediately.
Yes friends, this year we exported 753.4 million barrels of everything from gasoline to jet fuel, while we imported only 689.4 barrels, according to the US Energy Information Administration. How, you may ask, could this be, when gas has run over $3 per gallon most of this year? Well friends, it’s called the old law of supply and demand; and the gas producers have realized they can keep our prices high by selling to the ever growing third world markets and other countries across the globe, keeping our supply short.
In August of this year, US drivers burned 7.7% less gasoline than 4 years earlier; partly because of government mandates to the auto industry to improve mileage, and partly because we just plain could not afford to buy any more gasoline. Yet, did this reduction in demand bring down prices?
No-sirree, because the refiners knew they could sell it across the pond and keep prices up.
Furthermore, their insistence that we need to supplement our gasoline by adding up to10 per cent corn-based ethynol alcohol is specious, too. Look at what has happened to the price of corn-based food products as a result of the demand for corn. And yet we continue to give exorbitant tax credits for mixing gasoline and ethynol.
Now, don’t misunderstand me. I am a capitalist and I believe in free trade, but not at the expense of the citizens of this nation, for the benefit of China, et al. In September alone, we exported nearly 1 billion barrels of gasoline. Gasoline and low-sulfur diesel used by our truckers were the biggest lures for foreign customers, and look at the premium our truckers have to pay over gasoline for a product which requires much less refining. It’s insulting to us all.
According to the Wall Street Journal, Singapore’s petroleum imports from the US quadrupled in the last 5 years, while Mexico’s petroleum imports rose by two-thirds.
Growing domestic output means our refineries are producing more fuel than the US market demands, so they look overseas to keep demand up, and the prices high domestically. Corporate profits are rising for Royal Dutch Shell, Exxon, Valero and Marathon.
And the domestic petroleum industry continues to push for the Keystone XL pipeline carrying petroleum tar sands from Canada across our Midwest to refineries in Port Arthur, Texas. I am all for the pipeline, but I do not think we should see these sands refined, and then shipped across the world, so our $3 plus per gallon price can be retained. It is past time we all should join the occupy Wall Street movement and bombard Congress with the demand that restrictive tariffs be placed on US oil exports, and that all ethynol credits be ceased immediately.
Thursday, November 3, 2011
WHO OWNS YOUR GOVERNMENT?
This is a column to illustrate whether your government does its best to provide a stable economy for the average American citizen, or whether it represents the fat cats who spend the big bucks. You decide.
Following the crash of 1929, one of every five banks in America failed, and their depositors were completely wiped out. In 1933, the Glass-Steagall Act was passed in an attempt to prevent this ever happening again. The law prevented banks from underwriting either debt or equity securities, or owning insurance companies. Thus, they had to choose between being a deposit/lending institution, or a Wall Street financier. In 1956, under the President called “do nothing” Eisenhower, Congress passed the Bank Holding Company Act, stating that a holding company owning two or more banks could not engage in the securities or insurance business either.
Shortly thereafter, in the 60s, banks began to lobby Congress to let them slip into the municipal bond market, underwriting debt securities for cities. In 1986, the Federal Reserve Board, which regulates banks, re-interpreted Section 20 of the Act, which prevents banks from being engaged in securities, to allow up to 5% of their revenue to come from securities transactions. They also allowed Bankers Trust, a bank, to engage in commercial paper (unsecured short term business loans.) We should note here the “independent” Reserve Board was formulated by financiers and established by Congress in 1913, to control our money supply. It is a totally private corporation owned by the banks.
In 1987, over the objections of Chairman Paul Volcker, the board voted 3-2 in favor of proposals from Citicorp, J. P. Morgan and the aforementioned Bankers Trust to allow these banks to handle commercial paper as described above; and to underwrite revenue bonds and mortgage backed securities (the instrument which so recently wrecked the housing market and the whole economy). Chairman Volcker warned that banks would likely lower loan standards in pursuit of lucrative security offerings, and market bad loans to the public.
In March 1987, the Fed allowed Chase Manhattan Bank to enter the commercial paper market. It also stated it planned to raise the 5% securities revenue limit to a 10% limit. In August 1987, Alan Greenspan, a former Director at J. P. Morgan, was named to replace Volcker as Fed Chairman. Most of the world considered him a financial genius, but only until the crash of 2008-9.
In January 1989, the Fed voted to allow banks into both corporate debt and equity securities, and raised the revenue limit to 10%. All during the 80s and 90s, Congress debated legislation to repeal Glass-Steagall, but always failed to act. In 1996, with the support of Greenspan, the Fed raised the bank securities revenue limit to 25%. About the only teeth left in Glass-Steagall was preventing banks from entering the insurance business. In 1997, the Fed gave banks the right to buy and own securities firms outright. Bankers Trust started it by buying Alex Brown, a brokerage firm.
In fall of 1997, Sandy Weill, chairman of Travelers Insurance, tried to merge with J. P. Morgan, but failed. He then bought Salomon Smith Barney, a brokerage firm, and then proposed a merger with Citigroup, owner of Citibank. This was clearly a violation of what was left of Glass-Steagall, because it involved an insurance company.
Greenspan, with the support of President Bill Clinton and his Treasury Secretary Robert Rubin, leads the Fed to approve this merger which clearly violates the law. In order to protect us (what a ruse), Greenspan says that unless Congress repeals Glass-Steagall within 2 years, the merger will have to unwind. Deep within the Regs was the possibility of three additional 1 year extensions to Weill which could be provided by the Fed. Just days after announcing the administration would support the repeal, Treasury Secretary Robert Rubin, who had previously been Chairman of Goldman-Sachs investment firm, left the administration to take a top executive post at Citigroup, under Sandy Weill.
In the 1997-98 election cycle, the finance, insurance and real estate industry spends $200 million on lobbying, Citibank alone spent $100 million. The industry spent another $150 million on campaign contributions. And on November 4, 1999, Glass-Steagall is finally repealed, less than 2 years after the merger. Remember the mortgage debacle which started in 2007? Remember the crash of our economy? Remember Paul Volcker’s warning? You decide who Congress was representing.
Following the crash of 1929, one of every five banks in America failed, and their depositors were completely wiped out. In 1933, the Glass-Steagall Act was passed in an attempt to prevent this ever happening again. The law prevented banks from underwriting either debt or equity securities, or owning insurance companies. Thus, they had to choose between being a deposit/lending institution, or a Wall Street financier. In 1956, under the President called “do nothing” Eisenhower, Congress passed the Bank Holding Company Act, stating that a holding company owning two or more banks could not engage in the securities or insurance business either.
Shortly thereafter, in the 60s, banks began to lobby Congress to let them slip into the municipal bond market, underwriting debt securities for cities. In 1986, the Federal Reserve Board, which regulates banks, re-interpreted Section 20 of the Act, which prevents banks from being engaged in securities, to allow up to 5% of their revenue to come from securities transactions. They also allowed Bankers Trust, a bank, to engage in commercial paper (unsecured short term business loans.) We should note here the “independent” Reserve Board was formulated by financiers and established by Congress in 1913, to control our money supply. It is a totally private corporation owned by the banks.
In 1987, over the objections of Chairman Paul Volcker, the board voted 3-2 in favor of proposals from Citicorp, J. P. Morgan and the aforementioned Bankers Trust to allow these banks to handle commercial paper as described above; and to underwrite revenue bonds and mortgage backed securities (the instrument which so recently wrecked the housing market and the whole economy). Chairman Volcker warned that banks would likely lower loan standards in pursuit of lucrative security offerings, and market bad loans to the public.
In March 1987, the Fed allowed Chase Manhattan Bank to enter the commercial paper market. It also stated it planned to raise the 5% securities revenue limit to a 10% limit. In August 1987, Alan Greenspan, a former Director at J. P. Morgan, was named to replace Volcker as Fed Chairman. Most of the world considered him a financial genius, but only until the crash of 2008-9.
In January 1989, the Fed voted to allow banks into both corporate debt and equity securities, and raised the revenue limit to 10%. All during the 80s and 90s, Congress debated legislation to repeal Glass-Steagall, but always failed to act. In 1996, with the support of Greenspan, the Fed raised the bank securities revenue limit to 25%. About the only teeth left in Glass-Steagall was preventing banks from entering the insurance business. In 1997, the Fed gave banks the right to buy and own securities firms outright. Bankers Trust started it by buying Alex Brown, a brokerage firm.
In fall of 1997, Sandy Weill, chairman of Travelers Insurance, tried to merge with J. P. Morgan, but failed. He then bought Salomon Smith Barney, a brokerage firm, and then proposed a merger with Citigroup, owner of Citibank. This was clearly a violation of what was left of Glass-Steagall, because it involved an insurance company.
Greenspan, with the support of President Bill Clinton and his Treasury Secretary Robert Rubin, leads the Fed to approve this merger which clearly violates the law. In order to protect us (what a ruse), Greenspan says that unless Congress repeals Glass-Steagall within 2 years, the merger will have to unwind. Deep within the Regs was the possibility of three additional 1 year extensions to Weill which could be provided by the Fed. Just days after announcing the administration would support the repeal, Treasury Secretary Robert Rubin, who had previously been Chairman of Goldman-Sachs investment firm, left the administration to take a top executive post at Citigroup, under Sandy Weill.
In the 1997-98 election cycle, the finance, insurance and real estate industry spends $200 million on lobbying, Citibank alone spent $100 million. The industry spent another $150 million on campaign contributions. And on November 4, 1999, Glass-Steagall is finally repealed, less than 2 years after the merger. Remember the mortgage debacle which started in 2007? Remember the crash of our economy? Remember Paul Volcker’s warning? You decide who Congress was representing.
Thursday, January 27, 2011
THE FLAT INCOME TAX
The US income tax is broken. One answer to the revenue problems of the US government is so simple, that it defies the imagination. And so fair, it would make the Equal Employment Opportunity Commission blush. The problem is that the answer leaves the highly paid Washington lobbyists totally out of the equation, and as well reduces the size and scope of the IRS. It also makes everyone pay their fair share of operating our federal government. Therefore, until you, Mr. and Mrs. John Q. Public arise, and demand to be heard, our Congress will only hear from them. And people like me, who try to pose a reasonable solution, may find themselves ushered to a mental hospital to keep our voices silent.
According to the US census, the population of the United States in 2010 was some 308 million people. There were just under 140 million income tax returns made. According to the US Government Superintendant of Documents, the top half of those taxpayers paid 97.3 per cent of all the income taxes collected, and the bottom half paid only 2.7 per cent of the income taxes collected. The average rate of their income paid by the top 50 per cent of payers after deductions was 13.65 %. The average rate of their income paid by the bottom 50 per cent of payers after deductions was 2.59 per cent. So, you see the published progressive income tax rates of 10% through 35% are a farce, and just provide work for the lobbyists.
It does not take a genius to see that every able, adult working person in this country is not paying their fair share to operate the Federal government, and those who do pay are largely paying more of their income to make up what is collected. In fact, the top earning 1 per cent of the nation pays a 37% share of all the tax. The top earning 10 per cent of the nation pays a 68 % share of all the tax. The bottom earning 50 per cent of the nation pays only a 2.59% share of the tax. There are 43 per cent of working Americans who pay in little income tax, and some still receive Federal refunds, called Earned Income Tax Credits, for much more than they pay. A low income couple with three qualifying children may get an annual check as large as $5,666 from the IRS, without paying anything in first. This is wealth transfer at its finest.
The total federal income taxes collected last year was $1.031 trillion. If we were to charge every person who earned any income, no matter how small or how large, a flat 15% income tax while keeping all present deductions, the US Government personal income tax collections would have been about 25% higher, or $1.263 trillion, again leaving all deductions intact. If we disallowed all deductions, the total collected would be much higher. This would probably double the personal income taxes collected to $2 trillion plus, and be eminently more fair to every taxpayer. And it should please the socialistic thinkers among you, because the rich would suffer the loss of all their tax shelters.
Altogether, we spent about $3.721 billion last fiscal year. According to the Associated Press, therefore, forty cents of every dollar spent in the 2010 budget was borrowed. Federal debt last year totaled over $13 trillion. The debt is now crawling close to the $14.3 trillion debt limit, which Congress must soon raise, or we will be in default.
Alexander Tytler, 18th century Scottish lawyer and historian, is reported to have said words to this effect, abut the time our nation was born: “A democracy will last only until a majority of the electorate determines they can vote themselves money from the Federal treasury, by electing the people who will promise to give it to them.” History records the average lifetime of previous great nations as 200 years. This is today called by some the “Tytler cycle.” Tytler did not even mention borrowed money, which for us has made it all possible, thus far. But now comes the day of reckoning.
If we instituted the 15% flat income tax with no exemptions or deductions, we would probably double our income tax collections, and more important, everyone would be paying their fair share, even though the bottom half would still pay in much less of the taxes. And if everyone was paying taxes, there would be much less demand for free public services. Anyone interested?
According to the US census, the population of the United States in 2010 was some 308 million people. There were just under 140 million income tax returns made. According to the US Government Superintendant of Documents, the top half of those taxpayers paid 97.3 per cent of all the income taxes collected, and the bottom half paid only 2.7 per cent of the income taxes collected. The average rate of their income paid by the top 50 per cent of payers after deductions was 13.65 %. The average rate of their income paid by the bottom 50 per cent of payers after deductions was 2.59 per cent. So, you see the published progressive income tax rates of 10% through 35% are a farce, and just provide work for the lobbyists.
It does not take a genius to see that every able, adult working person in this country is not paying their fair share to operate the Federal government, and those who do pay are largely paying more of their income to make up what is collected. In fact, the top earning 1 per cent of the nation pays a 37% share of all the tax. The top earning 10 per cent of the nation pays a 68 % share of all the tax. The bottom earning 50 per cent of the nation pays only a 2.59% share of the tax. There are 43 per cent of working Americans who pay in little income tax, and some still receive Federal refunds, called Earned Income Tax Credits, for much more than they pay. A low income couple with three qualifying children may get an annual check as large as $5,666 from the IRS, without paying anything in first. This is wealth transfer at its finest.
The total federal income taxes collected last year was $1.031 trillion. If we were to charge every person who earned any income, no matter how small or how large, a flat 15% income tax while keeping all present deductions, the US Government personal income tax collections would have been about 25% higher, or $1.263 trillion, again leaving all deductions intact. If we disallowed all deductions, the total collected would be much higher. This would probably double the personal income taxes collected to $2 trillion plus, and be eminently more fair to every taxpayer. And it should please the socialistic thinkers among you, because the rich would suffer the loss of all their tax shelters.
Altogether, we spent about $3.721 billion last fiscal year. According to the Associated Press, therefore, forty cents of every dollar spent in the 2010 budget was borrowed. Federal debt last year totaled over $13 trillion. The debt is now crawling close to the $14.3 trillion debt limit, which Congress must soon raise, or we will be in default.
Alexander Tytler, 18th century Scottish lawyer and historian, is reported to have said words to this effect, abut the time our nation was born: “A democracy will last only until a majority of the electorate determines they can vote themselves money from the Federal treasury, by electing the people who will promise to give it to them.” History records the average lifetime of previous great nations as 200 years. This is today called by some the “Tytler cycle.” Tytler did not even mention borrowed money, which for us has made it all possible, thus far. But now comes the day of reckoning.
If we instituted the 15% flat income tax with no exemptions or deductions, we would probably double our income tax collections, and more important, everyone would be paying their fair share, even though the bottom half would still pay in much less of the taxes. And if everyone was paying taxes, there would be much less demand for free public services. Anyone interested?
Thursday, October 28, 2010
WHERE THE TEA PARTY?
I would say I am surprised at how the tea party has exploded in popularity with the public, until I remember what the Federal government did to cause it. Naturally, many patriots finally had enough and revolted.
I voted for Dwight Eisenhower in 1956, and have never looked back, until now. The national GOP, in my humble opinion, is no longer the representative of the conservative common man which it had always tried to be, and still pretends it is. I am a dues paying member of the Morgan GOP, but blind allegiance and financial contribution to any national party because you think they are pursuing your ideals alone is what got us here. On the other hand, the Democrat Party is certainly not representing any tax-paying citizen either. Wake up America!
Dwight Eisenhower, a military genius, warned us in his departing speech as President, to beware of the military/industrial complex, who, perhaps with all good intentions, would become so powerful in the name of national defense; that they would in effect, control the country’s economy and direction. Whatever you believe in terms of government’s role among its citizens; rest assured there is a counterpart in the other party who believes you are nothing but a complete radical, and is willing to invest and work to stop you. This is what drives the funding of both parties and keeps them both alive and strong. Both of them send the same message, and both succeed with it. Send me money, because the other guy is the bogeyman!
Both parties now belong to the money, and the grassroots needs to face it. Washington is run by lobbyists, who are paid by people wanting special legislation for their own selfish interests. Many fired elected representatives simply graduate to lobbying, probably at higher pay. And I am talking about both parties. Yet, I predict the tea party will never be able to acquire control of the Republican Party, and they certainly won’t gain control of the Democrat party. I also predict that no third political party will ever supplant either of the other two, whose main objective is to see who will get to control and spend the money. The third party always costs one side or the other an election, but never wins one itself. What then can the tea party do to help?
Today 40% of every dollar the Congress appropriates is borrowed money. Now Ben Bernanke says he is going to print even more artificial dough; by buying back the same debt the Treasury has already issued, from the banks who bought it from them in the first place, with more counterfeit fiat money. This is inflation personified! The US dollar continues to sink to a new low in the index basket comparing it to other major currencies --- 77 cents against the average basket of international currencies.
I watched Republican minority leader John Boehner earlier this year on television in Pennsylvania, where he said: “We need to tell the nation we are broke, and tell them Social Security retirement age needs to go up to age 70, and further it needs to be means tested. This means if you have worked your tail off to accumulate any assets of your own, you will be denied SS. This is from the man who wants to be the next Speaker of the House. One of the possible solutions, I would offer for the SS problem, is not to raise the retirement age, but to remove the SS tax cap on all income above the present $106,000 annual limit. Most Americans pay SS tax on every dollar they make. But the man, or woman who makes $1 million per year, pays SS tax on only 10% of his income. If you agree, please let all three of your elected Federal representatives know how you feel!
I watched Senator Corker (R-Tennessee), whom I personally like, tell CNBC last Friday morning that everything was on the table, including means testing for SS, which means if you make too much in retirement, you will not ever get it Yes, I can live without it, but I paid for it for 51 years, and I feel I am due it.
Don’t think they will never do means testing. Already Medicare premiums are means tested. I have never made over $250,000 annually in my life. But I was told two years ago my Medicare premiums were going up because my retirement income was too high, and they did go up. But the national GOP wants to tell us a tax increase for those making over $250,000 in annual income will penalize nearly every small business in America. How many small businesses do you know who really “net” over $250,000 a year? I ran a small business for 40 years, and I never did. But I can tell you there are thousands of Wall Street financiers who do. And they are saying to both parties, “If you take my money, you darn sure better not raise my taxes, and I have plenty of money to give.” The Wall Street cats play the middle income class against the poor among us, and laugh all the way to the bank.
You may not know the average 2009 income of the top 25 hedge fund managers, who are largely responsible for the mortgage debacle which caused our recent economic collapse, was over $1 billion each. Why are they partially responsible? Because when Greenspan kept rates at one per cent for eighteen months after 9/11, they said to the money market, “This one per cent is killing us. Figure out how to get us ten per cent return, and we will buy as much as you can provide.” Some unscrupulous mortgage brokers, with Barney Frank’s encouragement, figured how to do it. Make ten per cent mortgages to people who can’t pay, and don’t care; but they will sign anything if you tell them they are getting a house with no money down. These fund managers each made one billion with a “B.” The poor beggars only averaged $464 million each in 2008, a really bad year because of the crash. Before the crash in 2007, they averaged $900 million each. So they, alone in America, are better off already than they were before the crash. Yet, their income tax rate on all this earned income is 15% capital gains, because of a huge tax loophole called “carried interests.” The national GOP will not even consider talking about changing it, even entirely apart from the Bush tax cuts, which are a separate issue.
Two years ago, Goldman-Sachs was on the verge of being broke, and they borrowed $5 billion at 10% interest from Warren Buffett, America’s second richest man, to gain capital. Now the government has bailed out all the Wall Street cats. And Goldman is now sitting on $390 billion in net liquid cash, and wants to pay Buffett back early, even with a penalty. They already paid back TARP, because they wanted out from under any government scrutiny on their payroll bonuses.
Meanwhile, the government is bragging now about how the TARP program is actually returning $25 billion profit to the government. Good, but they say nothing about the estimated 154 Billion dollar bail-out cost of AIG Insurance. Nor did they mention Fanny and Freddy at a bail-out cost of from possibly 221 Billion to 363 Billion
This bailout is what allowed AIG to pay off all the billions of dollars of insurance Goldman had bought from them on this crappy mortgage mess, by purchasing credit default swaps from AIG. Without the insurance being paid them, Goldman was in danger of collapse. But now, thanks to you and me, and the money we borrowed to rescue AIG; Goldman is in great shape, and has no supervision over how many billion dollar bonuses they pay.
What then, do I see as the answer? The tea party can make a real difference! It needs to continue to grow, and to organize and focus itself nationally, so that it will have real clout. It should not spend all its efforts on individual races. Then it needs to have a national convention, not for naming candidates; its sole purpose to prepare a slate of demands for the 2012 Federal election platform planks. It needs to divest itself of its Republican bias, and present to both major parties the opportunity to endorse its platforms and objectives, with the pledge that whichever party embraces the most points from the tea party platform, will be assured the support of the tea party across the board. Let’s hope at least one of the parties would recognize the threat and awaken to reality. There are more us of than there are of them, and to quote---we are mad as hell, and we are not going to take it anymore.
One more thing about the FAIR TAX and I am through. I truly believe the ultra rich are actually providing the money to support this movement because of the enormous benefits it will mean to them. Please stop and think about it. It makes no difference to the ultra rich whether the FAIR TAX is 23%, 29%, or 35%. They will save either way because it is only charged on what you spend. The average American will pay that rate on nearly every dollar he makes, allowing that he may be lucky enough to save 10% of his income. Do you think the average billionaire, making $1 billion per year, is actually going to spend anywhere near that much on consumer purchases, even including his multi-million dollar mansion? But he will be taxed only on what he spends, not his investments.
Steve Forbes had it nearly right. We need instead a flat tax, with no deductions, including church or home interest, so that everyone, including the richest and the poorest, does pay their fair share. And if the poorest, who are nearly totally subsidized by the government, knew they had to pay a fair share, there would be less demand for government services, and fewer votes could be bought by political parties with a promise to pay. I highly suspect if every one paid just 15% flat tax, we could fund a decent Federal budget, as opposed to a FAIR TAX of between 23 and 35 per cent on consumer purchases only.
We can not win by helping one party. Only by playing the two major parties against each other for election, will those of us who call ourselves patriots have any chance to really make a difference.
I voted for Dwight Eisenhower in 1956, and have never looked back, until now. The national GOP, in my humble opinion, is no longer the representative of the conservative common man which it had always tried to be, and still pretends it is. I am a dues paying member of the Morgan GOP, but blind allegiance and financial contribution to any national party because you think they are pursuing your ideals alone is what got us here. On the other hand, the Democrat Party is certainly not representing any tax-paying citizen either. Wake up America!
Dwight Eisenhower, a military genius, warned us in his departing speech as President, to beware of the military/industrial complex, who, perhaps with all good intentions, would become so powerful in the name of national defense; that they would in effect, control the country’s economy and direction. Whatever you believe in terms of government’s role among its citizens; rest assured there is a counterpart in the other party who believes you are nothing but a complete radical, and is willing to invest and work to stop you. This is what drives the funding of both parties and keeps them both alive and strong. Both of them send the same message, and both succeed with it. Send me money, because the other guy is the bogeyman!
Both parties now belong to the money, and the grassroots needs to face it. Washington is run by lobbyists, who are paid by people wanting special legislation for their own selfish interests. Many fired elected representatives simply graduate to lobbying, probably at higher pay. And I am talking about both parties. Yet, I predict the tea party will never be able to acquire control of the Republican Party, and they certainly won’t gain control of the Democrat party. I also predict that no third political party will ever supplant either of the other two, whose main objective is to see who will get to control and spend the money. The third party always costs one side or the other an election, but never wins one itself. What then can the tea party do to help?
Today 40% of every dollar the Congress appropriates is borrowed money. Now Ben Bernanke says he is going to print even more artificial dough; by buying back the same debt the Treasury has already issued, from the banks who bought it from them in the first place, with more counterfeit fiat money. This is inflation personified! The US dollar continues to sink to a new low in the index basket comparing it to other major currencies --- 77 cents against the average basket of international currencies.
I watched Republican minority leader John Boehner earlier this year on television in Pennsylvania, where he said: “We need to tell the nation we are broke, and tell them Social Security retirement age needs to go up to age 70, and further it needs to be means tested. This means if you have worked your tail off to accumulate any assets of your own, you will be denied SS. This is from the man who wants to be the next Speaker of the House. One of the possible solutions, I would offer for the SS problem, is not to raise the retirement age, but to remove the SS tax cap on all income above the present $106,000 annual limit. Most Americans pay SS tax on every dollar they make. But the man, or woman who makes $1 million per year, pays SS tax on only 10% of his income. If you agree, please let all three of your elected Federal representatives know how you feel!
I watched Senator Corker (R-Tennessee), whom I personally like, tell CNBC last Friday morning that everything was on the table, including means testing for SS, which means if you make too much in retirement, you will not ever get it Yes, I can live without it, but I paid for it for 51 years, and I feel I am due it.
Don’t think they will never do means testing. Already Medicare premiums are means tested. I have never made over $250,000 annually in my life. But I was told two years ago my Medicare premiums were going up because my retirement income was too high, and they did go up. But the national GOP wants to tell us a tax increase for those making over $250,000 in annual income will penalize nearly every small business in America. How many small businesses do you know who really “net” over $250,000 a year? I ran a small business for 40 years, and I never did. But I can tell you there are thousands of Wall Street financiers who do. And they are saying to both parties, “If you take my money, you darn sure better not raise my taxes, and I have plenty of money to give.” The Wall Street cats play the middle income class against the poor among us, and laugh all the way to the bank.
You may not know the average 2009 income of the top 25 hedge fund managers, who are largely responsible for the mortgage debacle which caused our recent economic collapse, was over $1 billion each. Why are they partially responsible? Because when Greenspan kept rates at one per cent for eighteen months after 9/11, they said to the money market, “This one per cent is killing us. Figure out how to get us ten per cent return, and we will buy as much as you can provide.” Some unscrupulous mortgage brokers, with Barney Frank’s encouragement, figured how to do it. Make ten per cent mortgages to people who can’t pay, and don’t care; but they will sign anything if you tell them they are getting a house with no money down. These fund managers each made one billion with a “B.” The poor beggars only averaged $464 million each in 2008, a really bad year because of the crash. Before the crash in 2007, they averaged $900 million each. So they, alone in America, are better off already than they were before the crash. Yet, their income tax rate on all this earned income is 15% capital gains, because of a huge tax loophole called “carried interests.” The national GOP will not even consider talking about changing it, even entirely apart from the Bush tax cuts, which are a separate issue.
Two years ago, Goldman-Sachs was on the verge of being broke, and they borrowed $5 billion at 10% interest from Warren Buffett, America’s second richest man, to gain capital. Now the government has bailed out all the Wall Street cats. And Goldman is now sitting on $390 billion in net liquid cash, and wants to pay Buffett back early, even with a penalty. They already paid back TARP, because they wanted out from under any government scrutiny on their payroll bonuses.
Meanwhile, the government is bragging now about how the TARP program is actually returning $25 billion profit to the government. Good, but they say nothing about the estimated 154 Billion dollar bail-out cost of AIG Insurance. Nor did they mention Fanny and Freddy at a bail-out cost of from possibly 221 Billion to 363 Billion
This bailout is what allowed AIG to pay off all the billions of dollars of insurance Goldman had bought from them on this crappy mortgage mess, by purchasing credit default swaps from AIG. Without the insurance being paid them, Goldman was in danger of collapse. But now, thanks to you and me, and the money we borrowed to rescue AIG; Goldman is in great shape, and has no supervision over how many billion dollar bonuses they pay.
What then, do I see as the answer? The tea party can make a real difference! It needs to continue to grow, and to organize and focus itself nationally, so that it will have real clout. It should not spend all its efforts on individual races. Then it needs to have a national convention, not for naming candidates; its sole purpose to prepare a slate of demands for the 2012 Federal election platform planks. It needs to divest itself of its Republican bias, and present to both major parties the opportunity to endorse its platforms and objectives, with the pledge that whichever party embraces the most points from the tea party platform, will be assured the support of the tea party across the board. Let’s hope at least one of the parties would recognize the threat and awaken to reality. There are more us of than there are of them, and to quote---we are mad as hell, and we are not going to take it anymore.
One more thing about the FAIR TAX and I am through. I truly believe the ultra rich are actually providing the money to support this movement because of the enormous benefits it will mean to them. Please stop and think about it. It makes no difference to the ultra rich whether the FAIR TAX is 23%, 29%, or 35%. They will save either way because it is only charged on what you spend. The average American will pay that rate on nearly every dollar he makes, allowing that he may be lucky enough to save 10% of his income. Do you think the average billionaire, making $1 billion per year, is actually going to spend anywhere near that much on consumer purchases, even including his multi-million dollar mansion? But he will be taxed only on what he spends, not his investments.
Steve Forbes had it nearly right. We need instead a flat tax, with no deductions, including church or home interest, so that everyone, including the richest and the poorest, does pay their fair share. And if the poorest, who are nearly totally subsidized by the government, knew they had to pay a fair share, there would be less demand for government services, and fewer votes could be bought by political parties with a promise to pay. I highly suspect if every one paid just 15% flat tax, we could fund a decent Federal budget, as opposed to a FAIR TAX of between 23 and 35 per cent on consumer purchases only.
We can not win by helping one party. Only by playing the two major parties against each other for election, will those of us who call ourselves patriots have any chance to really make a difference.
Wednesday, July 7, 2010
WHAT NOW?
There is an old stock market mantra, “Sell in May and go away.” It could not be more true this year. In the last 2 months, the Dow is down more than ten per cent, or $1,200. Volatility is increasing, up or down over $200 in a given day. The stock market is saying, look out below. If it goes as low as $9,600; look out below ‘til we reach $9,000 and possibly $8,700.
These are the reasons why. One, the recent recovery was paid for with borrowed stimulus money, over $2 trillion in government spending. Now the money is running out.
Two, despite everything Washington has tried to do, about ten per cent of normal workers are trying to get by without a paycheck. And our conservative Republican friends, who let Wall Street out of the corral without a whimper, causing a housing debacle; are reluctant to extend any unemployment benefits, saying we cannot afford it. What can we afford? And John Boehner, House Minority leader, says retirement age should go up to seventy, and means testing should prohibit Social Security checks to those who have been wise enough to set aside their own capital.
Three, while we were once the world’s largest producer, we are now the world’s largest consumer. And now we are failing in that, too. Our economy is now seventy per cent consumer spending, and they are becoming scared again and cutting back purchases.
Four, the housing debacle, first home values fall since the great depression, was helped somewhat by the promised $8,000 government check for buying. Now its over, and sales are down and foreclosures are going up.
Five, many states are drowning in fiscal deficits, and unlike the US government, they can’t print money. The fifty state cumulative deficit is about $127 billion. New York, California and a few others are about to sink. Not to mention the underfunding of their defined benefit guaranteed employee pension plans.
Six, the sovereign debt crisis of individual nations; beginning in Europe with Greece, is just a harbinger of what will happen when it finally reaches us. The dollar will lose its status as the world reserve currency, eventually to be replaced with the Chinese yuan. China has the world’s largest natural gold reserves, and yet has just made a deal to buy most of an American company’s gold production.
The only way I see the US is going to be able to repay our debts is devalue the dollar and repay with cheaper dollars. This means eventually, inflation is going to raise its ugly head with a vengeance.
What can you do to fight it? While it won’t help the economy, try to set aside some savings. Consider a purchase of gold or silver. If you have any long term loans, consider refinancing them now while interest rates are at a pretty good low. Send John Boehner a first class letter telling him what you think about his Social Security proposal. And be careful for whom you vote in July and November.
There is an old stock market mantra, “Sell in May and go away.” It could not be more true this year. In the last 2 months, the Dow is down more than ten per cent, or $1,200. Volatility is increasing, up or down over $200 in a given day. The stock market is saying, look out below. If it goes as low as $9,600; look out below ‘til we reach $9,000 and possibly $8,700.
These are the reasons why. One, the recent recovery was paid for with borrowed stimulus money, over $2 trillion in government spending. Now the money is running out.
Two, despite everything Washington has tried to do, about ten per cent of normal workers are trying to get by without a paycheck. And our conservative Republican friends, who let Wall Street out of the corral without a whimper, causing a housing debacle; are reluctant to extend any unemployment benefits, saying we cannot afford it. What can we afford? And John Boehner, House Minority leader, says retirement age should go up to seventy, and means testing should prohibit Social Security checks to those who have been wise enough to set aside their own capital.
Three, while we were once the world’s largest producer, we are now the world’s largest consumer. And now we are failing in that, too. Our economy is now seventy per cent consumer spending, and they are becoming scared again and cutting back purchases.
Four, the housing debacle, first home values fall since the great depression, was helped somewhat by the promised $8,000 government check for buying. Now its over, and sales are down and foreclosures are going up.
Five, many states are drowning in fiscal deficits, and unlike the US government, they can’t print money. The fifty state cumulative deficit is about $127 billion. New York, California and a few others are about to sink. Not to mention the underfunding of their defined benefit guaranteed employee pension plans.
Six, the sovereign debt crisis of individual nations; beginning in Europe with Greece, is just a harbinger of what will happen when it finally reaches us. The dollar will lose its status as the world reserve currency, eventually to be replaced with the Chinese yuan. China has the world’s largest natural gold reserves, and yet has just made a deal to buy most of an American company’s gold production.
The only way I see the US is going to be able to repay our debts is devalue the dollar and repay with cheaper dollars. This means eventually, inflation is going to raise its ugly head with a vengeance.
What can you do to fight it? While it won’t help the economy, try to set aside some savings. Consider a purchase of gold or silver. If you have any long term loans, consider refinancing them now while interest rates are at a pretty good low. Send John Boehner a first class letter telling him what you think about his Social Security proposal. And be careful for whom you vote in July and November.
Monday, September 21, 2009
DOLLAR VALUE
The recent TEA (Taxed enough already) parties around the nation culminating with one in Washington, DC showed that most Americans are sick of the way the Federal government is continuing to take more and more of our hard earned income to pay for government expenditures (or at least use it for down payments on more financed borrowing). Unfortunately, what most Americans don’t realize is that we are mad about only the part of the iceberg above water, while 90% more lurks underneath the deep.
Fed Chairman Ben Bernanke advises us that we have probably seen the worst of the “recession”, and that things are looking up. From a purely “nominal” point of view, he is probably right. We may see GDP growth in this quarter and the next. Unemployment may be close to peaking, with gradual improvement into the distant future. But at what cost?
Governments can play with money supply, and they can play with interest rates. This is the method just recently used to prevent the US sky from falling in, with repercussions heard around the world. They can even play with the values of previous metals, by selling from their own stock, or even leasing their own stock to others. But they cannot really totally control the value of precious metals as compared to the value of paper money.
Incidentally, you should know that the US, richest nation in the world after World War II, held 20,000 metric tons of gold, and it was the backing for our paper money. Because we agreed in 1944, at an international conference in Bretton Woods, New Hampshire; to redeem dollars for gold to anybody in the world, the world considered the US dollar king of the hill. By the time LBJ decided to win the war in Viet Nam, while he won the battle against domestic poverty at the same time; the world decided they would rather hold gold than US dollars. They required us to give them 12,000 metric tons of our gold, leaving us only 8,000 metric tons. And history records LBJ lost both wars. Finally, Richard Nixon had to tell the world we could no longer redeem dollars with gold, lest we give away all we held, and we went off the gold standard.
Now our dollar is worth only what the rest of the world believes it is worth. Because Nixon made a deal with Saudi Arabia to require all oil sales to be paid for in US dollars, for 30 years, the dollar held up pretty well from the outside view, as compared to other world currencies. But when Nixon refused to redeem dollars, he also began to allow private ownership of gold, which FDR had confiscated during the depression, and private ownership led to real market prices.
Since the depths of the depression in 1932, the dollar has lost 98% of its purchasing power. Put another way, two pennies in the depression would buy the equivalent of what one dollar buys today. You laugh at your grandpa for making $2,000 per year, but if you are not making over $100,000 per year, he was better off than you are! At the same time, gold soared in value by 4,300 per cent. Put another way, $100,000 cash in 1932 is really worth $2,000 today. $100,000 gold in 1932 is now worth well over $4.3 million in paper dollars.
The dollar index compares the dollar to a basket of other world currencies. The US dollar is now at 76 cents, just 5 points away from its all time low, and headed lower. The Fed is now buying US bonds, which is the equivalent of you loaning yourself money. How long can it last? This is why I still call for a march on Washington for July 4, 2010.We absolutely must save our Republic.
Fed Chairman Ben Bernanke advises us that we have probably seen the worst of the “recession”, and that things are looking up. From a purely “nominal” point of view, he is probably right. We may see GDP growth in this quarter and the next. Unemployment may be close to peaking, with gradual improvement into the distant future. But at what cost?
Governments can play with money supply, and they can play with interest rates. This is the method just recently used to prevent the US sky from falling in, with repercussions heard around the world. They can even play with the values of previous metals, by selling from their own stock, or even leasing their own stock to others. But they cannot really totally control the value of precious metals as compared to the value of paper money.
Incidentally, you should know that the US, richest nation in the world after World War II, held 20,000 metric tons of gold, and it was the backing for our paper money. Because we agreed in 1944, at an international conference in Bretton Woods, New Hampshire; to redeem dollars for gold to anybody in the world, the world considered the US dollar king of the hill. By the time LBJ decided to win the war in Viet Nam, while he won the battle against domestic poverty at the same time; the world decided they would rather hold gold than US dollars. They required us to give them 12,000 metric tons of our gold, leaving us only 8,000 metric tons. And history records LBJ lost both wars. Finally, Richard Nixon had to tell the world we could no longer redeem dollars with gold, lest we give away all we held, and we went off the gold standard.
Now our dollar is worth only what the rest of the world believes it is worth. Because Nixon made a deal with Saudi Arabia to require all oil sales to be paid for in US dollars, for 30 years, the dollar held up pretty well from the outside view, as compared to other world currencies. But when Nixon refused to redeem dollars, he also began to allow private ownership of gold, which FDR had confiscated during the depression, and private ownership led to real market prices.
Since the depths of the depression in 1932, the dollar has lost 98% of its purchasing power. Put another way, two pennies in the depression would buy the equivalent of what one dollar buys today. You laugh at your grandpa for making $2,000 per year, but if you are not making over $100,000 per year, he was better off than you are! At the same time, gold soared in value by 4,300 per cent. Put another way, $100,000 cash in 1932 is really worth $2,000 today. $100,000 gold in 1932 is now worth well over $4.3 million in paper dollars.
The dollar index compares the dollar to a basket of other world currencies. The US dollar is now at 76 cents, just 5 points away from its all time low, and headed lower. The Fed is now buying US bonds, which is the equivalent of you loaning yourself money. How long can it last? This is why I still call for a march on Washington for July 4, 2010.We absolutely must save our Republic.
Thursday, March 5, 2009
I WISH PRESIDENT OBAMA WELL
I wish President Obama well, I really do. And I think he won the presidency with good intentions to change Washington for the benefit of most average Americans. But it seems he has already begun to come under the influence of special interests, which would protect their own turf at the expense of the general populace.
On May 15, 2008, when gasoline was heading toward $4 plus per gallon, I wrote that we had enough oil shale reserve in the Rocky Mountain States to provide our domestic gasoline needs for 110 years, over 2.5 trillion potential gallons. The problem is designing an efficient way to separate the oil from the rock. Royal Dutch Shell Oil led the way, and has made tremendous strides toward solving this problem. But with the national gas price now averaging under $2 per gallon, new Energy Secretary Ken Salazar has just reversed plans to lease oil shale land in Colorado, Utah and Wyoming. The nation loses, and the environmental groups, who oppose any oil shale development, win. I see this as a major mistake.
On another vein, we face a frozen banking system, which I acknowledge was allowed to develop by the Bush administration. Interest rates, which were kept too low for too long, brought into being complex mortgage backed securities to satisfy the demand of greedy investors for higher returns. When greedy investment bankers figured how to package bad mortgages into securities rated AAA investment grade; greedy mortgage brokers figured ways to approve unconscionable loans, and the die was cast for a disaster. And it does not help our national reputation that these products were sold to investors all over the world. This is one reason the remaining world is in worse financial shape than we are. But, our banking system is still frozen, and the federal government has already invested over $200 billion of taxpayer money into the largest banks in America, with no appreciable results. Furthermore, all the dying investment banks suddenly became commercial bank holding companies, so they could line up at the same trough.
Now, the Obama administration has announced a new “stress test” for the 19 largest bank holding companies, which hold assets of $100 billion or more each. There are two criteria used for the test. One assumes the economy will continue at its lackluster pace through 2010, and the second presumes things will worsen, with housing values falling another 29%, while unemployment rises to over 10%. This second scenario is probably a good idea. After the stress tests, Treasury Secretary Timothy Geithner will advise these banks how much new capital is required, and give them six months to raise it privately. If they can’t raise it, more of our tax money will go into buying 9% interest bearing preferred stock, which can be converted into common stock. The funds would come from the second half of the original $700 billion TARP plan. Every effort is being made to call this something other than nationalization.
I stated in a September column that our TARP money should be invested only in saving our commercial banks, which hold our hard earned money, rather than investment banks and insurance companies. The government has tried to do both.
It is imperative we learn from the mistakes of Japan in the 1990’s. They allowed their banks to carry bad real estate paper on the books as good assets for over ten years, before they finally wrote off about 96 trillion yen, or the equivalent of nearly 20% of their gross annual domestic output. During that delay, their stock index fell about 75%, and real estate prices declined for 15 straight years. We don’t want such results.
When the tests are completed, and the nation’s capital is invested, these bad investments must be written off the books. Only then, can we start building toward recovery.
On May 15, 2008, when gasoline was heading toward $4 plus per gallon, I wrote that we had enough oil shale reserve in the Rocky Mountain States to provide our domestic gasoline needs for 110 years, over 2.5 trillion potential gallons. The problem is designing an efficient way to separate the oil from the rock. Royal Dutch Shell Oil led the way, and has made tremendous strides toward solving this problem. But with the national gas price now averaging under $2 per gallon, new Energy Secretary Ken Salazar has just reversed plans to lease oil shale land in Colorado, Utah and Wyoming. The nation loses, and the environmental groups, who oppose any oil shale development, win. I see this as a major mistake.
On another vein, we face a frozen banking system, which I acknowledge was allowed to develop by the Bush administration. Interest rates, which were kept too low for too long, brought into being complex mortgage backed securities to satisfy the demand of greedy investors for higher returns. When greedy investment bankers figured how to package bad mortgages into securities rated AAA investment grade; greedy mortgage brokers figured ways to approve unconscionable loans, and the die was cast for a disaster. And it does not help our national reputation that these products were sold to investors all over the world. This is one reason the remaining world is in worse financial shape than we are. But, our banking system is still frozen, and the federal government has already invested over $200 billion of taxpayer money into the largest banks in America, with no appreciable results. Furthermore, all the dying investment banks suddenly became commercial bank holding companies, so they could line up at the same trough.
Now, the Obama administration has announced a new “stress test” for the 19 largest bank holding companies, which hold assets of $100 billion or more each. There are two criteria used for the test. One assumes the economy will continue at its lackluster pace through 2010, and the second presumes things will worsen, with housing values falling another 29%, while unemployment rises to over 10%. This second scenario is probably a good idea. After the stress tests, Treasury Secretary Timothy Geithner will advise these banks how much new capital is required, and give them six months to raise it privately. If they can’t raise it, more of our tax money will go into buying 9% interest bearing preferred stock, which can be converted into common stock. The funds would come from the second half of the original $700 billion TARP plan. Every effort is being made to call this something other than nationalization.
I stated in a September column that our TARP money should be invested only in saving our commercial banks, which hold our hard earned money, rather than investment banks and insurance companies. The government has tried to do both.
It is imperative we learn from the mistakes of Japan in the 1990’s. They allowed their banks to carry bad real estate paper on the books as good assets for over ten years, before they finally wrote off about 96 trillion yen, or the equivalent of nearly 20% of their gross annual domestic output. During that delay, their stock index fell about 75%, and real estate prices declined for 15 straight years. We don’t want such results.
When the tests are completed, and the nation’s capital is invested, these bad investments must be written off the books. Only then, can we start building toward recovery.
Monday, February 23, 2009
SOLVE THE HOUSING CRISIS
The Warren Plan
On October 9, 2008, I offered my suggestion to assuage the tremendous housing deflation problem which our nation faces, the real epicenter of the extended economic recession (?) which continues to grow daily. According to the National Association of Realtors, the median home price nationwide in February was down 12 per cent from one year ago. But declines of more than 30 per cent were found in California, Michigan, Arizona and Nevada. The biggest drop, more than 50 per cent, was in Ft. Myers, Florida. We can argue among ourselves as to whether tax dollars should be used to help some who made extremely unwise financial decisions, but meanwhile the house burns down around us.
My solution was for the government to actually use tax dollars to reduce troubled loan principal up to 20 per cent, provided the lender in control would voluntarily cut the interest rate, make it a fixed rate, and extend the term of the loan, to bring the monthly payment down to around 31% of monthly income. In the past, this front end ratio was always used for loan approval; but was combined with a back end ratio of 38 per cent, when all other monthly household credit obligations were included.
Unlike the Obama plan, the government would be secured in most instances under my plan. The distressed homeowner would have to give the government a second note and security deed for the amount of aid tendered, payable no later than ten years, or upon sale, if earlier, with 3 per cent simple interest to accrue. According to economists, the national inflation rate from 1970 to 2000 was about 5 per cent per year. Thus, in ten years, with the recession stopped, we should expect a 50 per cent increase in home values from today. If, in the unlikely event the home value had not increased enough to pay the entire government debt upon sale, the excess balance would be forgiven. If my math is correct, $700 billion, which made up the original TARP, would have funded up to $83,400 principal reduction each (20% of the $417,000 Fannie Mae nationwide maximum loan limit) to as many as 8,400,000 homeowners. I don’t think that many are in trouble, and further, most don’t need that much relief. According to the Washington Post, less than 3 million mortgages are now past due. If we relieved only 3 million homeowners, the original TARP would have funded up to $233,000 principal reduction each.
Instead, the Obama plan calls for the lender to eat the principal cost of getting the front end mortgage ratio alone down to 38 per cent of monthly income, and the government will eat the principal cost to bring the front end mortgage ratio alone down further to 31 per cent of monthly income. (Think of all the accounting jobs we will create.) All other household debt, the back end ratio, will not be affected. (Expect another plan later to handle that.) The loan servicers will get a flat $1,000 bonus for every loan which they renegotiate, and another $1,000 per year for three years if the borrower remains current. The lender gets a $1500 bonus, and the servicer gets another $500 bonus, if they renegotiate prior to a delinquency. In addition, the borrower gets a $1,000 annual bonus for 5 years if he makes his payments, and does not walk away.
Finally, the Obama government is injecting another $400 billion into Fannie Mae and Freddie Mac, the former government-sponsored mortgage buying enterprises which are now government owned mortgage buying enterprises. This new $400 billion would fund another 1,716,000 homeowners with $233,000 up front principal reduction. But, regretfully, my solution would not substantially grow the bureaucracy, nor would it pay the greedy lenders who initiated the problem, so it is out of the question. Furthermore, it is just much too simple to come out of the federal government.
Soon, I will be circulating a petition to elect me lifetime benevolent dictator of our nation. If you are willing to sign, please let me know.
On October 9, 2008, I offered my suggestion to assuage the tremendous housing deflation problem which our nation faces, the real epicenter of the extended economic recession (?) which continues to grow daily. According to the National Association of Realtors, the median home price nationwide in February was down 12 per cent from one year ago. But declines of more than 30 per cent were found in California, Michigan, Arizona and Nevada. The biggest drop, more than 50 per cent, was in Ft. Myers, Florida. We can argue among ourselves as to whether tax dollars should be used to help some who made extremely unwise financial decisions, but meanwhile the house burns down around us.
My solution was for the government to actually use tax dollars to reduce troubled loan principal up to 20 per cent, provided the lender in control would voluntarily cut the interest rate, make it a fixed rate, and extend the term of the loan, to bring the monthly payment down to around 31% of monthly income. In the past, this front end ratio was always used for loan approval; but was combined with a back end ratio of 38 per cent, when all other monthly household credit obligations were included.
Unlike the Obama plan, the government would be secured in most instances under my plan. The distressed homeowner would have to give the government a second note and security deed for the amount of aid tendered, payable no later than ten years, or upon sale, if earlier, with 3 per cent simple interest to accrue. According to economists, the national inflation rate from 1970 to 2000 was about 5 per cent per year. Thus, in ten years, with the recession stopped, we should expect a 50 per cent increase in home values from today. If, in the unlikely event the home value had not increased enough to pay the entire government debt upon sale, the excess balance would be forgiven. If my math is correct, $700 billion, which made up the original TARP, would have funded up to $83,400 principal reduction each (20% of the $417,000 Fannie Mae nationwide maximum loan limit) to as many as 8,400,000 homeowners. I don’t think that many are in trouble, and further, most don’t need that much relief. According to the Washington Post, less than 3 million mortgages are now past due. If we relieved only 3 million homeowners, the original TARP would have funded up to $233,000 principal reduction each.
Instead, the Obama plan calls for the lender to eat the principal cost of getting the front end mortgage ratio alone down to 38 per cent of monthly income, and the government will eat the principal cost to bring the front end mortgage ratio alone down further to 31 per cent of monthly income. (Think of all the accounting jobs we will create.) All other household debt, the back end ratio, will not be affected. (Expect another plan later to handle that.) The loan servicers will get a flat $1,000 bonus for every loan which they renegotiate, and another $1,000 per year for three years if the borrower remains current. The lender gets a $1500 bonus, and the servicer gets another $500 bonus, if they renegotiate prior to a delinquency. In addition, the borrower gets a $1,000 annual bonus for 5 years if he makes his payments, and does not walk away.
Finally, the Obama government is injecting another $400 billion into Fannie Mae and Freddie Mac, the former government-sponsored mortgage buying enterprises which are now government owned mortgage buying enterprises. This new $400 billion would fund another 1,716,000 homeowners with $233,000 up front principal reduction. But, regretfully, my solution would not substantially grow the bureaucracy, nor would it pay the greedy lenders who initiated the problem, so it is out of the question. Furthermore, it is just much too simple to come out of the federal government.
Soon, I will be circulating a petition to elect me lifetime benevolent dictator of our nation. If you are willing to sign, please let me know.
Wednesday, December 17, 2008
$8 TRILLION DEBT?
Last week I reminded you of my prediction this recession was starting last December, largely because the consumer, who was 71% of our gross domestic product, was tapped out. His credit card limit was maxxed, and his home equity line of credit was maxxed. I am still pulling for Ben Bernanke, but I have given up on Hank Paulson. He sold Congress a $700 billion bailout fund to buy troubled mortgage assets, and used half the money to bailout Wall Street and the banks, recently saying he was through—leave it to Obama. None of the money has gone to buying mortgages. And FDIC Chairwoman Sheila Bair has been begging for authority to do so. Meanwhile, it is rumored that Obama’s pick for Treasury, Timothy Geithner, wants to get rid of her, because she is not a “team player.”
In addition, Christopher Cox at the SEC has not restored the naked short selling rule or the “uptick” rule to Wall St.; and there is no more discussion of all the reasons why banks and investment houses should not be one and the same. I guess there is no need now, because all the former investment houses are now banks, or bank holding companies. This could not have happened except as a result of Congress under Clinton repealing the Glass-Steagall Act, which had been around since the depression. The investment houses, combined with Greenspan’s low 1% interest rate for 18 months following nine-eleven, were the origin of this whole debacle. Now, the investment houses are becoming our banks, and they want all our demand deposits, on which they usually don’t pay interest.
We raised the US debt limit from $10 trillion to $11.3 trillion to accommodate the bailout. But, since then, the government has loaned, invested or committed to over $7 trillion more, bringing the total to another $8 trillion just this year. That amount equals over half of our annual domestic production. If all that is expended, the total debt is going to be four times what it was just in 2000. According to The Bullion Buzz, a combination of spending on the New Deal, the Marshall Plan, Korea, Viet Nam, Iraq, NASA, the race to the moon, the S& L bailout, and even throwing in the Louisiana Purchase don’t total half of $8 trillion. Remember, a trillion is a million times a million. And the Detroit three auto manufacturers are still begging. As my old granddaddy used to say, “You can’t drink yourself sober, and you can’t spend yourself rich.”
Yet, surprisingly, our dollar has had a recent rally against all other currencies. Why? Because all the rest of the world were growing economies based on sales to the US for practically everything we need. Now, their economies are tanking because our purchases are way down, and they don’t have enough internal demand for their production. Thus, their currencies are experiencing depreciation. You might say they are at least temporarily in worse shape than we are. Still, Japan and China are lending us the money to stay in business. When they have to use their money to bolster their own internal economy, their purchases of our debt are going to suffer. When that finally happens, our dollar value will suffer, and gold and silver will rise in value. Inflation will be rampant.
According to the US Government General Accounting Office (the Comptroller) the TARP plan administrators have failed to figure out how to make sure financial firms receiving billions of dollars of Federal funds are complying with limits on executive compensation and dividend payments. Does that surprise you? Incidentally, did I ever mention that Section 202 of the bailout bill, as passed, raises the “biodiesel” tax credit from fifty cents to $1 per gallon and amends it to “liquid fuel”? This is the income tax credit given producers for mixing bio and petroleum fuels, which they are then free to sell abroad to other countries. The same credit which raised the price of corn sky high. What has that got to do with troubled mortgages? It just represents the enormous pork packed into this bill.
President Obama was elected by promising to bring us change. Let’s hope it is change for the better. So far it looks like more of the same Washington merry-go-round.
In addition, Christopher Cox at the SEC has not restored the naked short selling rule or the “uptick” rule to Wall St.; and there is no more discussion of all the reasons why banks and investment houses should not be one and the same. I guess there is no need now, because all the former investment houses are now banks, or bank holding companies. This could not have happened except as a result of Congress under Clinton repealing the Glass-Steagall Act, which had been around since the depression. The investment houses, combined with Greenspan’s low 1% interest rate for 18 months following nine-eleven, were the origin of this whole debacle. Now, the investment houses are becoming our banks, and they want all our demand deposits, on which they usually don’t pay interest.
We raised the US debt limit from $10 trillion to $11.3 trillion to accommodate the bailout. But, since then, the government has loaned, invested or committed to over $7 trillion more, bringing the total to another $8 trillion just this year. That amount equals over half of our annual domestic production. If all that is expended, the total debt is going to be four times what it was just in 2000. According to The Bullion Buzz, a combination of spending on the New Deal, the Marshall Plan, Korea, Viet Nam, Iraq, NASA, the race to the moon, the S& L bailout, and even throwing in the Louisiana Purchase don’t total half of $8 trillion. Remember, a trillion is a million times a million. And the Detroit three auto manufacturers are still begging. As my old granddaddy used to say, “You can’t drink yourself sober, and you can’t spend yourself rich.”
Yet, surprisingly, our dollar has had a recent rally against all other currencies. Why? Because all the rest of the world were growing economies based on sales to the US for practically everything we need. Now, their economies are tanking because our purchases are way down, and they don’t have enough internal demand for their production. Thus, their currencies are experiencing depreciation. You might say they are at least temporarily in worse shape than we are. Still, Japan and China are lending us the money to stay in business. When they have to use their money to bolster their own internal economy, their purchases of our debt are going to suffer. When that finally happens, our dollar value will suffer, and gold and silver will rise in value. Inflation will be rampant.
According to the US Government General Accounting Office (the Comptroller) the TARP plan administrators have failed to figure out how to make sure financial firms receiving billions of dollars of Federal funds are complying with limits on executive compensation and dividend payments. Does that surprise you? Incidentally, did I ever mention that Section 202 of the bailout bill, as passed, raises the “biodiesel” tax credit from fifty cents to $1 per gallon and amends it to “liquid fuel”? This is the income tax credit given producers for mixing bio and petroleum fuels, which they are then free to sell abroad to other countries. The same credit which raised the price of corn sky high. What has that got to do with troubled mortgages? It just represents the enormous pork packed into this bill.
President Obama was elected by promising to bring us change. Let’s hope it is change for the better. So far it looks like more of the same Washington merry-go-round.
I TOLD YOU SO
This is a reprint of an article written last December, though it was not published until January 8. Today’s news reports that the National Bureau of Economic Research stated today that the economy reached a peak in December 2007, and has been declining since.
Now I am predicting the next six months will make the last three months look like good times, in spite of last week’s bear market rally. From last December---
It’s time to build up your cash. As I predicted earlier, foreign nationals are buying us out, lock stock and barrel. Because of the sub-prime mortgage debacle, Morgan-Stanley has sold a $5 billion stake to Chinese interests. Merrill Lynch, likewise, sold $6.2 billion equity to Singapore interests. Recently Citigroup sold a $7.5 billion interest to Middle Eastern country Abu Dhabi. These interests are selling us more in petroleum or consumer goods than we can export to them, and using the surplus of our own money to purchase our country.
We were the world’s leading producer country from the time of the Second World War to the middle 1960’s. Since then, we have become the world’s leading consumer, and it is the consumer spender who has kept our economy afloat, making up a staggering 71% of our gross domestic product. Too much of this spending has been done through plastic credit cards. For many years, the increase in home values enabled consumers to pay off staggering credit card balances through increasing their home equity debt. Now, because of the sub-prime mortgage crisis, decreasing home values largely block this method of rescue. As a result, credit card accounts which are 30 days behind has jumped 26% to $17.3 billion. Those 90 days behind have jumped 50% over one year ago. Actual defaults have risen 18% to almost $961 million, according to the SEC.
The Conference Board publishes the Consumer Confidence Index, and Leading Economic Indicators, in an effort to predict the future economy. Usually, 3 consecutive months in the negative indicates a coming recession. October and November were both negative. When the 6 months cumulative total goes below a -1%, this also indicates recession. The 6 months cumulative total for November was -1.2%. Unless Santa Claus spends himself crazy for December, the future looks grim.
Does any of this interest you, or are you more concerned about who wins “Dancing with the Stars, or who is victorious in the Super Bowl? Our forefathers established and left us the greatest country in world history. Most of us have children or grandchildren who must look to us for their legacy. Are we going to fail them? When in 2000, the US voted 46% of the eligible population, we ranked about 139th out of 171 countries. Australia voted closer to 95%.
If you don’t vote, you have no right to complain. But worse than that, you will have no place to look for economic rescue. We must return this country to its founding principles. Next year is a presidential election year. Casting an ignorant vote is as bad as not voting. You have plenty of time to do an in depth study of all the eligible candidates. I urge you to get busy.
Now I am predicting the next six months will make the last three months look like good times, in spite of last week’s bear market rally. From last December---
It’s time to build up your cash. As I predicted earlier, foreign nationals are buying us out, lock stock and barrel. Because of the sub-prime mortgage debacle, Morgan-Stanley has sold a $5 billion stake to Chinese interests. Merrill Lynch, likewise, sold $6.2 billion equity to Singapore interests. Recently Citigroup sold a $7.5 billion interest to Middle Eastern country Abu Dhabi. These interests are selling us more in petroleum or consumer goods than we can export to them, and using the surplus of our own money to purchase our country.
We were the world’s leading producer country from the time of the Second World War to the middle 1960’s. Since then, we have become the world’s leading consumer, and it is the consumer spender who has kept our economy afloat, making up a staggering 71% of our gross domestic product. Too much of this spending has been done through plastic credit cards. For many years, the increase in home values enabled consumers to pay off staggering credit card balances through increasing their home equity debt. Now, because of the sub-prime mortgage crisis, decreasing home values largely block this method of rescue. As a result, credit card accounts which are 30 days behind has jumped 26% to $17.3 billion. Those 90 days behind have jumped 50% over one year ago. Actual defaults have risen 18% to almost $961 million, according to the SEC.
The Conference Board publishes the Consumer Confidence Index, and Leading Economic Indicators, in an effort to predict the future economy. Usually, 3 consecutive months in the negative indicates a coming recession. October and November were both negative. When the 6 months cumulative total goes below a -1%, this also indicates recession. The 6 months cumulative total for November was -1.2%. Unless Santa Claus spends himself crazy for December, the future looks grim.
Does any of this interest you, or are you more concerned about who wins “Dancing with the Stars, or who is victorious in the Super Bowl? Our forefathers established and left us the greatest country in world history. Most of us have children or grandchildren who must look to us for their legacy. Are we going to fail them? When in 2000, the US voted 46% of the eligible population, we ranked about 139th out of 171 countries. Australia voted closer to 95%.
If you don’t vote, you have no right to complain. But worse than that, you will have no place to look for economic rescue. We must return this country to its founding principles. Next year is a presidential election year. Casting an ignorant vote is as bad as not voting. You have plenty of time to do an in depth study of all the eligible candidates. I urge you to get busy.
Sunday, September 21, 2008
WHEN WILL WE EVER LEARN?
“Good judgment is the result of experience, which is the result of bad judgment.”- Anon. “Those who cannot remember the past are condemned to repeat it.”-George Santayana. Nearly 80 years ago, our country entered a great depression which only World War II effectively ended; not his honor, FDR, with his alphabet social programs. In the roaring 20’s, one could buy stock on margin, by putting up only 5% of the purchase price and borrowing the difference. With stocks rising nearly that much per month, one seemed a fool not to participate. Then on October 29, 1929, Black Tuesday, it all fell apart; the result of “irrational exuberance.”
One of the lessons of that era was that banks, who are heavily regulated and who are supposed to keep our hard earned deposits safe, should be forever separated from investment houses, which are very loosely regulated and finance the stock market. The Glass-Steagall Act of 1933 established the FDIC to insure our bank deposits, and erected a brick wall between commercial banking and investment banking. There was a three week Senate filibuster before the Act finally passed, and I suspect the bank lobbyists were heavily involved in trying to stop it. Through the decades, there was growing support (from the financial industry) to repeal Glass-Steagall, and they gradually garnered help from within both political parties.
As an aside, remember the early 1980’s, and the Savings and Loan Industry. They had since the 30’s been heavily regulated, yet had been able to borrow short term, and still provide long term mortgages for homeowners. But, because of inflation, they faced borrowing short term at rates approaching 18%, while stuck with 30 year loans on the books at 6%. In a government effort to help, they were deregulated and allowed to make all kinds of commercial real estate development loans. You recall the oxymoron, “I’m from the government, and I’m here to help you.” As a result, over 1,000 Savings and Loans failed. They were absorbed by the government funded Resolution Trust Corporation, a total cost to taxpayers of over $1 trillion, including interest on bonds issued to fund the project.
Now, we return to investment banking. In December 1986, over Chairman Paul Volker’s objections, the Fed allowed Bankers Trust Co. to engage in commercial paper (unsecured credit) transactions, but only up to 5% of their revenue. The wall begins to crumble, through a supposed loophole in Section 20 of Glass-Steagall.. In March 1987, the Fed allowed Chase Manhattan Bank to engage in commercial paper, also. In August 1987, Ronald Reagan appointed Alan Greenspan, a former J. P. Morgan director, to head the Federal Reserve. In 1989, the Fed expanded the bank loophole to dealing in debt and equity securities, as well as municipal securities. Later that year, they expanded the limit to 10% of revenue. In 1990, Fed head Greenspan allowed former boss, J. P. Morgan Co., to actually underwrite securities. In 1995, Robert Rubin, formerly a Goldman-Sachs executive, who was President Clinton’s Treasury Secretary, signaled in testimony before Congress that the administration was ready to end Glass-Steagall.
In 1998, financier Sandy Weill of Travelers Insurance, convinced President Clinton, Fed head Allan Greenspan, and Treasury Secretary Robert Rubin; all to sign off on merging Travelers Insurance, Solomon-Smith Barney Investments, and Citibank into one entity in clear violation of the Glass-Steagall Act. “Unless Congress repealed Glass-Steagall,” the Fed declared, “the new entity, Citigroup, would have two years to divest itself of the insurance business.” One year later, on November 4, 1999, Clinton signed the repeal of Glass-Steagall. Citigroup spent around $100 million in lobbying efforts that year to bring it about. Shortly thereafter, Secretary Rubin, formerly of Goldman-Sachs; resigned to take a top job at the new Citigroup. According to the Center for Public Integrity, the pharmaceutical and health industry all together, has only spent $100 million per year for lobbying during the past seven years.
Then after September 11, 2001, Fed head Allan Greenspan kept the Fed funds rate at 1% interest for an abnormally long 18 months before beginning to raise it. This was the beginning of the current debacle. 1% was good for you and me who needed to borrow money, but the money men were crying, “You are killing us. Figure a way to get me 8-11% on my money and I will buy all you can produce.” The ever obliging mortgage brokers, backed by the investment banks, figured a way. Sub-prime mortgages, which would be collateralized into securities, sliced and diced and sold in pieces to banks and unwary investors.
By early in this century, one seemed a fool not to buy a house. After all, you did not have to qualify properly, and the price was going to continue to rise, right? More “irrational exuberance.”
In January of this year, there were 5 large independent investment banking houses, all of whom had invested in toxic sub-prime mortgage backed securities. Like the S & L’s of yore, they were borrowing short and lending long. Since then, Bear Stearns was picked up by J. P. Morgan Chase Bank, with $30 billion backing by the Federal Reserve. Lehman Brothers has just filed for the largest bankruptcy in US history. I am sure we heard from Japanese investors, who lost over $300 million, themselves. Merrill Lynch just sold out to Bank of America. Goldman-Sachs and Morgan-Stanley just reported quarterly earnings better than estimated, but their stock still fell 22% and 37%, respectively, before last Friday.
The sub prime problem was exacerbated because all the derivatives, such as credit default swaps, which the brokerage houses created and “swapped” with each other, and with insurance companies such as Ambac, MBIA, and even the giant AIG insurance, went bad. A “credit swap” is actually an insurance policy against mortgage backed securities defaulting because the underlying mortgages are defaulting into foreclosure. The last estimate of the total of the global swaps market in 2007 was some $42 trillion. That’s about 3 times the size of the entire US economy. Single line insurers like Ambac and MBIA formerly specialized in insuring the pay-out of municipal bonds, which very rarely fail, since municipalities can always raise taxes to pay debt. They started selling insurance on mortgage backed securities, charging low premiums because they expected the same kind of loss experience. All these mortgages will probably not fail, but because they were bundled and sold in pieces, their true value is indeterminable. When you can’t accurately price your assets, you have a major problem. This is why Paulson came up Friday with “the ultimate solution.”
One year ago, the Fed had assets of $800 billion in Treasury securities. Since then, they pledged $200 billion to the Term Securities Lending Facility, a project to provide the brokerage houses with liquidity, loans previously only made available to banks. They have rescued Fannie Mae and Freddie Mac with $100 billion each, and agreed further to buy at least $5 billion of their government backed securities. They provided $30 billion to backstop the sale of Bear-Stearns. They passed on Lehman Brothers and let it bankrupt. The result was so catastrophic, they decided to rescue insurance giant AIG, to the tune of $85 billion, in return for 79% equity in the company. Including this week’s currency swap with other central banks amounting to another $180 billion, money meant to infuse liquidity into the world economy, their balance sheet of assets is probably down to about $200 billion.
Friday, Treasury Secretary Henry Paulson, former Goldman-Sachs executive, announced further plans to save the economy. The government will now insure Money Market Funds, which pay higher interest because they are invested in commercial paper, and are also beginning to freeze up. Immediately, Fannie Mae and Freddie Mac will buy more mortgage backed securities, because the Treasury is going to buy more than $5 billion from them. Then the SEC is going to increase securities regulation, as they should have done years ago, before the debacle was allowed to begin.
Further, if Congress passes a new law Treasury is requesting, which I am sure they will; taxpayers will be funding another equivalent of the Resolution Trust Corporation to buy all those stinking mortgage backed securities, which are unpriceable. Hopefully, they will pay less than face value, because they expect to hold them to maturity, usually an average of only seven years.
Sure, they can always issue more money simply by loaning it to the government, but every time they do, the dollars in your pocket fall in value. New Fed head Ben Bernanke and Treasury Secretary Paulson are doing a good job of holding it together, but at what future cost? Unfortunately, no one in Washington agrees with me. Texas ex-Senator, Phil Gramm is co-chair for John McCain. Gramm co-wrote the bill abolishing Glass-Steagall in 1999. When asked if he would restore Glass-Steagall, candidate Barack Obama replied: “Well, no. The argument is not to go back to the regulatory framework of the 1930’s because, as I said, the financial markets have changed substantially.” Three of his top contributors just happen to be: Goldman-Sachs, J. P. Morgan, and Citigroup.
Who is getting rewarded by the bailout? The mortgage brokers got their money up front. The securities people who packaged the mortgages into securities got their money up front. The securities people who are still holding some of the paper, and the banks and investors who bought them, are getting bailed out.
The candidates will not tell you anything which they do not believe will buy your vote. FDR perfected this election method over 70 years ago. Since I am not running for President, I can suggest what really needs to be done by the next President. You won’t like hearing it, but I am saying it anyway.
First, the ceiling on Social Security tax at $102,000 must be removed. Second, the cost of the Medicare drug insurance program must be curtailed, and the tax probably needs to be raised. The Medicare fund is in worse shape than Social Security. Third, the 15% capital gains tax rate given to the managers of hedge funds who have added to this credit freeze problem must be increased. Hedge funds are largely unregulated investment pools of wealthy sophisticated people who must invest hundreds of thousands to even participate. These managers, without a requirement to invest their own capital, have been driving down the stock of financial institutions so they, themselves, can profit even more. These managers are given capital gains rates on ordinary income (even thought it is usually in the millions of dollars per year.) Why should they pay the 15% tax rate of the average garbage collector on millions of income, when the average middle income American pays 28 to 35%?
In terms of the stock market, I have got several more suggestions. There must be more transparency.
There must be more regulation. The use of options to either buy or sell certain stocks in the future at a set price must be severely restricted. The uptick rule, which the SEC removed July 6, 2007, must be restored. It stated that if you were going to sell a stock short (guaranteeing to deliver it at a given price at a future date,) you had to sell it for at least slightly more than the last recorded sale, not less. Further naked short selling must be absolutely forbidden and tightly regulated. (The rule was if you did sell a stock short for delivery in the future, you had to either already own the stock, or borrow it at interest.) With a wink of the SEC eye, sellers have been allowed to sell the future delivery of a stock at a set price, without knowing where it would come from or what it would cost. When they could not deliver, it was simply considered a “failure to deliver.” Meanwhile, a given company’s stock had been driven downward for no good reason.
I have been a voting Republican since 1956, and I am sick of the Republican Party thinking the answer to every Presidential election is just to preach cutting taxes. They are now no more concerned with cutting spending than the average Democrat. My national Republican Party has been taken over by Neo-conservatives. They are not really conservatives. They are not adverse to burgeoning Federal debt. They don’t want us to be an empire, they just want us to control every other nation. They want a larger military-industrial complex, and they are not reluctant to use it. After all, they are not usually 18 to 25 years old. They consider themselves “nation builders,” and they expect their new nations to toe their line. If you don’t know them, you need to do some investigating. Consider me a paleo-conservative. But don’t get the idea I have given up. I am just going to have to hold my nose when I vote. At the rate things are going, my vote is not going to count, anyway
Our government now belongs to the moneyed interests of this country. Until we rise up in righteous anger and demand accountability, we are due for more of the same. When is the last time YOU wrote your Congressmen and Senators and informed them you are aware of their chicanery and that you are “mad as hell and you are not going to take it anymore?” Remember, we are the boss, they are the employees! If we don’t exercise our management functions, we should not expect promising results.
One of the lessons of that era was that banks, who are heavily regulated and who are supposed to keep our hard earned deposits safe, should be forever separated from investment houses, which are very loosely regulated and finance the stock market. The Glass-Steagall Act of 1933 established the FDIC to insure our bank deposits, and erected a brick wall between commercial banking and investment banking. There was a three week Senate filibuster before the Act finally passed, and I suspect the bank lobbyists were heavily involved in trying to stop it. Through the decades, there was growing support (from the financial industry) to repeal Glass-Steagall, and they gradually garnered help from within both political parties.
As an aside, remember the early 1980’s, and the Savings and Loan Industry. They had since the 30’s been heavily regulated, yet had been able to borrow short term, and still provide long term mortgages for homeowners. But, because of inflation, they faced borrowing short term at rates approaching 18%, while stuck with 30 year loans on the books at 6%. In a government effort to help, they were deregulated and allowed to make all kinds of commercial real estate development loans. You recall the oxymoron, “I’m from the government, and I’m here to help you.” As a result, over 1,000 Savings and Loans failed. They were absorbed by the government funded Resolution Trust Corporation, a total cost to taxpayers of over $1 trillion, including interest on bonds issued to fund the project.
Now, we return to investment banking. In December 1986, over Chairman Paul Volker’s objections, the Fed allowed Bankers Trust Co. to engage in commercial paper (unsecured credit) transactions, but only up to 5% of their revenue. The wall begins to crumble, through a supposed loophole in Section 20 of Glass-Steagall.. In March 1987, the Fed allowed Chase Manhattan Bank to engage in commercial paper, also. In August 1987, Ronald Reagan appointed Alan Greenspan, a former J. P. Morgan director, to head the Federal Reserve. In 1989, the Fed expanded the bank loophole to dealing in debt and equity securities, as well as municipal securities. Later that year, they expanded the limit to 10% of revenue. In 1990, Fed head Greenspan allowed former boss, J. P. Morgan Co., to actually underwrite securities. In 1995, Robert Rubin, formerly a Goldman-Sachs executive, who was President Clinton’s Treasury Secretary, signaled in testimony before Congress that the administration was ready to end Glass-Steagall.
In 1998, financier Sandy Weill of Travelers Insurance, convinced President Clinton, Fed head Allan Greenspan, and Treasury Secretary Robert Rubin; all to sign off on merging Travelers Insurance, Solomon-Smith Barney Investments, and Citibank into one entity in clear violation of the Glass-Steagall Act. “Unless Congress repealed Glass-Steagall,” the Fed declared, “the new entity, Citigroup, would have two years to divest itself of the insurance business.” One year later, on November 4, 1999, Clinton signed the repeal of Glass-Steagall. Citigroup spent around $100 million in lobbying efforts that year to bring it about. Shortly thereafter, Secretary Rubin, formerly of Goldman-Sachs; resigned to take a top job at the new Citigroup. According to the Center for Public Integrity, the pharmaceutical and health industry all together, has only spent $100 million per year for lobbying during the past seven years.
Then after September 11, 2001, Fed head Allan Greenspan kept the Fed funds rate at 1% interest for an abnormally long 18 months before beginning to raise it. This was the beginning of the current debacle. 1% was good for you and me who needed to borrow money, but the money men were crying, “You are killing us. Figure a way to get me 8-11% on my money and I will buy all you can produce.” The ever obliging mortgage brokers, backed by the investment banks, figured a way. Sub-prime mortgages, which would be collateralized into securities, sliced and diced and sold in pieces to banks and unwary investors.
By early in this century, one seemed a fool not to buy a house. After all, you did not have to qualify properly, and the price was going to continue to rise, right? More “irrational exuberance.”
In January of this year, there were 5 large independent investment banking houses, all of whom had invested in toxic sub-prime mortgage backed securities. Like the S & L’s of yore, they were borrowing short and lending long. Since then, Bear Stearns was picked up by J. P. Morgan Chase Bank, with $30 billion backing by the Federal Reserve. Lehman Brothers has just filed for the largest bankruptcy in US history. I am sure we heard from Japanese investors, who lost over $300 million, themselves. Merrill Lynch just sold out to Bank of America. Goldman-Sachs and Morgan-Stanley just reported quarterly earnings better than estimated, but their stock still fell 22% and 37%, respectively, before last Friday.
The sub prime problem was exacerbated because all the derivatives, such as credit default swaps, which the brokerage houses created and “swapped” with each other, and with insurance companies such as Ambac, MBIA, and even the giant AIG insurance, went bad. A “credit swap” is actually an insurance policy against mortgage backed securities defaulting because the underlying mortgages are defaulting into foreclosure. The last estimate of the total of the global swaps market in 2007 was some $42 trillion. That’s about 3 times the size of the entire US economy. Single line insurers like Ambac and MBIA formerly specialized in insuring the pay-out of municipal bonds, which very rarely fail, since municipalities can always raise taxes to pay debt. They started selling insurance on mortgage backed securities, charging low premiums because they expected the same kind of loss experience. All these mortgages will probably not fail, but because they were bundled and sold in pieces, their true value is indeterminable. When you can’t accurately price your assets, you have a major problem. This is why Paulson came up Friday with “the ultimate solution.”
One year ago, the Fed had assets of $800 billion in Treasury securities. Since then, they pledged $200 billion to the Term Securities Lending Facility, a project to provide the brokerage houses with liquidity, loans previously only made available to banks. They have rescued Fannie Mae and Freddie Mac with $100 billion each, and agreed further to buy at least $5 billion of their government backed securities. They provided $30 billion to backstop the sale of Bear-Stearns. They passed on Lehman Brothers and let it bankrupt. The result was so catastrophic, they decided to rescue insurance giant AIG, to the tune of $85 billion, in return for 79% equity in the company. Including this week’s currency swap with other central banks amounting to another $180 billion, money meant to infuse liquidity into the world economy, their balance sheet of assets is probably down to about $200 billion.
Friday, Treasury Secretary Henry Paulson, former Goldman-Sachs executive, announced further plans to save the economy. The government will now insure Money Market Funds, which pay higher interest because they are invested in commercial paper, and are also beginning to freeze up. Immediately, Fannie Mae and Freddie Mac will buy more mortgage backed securities, because the Treasury is going to buy more than $5 billion from them. Then the SEC is going to increase securities regulation, as they should have done years ago, before the debacle was allowed to begin.
Further, if Congress passes a new law Treasury is requesting, which I am sure they will; taxpayers will be funding another equivalent of the Resolution Trust Corporation to buy all those stinking mortgage backed securities, which are unpriceable. Hopefully, they will pay less than face value, because they expect to hold them to maturity, usually an average of only seven years.
Sure, they can always issue more money simply by loaning it to the government, but every time they do, the dollars in your pocket fall in value. New Fed head Ben Bernanke and Treasury Secretary Paulson are doing a good job of holding it together, but at what future cost? Unfortunately, no one in Washington agrees with me. Texas ex-Senator, Phil Gramm is co-chair for John McCain. Gramm co-wrote the bill abolishing Glass-Steagall in 1999. When asked if he would restore Glass-Steagall, candidate Barack Obama replied: “Well, no. The argument is not to go back to the regulatory framework of the 1930’s because, as I said, the financial markets have changed substantially.” Three of his top contributors just happen to be: Goldman-Sachs, J. P. Morgan, and Citigroup.
Who is getting rewarded by the bailout? The mortgage brokers got their money up front. The securities people who packaged the mortgages into securities got their money up front. The securities people who are still holding some of the paper, and the banks and investors who bought them, are getting bailed out.
The candidates will not tell you anything which they do not believe will buy your vote. FDR perfected this election method over 70 years ago. Since I am not running for President, I can suggest what really needs to be done by the next President. You won’t like hearing it, but I am saying it anyway.
First, the ceiling on Social Security tax at $102,000 must be removed. Second, the cost of the Medicare drug insurance program must be curtailed, and the tax probably needs to be raised. The Medicare fund is in worse shape than Social Security. Third, the 15% capital gains tax rate given to the managers of hedge funds who have added to this credit freeze problem must be increased. Hedge funds are largely unregulated investment pools of wealthy sophisticated people who must invest hundreds of thousands to even participate. These managers, without a requirement to invest their own capital, have been driving down the stock of financial institutions so they, themselves, can profit even more. These managers are given capital gains rates on ordinary income (even thought it is usually in the millions of dollars per year.) Why should they pay the 15% tax rate of the average garbage collector on millions of income, when the average middle income American pays 28 to 35%?
In terms of the stock market, I have got several more suggestions. There must be more transparency.
There must be more regulation. The use of options to either buy or sell certain stocks in the future at a set price must be severely restricted. The uptick rule, which the SEC removed July 6, 2007, must be restored. It stated that if you were going to sell a stock short (guaranteeing to deliver it at a given price at a future date,) you had to sell it for at least slightly more than the last recorded sale, not less. Further naked short selling must be absolutely forbidden and tightly regulated. (The rule was if you did sell a stock short for delivery in the future, you had to either already own the stock, or borrow it at interest.) With a wink of the SEC eye, sellers have been allowed to sell the future delivery of a stock at a set price, without knowing where it would come from or what it would cost. When they could not deliver, it was simply considered a “failure to deliver.” Meanwhile, a given company’s stock had been driven downward for no good reason.
I have been a voting Republican since 1956, and I am sick of the Republican Party thinking the answer to every Presidential election is just to preach cutting taxes. They are now no more concerned with cutting spending than the average Democrat. My national Republican Party has been taken over by Neo-conservatives. They are not really conservatives. They are not adverse to burgeoning Federal debt. They don’t want us to be an empire, they just want us to control every other nation. They want a larger military-industrial complex, and they are not reluctant to use it. After all, they are not usually 18 to 25 years old. They consider themselves “nation builders,” and they expect their new nations to toe their line. If you don’t know them, you need to do some investigating. Consider me a paleo-conservative. But don’t get the idea I have given up. I am just going to have to hold my nose when I vote. At the rate things are going, my vote is not going to count, anyway
Our government now belongs to the moneyed interests of this country. Until we rise up in righteous anger and demand accountability, we are due for more of the same. When is the last time YOU wrote your Congressmen and Senators and informed them you are aware of their chicanery and that you are “mad as hell and you are not going to take it anymore?” Remember, we are the boss, they are the employees! If we don’t exercise our management functions, we should not expect promising results.
Thursday, June 19, 2008
BIO-DIESEL
Think About It
You have probably seen our good buddy Willie Nelson advertising his Texas bio-diesel on television. It is a blend of petroleum based diesel with plant based bio-fuel. But, as Commentator Paul Harvey says: Do you want the “rest of the story”? To me, not surprisingly, it demonstrates the fallacies of believing that worldwide free trade is a win-win for everyone.
The European Union in 2004 was complaining to the World Trade Organization that the US was subsidizing our manufacturers to allow them to compete unfavorably with European manufacturers on our exports to Europe. The WTO agreed and allowed the European Union to impose a 5% import tax on all our exports to them, and increase it 1% per month until we were in compliance. Senators Charles Grassley, (R-IA) and Max Baucus (D-MT) passed the “Jumpstart our Business Strength” (JOBS) Act which repealed the tax subsidy regime and replaced it with a bill that met WTO demands.
Here is a quote from Grassley at the time of passage. “This bill is a good solution. It’s not only the first step toward ending the Euro tax on America’s exports, but it also gives a real shot in the arm to US factories and farmers, at home and abroad. This bill was years in the making. Today’s vote was overdue, but couldn’t have been more welcome. Every day of delay means more sanctions freezing US businesses out of the European markets, and more jobs in danger. I hope the House will soon follow suit with similar legislation. We need to give permanent relief to the nation’s job creators and lift the sanctions burden from our exports.”
Hidden within the Jobs Act, Grassley inserted a “Blender’s Credit” to encourage the production of bio-fuel, which would benefit his corn-farming folks back home. At that time, I suppose, no one suspected what we were going to do to the price of cornbread, grits and cereal. The Act awards a US income tax credit of $1 per gallon on any finished bio-diesel mixture produced, but it does not have to be domestically produced. And here is the kicker. The definition is a mixture containing at least 0.1 per cent (by volume) of petroleum diesel fuel. For example, a mixture of 999 gallons of bio-fuel and 1 gallon of diesel is a bio-diesel mixture.
According to the Christian Science Monitor, a shipload of 9,000,000 gallons of Malaysian bio-fuel, typically made from their palm oil, pulls into a dock in Houston, where a shot of 9,000 gallons of petroleum diesel is blended in. The US importer now qualifies for a US tax credit of $9,000,000. He is also free to export his 9,000,000 gallons for sale to Europe, where European consumer tax credits allow him to sell above US prices. We are now supplying 20% of their bio-diesel. But, here come the Europeans again, complaining to the WTO once more about US unfair trade practices. So, you and I are helping petroleum producers with subsidies on both sides of the pond, while we have to import 80% of our fuel. Is this a great country, or what?
Fortunately, the splash-and-dash scheme has not caught on fully. Estimates are that it cost us a total of only $30 million in 2006. Then the first 4 months of 2007 saw shipments of 60 million gallons, or $60 million. According to the Wall Street Journal of April 1, 2008, it now may be costing as much as $300 million annually. You know what they say: “A million dollars here, a million dollars there, after awhile, it adds up.” But, thank goodness, our ever alert Congress has it on its radar screen. According to an anonymous member of the House Ways and Means Committee, “It’s one of the issues that’s driving closer scrutiny.
You have probably seen our good buddy Willie Nelson advertising his Texas bio-diesel on television. It is a blend of petroleum based diesel with plant based bio-fuel. But, as Commentator Paul Harvey says: Do you want the “rest of the story”? To me, not surprisingly, it demonstrates the fallacies of believing that worldwide free trade is a win-win for everyone.
The European Union in 2004 was complaining to the World Trade Organization that the US was subsidizing our manufacturers to allow them to compete unfavorably with European manufacturers on our exports to Europe. The WTO agreed and allowed the European Union to impose a 5% import tax on all our exports to them, and increase it 1% per month until we were in compliance. Senators Charles Grassley, (R-IA) and Max Baucus (D-MT) passed the “Jumpstart our Business Strength” (JOBS) Act which repealed the tax subsidy regime and replaced it with a bill that met WTO demands.
Here is a quote from Grassley at the time of passage. “This bill is a good solution. It’s not only the first step toward ending the Euro tax on America’s exports, but it also gives a real shot in the arm to US factories and farmers, at home and abroad. This bill was years in the making. Today’s vote was overdue, but couldn’t have been more welcome. Every day of delay means more sanctions freezing US businesses out of the European markets, and more jobs in danger. I hope the House will soon follow suit with similar legislation. We need to give permanent relief to the nation’s job creators and lift the sanctions burden from our exports.”
Hidden within the Jobs Act, Grassley inserted a “Blender’s Credit” to encourage the production of bio-fuel, which would benefit his corn-farming folks back home. At that time, I suppose, no one suspected what we were going to do to the price of cornbread, grits and cereal. The Act awards a US income tax credit of $1 per gallon on any finished bio-diesel mixture produced, but it does not have to be domestically produced. And here is the kicker. The definition is a mixture containing at least 0.1 per cent (by volume) of petroleum diesel fuel. For example, a mixture of 999 gallons of bio-fuel and 1 gallon of diesel is a bio-diesel mixture.
According to the Christian Science Monitor, a shipload of 9,000,000 gallons of Malaysian bio-fuel, typically made from their palm oil, pulls into a dock in Houston, where a shot of 9,000 gallons of petroleum diesel is blended in. The US importer now qualifies for a US tax credit of $9,000,000. He is also free to export his 9,000,000 gallons for sale to Europe, where European consumer tax credits allow him to sell above US prices. We are now supplying 20% of their bio-diesel. But, here come the Europeans again, complaining to the WTO once more about US unfair trade practices. So, you and I are helping petroleum producers with subsidies on both sides of the pond, while we have to import 80% of our fuel. Is this a great country, or what?
Fortunately, the splash-and-dash scheme has not caught on fully. Estimates are that it cost us a total of only $30 million in 2006. Then the first 4 months of 2007 saw shipments of 60 million gallons, or $60 million. According to the Wall Street Journal of April 1, 2008, it now may be costing as much as $300 million annually. You know what they say: “A million dollars here, a million dollars there, after awhile, it adds up.” But, thank goodness, our ever alert Congress has it on its radar screen. According to an anonymous member of the House Ways and Means Committee, “It’s one of the issues that’s driving closer scrutiny.
ETHANOL
Think About It
God help us when our Federal government tries to do the same. I wrote recently about Senator Charles Grassley (R-IA) and his Blender’s Tax Credit, hidden in the JOBS ACT to help out the corn growers in his state, and the disastrous side effects. In 2005-6, corn was averaging $2 per bushel. Now, the future’s market for corn is over $7 per bushel. Yet in 2006, the US produced only 10 billion bushels of corn, while last year it was over 13 billion bushels. But because of competition with ethanol production, the National Pork Producers Council reports that the cost to feed a pig to slaughter was $65 least year, compared to $35 the year before. We can look for a price increase of about 7.5% more on milk, pork, beef and chicken because of corn ethanol. As early as 2006, Bush was considering removing ethanol subsidies, but Congress kills the action every year.
In 2007, the US, world’s largest ethanol producer, produced 6.5 trillion gallons of ethanol from corn. The second largest producer by far was Brazil, with 5 trillion gallons made from sugar cane. Third place EU produced only 600 million gallons. Brazil produces much more than they can consume. Yet, we imported only about 189 million gallons from Brazil. They would like to ship us more, but can’t. Why? Because we charge them a 2.5% import tariff, and a secondary duty of 54 cents per gallon; supposedly to offset the blender’s credit given to the US petroleum producers who mix ethanol and petroleum. We don’t charge these tariffs to Israel, or our NAFTA buddies, or the Caribbean islands, because they can’t send us even 100 million gallons. But the US corn growers have a substantial ally in keeping tariffs against Brazil. The US sugar industry, who frowns at the precedent of doing anything to help foreign sugar producers, supports these tariffs.
The cheapest price for E85, which is 85% bio-fuel and 15% petroleum, is about $3.13 per gallon now in Georgia, nearly 25% cheaper than pure gasoline. However, you need a flex-fuel car to burn it. Tried to buy any E85 lately? With a population nearing 9 million, until recently, there were 5 stations in Georgia. I understand Protec Fuel is now opening 12 stations in metro Atlanta. In 2007, corn-growing Iowa, with a population of under 3 million, had 88 stations open. Surprise, surprise!
While ethanol is easier to produce from starch, such as in corn, it can also be produced from cellulose. While we think of cellulose as wood fiber, it is the main component of all plant cell walls, and is the most common organic compound on earth. Ethanol could be produced from corn stalks, rice straw, wood chips, even kudzu. The US Energy Department states that it takes only 0.1 btu’s of fossil energy to produce 1 btu of energy from cellulose for the pump, while it takes 0.74 btu’s to produce 1 btu from corn. The corn is almost not worth the effort. According to the Energy Department, with only modest changes in land use, we could grow 1.3 billion tons of replaceable cellulosic biomass by 2030; enough to replace 30% of our gasoline consumption.
Are the corn growers taking us to the cleaners, or what? The Iogen Corporation of Canada is already producing 1 million gallons of cellulosic ethanol annually from a plant started in 2004. And they have just received a license from Perdue Research Foundation to use genetically enhanced yeast that increases the yield by 40%. Iogen considered a second generation plant in Idaho, but backed away because of lack of support from our Energy Department. I wonder what part Grassley may have played. Whatever happened to US leadership?
While miles per gallon go down slightly with E85, power seems to be greater, because octane is higher. If there are two things Georgia can grow, it’s pine trees and kudzu. Johnny and Saxby, are you listening?
God help us when our Federal government tries to do the same. I wrote recently about Senator Charles Grassley (R-IA) and his Blender’s Tax Credit, hidden in the JOBS ACT to help out the corn growers in his state, and the disastrous side effects. In 2005-6, corn was averaging $2 per bushel. Now, the future’s market for corn is over $7 per bushel. Yet in 2006, the US produced only 10 billion bushels of corn, while last year it was over 13 billion bushels. But because of competition with ethanol production, the National Pork Producers Council reports that the cost to feed a pig to slaughter was $65 least year, compared to $35 the year before. We can look for a price increase of about 7.5% more on milk, pork, beef and chicken because of corn ethanol. As early as 2006, Bush was considering removing ethanol subsidies, but Congress kills the action every year.
In 2007, the US, world’s largest ethanol producer, produced 6.5 trillion gallons of ethanol from corn. The second largest producer by far was Brazil, with 5 trillion gallons made from sugar cane. Third place EU produced only 600 million gallons. Brazil produces much more than they can consume. Yet, we imported only about 189 million gallons from Brazil. They would like to ship us more, but can’t. Why? Because we charge them a 2.5% import tariff, and a secondary duty of 54 cents per gallon; supposedly to offset the blender’s credit given to the US petroleum producers who mix ethanol and petroleum. We don’t charge these tariffs to Israel, or our NAFTA buddies, or the Caribbean islands, because they can’t send us even 100 million gallons. But the US corn growers have a substantial ally in keeping tariffs against Brazil. The US sugar industry, who frowns at the precedent of doing anything to help foreign sugar producers, supports these tariffs.
The cheapest price for E85, which is 85% bio-fuel and 15% petroleum, is about $3.13 per gallon now in Georgia, nearly 25% cheaper than pure gasoline. However, you need a flex-fuel car to burn it. Tried to buy any E85 lately? With a population nearing 9 million, until recently, there were 5 stations in Georgia. I understand Protec Fuel is now opening 12 stations in metro Atlanta. In 2007, corn-growing Iowa, with a population of under 3 million, had 88 stations open. Surprise, surprise!
While ethanol is easier to produce from starch, such as in corn, it can also be produced from cellulose. While we think of cellulose as wood fiber, it is the main component of all plant cell walls, and is the most common organic compound on earth. Ethanol could be produced from corn stalks, rice straw, wood chips, even kudzu. The US Energy Department states that it takes only 0.1 btu’s of fossil energy to produce 1 btu of energy from cellulose for the pump, while it takes 0.74 btu’s to produce 1 btu from corn. The corn is almost not worth the effort. According to the Energy Department, with only modest changes in land use, we could grow 1.3 billion tons of replaceable cellulosic biomass by 2030; enough to replace 30% of our gasoline consumption.
Are the corn growers taking us to the cleaners, or what? The Iogen Corporation of Canada is already producing 1 million gallons of cellulosic ethanol annually from a plant started in 2004. And they have just received a license from Perdue Research Foundation to use genetically enhanced yeast that increases the yield by 40%. Iogen considered a second generation plant in Idaho, but backed away because of lack of support from our Energy Department. I wonder what part Grassley may have played. Whatever happened to US leadership?
While miles per gallon go down slightly with E85, power seems to be greater, because octane is higher. If there are two things Georgia can grow, it’s pine trees and kudzu. Johnny and Saxby, are you listening?
OIL DEPLETION
THINK ABOUT IT
If you read the Atlanta Journal, you may have seen recent full page ads paid for by the oil industry, dissecting the internal costs of a gallon of gas; which is now around $4.00 retail. According to the oil industry, they point out that around 73% of the cost of a gallon is for crude oil, the price of which is set by OPEC. This much of the story is true. What remains unsaid is how much of that crude is produced by our domestic oil companies for their own use, in their own production. According to money.cnn.com, our biggest company Exxon, produced around 44% of the oil they sold, and smaller Chevron, produced 48% of the oil they sold. While it is true that it may cost $5-7 per barrel to pump crude, and the government is looking for taxes; that still leaves a big piece for profit…Exxon made over $40 billion last year.
Geologist M. K. Hubbert had predicted US “peak oil” by 1970 over 50 years ago. What he said was that the crude supply was not everlasting and would run out. Truth is, he was right. Our highest internal production was about 1971, just before the last energy crisis. We have been decreasing since, and actually produced less oil domestically in 2006, than we did in 1950. But again, what is unsaid is how little our producers may be trying to increase production, while gaining favorable tax treatment because of it.
As early as 1913, they had convinced the government that oil would probably run out, and that they deserved an oil depletion allowance deduction on taxes amounting to 5% of sales. By 1926, this was increased to 27.5% of production. In 1976, Jimmy Carter managed to restrict this to only independent companies which don’t import or refine oil. But to make up for this, the larger companies were then given an intangible drilling cost deduction, 100% the first year, and tangible drilling cost deduction, split over 7 years.
Listen to a conversation from ExxonMobil’s recent presentation to financial analysts in New York last March. Halfway through the presentation, they flashed a chart showing production flat through 2012. According to Business Week, the first question was, “Why are you not showing any growth in production?” The answer of Chairman Rex Tillerson:
“We don’t start with a volume target and then work backwards,” he said. Instead, his team examines the available investment opportunities, figures out what prices they’ll likely get for that output down the road and places its bets accordingly. “It really goes back to what is an acceptable investment return for us.” Tillerson said. In other words, producing more barrels just to help consumers is not part of the company’s calculations. Apparently that acceptable return is 32% on capital, because that is what they reported last year.
I never thought I would agree with Hillary Clinton on anything, but if our oil companies are not enjoying “windfall profits”, they cannot be enjoyed. It’s time for them to pay the piper. Yes, I know that as individual investors, you and I probably own some oil stocks, but that is beside the point.
Lastly, we should let our political leaders in both parties know we are disgusted with their inattention to this crisis which was predicted 50 years ago by a respected geologist.Had we been working on solving the crisis with determination, it would have been solved years ago, but it seems it takes financial Armageddon to get Washington’s attention.
If you read the Atlanta Journal, you may have seen recent full page ads paid for by the oil industry, dissecting the internal costs of a gallon of gas; which is now around $4.00 retail. According to the oil industry, they point out that around 73% of the cost of a gallon is for crude oil, the price of which is set by OPEC. This much of the story is true. What remains unsaid is how much of that crude is produced by our domestic oil companies for their own use, in their own production. According to money.cnn.com, our biggest company Exxon, produced around 44% of the oil they sold, and smaller Chevron, produced 48% of the oil they sold. While it is true that it may cost $5-7 per barrel to pump crude, and the government is looking for taxes; that still leaves a big piece for profit…Exxon made over $40 billion last year.
Geologist M. K. Hubbert had predicted US “peak oil” by 1970 over 50 years ago. What he said was that the crude supply was not everlasting and would run out. Truth is, he was right. Our highest internal production was about 1971, just before the last energy crisis. We have been decreasing since, and actually produced less oil domestically in 2006, than we did in 1950. But again, what is unsaid is how little our producers may be trying to increase production, while gaining favorable tax treatment because of it.
As early as 1913, they had convinced the government that oil would probably run out, and that they deserved an oil depletion allowance deduction on taxes amounting to 5% of sales. By 1926, this was increased to 27.5% of production. In 1976, Jimmy Carter managed to restrict this to only independent companies which don’t import or refine oil. But to make up for this, the larger companies were then given an intangible drilling cost deduction, 100% the first year, and tangible drilling cost deduction, split over 7 years.
Listen to a conversation from ExxonMobil’s recent presentation to financial analysts in New York last March. Halfway through the presentation, they flashed a chart showing production flat through 2012. According to Business Week, the first question was, “Why are you not showing any growth in production?” The answer of Chairman Rex Tillerson:
“We don’t start with a volume target and then work backwards,” he said. Instead, his team examines the available investment opportunities, figures out what prices they’ll likely get for that output down the road and places its bets accordingly. “It really goes back to what is an acceptable investment return for us.” Tillerson said. In other words, producing more barrels just to help consumers is not part of the company’s calculations. Apparently that acceptable return is 32% on capital, because that is what they reported last year.
I never thought I would agree with Hillary Clinton on anything, but if our oil companies are not enjoying “windfall profits”, they cannot be enjoyed. It’s time for them to pay the piper. Yes, I know that as individual investors, you and I probably own some oil stocks, but that is beside the point.
Lastly, we should let our political leaders in both parties know we are disgusted with their inattention to this crisis which was predicted 50 years ago by a respected geologist.Had we been working on solving the crisis with determination, it would have been solved years ago, but it seems it takes financial Armageddon to get Washington’s attention.
OIL RESERVES
Think About It
Aggravated that the price of gasoline is running around $3.50 per gallon and an average fill-up is above $50? The threat of a global recession brought crude oil down from $100, to about $90 a barrel for a while, but the dollar’s collapse has pushed it back to $117. However, we need to realize the problem is much greater than just price gouging by producers. The United States needs to invest more money in becoming energy independent, and less on trying to establish democracies around the world.
In the 70’s, when our Alaska slope oil was discovered, we had 39 billion barrels of US oil reserve un-pumped, but by 2006, we were down to 21 billion barrels of reserve. In 1970, we produced an annual total of 3.5 billion barrels; while in 2006, we produced a total of only 1.8 billion barrels; so in 36 years, our internal production went down by 50%. At the same time our consumption went up to 7.3 billion barrels annually. The net difference, 5.5 billion barrels annually, was imported. We seemed to have a policy of wanting to sit on our oil, as long as we could buy worldwide. Apparently someone had conjectured that the world barrel price would never surpass the $30-$50 range. It costs us something like $10 a barrel to pump oil out of the ground. According to the US Department of Energy, our 2007 oil consumption was predicted to be 20.9 million barrels per day, while production would fall to 5.1 million barrels per day. That means our consumption is now 4 times our production, and yet we still have only about 12 years of known domestic reserve production left under our soil. What then? While protecting the environment, which we can do, it is extremely essential we start to drill in the Arctic National Wildlife Refuge, and in all known US coastal resources.
But even that is not enough to achieve long time independence. Fortunately, the US has the largest known concentration of oil shale in the world, 2.5 trillion potential barrels, enough to meet our current internal demands for 110 years. Unfortunately, oil from shale currently must be produced by methods other than drilling and pumping, and is much more expensive. There is current research being done on using carbon dioxide, of which we produce too much, as a catalyst to release the oil more efficiently. Also being studied is a method of freezing a donut ring in the earth, within which steam is pumped under high pressure, helping release the oil with less danger to the environment. It is called In-situ conversion process, or ICP. If we direct the time, money and talent to this project that we invested in a moon landing, instead of a new moon landing, we could probably succeed within 10 years, as we did before.
Our good neighbor, Canada, which is actually our major single source of petroleum imports, (6.5 billion barrels annually) has one of the largest world deposits of oil sand (tarry sand), 265 billion barrels. Canada, our ally, and Venezuela, our antagonist, each control about 1/3 of the world supply of oil sands. Oil sand is much less expensive to convert that oil shale. To put it into perspective, Canada now ranks 3rd in worldwide oil production, and has 174 billion barrels of recoverable oil in oil sands, while Saudi Arabia has only 260 billion barrels of traditional crude oil reserve.
What is Congress’ solution? In December, they passed legislation mandating that auto manufacturers increase their Corporate Average Fuel Economy (CAFÉ) standards to 35 mpg by 2020. This means that the average mileage of all the cars they offer must be 35 mpg. Don’t you wish you could solve all your own problems by ordering some one else to engineer a quick fix? It is high time that we citizens educate ourselves to our nation’s problems and demand that our Congress address them with a righteous determination to solve them proficiently.
Aggravated that the price of gasoline is running around $3.50 per gallon and an average fill-up is above $50? The threat of a global recession brought crude oil down from $100, to about $90 a barrel for a while, but the dollar’s collapse has pushed it back to $117. However, we need to realize the problem is much greater than just price gouging by producers. The United States needs to invest more money in becoming energy independent, and less on trying to establish democracies around the world.
In the 70’s, when our Alaska slope oil was discovered, we had 39 billion barrels of US oil reserve un-pumped, but by 2006, we were down to 21 billion barrels of reserve. In 1970, we produced an annual total of 3.5 billion barrels; while in 2006, we produced a total of only 1.8 billion barrels; so in 36 years, our internal production went down by 50%. At the same time our consumption went up to 7.3 billion barrels annually. The net difference, 5.5 billion barrels annually, was imported. We seemed to have a policy of wanting to sit on our oil, as long as we could buy worldwide. Apparently someone had conjectured that the world barrel price would never surpass the $30-$50 range. It costs us something like $10 a barrel to pump oil out of the ground. According to the US Department of Energy, our 2007 oil consumption was predicted to be 20.9 million barrels per day, while production would fall to 5.1 million barrels per day. That means our consumption is now 4 times our production, and yet we still have only about 12 years of known domestic reserve production left under our soil. What then? While protecting the environment, which we can do, it is extremely essential we start to drill in the Arctic National Wildlife Refuge, and in all known US coastal resources.
But even that is not enough to achieve long time independence. Fortunately, the US has the largest known concentration of oil shale in the world, 2.5 trillion potential barrels, enough to meet our current internal demands for 110 years. Unfortunately, oil from shale currently must be produced by methods other than drilling and pumping, and is much more expensive. There is current research being done on using carbon dioxide, of which we produce too much, as a catalyst to release the oil more efficiently. Also being studied is a method of freezing a donut ring in the earth, within which steam is pumped under high pressure, helping release the oil with less danger to the environment. It is called In-situ conversion process, or ICP. If we direct the time, money and talent to this project that we invested in a moon landing, instead of a new moon landing, we could probably succeed within 10 years, as we did before.
Our good neighbor, Canada, which is actually our major single source of petroleum imports, (6.5 billion barrels annually) has one of the largest world deposits of oil sand (tarry sand), 265 billion barrels. Canada, our ally, and Venezuela, our antagonist, each control about 1/3 of the world supply of oil sands. Oil sand is much less expensive to convert that oil shale. To put it into perspective, Canada now ranks 3rd in worldwide oil production, and has 174 billion barrels of recoverable oil in oil sands, while Saudi Arabia has only 260 billion barrels of traditional crude oil reserve.
What is Congress’ solution? In December, they passed legislation mandating that auto manufacturers increase their Corporate Average Fuel Economy (CAFÉ) standards to 35 mpg by 2020. This means that the average mileage of all the cars they offer must be 35 mpg. Don’t you wish you could solve all your own problems by ordering some one else to engineer a quick fix? It is high time that we citizens educate ourselves to our nation’s problems and demand that our Congress address them with a righteous determination to solve them proficiently.
Tuesday, March 11, 2008
BANKING'S ORIGINS
Think About It
“Give me control of a nation’s money and I care not who makes the laws,” a quote attributed to Meyer Amschel Rothschild, founder of the European banking dynasty. To see how banking developed, we need to go back beyond the birth of Jesus Christ. As civilization developed, feudal lords, or seigniors, were the first to assert power over others who became their serfs. At that time, all commodity production was generally kept within the seigniorial domains. About 586 bc, Nebuchadnezzar of Babylon conquered Judah, and as a result the Jewish inhabitants were dispersed throughout the world. This became known as the diaspora, and 11 of the 12 tribes of Israel were said to have lost their identity as they assimilated.
By the time of Christ, import of Oriental goods: spices, silk, etc., was making its way into the Middle East, and eventually Western Europe. By the middle ages, the Orient was interested in acquiring English woolen, Venetian salt, copper from Belgium, etc. The original initiative in this trade belonged to the Jews of the diaspora, who became major traders. But as local economies gradually developed, so did the growth of local artisans, the first middle class. This economic development eventually destroyed the commercial function of the Jews, as the artisans began to do their own trading. By the time of the Crusades, the will of the Christians to carve their own road to the Orient, led to persecution of both Jews and Muslims. As the artisans developed guilds to foster their crafts, they excluded Jews from membership. Old Testament law prohibits a Jew from lending to another Jew with interest, but it does not prohibit lending to a gentile with interest. Thus many of the Jews, excluded from trading and artisanship, became lenders of money. They loaned to Lords for luxuries and war; they loaned to artisans and peasants to pay their taxes and rents. The rates were extremely high.
In 1743, Amschel Moses Bauer, father of the author quoted above, was a goldsmith in Frankfurt, Germany. By now the Jews had developed their own guilds for their artisans. His sign was a Roman eagle on a red shield. The German word for red shield is “Rothschild”, and he eventually changed his surname. Goldsmiths kept other peoples gold in more secure surroundings. They issued the owners gold receipts which became useful as a substitute for gold, and people soon accepted them as currency. Then, the goldsmiths realized they could rather safely “lend” gold receipts at interest for more gold than they had on hand, and fractional reserve banking was begun.
Meyer Rothschild was an even greater financial intellect than his father, and he in turn had 5 sons, who he instructed in the secret techniques of money creation and manipulation. His son, Amschel II, was to stay in Frankfurt; but he sent the other 4 to the financial capitals in Vienna, London, Naples and Paris. They learned they could be successful by lending to both sides carrying on a common war, and they learned that prior knowledge of breaking world conditions could help make a fortune. Thus, they developed an intelligence network long before our CIA.
In 1815, Napoleon wanted to control Europe. Only British commander Wellington stood in his way, at Waterloo, in Belgium. Meyer’s son, Nathan, ran the London banking operations. He had loaned enormous amounts to Britain, backed by their bonds. If Napoleon won, they were worthless. But his spy rushed to him with the knowledge that Wellington would win. When the exchange opened, Nathan nodded to his trader to sell English bonds. “He knows,” other traders began to shout, “Wellington has lost.” Shortly a half million in bonds was dumped onto the market, with prices falling down to 5% of worth. Suddenly, Rothschild began to buy bonds, and before his colleagues realized their duping, Rothschild had increased his wealth 20 fold, buying English bonds back at 5 cents on the dollar.
“Give me control of a nation’s money and I care not who makes the laws,” a quote attributed to Meyer Amschel Rothschild, founder of the European banking dynasty. To see how banking developed, we need to go back beyond the birth of Jesus Christ. As civilization developed, feudal lords, or seigniors, were the first to assert power over others who became their serfs. At that time, all commodity production was generally kept within the seigniorial domains. About 586 bc, Nebuchadnezzar of Babylon conquered Judah, and as a result the Jewish inhabitants were dispersed throughout the world. This became known as the diaspora, and 11 of the 12 tribes of Israel were said to have lost their identity as they assimilated.
By the time of Christ, import of Oriental goods: spices, silk, etc., was making its way into the Middle East, and eventually Western Europe. By the middle ages, the Orient was interested in acquiring English woolen, Venetian salt, copper from Belgium, etc. The original initiative in this trade belonged to the Jews of the diaspora, who became major traders. But as local economies gradually developed, so did the growth of local artisans, the first middle class. This economic development eventually destroyed the commercial function of the Jews, as the artisans began to do their own trading. By the time of the Crusades, the will of the Christians to carve their own road to the Orient, led to persecution of both Jews and Muslims. As the artisans developed guilds to foster their crafts, they excluded Jews from membership. Old Testament law prohibits a Jew from lending to another Jew with interest, but it does not prohibit lending to a gentile with interest. Thus many of the Jews, excluded from trading and artisanship, became lenders of money. They loaned to Lords for luxuries and war; they loaned to artisans and peasants to pay their taxes and rents. The rates were extremely high.
In 1743, Amschel Moses Bauer, father of the author quoted above, was a goldsmith in Frankfurt, Germany. By now the Jews had developed their own guilds for their artisans. His sign was a Roman eagle on a red shield. The German word for red shield is “Rothschild”, and he eventually changed his surname. Goldsmiths kept other peoples gold in more secure surroundings. They issued the owners gold receipts which became useful as a substitute for gold, and people soon accepted them as currency. Then, the goldsmiths realized they could rather safely “lend” gold receipts at interest for more gold than they had on hand, and fractional reserve banking was begun.
Meyer Rothschild was an even greater financial intellect than his father, and he in turn had 5 sons, who he instructed in the secret techniques of money creation and manipulation. His son, Amschel II, was to stay in Frankfurt; but he sent the other 4 to the financial capitals in Vienna, London, Naples and Paris. They learned they could be successful by lending to both sides carrying on a common war, and they learned that prior knowledge of breaking world conditions could help make a fortune. Thus, they developed an intelligence network long before our CIA.
In 1815, Napoleon wanted to control Europe. Only British commander Wellington stood in his way, at Waterloo, in Belgium. Meyer’s son, Nathan, ran the London banking operations. He had loaned enormous amounts to Britain, backed by their bonds. If Napoleon won, they were worthless. But his spy rushed to him with the knowledge that Wellington would win. When the exchange opened, Nathan nodded to his trader to sell English bonds. “He knows,” other traders began to shout, “Wellington has lost.” Shortly a half million in bonds was dumped onto the market, with prices falling down to 5% of worth. Suddenly, Rothschild began to buy bonds, and before his colleagues realized their duping, Rothschild had increased his wealth 20 fold, buying English bonds back at 5 cents on the dollar.
NAFTA SUPERHIGHWAY
Think about It
The Council on Foreign Relations describes itself as a non-partisan and independent membership organization promoting understanding of foreign policy and America’s role in the world. I describe it as an elitist, invitation only organization dedicated to bringing about a one world economy, to the detriment of the sovereignty of the United States. It was founded in 1921 by Col. Thomas House, alter ego to Woodrow Wilson in his White House, and protégé of the Rockefeller financiers. While most of our recent Presidents have been members, I find it interesting that all its actual meeting records are sealed from public view for 25 years after inception.
In 2006, Dr. Robert Pastor, Vice-chair of CFR’s Independent Task Force on the Future of North America (ITF)), appeared before the US Senate Committee on Foreign Relations (no connection to CFR) to call for nominally erasing all US Borders and a merger of the US, Canada and Mexico in a North American Union running from Prudhoe Bay, Alaska to Guatemala. “Instead of stopping North Americans on the borders,” he said, “we ought to provide them with a secure, biometric Border Pass that would ease transit across our border like an E-Z pass permits our cars to speed through tolls.” Such a move is underway in what some people say is a NAFTA superhighway, which would run from the Mexican port city of Lazaro Cardenas, through Kansas City, onward through Duluth, Minnesota to Canada. Other people would tell you such an idea does not exist.
What does surely exist is a quasi-government organization called “Security and Prosperity Partnership of North America (SPP) launched in Waco, TX in 2005 by George W. Bush, Vicente Fox of Mexico, and Paul Martin of Canada. Because it is quasi-government, it is somewhat opaque and does not require the sanction of our Congress. Speaking in 2002, Fox said, “Our long range objective is to establish with the United States…an ensemble of connections and institutions similar to those created by the European Union, with the goal of attending to future themes as important as…the freedom of movement of capital, goods, services and persons. The new framework we wish to construct is inspired in the example of the European Union.”
What also surely exist are plans for the Trans-Texas Corridor (TTC). Governor Rick Perry of Texas has signed a $1.3 billion contract with Cintra, SA, a foreign company listed on the Madrid Stock exchange, which already operates US toll roads known as the Chicago Skyway and the Indiana Toll Road. TTC will be operated by Cintra, SA as a toll road, in partnership with Zachry Construction Co. of San Antonio. Is this the first leg of the NAFTA superhighway?
What also surely exists is Kansas City SmartPort, Inc., an investor based organization supported by the public and private sector to create the key hub on the NAFTA superhighway. Their brochure states, “For those who live in Kansas City, the idea of receiving containers nonstop from the Far East by way of Mexico may sound unlikely, but later this month that seemingly far-fetched notion will become a reality.” In 2005, Kansas City signed a cooperative pact with representatives from the Mexican State of Michoacan and its port city of Lazaro Cardenas; to increase cargo volume between the two cities. According to author Jerome Corsi, container ships from China would unload at Lazaro Cardenas, and Mexican drivers would speed their cargo on the Fox-Bush autobahn directly to the first customs inspection terminal at Kansas City; without US customs or US workers being theretofore involved. The freight would then fan out across the US and Canada.
According to economist and researcher Miguel Pickard, the aforementioned Dr. Pastor of the ITF has since met 3 times in Toronto, New York and Monterrey, with foreign representatives. The 3 called for a unified North American Border Action Plan (i.e. open borders). The 3 then signed close to 300 regulations, which are intended as a substitute for any treaty, which the US Senate would need to approve.
Do you really care? .
The Council on Foreign Relations describes itself as a non-partisan and independent membership organization promoting understanding of foreign policy and America’s role in the world. I describe it as an elitist, invitation only organization dedicated to bringing about a one world economy, to the detriment of the sovereignty of the United States. It was founded in 1921 by Col. Thomas House, alter ego to Woodrow Wilson in his White House, and protégé of the Rockefeller financiers. While most of our recent Presidents have been members, I find it interesting that all its actual meeting records are sealed from public view for 25 years after inception.
In 2006, Dr. Robert Pastor, Vice-chair of CFR’s Independent Task Force on the Future of North America (ITF)), appeared before the US Senate Committee on Foreign Relations (no connection to CFR) to call for nominally erasing all US Borders and a merger of the US, Canada and Mexico in a North American Union running from Prudhoe Bay, Alaska to Guatemala. “Instead of stopping North Americans on the borders,” he said, “we ought to provide them with a secure, biometric Border Pass that would ease transit across our border like an E-Z pass permits our cars to speed through tolls.” Such a move is underway in what some people say is a NAFTA superhighway, which would run from the Mexican port city of Lazaro Cardenas, through Kansas City, onward through Duluth, Minnesota to Canada. Other people would tell you such an idea does not exist.
What does surely exist is a quasi-government organization called “Security and Prosperity Partnership of North America (SPP) launched in Waco, TX in 2005 by George W. Bush, Vicente Fox of Mexico, and Paul Martin of Canada. Because it is quasi-government, it is somewhat opaque and does not require the sanction of our Congress. Speaking in 2002, Fox said, “Our long range objective is to establish with the United States…an ensemble of connections and institutions similar to those created by the European Union, with the goal of attending to future themes as important as…the freedom of movement of capital, goods, services and persons. The new framework we wish to construct is inspired in the example of the European Union.”
What also surely exist are plans for the Trans-Texas Corridor (TTC). Governor Rick Perry of Texas has signed a $1.3 billion contract with Cintra, SA, a foreign company listed on the Madrid Stock exchange, which already operates US toll roads known as the Chicago Skyway and the Indiana Toll Road. TTC will be operated by Cintra, SA as a toll road, in partnership with Zachry Construction Co. of San Antonio. Is this the first leg of the NAFTA superhighway?
What also surely exists is Kansas City SmartPort, Inc., an investor based organization supported by the public and private sector to create the key hub on the NAFTA superhighway. Their brochure states, “For those who live in Kansas City, the idea of receiving containers nonstop from the Far East by way of Mexico may sound unlikely, but later this month that seemingly far-fetched notion will become a reality.” In 2005, Kansas City signed a cooperative pact with representatives from the Mexican State of Michoacan and its port city of Lazaro Cardenas; to increase cargo volume between the two cities. According to author Jerome Corsi, container ships from China would unload at Lazaro Cardenas, and Mexican drivers would speed their cargo on the Fox-Bush autobahn directly to the first customs inspection terminal at Kansas City; without US customs or US workers being theretofore involved. The freight would then fan out across the US and Canada.
According to economist and researcher Miguel Pickard, the aforementioned Dr. Pastor of the ITF has since met 3 times in Toronto, New York and Monterrey, with foreign representatives. The 3 called for a unified North American Border Action Plan (i.e. open borders). The 3 then signed close to 300 regulations, which are intended as a substitute for any treaty, which the US Senate would need to approve.
Do you really care? .
Friday, February 15, 2008
SOVEREIGN WEALTH FUNDS
Think About It
Let’s talk about CFIUS (pronounced sifius). No it is not a sexually transmitted disease. It is a committee that is supposed to protect your national interests---The Committee on Foreign Investment in the United States. Chaired by the Secretary of the Treasury, it includes members from Defense, State, Commerce and Homeland Security. Started by President Ford, its objective is to approve or disapprove the acquisition of US companies by foreigners. Companies proposing to be acquired by foreigners are supposed to voluntarily notify CFIUS, but CFIUS has the power to review any of which they become aware. The problem is, they have not seen many foreign acquisitions which they did not like.
Remember 2006, when Dubai Ports World proposed to buy P & O, a British company which was the 4th largest in the world, and operated at least 6 United States Ports? This transaction had already been vetted and approved by CFIUS when it became public knowledge. There was such a national uproar that our ever alert Congressmen and women decided to jump into action. On February 22, President Bush threatened to veto any action by Congress to block the deal. Up until then, he had not used his veto even once. On February 23, DP World volunteered to postpone its takeover while President Bush tried to convince lawmakers the deal involved no risk. On March 9, DP World said it would transfer its operations to a “US owned entity” after Congress told Bush the deal was dead on Capitol Hill. On March 16, the House added provisions to an appropriations bill to stop the sale. The Senate cut the provisions, and the bill was finally approved by both houses without any prohibitions. On July 18, 2006, Congressman John Murtha (D-PA) pointed out that our free trade agreement with the nation of Oman would allow Dubai to set up an Oman subsidiary and sue for compensation under free trade if such an Oman/Dubai deal was blocked. No one contradicted him. On December 11, Dubai finally reported they were selling the US port operations to American International Group’s asset management division. Hopefully it happened. You can’t prove it by me.
I point all this out to bring up a discussion of Sovereign Wealth Funds. These are cash asset funds actually owned by the governments of foreign countries, not by foreign private investors. As long as we have had US Hedge Funds, their assets amount to only $1.7 trillion. But these sovereign government directed funds have already grown to $2.8 trillion. Our own Morgan-Stanley brokerage firm predicts such funds will reach $12 trillion by the year 2015; almost the size of our total economy. In size of assets, the first 6 are the United Arab Emirates, Singapore, Norway, Kuwait, Russia and China. And you wonder where all our US dollars are going? Since May, 2007, over $20 billion of our trade deficit came back through foreigners to rescue our biggest Wall Street brokers, by buying equity ownership.
There are free-traders on both sides of the aisle in our Congress who don’t care what smell money has, as long as its color is green. I repeat my charge---we are being sold out, lock, stock and barrel, and they are using our own money to buy us. Because we are no longer a producer, and because our insatiable energy demand exceeds our domestic supply, we are their willing victims. This all started about 30 years ago, when Japan, flush with cash, began to buy up some of our prized real estate. Now, foreigners are not just buying real estate, they are buying our domestic corporations. Some day, we are going to wake up and realize that we are the vassals of foreigners.
Senator Evan Bayh (D-IN) rightly warns that when Sovereign funds approach the size of the entire American economy in a few years, the lack of regulation is a huge risk this country cannot continue to run. Sovereign nations have interests other than maximizing profits, and we must promulgate rules to protect our own self-interests.
Let’s talk about CFIUS (pronounced sifius). No it is not a sexually transmitted disease. It is a committee that is supposed to protect your national interests---The Committee on Foreign Investment in the United States. Chaired by the Secretary of the Treasury, it includes members from Defense, State, Commerce and Homeland Security. Started by President Ford, its objective is to approve or disapprove the acquisition of US companies by foreigners. Companies proposing to be acquired by foreigners are supposed to voluntarily notify CFIUS, but CFIUS has the power to review any of which they become aware. The problem is, they have not seen many foreign acquisitions which they did not like.
Remember 2006, when Dubai Ports World proposed to buy P & O, a British company which was the 4th largest in the world, and operated at least 6 United States Ports? This transaction had already been vetted and approved by CFIUS when it became public knowledge. There was such a national uproar that our ever alert Congressmen and women decided to jump into action. On February 22, President Bush threatened to veto any action by Congress to block the deal. Up until then, he had not used his veto even once. On February 23, DP World volunteered to postpone its takeover while President Bush tried to convince lawmakers the deal involved no risk. On March 9, DP World said it would transfer its operations to a “US owned entity” after Congress told Bush the deal was dead on Capitol Hill. On March 16, the House added provisions to an appropriations bill to stop the sale. The Senate cut the provisions, and the bill was finally approved by both houses without any prohibitions. On July 18, 2006, Congressman John Murtha (D-PA) pointed out that our free trade agreement with the nation of Oman would allow Dubai to set up an Oman subsidiary and sue for compensation under free trade if such an Oman/Dubai deal was blocked. No one contradicted him. On December 11, Dubai finally reported they were selling the US port operations to American International Group’s asset management division. Hopefully it happened. You can’t prove it by me.
I point all this out to bring up a discussion of Sovereign Wealth Funds. These are cash asset funds actually owned by the governments of foreign countries, not by foreign private investors. As long as we have had US Hedge Funds, their assets amount to only $1.7 trillion. But these sovereign government directed funds have already grown to $2.8 trillion. Our own Morgan-Stanley brokerage firm predicts such funds will reach $12 trillion by the year 2015; almost the size of our total economy. In size of assets, the first 6 are the United Arab Emirates, Singapore, Norway, Kuwait, Russia and China. And you wonder where all our US dollars are going? Since May, 2007, over $20 billion of our trade deficit came back through foreigners to rescue our biggest Wall Street brokers, by buying equity ownership.
There are free-traders on both sides of the aisle in our Congress who don’t care what smell money has, as long as its color is green. I repeat my charge---we are being sold out, lock, stock and barrel, and they are using our own money to buy us. Because we are no longer a producer, and because our insatiable energy demand exceeds our domestic supply, we are their willing victims. This all started about 30 years ago, when Japan, flush with cash, began to buy up some of our prized real estate. Now, foreigners are not just buying real estate, they are buying our domestic corporations. Some day, we are going to wake up and realize that we are the vassals of foreigners.
Senator Evan Bayh (D-IN) rightly warns that when Sovereign funds approach the size of the entire American economy in a few years, the lack of regulation is a huge risk this country cannot continue to run. Sovereign nations have interests other than maximizing profits, and we must promulgate rules to protect our own self-interests.
Thursday, February 14, 2008
ECONOMICS
Think About It
To paraphrase Charles Dickens: “It is the best of times, it is the worst of times.” Last year, our stock market reached an all time high, while our dollar has reached a new low against the Euro, which now costs $1.46 American. Our bull market, which is down 8% year to date, is effectively supported by foreigners, who are buying us out, lock, stock and barrel. According to the U S Treasury, net overall capital inflows into the United States are rising over $100 Billion per month, with corporate bond and equity purchases driving foreign investments to a record high. Meanwhile our Federal debt is growing nearly $1.5 billion per day. In July, the Treasury Secretary asked Congress to raise the debt limit to $ 9.82 trillion, as I had predicted months ago. This is the fifth raise of the Bush administration. The result is that we have now become dependent on foreigners to buy our corporate stock and underwrite our debt.
Using 1985 as a base, outside world holding of U. S. financial assets has increased from $1 Trillion to $13 Trillion today. Worldwide, the dollar is considered extremely cheap, thanks to the Federal Reserve, which has seriously inflated the currency. As noted before, the Fed has even quit publishing M3, which is the most accurate measure of inflation. (You can keep up with an estimated M3 by going to www.shadowstats.com.) The downside of this is that the real value of our wealth in dollars has fallen dramatically. Yet, we are in a tenuous position. If we move to strengthen the dollar, it will likely scare away some of this foreign inflow of capital.
Now, the BLS January 2008 unemployment report shows the U S economy is slowing. Payroll employment has lost 17,000 jobs over the past month. Unemployment stands at 4.9%. And remember, it is consumer spending which now accounts for nearly 70% of our total output of goods and services; while only 60 years ago, we were the leading producer for the world. But consumer debt is reaching an all time high. Consumers have been using borrowed home equity, and are nearly spent out. Now home values have been falling for the past 3 months, and the sub-prime mortgage debacle is still growing.
The Clinton administration changed the criteria for calculating inflation, and the Bush administration heartily endorsed it and followed suit. While government figures show inflation at some 2%, it is under the old formula more like 6%. Why? With a low inflation rate reflected in the CPI, our U S government saves billions of dollars on interest and Social Security payments. Meanwhile, we, as citizens, are left to deal with the real inflation.
At the same time, foreign central banks, corporations and individuals are diversifying their cash reserves out of the dollar and into the Euro. This adds to the dollar’s decline. Now certain oil producers are demanding payment in Euros. We are no longer universally recognized as the world’s reserve currency, a position we had held since World War II. This drains our diplomatic, economic and financial power.
Things can’t be fixed overnight. It will take real fiscal prudence and a lot of belt tightening on the part of everyone, first and foremost our government. There will be a Presidential election next year, with the largest number of potential candidates in recent history. Don’t fall for the man or woman who promises you more out of your government. It is an outright lie which they cannot deliver, and will cost you directly in your pocketbook. Look, instead to the man or woman who acknowledges the government is not our daddy, and is not totally responsible for our upkeep and wellbeing. We of all people deserve to be the most hated if we leave this burden upon our children and grandchildren, who for the most part look up to and respect us. We must develop and demonstrate the courage of our founding fathers.
To paraphrase Charles Dickens: “It is the best of times, it is the worst of times.” Last year, our stock market reached an all time high, while our dollar has reached a new low against the Euro, which now costs $1.46 American. Our bull market, which is down 8% year to date, is effectively supported by foreigners, who are buying us out, lock, stock and barrel. According to the U S Treasury, net overall capital inflows into the United States are rising over $100 Billion per month, with corporate bond and equity purchases driving foreign investments to a record high. Meanwhile our Federal debt is growing nearly $1.5 billion per day. In July, the Treasury Secretary asked Congress to raise the debt limit to $ 9.82 trillion, as I had predicted months ago. This is the fifth raise of the Bush administration. The result is that we have now become dependent on foreigners to buy our corporate stock and underwrite our debt.
Using 1985 as a base, outside world holding of U. S. financial assets has increased from $1 Trillion to $13 Trillion today. Worldwide, the dollar is considered extremely cheap, thanks to the Federal Reserve, which has seriously inflated the currency. As noted before, the Fed has even quit publishing M3, which is the most accurate measure of inflation. (You can keep up with an estimated M3 by going to www.shadowstats.com.) The downside of this is that the real value of our wealth in dollars has fallen dramatically. Yet, we are in a tenuous position. If we move to strengthen the dollar, it will likely scare away some of this foreign inflow of capital.
Now, the BLS January 2008 unemployment report shows the U S economy is slowing. Payroll employment has lost 17,000 jobs over the past month. Unemployment stands at 4.9%. And remember, it is consumer spending which now accounts for nearly 70% of our total output of goods and services; while only 60 years ago, we were the leading producer for the world. But consumer debt is reaching an all time high. Consumers have been using borrowed home equity, and are nearly spent out. Now home values have been falling for the past 3 months, and the sub-prime mortgage debacle is still growing.
The Clinton administration changed the criteria for calculating inflation, and the Bush administration heartily endorsed it and followed suit. While government figures show inflation at some 2%, it is under the old formula more like 6%. Why? With a low inflation rate reflected in the CPI, our U S government saves billions of dollars on interest and Social Security payments. Meanwhile, we, as citizens, are left to deal with the real inflation.
At the same time, foreign central banks, corporations and individuals are diversifying their cash reserves out of the dollar and into the Euro. This adds to the dollar’s decline. Now certain oil producers are demanding payment in Euros. We are no longer universally recognized as the world’s reserve currency, a position we had held since World War II. This drains our diplomatic, economic and financial power.
Things can’t be fixed overnight. It will take real fiscal prudence and a lot of belt tightening on the part of everyone, first and foremost our government. There will be a Presidential election next year, with the largest number of potential candidates in recent history. Don’t fall for the man or woman who promises you more out of your government. It is an outright lie which they cannot deliver, and will cost you directly in your pocketbook. Look, instead to the man or woman who acknowledges the government is not our daddy, and is not totally responsible for our upkeep and wellbeing. We of all people deserve to be the most hated if we leave this burden upon our children and grandchildren, who for the most part look up to and respect us. We must develop and demonstrate the courage of our founding fathers.
Subscribe to:
Posts (Atom)
